If there is anything we all are deprived of after three deadly Covid-19 waves across the globe is that lack of leisure travel. This is evident from the fact that as soon as things start to normalize, there is a jump in people vacationing. Amid all this, an online travel agency, Le Travenues Technology Limited (Ixigo) has filed its draft prospectus with the SEBI. So let us discuss the company’s business prospects in detail.
About the company
Le Travenues Technology Limited is a technology company focused on enabling Indian travelers to plan, book and manage their trips across rail, air, buses and hotels. The company enables its customers to make smarter travel decisions by leveraging artificial intelligence, machine learning, and data science led innovations on its OTA platform. The company’s OTA platforms allow travellers to book train tickets, flight tickets, bus tickets, hotels, and cabs. The company also provides personalized recommendations, instant fare alerts for flights, and automated customer support services. In the train booking segment, ixigo trains and ConfirmTkt, the company’s train-centric mobile applications, were the leading B2C distribution platforms for IRCTC with 42% market share in FY21.
Details about the IPO
Following are the details about the company’s IPO:
- The company has not yet announced its subscription dates for the IPO.
- The IPO is a book building offer, but the company is yet to come up with the price range for its equity shares.
- The total issue size of the IPO is ₹1600 crore, out of which ₹750 crore will be a fresh issue, while the rest ₹850 crore will be an offer for sale.
Objectives of the IPO
Following are the objectives of the company’s IPO:
- The company is said to collect ₹750 crores as gross proceeds from the fresh issue.
- From these proceeds, the company aims to utilize a part of the proceeds towards organic and inorganic growth initiatives.
- Also, the company will use a part of the proceeds towards general corporate purposes.
- Further, by listing its equity shares on the exchanges, the company believes that it will be able to improve its brand image and credibility.
Following are the key strengths in the company’s business:
- According to a report, the company is the leading OTA for the ‘next billion users’ with the highest monthly active users across all OTAs.
- Technology forms the basis for the company’s operating leverage and is instrumental in achieving significant efficiencies in business processes and operations.
- The company’s app is the top-ranked OTA app on Google Play Store as of July 2021 with the highest usage and engagement.
- The company’s gross transaction value has grown at a CAGR of 135% between FY19 and FY21.
- Compared to other OTAs, the company has the highest ratio of gross transactional value to employees.
Following are the key risks that the company faces:
- If there is something that the Covid-19 lockdowns affect first, it is public mobility and travel. In the current times, this could severely affect the company’s business if people are forced to remain confined in their homes.
- Every OTAs train ticketing services depend on its agreement with IRCTC. The termination of the company’s agreement with IRCTC could impact the company’s business.
- Being a technology-focused company, the company will have to keep pace with rapidly changing technology.
- The company has a history of net losses and it anticipates increased expenses in the future.
- The Indian OTA industry is highly competitive, leading to fierce competition.
- The company’s business depends on its relationship with a broad range of travel suppliers and certain distributors, and any adverse changes in these relationships could negatively affect the business operations.
- In FY21, 1.95 million users made their first booking with the company.
- The company’s customer acquisition cost has decreased from ₹246.69 per customer in FY19 to ₹44.27 per customer in FY21.
Fundamentals of the company
Following are the fundamentals of the company:
- The company’s revenue from operations increased from ₹42.6 crores in FY19 to ₹135.5 crores in FY21.
- The company incurred a loss of ₹57.3 crore in FY19, but that turned into a profit of ₹7.5 crore in FY21.
- The company’s earnings per share stands at ₹99.25 as of March 2021.
- The company’s transactions CAGR were 41.59% between FY19 and FY21.
- As of March 2021, the company had 37.48 million monthly active users, with a repeat transaction rate of 87.18%.
- The company receives 92.60% of its bookings from Tier II/III cities.
According to its prospectus, there are no listed companies in India that engage in a business similar to that of the company’s. Hence, it is not possible to provide a peer-to-peer industry comparison in this regards.
So this was all about the company’s IPO. However, investors should do their own due diligence and make a decision to invest in the company’s IPO only after it comes out with the IPO price and valuations.