The IPO notes released so far by brokerage firms have termed RateGain Travel Technologies Limited as the largest Software as a Service ('SaaS') company in hospitality and tourism industry. The company provides platform from rates insights to end to end pricing for the products of the clients like Hotels, OTA (Online travel agents) through their technology.
Prabhudas Lilladher has summarized its view on the IPO issue through its SUBSCRIBE IPO note titled "Leading Global SaaS player in hospitality and travel sector". Justifying the premium valuation and recommending investors to subscribe for long term gains, it has stated in its IPO note that company has superior product portfolio integrated across all value chain partners enabling it to access data at granular level which cannot be easily replicated.
RateGain is one of the largest aggregators of travel related data in the world. The company intends to leverage its data assets across the travel & hospitality industry to introduce novel and cross-vertical product offerings such as Demand.AI. With access to large enterprise clients, RateGain is well positioned to scale up and then cross-sell these offerings says Aditya Birla Money Ltd. It recommends SUBSCRIBING TO THE PUBLIC ISSUE FOR LONG TERM GAINS in its IPO note.
On valuation, Aditya Birla Money Ltd is of the view that at the issue price, RateGain will trade at 18.1x FY21 P/S, indicating a valuation broadly in line with global SaaS companies with similar growth prospects. RateGain generates stable and recurring revenues with relatively low capital requirements, leading to healthy free cash flow generation. Going ahead, relationships with large enterprises and a wide array of product offerings would contribute to higher mining of existing accounts and robust growth.
On company's business model, Canara Bank Securities Ltd. recommends SUBSCRIBE has termed company's business scalable with asset light business model, leveraged with technology backed by Artificial intelligence in its IPO note.
On addressable market, Dalal & Broacha Securities is of the view that, RateGain offers its solutions to 350 hotel properties and the Total Addressable Market potential stands at 100,000 properties for 2 out of its 3 verticals and 300,000 for the 3rd vertical. The company has a non-linear business model with 75% of the revenue coming from Subscription based revenue model and 25% coming from transitionary model.
The company offers travel and hospitality solutions across a wide spectrum of verticals including hotels, airlines, OTAs, car rentals, cruises etc. RateGain's solutions help companies find the right guest, decide the right price, distribute it through the preferred channel and facilitates in improving customer experience.
Comparing the company with unicorns such as Zomoto and Paytm, Reliance Securities believes that the IPO is valued at 18.1x FY21 price-to-sales and 15.1x FY22 annualized price-to-sales, which is at a discount of 27.3x to PayTM and 31.7x to Zomato (at CMP). While there is no listed peer available for a direct comparison to RateGain in the domestic market, its valuations at ~50% discount to unicorns like Zomato and Paytm give comfort on valuation front. In the new era of internet and AI-based software services, Reliance Securities believes the premium valuation of company is likely to sustain.
Covid-19 has accelerated the digitization process of customer interactions with hospitality and travel companies. These changes are likely to lead to a shift in business practices by hospitality and travel companies from an in-house solution model to third party software and services model. RateGain serves a large and rapidly-growing total addressable market. Third party travel and hospitality technology are likely to clock a CAGR of 18% over the next five years and indicates a healthy growth in the long run. The 3rd party travel technology market is estimated to reach $11.5 Bn. in 2025 from US$5.9 Bn.
RateGain has a global and diverse customer base, with long-standing relationships with 25 out of the top 30 OTAs, 23 of the top 30 hotel chains, several of the world's fastest growing airlines, all leading cruise lines & car rental companies, etc. The company currently caters to 1,462 customers including 8 Fortune-500 companies. 7 of its Top 10 customers have been associated with the company for over 10 years. These long-standing relationships with customers are demonstrated by the company delivering ~90% Gross Revenue Retention ("GRR") since FY19.