Evaluating Le Travenues Technology Ltd IPO opportunity; Should you invest?

In this analysis, we take a closer look at Le Travenues Technology Ltd and present you with the exclusive IPO details.

About the Issue:  

Le Travenues Technology Ltd is set to launch its initial public offering (IPO) for equity shares, each with a face value of Re 1. The IPO price range is set between Rs 88 and Rs 93 per equity share, resulting in a total issue size of Rs 740.10 crore at the upper price band.  

The IPO is scheduled to commence on June 10, 2024, and will conclude on June 12, 2024. The market lot size for the IPO is 161 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 13 lots, equivalent to 2,093 shares or a total investment of Rs 1,94,649 assuming the upper price band.   

Objects of the Issue  

The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:

1. Part-funding working capital requirements of the company

2. Investments in cloud infrastructure and technology

3. Funding inorganic growth through unidentified acquisitions and other strategic initiatives and general corporate purposes.

Promoter holding  

The company states that it is professionally managed and does not have any identifiable promoter.

Company profile  

The company, popularly known as ‘ixigo’, is a technology-driven enterprise dedicated to empowering travellers to plan, book, and manage their trips. Focusing on the 'next billion users' market segment, it emphasizes travel utility and customer experience through innovative, cost-efficient solutions. The company's OTA platforms enable travellers to book train tickets, flight tickets, bus tickets, and hotels, while offering a suite of travel utility tools and services.

These include in-house proprietary algorithms and crowd-sourced information for train PNR status and confirmation predictions, seat availability alerts, train running status updates, delay predictions, alternative route or mode planning, flight status updates, automated web check-in, bus running status, pricing and availability alerts, deal discovery, destination content, personalized recommendations, instant fare alerts for flights, an AI-based travel itinerary planner, and automated customer support services.

The company partnered with IRCTC in 2017, allowing it to act as a principal service provider on a non-exclusive basis for booking reserved e-tickets for train travel in India through the IRCTC web service. This agreement is valid until April 30, 2028.

According to the F&S Report, the company is the leading OTA focused on solving the problems of Tier II and Tier III travellers and is the second largest OTA in India based on consolidated revenue from operations in Fiscal 2023. It boasts the highest app usage among OTAs, with 83 million monthly active users across its apps as of September 2023.

The company's registered users increased from 64.66 million as of March 31, 2021, to 169.74 million as of March 31, 2023, growing at a CAGR of 62.02 per cent. Additionally, the repeat transaction rate was 86.06 per cent in the nine months ended December 31, 2023.

Financials  

The company has consistently achieved substantial revenue growth over the past few years. Profitability has also shown strong growth, with the exception of FY22. According to the management, the setback in FY22 was due to the pandemic and adjustments related to the Employee Stock Option Scheme (ESOS). The figures for the first nine months of FY24 are equally impressive, indicating robust growth for the full fiscal year if the current momentum continues.

Valuation and outlook  

The issue is priced with a P/BV ratio of 8.14 times, calculated using its Net Asset Value (NAV) of Rs 11.43 as of December 31, 2023. When we calculate the PE ratio for the company by considering the annualized FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 40. While the company demonstrated superior performance relative to its listed peers, its lower returns are justified by the attractive valuation.

The company’s reliance on the agreement with IRCTC for train ticketing services is crucial; termination of this agreement could have a material adverse effect on the company's operations, cash flows, financial condition, and business prospects. However, its strengths include operating in an industry with immense potential, leveraging AI and technology-driven operations, established consumer travel brands, and a diversified business model.

Hence, we advise investors to contemplate subscribing to the offering with a long-term perspective.