RateGain Travel Technologies is engaged in
offering travel and hospitality solutions for hotels, airlines, online travel
agents (OTAs), meta-search companies, vacation rentals, package providers, car
rentals, rail, travel management companies, cruises, and ferries. The company
is one of the largest aggregators of data points in the world for the
hospitality and travel industry.
The company offers a suite of interconnected
products that manage the revenue creation value chain for its customers by
leveraging its big data capabilities and integration with other technology
platforms helping hospitality and travel providers acquire more guests, retain
them via personalised guest experiences and seek to maximize the clients’
margins.
The company delivers its hospitality and
travel technology solutions through its software as a service (SaaS) platform
and its products are classified into three business units including Data as a
Service, Distribution and Marketing Technology.
Data as a Service (DaaS)– Delivers insights including competitive
intelligence. The company equips suppliers and demand providers with the
ability to connect with data and information to increase acquisition and
conversion.
The company offers data under two categories
namely Market Intelligence which provides access to pricing and availability
data at scale along with analytics to present trends, opportunities and market
developments and dynamic pricing recommendations through which the company serve
certain segments within the travel industry that have traditionally used a flat
pricing or a seasonal pricing structure with its proprietary dynamic pricing
technology to help them maximize revenue.
The company operates its data as a service production a
subscription model where its customers in the hospitality sector subscribe to
its data as a service product such as Optima and Parity+ for a period. For its
online travel agents customers and airline, car rental and vacation packages
customers, the company operates on a hybrid model where the company charge a
minimum subscription fee for use of its products and a pay-per-use charge for
accessing additional data.
The company’s competitive intelligence
products tracked over 3.61 billion price points across over 2,900 hotels, online
travel agents, airlines, cruise lines and car rentals, in the six months ended
Sep 30, 2021 and covers points such as pricing, ratings, rankings,
availability, room descriptions, cancellation policy, payment policy,
discounting and package inclusions. Active Customers in its data as a service
business has grown from 945, as of March 31, 2019, to 1,083 Active Customer, as
of March 31, 2020, and to 1,160 Active Customers, as of March 31, 2021, while
as of September 30, 2021, the company had 1,406 Active Customers.
Distribution –The company provides mission critical
distribution including availability, rates, inventory and content connectivity
between leading accommodation providers and their demand partners. Distribution
also enables delivery of reservations back to hotel systems to ensure smooth
operations and accurate reporting by hotels.
In its Distribution segment, the company operate RezGain on
subscription basis where customers pay a subscription fee to access the product
while DHISCO operates on a transaction model where the company generate
revenues from bookings done by online travel agents and GDS operators.
The company covered over 194,000 hotel
properties with over 70 demand partners, as of Sep 30, 2021. These connections
are available through multiple flow architectures including various
combinations and conduct distribution of availability, rates, inventory,
negotiated rates, cancellation policy, amenities, attributes, images, and
description, all in multiple languages. In FYs 2019, 2020 and 2021, the company’s
distribution platform handled 31.22 million, 29.84 million and 9.02 million,
bookings, respectively, while in the six months ended September 30, 2021, it
handled 6.93 million bookings. The aggregate value of bookings completed using the
company’s products was Rs 62,857.92 crore, Rs 48,758.00 crore and Rs 14,186.68
crore, Rs 5760.05 crore and Rs 13603.16 crore in FYs 2019, 2020 and 2021 and in
the five months ended August 31,2020, and August 31,2021, respectively, while
the average booking value was Rs 20,133.63, Rs 16,339.08 and Rs 15,732.56, Rs
17955.27 and Rs 24,123.35 in similar periods. Aggregate value of bookings and
average booking value was Rs 17896.72 crore and Rs 25,821.27 in the five months
ended September 30, 2021.
Marketing Technology (MarTech) – The company’sMarTech offering enhances brand
experience to drive guest satisfaction, increase bookings and increases guest
loyalty. The company also manages social media for luxury travel suppliers
allowing them to be responsive to social media engagements 24x7 as well as
effectively manage their social media handles and run promotional campaigns.Martech
solution is priced on subscription basis.
