Travel & Rentals BSE SME IPO review (Apply)

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Review By Dilip Davda on August 27, 2024

•    The company provides comprehensive products for travel/visa related services and solutions.
•    It has a tie-up with LCCI and is also registered with TAAI and IATO.
•    The company marked steady growth in its top and bottom lines for the reported periods. 
•    Based on FY24 earnings, the issue appears reasonably priced. 
•    Investors may park funds for medium to long term. 

ABOUT COMPANY:
Travels & Rentals Ltd. (TRL) offers a comprehensive range of travel-related products and services for end-to-end travel solutions, including airline tickets, hotels and tour packages, rail tickets as well as ancillary value-added services such as travel insurance, passport & visa processing and tickets for activities and attractions.

TRL has also taken franchisee of Lufthansa City Center International GmbH (LCCI) since 2010 and has been granted right to operate under "Business Plus Lufthansa City Center" in India in the year 2013. LCCI has world-wide travel agency franchisee network in around 580 locations in 105 countries. Being a franchisee of Lufthansa City Center, it is authorized to use the brand name of Lufthansa City Center of our business activities. Recently this year, the company has entered into Sales and Marketing Agreement with Group Voyagers Inc. [registered under the trade names of Globus, Cosmos and Avalon Waterways ("Globus family of brands")] for the sale of Globus family of brands travel products in India.

TRL is accredited by IATA (International Air Transport Association, Geneva, Switzerland), recognized by Ministry of Tourism, Government of India, member of TAAI (Travel Agent Association of India) and member of IATO (Indian Association of Tour Operators).

Its Business is completely dependent on the geographical changes. The current environmental conditions going on in the destination is very important for a customer. Customers choose a destination depending upon the month of travel, as not all destinations are travelable in all seasons of the year. It offers best services to all customers by understanding client's needs and strive to deliver beyond their expectations. The company is always committed to fulfil the requirements of clientele according to their needs. In order to meet these requirements, it has adapted to best measures in the industry. A professional approach and constant interaction ensure client requirement is met with high standard within the agreed guidelines of time and cost. Its impressive growth has been largely due to confidence in its own capability and impressive infrastructure it has created over the years. The company has been steadily diversifying as well as adding new packages to its portfolio. As of March 31, 2024, it had 58 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 3060000 equity shares of Rs. 10 each at a fixed price of Rs. 40 per share to mobilize Rs. 12.24 cr. The issue opens for subscription on August 29, 2024, and will close on September 02, 2024. The minimum application to be made is for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 27.31% of the post-IPO paid-up capital of the company. The company is spending Rs. 1.71 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 8.03 cr. for working capital, and Rs. 2.50 cr. for general corporate purposes. 

The issue is solely lead managed by Finshore Management Services Ltd., and Cameo Corporate Services Ltd. is the registrar to the issue. Black Fox Financial Pvt. Ltd. is the market maker for the company. 

Having issued initial equity shares at par value, the company issued further equity shares at a price of Rs. 40 (on the basis of Rs. 10 FV) in November 2022 and December 2023. The company has also issued bonus shares in the ratio of 25 for 10 in December 2023. The average cost of acquisition of shares by the promoters is Rs. 2.86, Rs. 4.75, and Rs. 6.66 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 8.14 cr. will stand enhanced to Rs. 11.20 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 44.81 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 2.91 cr. / Rs. 0.69 cr. (FY22), Rs. 5.79 cr. / Rs. 1.51 cr. (FY23), Rs. 8.04 cr. / Rs. 2.97 cr. (FY24). The company marked steady growth in its top and bottom lines.

For the last three fiscals, it has reported an average EPS of Rs. 2.72, and an average RoNW of 19.14%. The issue is priced at a P/BV of 2.20 based on its NAV of Rs. 18.16 as of March 31, 2024, and at a P/BV of 1.66 based on its post-IPO NAV of Rs. 24.12 per share. 

If we attribute FY24 earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 15.09. Thus the issue relatively appears fully priced.

For the reported periods, the company has posted PAT margins of 23.75% (FY22), 26.01% (FY23), 36.91% (FY24), while RoCE margins data is missing from offer document respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Sailani Tours as their listed peers. It is trading at a P/E of 40.8 (as of August 27, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 27th mandate from Finshore Management in the last four fiscals (including the ongoing one), out of the last 26 listings, 7 issued closed at discount and the rest 19 closed with premiums on the date of listing. 

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