TBO Tek IPO Opens for Subscription: 5 Things to Know

The primary market remained abuzz last month, with a slew of initial public offerings (IPO) hitting Dalal Street despite the volatility in the Indian stock market.

The IPO party is expected to continue with nine new initial public offerings (IPO) to hit Dalal Street this week.

Other than public issues, around four new listings are also scheduled.

The primary market will witness the opening of three new IPOs in the mainboard segment and six new IPOs in the small and medium enterprise (SME) segment.

These nine companies are going to raise more than Rs 65 billion (bn) through their initial share sale.

TBO Tek, a leading name among them, is set to launch its IPO today.

About TBO Tek

TBO Tek is one of the leading travel distribution platforms in the global travel and tourism industry, operating in over 100 countries.

It provides buyers with a comprehensive travel inventory according to the needs of their customers and supports a wide range of currencies along with forex assistance.

The company simplifies the travel business for suppliers such as hotels, airlines, car rentals, transfers, cruises, insurance, rail companies, and others, as well as for retail customers such as travel agencies and independent travel consultants.

The company's platform enables sellers to show and market their inventory and set prices for buyers.

As of 31 December 2023, the company had sold over 7,500 destinations in more than 100 countries and employed over 2,000 people.

The average booking accepted through TBO has skyrocketed from just 13,396 in FY21 to 41,218 in FY23.

TBO Tek IPO is a book-built issue of Rs 15.5 bn.

The issue is a combination of a fresh issue of 4.3 m shares aggregating to Rs 4 bn and an offer for sale of 12.5 m shares aggregating to Rs 11.5 bn.

Here are the key details of the IPO.

Issue period: 8 May 2024 to 10 May 2024

Type of issue: Book Built Issue

Price band: Rs 875-920 per share

Face value: Rs 1 per equity share

Lot size: 16 Shares

Application limit: Maximum thirteen lots for retail investors. Retail investors can make an application for a minimum of Rs 14,720 for one lot (16 shares).

Tentative IPO allotment date: 13 May 2024

Tentative listing date: 15 May 2024

The shares of TBO Tek traded at a 56.5% premium in the grey market on 7 May 2024. The shares were quoting at around Rs 1440. This gives it a premium of Rs 520 per share over the cap price of Rs 920.

#2 A Look at the Financials

The company has demonstrated robust financial performance, with revenue from operations witnessing a compound annual growth rate (CAGR) of 83.2% between the financial years 2021 and 2023.

The reason behind the sky-high growth can be attributed to the acquisition of Bookabed.

Similarly, its net profit improved. The company turned profitable in FY22 reporting a net profit of Rs 337 m.

In FY23 its net profit jumped 4.4x to hit a record Rs 1,484 m. A higher revenue and the ability to sustained and slightly increase margins allowed TBO to scale its Net Profits effectively.

TBO Tek Financial Snapshot (2021-23)

Particulars	31-Mar-21	31-Mar-22	31-Mar-23
Revenues (Rs in m)	1,765.50	5,119.30	10,857.70
Revenue Growth (%)	-	189.9	112
Net Profit (Rs in m)	-341.4	337.2	1,484.90
Net Worth (Rs in m)	2,040.70	2,319.00	3,371.90

Data Source: Company's Red Herring Prospectus (RHP)

In the nine months period ended December 2023 the company has already surpassed its FY23 profits and recorded over Rs 10 bn income on the topline front.

Its net profit rose 28% year-on-year to Rs 1.5 bn and revenue jumped 31% to Rs 10.2 bn, compared to the nine-month period of previous fiscal FY23.

#3 Peer Comparison

As per the company's red herring prospectus, these are the industry peers of TBO Tek.

Peer Comparison

Company	Revenue from Operations (2023) (Rs in m)	EPS (Basic) (in Rs)	Net Worth (Rs in m)	Return on Net Worth (%)
TBO Tek	10,645.90	14.2	3,371.90	44
Rategain Travel Technologies	5,651	6.3	7,097.40	9.6

Data Source: Company's Red Herring Prospectus (RHP)

TBO Tek, a pioneering company in the travel and hospitality sector, stands out with only one competitor, Rategain, a SaaS company in a similar field.

While TBO Tek boasts double the revenue of Rategain, its net worth is only half the size.

Despite this, TBO Tek outperforms Rategain with a Return on Equity (ROE) of 44% compared to Rategain's 10%, largely due to its higher equity base.

Rategain entered the exchange on 17 December 2021, at Rs 340 per share. By 3 May 2024, the stock had almost doubled in price to Rs 674, with a high Price-to-Earnings ratio of 144x.

#4 Arguments in Favour of the Business

• TBO’s platform creates a network effect with interlinked flywheels enhancing the value proposition for partners. This platform is not only scalable but also modular, allowing for the seamless addition of new lines of business, markets, and travel products.
• As the company has built its proprietary platform that generates large volumes of data, it houses the data related to searches, bookings, invoices, and payments. This data can be used to get insights into consumer behaviour & make business decisions accordingly.
• The company has developed this asset-light business model, which can be scaled easily without further Capex. This will allow the company to maintain its EBITDA Margins and also scale up in the coming years.
• On 31 March 2022, it acquired Europe-based Bookabed, a B2B accommodation supplier serving the UK & Ireland markets. The company will continue to make such acquisitions that can help strengthen its platform.

#5 Risk Factors

• TBO Tek’s revenue is heavily reliant on hotel and ancillary bookings, which accounted for 68% of its revenue in FY23. This concentration exposes the company to risks associated with fluctuations in the hotel industry.
• TBO Tek’s business model is dependent on a limited range of suppliers with whom it has long-standing relationships. Any disruption in these supplier relationships or changes in pricing policies could adversely impact the company's operations and profitability.
• The company relies heavily on its proprietary technology for critical business functions, including booking management and customer service. Any failure to maintain or upgrade these systems promptly could result in disruptions to operation.

In Conclusion

The global travel and tourism market witnessed a significant recovery in 2023, growing by 18.2% year-on-year to reach US$ 1.9 trillion (tn), and is projected to continue growing at a compound annual growth rate (CAGR) of 8.2% to reach US$ 2.6 tn by 2027.

This growth is primarily driven by emerging economies, notably China and India, which are expected to add over half a billion new consumers by 2030.

India, in particular, has witnessed a substantial increase in passport issuance, with over 12.9 m passports issued in 2022 compared to 8.5 m in 2021, indicating a rising trend of international travel among its citizens.

For suppliers such as hotels, experience providers, and car rental companies, this presents an opportunity to cater to a diverse range of travellers from an increasing number of countries.

Similarly, travel buyers can expect to serve a growing base of travellers willing to spend more on travel experiences and are continuously exploring new destinations.

Overall, these trends bode well for the company, positioning it to benefit from the expanding global travel and tourism market and the increasing propensity for travel among consumers worldwide.

Nevertheless, it is always prudent to conduct thorough research before making any investment decisions.

Ensure that the investment aligns with your financial objectives and matches your risk tolerance level.

For more information on IPOs, check out the list of upcoming IPOs.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...