As a software as a service (SaaS) company, the company’s
cloud-based products offer customer improved use, and the company can
effectively scale its operations. The scale of its operations and its strength
in analytics has helped the company grow in operations and monetize its
offerings.
In Fiscals 2019, 2020, 2021 and in the five months ended August
31,2020, and August 31,2021, the company generated 34.65%, 35.06%, 26.34%,
26.02% and 27.19% of its revenues from operations from the sale of services of its
transaction-based products while the company generated 30.07%, 40.86%,44.16%,46.43%
and 48.35% of its revenues from operations from the sale of services of its subscription-based
products in similar periods and the company generated 35.28%, 24.07%, 29.50%,
27.54% and 24.47% of its revenues from operations from the sale of services of its
products which are on a hybrid revenue
model of subscription and transaction based pricing.
As of September 30, 2021, the company caters to over 1,462
customers including eight Global Fortune 500 companies. Its customers include
Six Continents Hotels, Inc., an InterContinental Hotels Group Company, Kessler
Collection, a luxury hotel chain, Lemon Tree Hotels and Oyo Hotels and Homes
Private Limited. The company’s clients also include 1,220 large and mid-size
hotel chains, 110 travel partners including airlines, car rental companies and
large cruise companies and over 132 distribution partners including online
travel agents such as GroupOn and distribution companies such as Sabre GLBL
Inc., in over 110 countries as its customers, as of Sep 30, 2021. The company servicesits
customers in multiple geographies with local go-to market teams and have
offices in six countries.
The company’s internal practices have been developed over a decade
and has helped it to increase its net promoter score (NPS) and its net promoter
score was 8.44, 18.43, 40.78 and 33.33 in FYs 2019, 2020 and 2021 and in the
six months ended September 30, 2021, respectively. The company tracks this
through an automated and independent process to measure customer health and
gather feedback for continuous improvement.
The company is promoted by Mr Bhanu Chopra and Ms Megha Chopra.
Object of
the offer
The offer comprises a fresh issue of 8823529 equity shares at
upper price band of Rs 425 and 92,59,259 equity shares at lower price band of
Rs 405 aggregating up to Rs 375 crore by the company and an offer for sale by
selling shareholders Wagner Ltd of up to 17114490 equity shares aggregating Rs
727 crore at upper price band, Mr Bhanu Chopra of up to 4043950 equity shares aggregating
Rs172 crore at upper price band , Megha Chopra
of up to 1294760 equity shares
aggregating Rs 55 crore at upper price band , and Usha Chopra of up to
152330 equity shares aggregating Rs 6
crore at upper price band.
Mr Bhanu Chopra pre-issue shareholding was 49.55%, which shall
decrease to 41.67% at the upper price band of Rs 425.Mr Megha Chopra pre-issue
shareholding was 15.87%, which shall decrease to 13.34% at the upper price band
of Rs 425 and Wagner Ltd pre-issue shareholding was 22.69%, which shall
decrease to 5.34% at the upper price band of Rs 425.
Thecompany proposes to utilize the net proceeds of the fresh issue
towards repayment/prepayment of indebtedness availed by RateGain UK, one of the
company’s subsidiaries, from Silicon Valley Bank amounting to Rs 85.26 crore, payment
of deferred consideration for acquisition of DHISCO amounting to Rs 25.20
crore, strategic investments, acquisitions and inorganic growth amounting to Rs
80.00 crore, Investment in technology innovation, artificial intelligence and
other organic growth initiatives amounting to Rs 50.00 crore, purchase of
certain capital equipment for the company’s data centre amounting to Rs 40.77
crore and the balance towards general
corporate purposes.
