Rategain Travel Technologies Ltd. - IPO Note

IT - Software Services

Rategain Travel Technologies Ltd. - IPO Note

IT - Software Services

Price range
Rs. 405-425
Issue Period:
Dec 07, 2021
Dec 09, 2021
December 06, 2021

Stock Info

CNX Nifty
Face value (Rs.)
Market lot
Issue size
Rs. 1336 cr.
Public Issue
3.14 cr. shares
Market cap post IPO
Rs 4537 cr.
Equity Pre - IPO
Rs 9.79 cr.
Equity Post - IPO
Rs 10.68 cr.
Issue type
Fresh Issue & Offer for sale

Shareholding (Pre IPO)

Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Source: Ace equity, StockAxis Research

Key Strengths

Marquee global customers with long-term relationships
Rategain has global and diverse customer base with which they have long-standing relationships. As of September 30, 2021, the customer base stood at 1,462 customers including eight Global Fortune 500 companies comprising of both travel suppliers and travel intermediaries including airlines, hotels, cruise lines, car rental companies, online travel agents (OTA’s), tour operators and wholesalers. Their customers include 25 out of the top 30 OTAs, several of the world’s fastest-growing airlines, 23 of the top 30 hotel chains, tour operators & wholesalers and the largest travel management companies. Rategain also works with seven global car rental companies and major cruise lines.

Innovative AI driven industry relevant SaaS solutions provider
The company offers a comprehensive platform of industry-specific solutions with growth and monetization capabilities. Given the fragmented nature of the hospitality and travel industry, they have developed products that are inter-operable and integrate across a single platform allowing customers to maximize their revenues along with cost savings. Rategain has built proprietary AI algorithms and applied it in connection with its SaaS products to provide customers with next generation of product features. Their suite of products for rate intelligence include OPTIMA, Parity+, AirGain, CarGain and FerryGain that offer customers competitive pricing intelligence leveraging an AI-powered data platform while tracking real-time parity with features such as advanced dashboards, identification of key violators and reasons, revenue leakage. Their revenue optimization products, Rev.AI offer revenue management through historical pricing insights. Rategain’s continuous innovation, as well as strategic acquisition of technological capabilities, helps them to continuously expand and extend the addressable market.

Diverse and comprehensive portfolio of revenue maximization and business critical solutions
The company has developed a comprehensive product portfolio that caters to the technology ecosystem for the hospitality and travel industry and in particular, to enterprise and mid-market customers for revenue management decision support, competitive intelligence, distribution and social media marketing, online reputation and brand engagement. The scale of Rategain’s operations allows its customers globally to streamline their operations and increase revenues.

Continued focus to scale DaaS and Distribution offerings through cross-sell and geographical expansion in existing and adjacent verticals
Over the last 15 years, Rategain has introduced various products that provide access to rate intelligence to customers in the hospitality and travel industry that gives them a real-time and accurate view of the market. The company intends to expand its existing product offerings into segments of the hospitality and travel that are expected to grow following greater normalization of travel as COVID-19 recedes. They also intend to leverage their portfolio of products and products under development to provide additional solutions to existing customers. The interoperability of company products displaces point solutions with bundled offerings to customers. For example, to assist customers that require both rate intelligence and distribution capabilities, it has launched Demand.AI that provides an aggregated, real-time view of demand based on data-mining across various silos including internet searches, flight activity, local COVID-19 lockdown rules, booking engine inventory and pricing data.

High customer retention rates:
Company’s AI enabled platform and technology focused offerings, 24x7 customer support, quick resolution of issues and customer feedback mechanism to improve customer satisfaction has led to consistent customer retention rates. For example, 7 out of top 10 customers have been with the company for more than 10 years and certain key customers including Sabre GLBL Inc., have been associated with the company since 2003. Gross Revenue Retention has consistently remained high at 92.78%/95.46%/89.24% in FY19/20/21, respectively.

New product development capabilities:
Rategain is substantially investing in existing as well as new products to build capabilities that will be used by travel companies in the post COVID-19 era. These AI-led products will offer real time intelligence and make pricing recommendations for revenue maximization.


Revenue, which is dependent on hospitality and travel industry, can be impacted by COVID
RateGain substantially derives its revenues from worldwide travel and hospitality industry. Revenue decreased by 37.1% in FY21, primarily on account of impact of COVID-19 pandemic on all three business segments.

