What you must know about Le Travenues Technology (Ixigo) IPO?

Le Travenues Technology Ltd (Ixigo) – About the company

Le Travenues Technology Ltd (Ixigo) was founded in 2006 and offers its services as an online travel agency (OTA). Like any travel agency,  Le Travenues Technology Ltd (Ixigo) allows travellers to book train, flight, and bus tickets; and also do hotel bookings through its OTA platforms "Ixigo". The company offers a number of value added and innovative services to its customers including, update on PNR status, also driven prediction of PNR confirmation, Train seat availability, updates on delays and delay predictions; apart from alerts. Its travel planning services are largely based on artificial intelligence (AI), so that the entire travel and stay itinerary can be planned in an efficient and cost-effective manner. Ixigo in the last few years, has emerged as an umbrella brand and has several digital properties under its banner. Currently, Le Travenues Technology Ltd (Ixigo) has dedicated OTA properties catering to trains, flights, and bus bookings. Here is a quick rundown on these 3 properties of Ixigo. 

The first app is the Ixigo Trains and ConfirmTKT app, which facilitates travel planning and booking in trains across India. It is a complete end-to-end solution that ranges from checking availability, to selecting the most optimal option, to travel planning to real time updates and alerts as well as call to action for your entire travel program. Secondly, the Ixigo Flights mobile app allows similar ecosystem for flight bookings. One can book, amend, and cancel tickets through this app and it is available in the IOS and Android operating systems. The company also offers real time AI-based predictions based on a real data stack. The third property offered by Ixigo is the Abhibus app, which offers the complete ecosystem for booking bus tickets and managing such bookings from the mobile app. Le Travenues Technology Ltd (Ixigo) boasts of the highest app usage among OTAs with cumulative monthly active users at over 83 million. In addition, the Ixigo Plan allows comprehensive travel planning according time zones, geographies, modes of transport etc. This is again an intelligent app that uses AI plugins for better research and quality of output. The company has a total of 486 employees on its rolls; apart from consultants.

The fresh funds will be used for funding working capital needs, investing in cloud infrastructure and technology, as well as to fund inorganic growth via M&A. The company, being a professionally managed company, does not have an identified promoter group. The IPO will be lead managed by Axis Capital, DAM Capital Advisors (formerly IDFC Securities), and JM Financial; while Link Intime India Private Ltd will be IPO registrar.

Highlights of the IPO issue of Le Travenues Technology Ltd (Ixigo)

Here are some of the key highlights to the public issue of Le Travenues Technology Ltd (Ixigo).

• The Le Travenues Technology Ltd (Ixigo) IPO will be open from June 10th, 2024 to June 12th, 2024; both days inclusive. The stock of Le Travenues Technology Ltd (Ixigo) has a face value of ₹1 per share and the price band for the book building IPO has been set in the range of ₹88 to ₹93 per share. 
• The IPO of Le Travenues Technology Ltd (Ixigo) will be a combination of a fresh issue of shares and offer for sale (OFS) component. The fresh issue brings in fresh funds into the company, but is also EPS and equity dilutive. On the other hand, OFS is just a transfer of ownership; and hence neither EPS nor equity dilutive.
• The fresh issue portion of the IPO of Le Travenues Technology Ltd (Ixigo) comprises the issue of 1,29,03,226 shares (129.03 lakh shares approximately), which at the upper price band of ₹93 per share will translate into a fresh issue size of ₹120.00 crore.
• The offer for sale (OFS) portion of the IPO of Le Travenues Technology Ltd (Ixigo) comprises the sale / offer of 6,66,77,674 shares (666.78 lakh shares approximately), which at the upper price band of ₹93 per share will translate into an OFS size of ₹620.10 crore.
• Out of the OFS size of 666.78 lakh shares, 8 selling shareholders will offer the entire quantity in the OFS. The selling shareholders include SAIF Partners (194.37 lakh shares), Peak XV Partners (130.24 lakh shares), Aloke Bajpai (119.50 lakh shares), Rajnish Kumar (119.50 lakh shares), Micromax Informatics (54.87 lakh shares), Placid Holdings (30.48 lakh shares),  Catalyst Trusteeship (13.34 lakh shares), and Madison India Capital (4.47 lakh shares). All selling in OFS will be by investor shareholders, since the company is professionally managed and does not identify with a promoter group. 
• Thus, the total IPO of Le Travenues Technology Ltd (Ixigo) will comprise of a fresh issue and an OFS of 7,95,80,900 shares (795.81 lakh shares approximately) which at the upper end of the price band of ₹93 per share aggregates to total issue size of ₹740.10 crore.

