Le Travenues (IXIGO) IPO Review (Apply)

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Review By Dilip Davda on June 6, 2024

•    LTTL is one of the fastest growing OTA player with its popular brand "IXIGO".
•    After suffering a setback for the Pandemic year, it is on a steady growth path.
•    9M-FY24 earnings includes exception item worth Rs.29.72 cr.
•    Based on annualized FY24 earnings, the issue appears fully priced. 
•    Investors may lap it up for the long term rewards.

ABOUT COMPANY:
Le Travenues Technology Ltd. (LTTL)- popularly known as "IXIGO" is a technology company focused on empowering Indian travellers to plan, book and manage their trips across rail, air, buses and hotels. Its vision is to become the most customer-centric travel company, by offering the best customer experience to users. LTTL's focus on travel utility and customer experience for travellers in the 'next billion users' market segment is driven by technology, cost-efficiency and its culture of innovation. 

Company's OTA platforms allow travellers to book train tickets, flight tickets, bus tickets and hotels, while providing 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 running status updates and delay predictions, ices.

According to the F&S Report, LTTL is the leading OTA for the 'next billion users', with its focus on localized content and app features that aim at solving problems of Tier II/ Tier III travellers. (Source: F&S Report). It is the second largest OTA in India in terms of consolidated revenue from operations in Fiscal 2023. (Source: F&S Report). The company is also the leading OTA for the 'next billion users', and in September 2023, ixigo flights, ixigo trains, ConfirmTkt and AbhiBus have 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 (Source: F&S Report).

LTTL is the largest Indian train ticket distributor in the OTA rail market and it had the largest market share of around 51%, in terms of rail bookings, among OTAs, as of March 31, 2023. Its market share in India in the OTA rail market was 46.15% in Fiscal 2023 and increased from 46.4% in the first half of Fiscal 2023 to 52.4% in the first half of Fiscal 2024. (Source: F&S Report).  Its bus-focused app, AbhiBus, was the second largest bus-ticketing OTA in India, with a 11.5% market share in online bus ticket bookings in Fiscal 2023 which increased further to 12.5% in the first half of Fiscal 2024. (Source: F&S Report). The company had a market share in India of nearly 5.2% of the total airline OTA market by volume in the first half of Fiscal 2024 up from 3.3% in Fiscal 2023. (Source: F&S Report). LTTL is also the fastest growing OTA in India, in terms of revenue from operations between Fiscal 2020 and Fiscal 2023. (Source: F&S Report). 

Its revenue from operations have grown at a CAGR of 92.29% between Fiscal 2021 and Fiscal 2023. It has the highest app usage among OTAs with 83 million Monthly Active Users cumulatively across its apps, as per data.ai in September 2023. (Source: F&S Report). The company is also the fastest growing OTA in terms of app downloads, with 4.9 million monthly app downloads as per data.ai in September 2023, which was more monthly app downloads than all other OTAs in that month. (Source: F&S Report). 

As of March 31, 2023, it had 429.38 million Annual Active Users and 49.07 million transactions were booked through its OTA platforms in Fiscal 2023. As of December 31, 2023, it had 213.21 million Registered Users, i.e., users who have provided their unique mobile number or email address, as applicable, on its platforms as of the relevant date, and 42.00 million transactions were booked through its OTA platforms in the nine months ended December 31, 2023. In 2022, ixigo trains app was the 8th most downloaded travel and navigation app globally as per data.ai (formerly App Annie). (Source: F&S Report).  As per data.ai (formerly App Annie), in 2022, the ixigo trains app and ConfirmTkt app was also featured in the top 10 travel apps in India with the ixigo trains app ranked 2nd and ConfirmTkt ranked 7th, in terms of most downloaded travel apps. 

LTTL has a significant penetration in the 'next billion users' market. '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 i.e., all travel demand originating from and/or concluding in Tier II, III and rural areas in India as well as "new to Internet" users emerging from middle and lower income groups of Tier I cities. (Source: F&S Report). In the next five years, it is expected that 20% of the 'next billion users' will come from Tier I cities, and a substantial 50% to come from Tier II and Tier III cities, and significantly, the rest of 30% will come from rural India. (Source: F&S Report). 

In 2023, the 'next billion users' comprised over 60%-65% of the overall travel market. (Source: F&S Report) In the nine months ended December 31, 2023 and December 31, 2022 and in Fiscals 2023, 2022 and 2021, the percentage of transactions booked through LTTL's OTA platforms where either an origin or destination was a non-Tier I city (non-Tier I transactions), were 93.83%, 94.50%, 94.39%, 95.26% and 92.60%, respectively. Its focus on addressing travel-related issues of the 'next billion users' has enabled improved engagement and customer satisfaction, a fact reflected by 23 monthly average sessions per user per month in September 2023, which was the highest engagement among all OTAs in India in such period (Source: F&S Report). The company focuses on solving travel utility needs as well as transactional use-cases of its users in order to establish itself as a customer focused technology company in the online travel industry. By leveraging its utility-focused OTA platforms, it has been able to enhance use of its offerings, and sell travel services, such as tickets and bookings for trains, flights, buses and hotels, to users.

