Evaluating TBO Tek Ltd IPO opportunity; Should you invest?

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

About the Issue  

TBO Tek Ltd is launching its initial public offering (IPO) for equity shares valued at Re 1 each. The IPO price range is set between Rs 875 and Rs 920 per equity share, resulting in a total issue size of Rs 1,550.81 crore at the upper price band.  

The IPO is scheduled to commence on May 08, 2024, and will conclude on May 10, 2024. The market lot size for the IPO is 16 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 208 shares or a total investment of Rs 1,91,360 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. Expansion of the supplier and buyer base

2. Amplification of value of the company’s platform by adding new lines of businesses

3. Inorganic growth through selective acquisitions and building synergies with its existing platform

4. Leveraging data procured to offer bespoke travel solutions to its buyers and suppliers

Promoter holding  

Ankush Nijhawan, Gaurav Bhatnagar, Manish Dhingra, Arjun Nijhawan and LAP Travel Pvt Ltd are the promoters of the company. The promoters currently hold a pre-issue shareholding stake of 51.26 per cent in the company.

Company profile  

In 2006, the company conceptualised the TBO platform as a technological solution designed to streamline the process for travel agents to book airline tickets across various airlines. Today, the company stands as a leading travel distribution platform in the global travel and tourism industry, boasting significant revenue from operations for FY23. Operating in over 100 countries, it offers a diverse range of services.

It simplifies the travel business for suppliers, including hotels, airlines, cruises, rail services, car rentals, transfers, insurance, and others, as well as for retail buyers such as travel agencies and independent travel advisors. Moreover, it caters to enterprise buyers, such as tour operators and travel management companies, and online travel companies, through its two-sided technology platform. This platform enables seamless transactions between suppliers and buyers.

The company's reach extends widely, encompassing over 7,500 destinations across more than 100 countries. It handles a remarkable volume, with over 41,000 bookings processed daily through the platform as of FY23.

Financials  

Following a setback in FY21 due to the COVID-19 pandemic, the company experienced steady and robust growth from FY22 onwards. In FY23, both revenue and net profit witnessed substantial year-on-year growth, with an impressive 112 per cent surge in revenue and a remarkable 335 per cent growth in net profit compared to FY22. The 9MFY24 figures were equally impressive, suggesting robust growth for FY24 if the current pace is maintained.

Valuation and outlook  

The company states that it lacks direct comparable listed peers both in India and globally. While there are other listed Indian platforms in the travel industry, such as RateGain Travel Technologies Ltd, and global entities like Travel CTM and Webjet Ltd, the company may not align directly with them for comparison purposes.

The issue is priced with a P/BV ratio of 18.66 times, calculated using its Net Asset Value (NAV) of Rs 49.31 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 46.

In 2023, the travel and tourism industry reached a value of USD 1.9 trillion and is projected to grow at a CAGR of around 8.2 per cent, reaching USD 2.6 trillion by 2027. Given the substantial growth potential of the Indian tourism industry, the company is well-positioned for further expansion. Also, the business platform is creating a network effect through interconnected flywheels to enhance the value proposition for partners.

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