The IPO of Le Travenues Technology Ltd (Ixigo) will be listed on the NSE and the BSE on the IPO mainboard.

Key dates for Le Travenues Technology Ltd (Ixigo) IPO and How to Apply?

The IPO of Travenues Technology Ltd (Ixigo) opens on Monday, 10th June 2024 and closes on Wednesday, 12th June 2024. The Travenues Technology Ltd (Ixigo) IPO bid date is from 10th June 2024 at 10.00 AM to 12th June 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 12th June 2024.

Data Source: Company RHP

Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account. The credit of shares to the demat account on June 14th 2024, will be visible to investors under the ISIN Code – (INE0HV901016). This allocation to the demat account is only applicable to the extent of the allocation of shares and if no allocations are made in the IPO, then no credit would be visible in the demat account.

Promoter Holdings and Investor Quota, Allocation Quota

The company is professionally managed company and does not have any identified promoter group. As per the terms of the offer, not less than 75% of the net offer is reserved for the qualified institutional buyers (QIBs), while not more than 10% of the net offer size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors. The table below captures the gist of the allocation to various categories.

Data Source: Company RHP

It may be noted here that the Net Offer above refers to the quantity net of employee and promoter quota, as indicated above. There is no employee quota that has been communicated by the company as the shares reserved for employees in its red herring prospectus (RHP). The anchor portion, will be carved out of the QIB portion and the QIB portion available to the public will be reduced proportionately.

Lot sizes for investing in the IPO of Le Travenues Technology Ltd (Ixigo)

Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of Le Travenues Technology Ltd (Ixigo), the minimum lot size is 13 shares with upper band indicative value of ₹14,973. The table below captures the minimum and maximum lots sizes applicable for different categories of investors in the IPO of Le Travenues Technology Ltd (Ixigo).

It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Financial highlights of Le Travenues Technology Ltd (Ixigo)

The table below captures the key financials of Le Travenues Technology Ltd (Ixigo) for the last 3 completed financial years. 

Data Source: Company RHP filed with SEBI (FY refers to Apr-Mar period)

There are few key takeaways from the financials of Le Travenues Technology Ltd (Ixigo) which can be enumerated as under
a)    In the last 3 years, revenue growth has been robust with the sales revenues have grown more than 3-fold in the last 2 years. We are not comparing the data for previous year as the last year was a year of losses due to absence of economies of scale amidst the aftermath of COVID related restrictions on contact intensive services. 

b)    The net profits in the latest year FY23 have turned around from losses while it is up nearly 3-fold compared to FY21. Also, the return on equity (ROE) at 5.79% and the return on assets (ROA) at 3.69% are relatively modest in the latest year. However, this is a business where the network effect allows scalability at minimal cost once the economics of scale set in. It has just reached that point.

c)    The company has a slightly lower sweating of assets at just around 0.80X in the latest year, although the average of the last 3 years is closer to 0.70X. However, this benefit gets magnified once the network effect of the ecommerce business sets in.
Overall, the company has maintained healthy numbers in terms of growth in top line and bottom line over FY21; and the scale is also now robust enough to generate profits.

Valuation metrics of the Le Travenues Technology Ltd (Ixigo) IPO

Let us turn to the valuations part. On the latest year diluted EPS of ₹0.57, the upper band stock price of ₹93 gets discounted at a P/E ratio of 163-164 times. However, this sort of high P/E ratios are normal in the value added ecommerce segment where the network effect and scale economies can raise profits geometrically in future years. If you look at the numbers for the first 9 months of FY24, the EPS is already at ₹1.75, so full year EPS can be extrapolated to ₹2.33 per share. It now translates into P/E ratio of 39-40 times, which looks a lot more reasonable.
Here are some qualitative advantages that Le Travenues Technology Ltd (Ixigo) brings to the table. 

• Ixigo has a dominant position in the OTA segment, especially considering that its network effect and scale are just about setting in and likely to impact growth in profits.
• The ability to leverage AI for offering predictive analysis for travel plans is a major value addition and that cannot be quantified at this point in time.

If you add up the qualitative factors and the valuation on forward P/E of FY24, the story look attractive and reasonably priced. Investors must look at this franchise from a long term investment perspective but only with a higher risk appetite.