RateGain makes a weak stock market debut, lists 15% below issue price

RateGain Travel Technologies (RTTL) has made a weak stock market debut, with its shares listed at Rs 360, a 15 per cent discount to its issue price of Rs 425 per share on the National Stock Exchange (NSE). The stock opened at Rs 364.80, a 14 per cent lower from its issue price on the BSE.

At 10:02 am; the stock was traded at Rs 372, a 12 per cent discount when compared to its issue price. The stock so far had hit a high of Rs 375.05 and a low of Rs 342.30 in intra-day trade on the BSE. On the NSE, the stock hit a high of Rs 378.90 and a low of Rs 340.25 so far. A combined around 5 million equity shares changed hands on the NSE and BSE.

The Rs 1,336 crore initial public offer (IPO) of RTTL had received a good response from the investors. The issue was subscribed 17.4 times. The qualified institutional buyers (QIBs) portion of the issue was subscribed 8.42 times, while those of non institutional investors was subscribed 42.04 times and that of retail individual investors (RIIs) was subscribed 8.08 times, the data showed.

RTTL is among the leading distribution technology companies globally and is the largest Software as a Service (“SaaS”) company in the hospitality and travel industry in India, which is expected to benefit thrust on technology spending in the space. It operates through three business units of DaaS, Distribution and MarTech. The clients include some of the leading global airlines, hotel chains, cruises, car rental companies etc.

The company serves a large and rapidly growing total addressable market. Third party travel and hospitality technology is 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 per cent. 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 $4.34 billion in 2021, growing to an estimated US$ 8.45 billion in 2025.

This is a large and rapidly growing addressable market opportunity for a vertical specific platform company like RateGain. The travel technology segment is further favoured by industry tailwinds of digitization in the post COVID times, ICICI Securities said in IPO note.

As the largest SaaS provider in the travel and hospitality industry in India, RateGain Travel Technologies has a promising future. However, the company has suffered losses in the last two years due to COVID, and the rising number of cases remains concerning, said Aayush Agrawal, senior analyst at Swastika Investmart.

The cost of acquisition of the equity shares by Avataar and Wagner, the investor selling shareholder, pursuant to conversion of the Series A CCCPS and Series B CCCPS held by them may be below the offer price.

The substantially all of 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 business, prospects, financial condition and results of operations. The COVID-19 pandemic has had a significant adverse effect on the business and operations, and its future impact on the business, operations and financial performance is uncertain, are among key concerns said HDFC Securities in IPO note.