Strengths
Thecompany serves a large and rapidly growing total addressable
market. Third party travel and hospitality technology are estimated to be a US$
5.91 billion market in 2021 growing to an estimated U$ 11.47 billion in 2025 at
a CAGR of 18%. Enterprise applications focused on guest acquisition,
distribution, revenue maximization and wallet share expansion in the
hospitality and travel industry have a serviceable addressable market size of
$4.34 billion in 2021, expected to be growing to an estimated US$ 8.45 billion
in 2025. This is a large and rapidly growing addressable market opportunity for
a vertical specific platform company like RateGain Travel Technologies. The
travel technology segment is further favoured by industry tailwinds of
digitization in the post COVID times. According to Phocuswright, pre-COVID-19
in 2019, the global travel and tourism industry was 10.4% of the global GDP but
faces number of challenges, the most critical of them being low digitization
and disparate systems that are not inter-operable. COVID-19 has however,
accelerated digitization of customer interactions with hospitality and travel
companies. These changes are likely to lead to a shift by hospitality and
travel companies from in-house solutions to thirdparty software and services.
The company has developed a comprehensive product portfolio that
caters to the technology ecosystem for the hospitality and travel industry and
to enterprise and mid-market customers for revenue management decision support,
competitive intelligence, distribution and social media marketing, online
reputation, and brand engagement. The company has over the years grown its
operations and the scale of its operations allows customers globally to
streamline their operations and increase revenues. The company offers a wide
range of travel and hospitality solutions across the spectrum of verticals:
hotels, airlines, OTAs and METAs, vacation rentals, package providers, car
rentals, rail, travel management companies, cruises, and ferries. The company
frequently contribute to the travel recovery index published by one of the
largest travel industry intelligence platforms providing insights to key sectors
of travel.
In a highly fragmented landscape of travel technology providers,
the company offers a platform that bridges the data gap across the hospitality
and travel industry. The company provide inter-operable products that leverage
data across internal and external sources, unlock value through integration and
enable better, faster, and automated decision making. Its solutions help
hospitality and travel companies find the right guest, decide the right price,
distribute it to the preferred channel of the guest and once converted, help
them have an exceptional experience.
The company offers a comprehensive platform of industry-specific
solutions with growth and monetization capabilities. Given the fragmented
nature of the hospitality and travel industry, the company has developed
products that are inter-operable and integrate across a single platform
allowing customers to maximize their revenues while also resulting in cost
savings. The company has built its proprietary Artificial Intelligence
algorithms and applied it in connection with its software as a service product
to provide its customers with next generation of product features. Its suite of
products for rate intelligence includes OPTIMA, Parity+, AirGain, CarGain and
FerryGain that offer customers competitive pricing intelligence leveraging an
AI-powered data platform while tracking real-time parity with features such as
advanced dashboards, identification of key violators and reasons, revenue
leakage. The company’s revenue optimization products, Rev.AI offer revenue
management through historical pricing insights. Its products are enabled with
an intuitive user interface, offer a high degree of personalisation at a
subscriber level, and break down market rate and pricing strategy into logical
insights.
The company has global and diverse customer base with whom it has long-standing
relationships. As of September 30, 2021, the company’s customer base of 1,462
customers including eight Global Fortune 500 companies.
Comprised both travel suppliers and travel intermediaries
including airlines, hotels, cruise lines, car rental companies, online travel
agents, tour operators and wholesalers.The company serves almost all top
players in respective sub-segments such as25 out of the top 30 OTAs, several of
the world’s fastest-growing airlines; 23 of the top 30 hotel chains; tour
operators and wholesalers; 7 global car rental companies; all large cruise
lines, and largest travel management companies.
The company’s customer base has increased over the years. It has added
147 active customers in the last three Fiscals. Its customer base grew from
1,190 active customers as of March 31, 2019, to 1,274 active customers as of
March 31, 2020, and to 1,337 active customers as of March 31, 2021, and the
company had 1,462 active customers as of September 30, 2021, due to sales and
marketing efforts. The company serves customers in over 110 countries, as of
June 30, 2021, including in other parts of Asia, Europe, and the United States.