Over the lifecycle of its users, LTTL has been able to cross-sell and up-sell tickets and Value-Added Services or services ancillary to its booking offerings and include services such as ixigo Assured, ixigo Assured Flex, Abhi Assured, seat 1.81% in March 2021 to 4.32% in March 2022 and was 3.40% in March 2023, while it was 3.22% and 3.39% in December 2023 and December 2022. The company is also able to cross-sell flight bookings to next billion users-focused app users, or users of ixigo trains app, ConfirmTkt and AbhiBus.

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.

It has been granted an API-based connection access to the Indian Railways' passenger reservation system online by IRCTC, as a result of which users are allowed to reserve and purchase Indian Railways tickets on a real-time basis. It offers discounts on users' first booking and other deals and discounts on future railway reservations. Users are required to enter IRCTC user ID if they already have one or make a new one with IRCTC which can also be made through its app and then users need to enter the journey date, origin and destination to search for all train routes, availability and fares. LTTL's platforms provide updated information about train ticket booking, such as seats and classes of trains that are available, as well as their corresponding fares updated in real-time to make train bookings. Users can use different modes of payments, including all credit and debit cards, net banking, wallets as well as other UPI payment options. As of December 31, 2023, it had 486 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden combo IPO of fresh equity shares issue worth Rs. 120 cr. (approx. 12903184 shares) at the upper cap, and an offer for sale (OFS) of 66677674 shares (worth Rs. 620.10 cr. at the upper cap. Thus the overall size of the IPO will be 79580858 shares worth Rs. 740.10 cr. The company has announced a price band of Rs. 88 - Rs. 93 per share of Re. 1 each. The issue opens for subscription on June 10, 2024, and will close on June 12, 2024. The minimum application to be made is for 161 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 20.54% of the post-IPO paid-up capital of the company. From the net proceeds of the fresh equity issue, the company will utilize Rs. 45.00 cr. for working capital, Rs. 25.80 cr. for investment in technology and data science, and the rest for inorganic growth and general corporate purposes. 

The company has allocated not less than 75% for QIBs, not more than 15% for HNIs and not more than 10% for Retail investors. 

The joint Book Running Lead Managers (BRLMs) to this issue are Axis Capital Ltd., DAM Capital Advisors Ltd., and JM Financial Ltd., while Link Intime India Pvt. Ltd. is the registrar to the issue. 

After issuing initial equity shares at par value, the company issued/based of Re. 1 FV) between December 2007, and May 2024. It has also issued bonus shares in the ratio of 399 for 1 in August 2021. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 0.37, Rs. 0.86, Rs. 7.14, Rs. 8.55, Rs. 11.32, Rs. 69.45, and Rs. 81.00 per share. 

Post-IPO, its current paid-up equity capital of Rs. 37.45 cr. will stand enhanced to Rs. 38.74 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 3603.04 cr. 

FINANCIAL PERFORMANCE:
On a consolidated basis, for the last three fiscals, the company has posted a total income/net profit/ - (loss) of Rs. 138.41 cr. / Rs. 7.53 cr. (FY21), Rs. 384.94 cr. / Rs. - (21.09) cr. (FY22), and Rs. 517.57 cr. / Rs. 23.40 cr. (FY23). For 9m of FY24 ended on December 31, 2023, it earned a net profit of Rs.65.71 cr. on a total income of Rs. 497.10 cr. According to the management, while company posted setback for FY22 on account of the pandemic and ESOS process adjustments, its 9M-fY24 net profit includes exceptional income of Rs. 29.72 cr. and even if it is not considered, the company marked growth in its bottom line over corresponding previous period. With the rising count of its users, the company is poised for a bright prospects and is confident that its other variants will add more users going forward.

For the last three fiscals, the company has reported an average EPS of Rs. 0.11, and an average RoNW of 4.51%. The issue is priced at a P/BV of 8.14 based on its NAV of Rs. 11.43 as of December 31, 2023, and at a P/BV of 6.62 based on its post-IPO NAV of Rs. 14.06 per share (at the upper cap). 

If we attribute FY24 annualized earnings (with exceptional income) to its post-IPO paid-up capital, then the asking price is at a P/E of 41.15. And if we attribute annualized FY24 earnings (without exception income), then the P/E stands at 75. Thus the issue appears fully priced.. Thus the issue appears fully priced. 

The offer document has posted company's EBITDA margins for the reported periods as 4.53% (FY21), - (1.83) % (FY22), 8.99% (FY23), and 6.99% (9M-FY24). However, the other KPI info like PAT and RoCE margins data are missing from it. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It has already approved a dividend policy in January 2022, based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Easy Trip Planners, and Yatra Online as their listed peers. They are trading at a P/E of 48.0, and NA (as of June 05, 2024). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
The three BRLMs associated with the offer have handled 61 public issues in the past three fiscals, out of which 17 issued closed below the offer price on listing date. 

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