Le Travenues Technology Ltd (ixigo) Limited – IPO Note – Equity Research Desk

Company overview

Incorporated in 2006 and headquartered in Gurugram, Le Travenues Technology Ltd (ixigo) is a technology company focused on enabling Indian travelers to plan, book and manage their trips across rail, air, buses and hotels. The company’s Online Travel Agency (OTA) platform allows travellers to book train, flight and bus tickets & hotels. The company also provides travel utility tools and services developed using in-house proprietary algorithms and crowd-sourced information, including train PNR status and confirmation predictions, train seat availability alerts, train, bus and flight status updates and delay predictions, alternate route or mode planning, automated web check-in, pricing and availability alerts, deal discovery, destination content, personalized recommendations, instant fare alerts for flights, AI-based travel itinerary planner and automated customer support services. Operating through its products ixigo flights, ixigo trains, ConfirmTkt and AbhiBus, the company is the second largest OTA in India in terms of consolidated revenue from operations as of FY23.

Objects of the offer

• Part-funding working capital requirements of the company.

• Investments in cloud infrastructure and technology.

• Funding inorganic growth through unidentified acquisitions and other strategic initiatives and general corporate purposes.

Investment Rationale

• Established position – The company is the second largest OTA in India in terms of consolidated revenue from operations and leading OTA for the “next billion users” (refers to an existing as well as anticipated market of “new to Internet” users that includes all non-Tier I market demand). As of September 2023, the company has collectively seen the highest usage and engagement among all key OTA players and standalone transactional train mobile apps in India in terms of Monthly Active Users and sessions. As of 31 March 2023, the company is the largest Indian train ticket distributor in the OTA rail market and had the largest market share of around 51%, in terms of rail bookings, among OTAs. The company’s bus-focused app, AbhiBus, was the second largest bus-ticketing OTA in India.

• Consistent growth – As of September 2023, the company had the highest app usage among OTAs with 83 million Monthly Active Users cumulatively across its apps and it is also the fastest growing OTA in terms of app downloads with 4.9 million monthly app downloads. During FY23, the company had 429.38 million Annual Active Users and 49.07 million transactions booked through its OTA platforms. LTTL’s operating history initially as a travel meta search engine, and later as a utility platform and an OTA has helped its OTA platforms generate considerable cost-efficient organic user traffic, which helps the company to attract new users, and retain and convert users to transacting users.

• Financial track record – The company reported a revenue of Rs.501 crore in FY23 against Rs.380 crore in FY22, a growth of 32%. The revenue has grown at a CAGR of 92% between FY21-23. The EBITDA of the company in FY23 is at Rs.44 crore, a 615% YoY growth compared to the Rs.6.2 crore of FY22. The CAGR between FY2021-23 of EBITDA is 132%.The PAT of the company in FY23 is at Rs.23 crore. The net profit increased by 211% compared to a loss of Rs.21 crore in FY22. The CAGR between FY2021-23 of EBITDA is 76%.

Key risks

• OFS risk – In addition to a fresh issue, the IPO will see the sale by of up to 19,437,465 shares by SAIF Partners India IV Limited, 13,024,000 shares by Peak XV Partners Investments V, 11,950,000 shares each by Aloke Bajpai and Rajnish Kumar. Remaining up to 1,03,16,209 shares are sold by 4 other Selling Shareholders.

• Agreement with IRCTC – Train ticketing operations depend on the agreement with IRCTC and any termination of agreement by IRCTC could have a material adverse effect on the company’s financial conditions, cash flows and business prospects.  

• Technical failure – Any failure to maintain satisfactory performance of technology infrastructure, including OTA platforms, particularly those leading to disruptions in services, could adversely affect the company’s business and reputation.

Outlook

The company is a leading OTA with significant penetration in the underserved “next billion user” market segment. According to RHP, Easy Trip Planners Limited and Yatra Online Limited are the listed competitors for Le Travenues Technology Limited. The peers are trading at an average P/E of 121.4x with the highest P/E of 187.83x and the lowest being 54.96x. At the higher price band, the listing market cap of Le Travenues Technology will be around ~Rs.3,603.04 crore and the company is demanding a P/E multiple of 153.98x based on post issue diluted FY23 EPS of Rs.0.60. However, the company significantly increased the net profit during 9M December FY23, further aiding the company to demand a P/E multiple of 54.93x which makes the issue reasonably priced. Based on the above views, we provide a ‘Subscribe’ rating for this IPO for a medium to long-term Holding.