The company earned majority of its revenues from enterprise
customers. Such customers who generated revenues of over Rs 0.4 croreeach accounted
for 82.98%, 85.47%,78.88%,66.80% and 73.89% of its total revenue from
operations in FYs 2019, 2020, 2021 and in the five months ended August 31,2020
and August 31,2021 respectively. Its AI enabled platform and technology focused
offerings have led to consistent customer retention rates. As of September 30,
2021, seven of its top 10 customers (by revenue in FY2021) have been associated
with the company for over 10 years. Revenue contributed from its ten major
customer groups was Rs 110.27 crore, Rs 176.66 crore, Rs 92.81 crore, Rs 35.09
crore and Rs 50.19 crore and represented 42.16%, 44.31%,37.01%, 35.93% and
40.19% of its revenue from operations in FYs 2019, 2020, 2021 and in five
months ended Aug 31, 2020, and Aug 31,2021, respectively. Its long-standing
relationship with its customers is evidenced by the company’s Gross Revenue
Retention that was 92.78%, 95.46%, 89.24%, 94.20% and 92.92% in Fiscals 2019,
2020, 2021 and in five months ended Aug 31, 2020, and Aug 31,2021,
respectively.
Weaknesses
Substantial portion of the company’s revenues are derived from the
worldwide hospitality and travel industry and factors that negatively impact
that industry could have a material adverse effect on the company’s business,
prospects, financial condition, and results of operations. The worldwide
hospitality and travel industry is highly sensitive to general economic
conditions and trends. One of the most significant factors that has affected,
and is continuing to affect, travel and the global economy is the COVID-19
pandemic, which has resulted in a significant fall in demand for travel
worldwide.
The software underlying its platform and products, particularly in
DaaS and Distribution business, is complex and may contain design issues,
defects, or errors, that could be difficult to detect and correct, particularly
when first introduced or when new features or capabilities are released. In
addition, its platform and products depend on the ability of the software to
store, retrieve, process, and manage immense amounts of data. Any real or
perceived defects, errors, failures, bugs, or vulnerabilities could result in
negative publicity, cybersecurity breaches and other data security, privacy,
access, retention issues, performance issues and customer terminations and may
impair its ability to enter client contracts for our platform, products, and
solutions in the future. Some errors, bugs or vulnerabilities inherently may be
difficult to detect and may only be discovered after code has been released for
external or internal use. The costs incurred in correcting any defects in the
platform and products may be substantial and could adversely affect results of
operations.
The company’s future success will depend on its ability to adapt
and innovate. To attract new customers and increase revenue from the existing
customers, it will need to continuously enhance and improve existing platform
and introduce new products, features and functionality based on continuing
changes in technology, industry standards and client preferences. Enhancements
and new products may not be introduced in a timely or cost-effective manner,
may contain errors or defects and may have interoperability difficulties with
it platform or other products. In the past the company has experienced delays
in internally planned release dates of new products, features and functionality,
and there have also been instances where it was unable to make product
enhancements in line with market’s expectations.
If the company suffers a cyber security breach or other security
incident or unauthorised parties otherwise obtain access to its customers’ data
or its own data, the company’s platform and products may be perceived as not
being secure. As a result, reputation may be harmed, demand for its platform
and products may be reduced and it may incur significant liabilities.
The market for software as a service solution in the hospitality
and travel industry is new and evolving, and if the market develops more slowly
or develops in a way that the company does not expect, than the business of the
company could be adversely affected.
The company has over the years acquired technological capabilities
that has helped expand its product offerings and scale its operations. Pursuant
to its overall strategy to continue scaling its business, the company intends
to keep pursuing strategic investments and acquisitions which are complementary
to its business, and which will enhance its product and service capabilities.
However, if the acquisition does not match up to its expectations and it can be
value destructive. Of the total fresh issue, Rs 80 crore is set aside for
acquisitions.
The company has reported losses in the last two
financial years as also in the first five months of the current year. It expects
rise in costs and recurrence of losses in future also.
Valuation
For
5 months ended Aug 2021, consolidated sales were up by 28% to Rs 125.27 crore.
OPM declined 576 bps which led to 51% decline in operating profit to Rs 4.54
crore. Other income declined by 26.1% to 5.95 crore while interest cost
decreased 51.1% to Rs 2.17 crore and depreciation decreased 31.6% to 12.96 crore.
Loss before exceptional items was down 25% to Rs 4.64 crore.Issue-related
expenses of Rs 4.73 crore has been treated as exceptional.Loss before tax after exceptional items widened by 52.5% to
Rs 9.37 crore. Tax credit was Rs 1.03 crore against tax expense of Rs 1.71
crore in previous period. Net loss stood at Rs 8.34 crore as against net loss
of Rs 7.86 crore during the same period last year.