High revenue concentration from top clients
Revenue contribution from top 10 customers was 40.8%/41.0%/36.9% during FY19/20/21. Certain customers, including customers that represent a significant portion of Rategains business, have in the past reduced their spend or terminated their agreements with the company. Losing few of these top clients may significantly impact financials of the company.

Company has contingent liabilities that have not been provided in financial statements
As on FY21, the company had contingent liabilities worth (Indirect Tax expenses) Rs 68 crores. If a significant portion of these liabilities materialize, it could have an adverse effect on RateGain’s financial performance.

Major portion of the IPO is OFS:
Although the company is raising funds to meet a number of objectives, major portion of the IPO consists of OFS, where the selling shareholders will receive the money.

Steep valuation given current market conditions:
At the upper price band of Rs 425, the IPO is valued at ~18x FY21 sales.

Company Description

Rategain Travel Technologies is among the leading distribution technology companies globally and the largest Software as a Service (“SaaS”) company in the hospitality and travel industry in India. The company offers travel and hospitality solutions across a wide spectrum of verticals including hotels, airlines, online travel agents (“OTAs”), meta-search companies, vacation rentals, package providers, car rentals, rail, travel management companies, cruises and ferries. They are one of the largest aggregators of data points in the world for the hospitality and travel industry. Rategain also offers a suite of inter-connected products that manage the revenue creation value chain for customers by leveraging big-data capabilities and integration with other technology platforms helping hospitality and travel providers acquire more guests, retain them via personalized guest experiences and seek to maximize their margins. As of September 30, 2021, the company serves 1,462 customers including eight Global Fortune 500 companies.


Rategains superior product portfolio integrated across all value chain partners enables it to access data at granular level which cannot be easily replicated. Also they have a highly predictable and scalable business model. COVID had impacted their business in FY21, however, we do not expect COVID third wave to significantly impact the business operations this time. At the upper price band of Rs 425, the IPO is valued at ~18x FY21 sales. Hence, we recommend investors to SUBCRIBE to the IPO for long term.

Key Information

Use of Proceeds:
The offer comprises of a fresh issue and an offer for sale. Out of the fresh Issue of Rs 375 crores, Rs 82 crores is proposed to be utilized for repayment and/or prepayment of debt availed by Rategain UK, Rs 25 crore for payment of deferred consideration for acquisition of DHISCO, Rs 80 crore for strategic investments, acquisition, and inorganic growth, Rs 50 crores for investment in technology innovation, artificial intelligence, and other organic growth initiatives, Rs 41 crores for purchasing capital equipment for the company's data center and the balance Rs 94 crores is to be used for general corporate purposes. The balance ~Rs 960 crores of the issue would be through offer for sale by the shareholders and proceeds would go to such selling shareholders.

Book running lead managers:
Kotak Mahindra Capital, IIFL Securities, Nomura Financial Advisory and Securities

Mr. Bhanu Chopra is the founder and executive chairman of RateGain. He has rapidly grown the company since 2004. The senior management team has over a decade of experience each in contribution to revenue growth in SaaS and hospitality and travel sectors. They have extensive go-to market and product development experience. Given that senior management team is located across three continents, Rategain benefits from teams across multiple geographies including go-to market teams that are located near enterprise and mid-market customers allowing it to maintain relationships with them.

Financial Statement

Profit & Loss Statement:- (Consolidated)

Yr End March (Rs Cr) FY19 FY20 FY21
Net Sales 261.57 398.71 250.79
Employee Cost 120.83 205.80 151.26
Other Expenses 118.99 164.21 93.37
EBITDA 21.75 28.70 6.16
EBITDA Margin 8.00% 7.00% 2.00%
Depreciation & Amortization 20.22 96.44 35.88
EBIT 1.53 -67.74 -29.72
Other Income 11.13 58.90 13.30
Interest & Finance Charges 3.18 8.93 8.20
Profit Before Tax - Before Exceptional 9.48 -17.77 -24.62
Tax Expense -1.55 2.34 3.95
Effective Tax rate -16.00% 26.00% -16.00%
Net Profit 11.03 -20.11 -28.57
Net Profit Margin 4.00% -5.00% -11.00%