For
FY 2021, consolidated sales were down by 37.1% to Rs 250.79 crore. Decline in
revenues was due to covid-led slowdown. OPM declined 474 bps to 2.46% which led
to 78.5% decline in operating profit to Rs 6.16 crore. Other income declined
77.4% to 13.3 crore while interest cost decreased 8.1% to Rs 8.2 crore and
depreciation decreased 62.8% to Rs 35.88 crore. Loss before tax widened by
38.7% to Rs 24.63 crore. Tax expenses increased by 68.5% to Rs 3.95 crore. Net loss
stood Rs 28.58 crore as against net loss of Rs 20.10 crore.
At
the higher price band of Rs 425, the offer is made at around 18.09 times P/ (S
FY2021). There are no listed peers for the company in India.
Rategain
Travel Technologies: Issue Highlights
|
Fresh issue (in Rs crore)
|
375
|
Offer for sale (in Rs crore)
|
|
Offer for sale (in number of shares)
|
|
- in Upper price band
|
22605530
|
- in Lower price band
|
22605530
|
|
|
Price Band (Rs)
|
405-425
|
For Fresh Issue Offer size (in no of shares)
|
|
- in Upper price band
|
8823529
|
- in Lower price band
|
9259259
|
Pre issued capital (Rs crore)
|
9.79
|
Post issue capital (Rs crore)
|
|
- in Upper price band
|
10.67
|
- in Lower price band
|
10.72
|
Pre issue promoter and Promoter Group shareholding
(%)
|
67.29%
|
Post issue Promoter and Promoter Group shareholding
|
|
-On higher price band (%)
|
56.58%
|
-On lower price band (%)
|
56.35%
|
Bid Size (in No. of shares)
|
-
|
Issue open date
|
07/12/2021
|
Issue closed date
|
09/12/2021
|
Listing
|
BSE, NSE
|
Rating
|
45/100
|
RateGain Travel
Technologies: Consolidated Financial
|
|
1903 (12)
|
2003 (12)
|
2103 (12)
|
2008 (5)
|
2108 (5)
|
Sales
|
261.57
|
398.71
|
250.79
|
97.90
|
125.27
|
OPM (%)
|
8.32
|
7.20
|
2.46
|
9.38
|
3.62
|
OP
|
21.76
|
28.70
|
6.16
|
9.18
|
4.54
|
Other inc.
|
11.13
|
58.90
|
13.30
|
8.05
|
5.95
|
PBIDT
|
32.88
|
87.60
|
19.46
|
17.24
|
10.49
|
Interest
|
3.18
|
8.93
|
8.20
|
4.44
|
2.17
|
PBDT
|
29.71
|
78.68
|
11.25
|
12.80
|
8.32
|
Dep.
|
20.22
|
96.44
|
35.88
|
18.95
|
12.96
|
PBT
|
9.49
|
-17.76
|
-24.63
|
-6.14
|
-4.64
|
Share of profit/loss from JV
|
-
|
-
|
-
|
-
|
-
|
PBT Before EO
|
9.49
|
-17.76
|
-24.63
|
-6.14
|
-4.64
|
Exceptional items
|
-
|
-
|
-
|
-
|
-4.73
|
PBT After EO
|
9.49
|
-17.76
|
-24.63
|
-6.14
|
-9.37
|
Total Tax
|
-1.55
|
2.34
|
3.95
|
1.71
|
-1.03
|
PAT
|
11.03
|
-20.10
|
-28.58
|
-7.86
|
-8.34
|
Minority Interest
|
-
|
-
|
-
|
-
|
-
|
Net Profit
|
11.03
|
-20.10
|
-28.58
|
-7.86
|
-8.34
|
EPS (Rs)*
|
1.03
|
-1.88
|
-2.68
|
-1.77
|
-0.12
|
*EPS is calculated based on post issue share
capital of Rs 10.67cr at upper price band, Face Value Rs 1
|
Figures in Rs crore
|
Source: Capitaline Corporate Database
|
|