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RateGain Files DRHP Ahead Of IPO; Targets Raising INR 400 Cr Through Fresh Issue

RateGain Files DRHP Ahead Of IPO; Targets Raising INR 400 Cr Through Fresh Issue

The IPO also comprises an offer for sale of up to 2,26,05,530 equity shares by existing investors

Among the entities selling shares is key RateGain investor Wagner, who will be offering up to 1,71,14,490 shares for sale,

The proceeds from the offering would primarily be used to repay a loan by RateGain UK from Silicon Valley Bank for INR 86.4 Cr

Travel tech company RateGain has joined the parade of Indian tech startups looking at a public listing in the next few months. The Noida-based travel and hospitality software-as-a-service (SaaS) startup has filed its draft red herring prospectus, ahead of a potential initial public offering (IPO). The IPO comprises a fresh issue of equity shares aggregating up to INR 400 Cr and an offer for sale of up to 2,26,05,530 equity shares.

Among the entities selling shares is private equity firm TA Associates, who will be offering up to 1,71,14,490 shares for sale through its associate Wagner. RateGain founder and CEO Bhanu Chopra will be offloading 40,43,950 shares. In addition, the founder’s family members Megha Chopra and Usha Chopra would be offering up to 12,94760 and up to 1,52,330 equity shares for sale in the offer. According to unconfirmed reports, the company is looking to raise a total of INR 1,200 Cr through the IPO.

Kotak Investment Banking, IIFL Securities, Nomura and KFin Technologies (Karvy) will be the book running lead managers for the IPO. Up to 75% of the offering is reserved for qualified institutional investors, while non-institutional investors have been allocated 15% of the offering, with the rest (10%) for retail investors.

The proceeds from the offering would primarily be used for repayment or prepayment of a loan by RateGain UK from Silicon Valley Bank for INR 86.4 Cr. Further, the company will use the funds raised for payment of INR 26.2 Cr in deferred consideration for the DHISCO acquisition from 2018.  It will also look to invest INR 80 Cr towards strategic investments, acquisitions and inorganic growth and INR 50 Cr for technology innovation, artificial intelligence and other organic growth initiatives, as well as data centre enhancements worth INR 43.3. Cr.

RateGain’s Business Model

Founded in 2004 by Bhanu Chopra, RateGain offers a SaaS product targeted at travel and hospitality companies to help them streamline operations and sales. The startup enables these businesses to determine the right pricing for their products based on the demand, the current market rates and more to help hotels and booking agents maximise revenue. The company’s pricing decisions are based on the prices set by competitors or other hotels in the vicinity. It also provides hotels information on what people are saying about their property or concept online.

Besides this, RateGain also enables hospitality businesses to reach more customers by increasing the distribution points by syndicating bookings across platforms and provides companies marketing insights from various social media channels to boost conversions. It breaks down market rate, travel aggregator rankings and reviews, and pricing strategy into logical insights. Once the pricing is set, RateGain’s distribution partners bring the hotel products to online ticketing platforms.

Like other travel sector startups, the pandemic severely impacted RateGain’s revenue from operations, even though the company managed to avoid a massive increase in losses by cutting its spending. The company’s revenue contracted by 37.10% in FY21, in comparison to FY20 — going down from INR 398.7 Cr to INR 250.7 Cr. This is even lower than the INR 261.5 Cr that RateGain had reported in FY2019 . Loss for FY21 increased from INR 20.1 Cr to INR 28.5 Cr, despite expenses coming down to INR 288 Cr in FY21 from INR 475 Cr in FY20.

Revenue from sale of services outside India was the largest contributor with a massive share of 99.24%, increasing from 99.07% last year. Revenue generated from sale of services in North America and Europe was INR 199.9 Cr or 79.74% of total revenue from operations in the year.

RateGain said it operates under three distinct business verticals: distribution as a service (DaaS), direct distribution and marketing technology. Its DaaS vertical clocked INR 93.37 Cr in revenue (37.23% of total revenue from operations), while distribution accounted for INR 121.8 Cr (48.57% of revenue) and marketing tech services sales brought in INR 35.6 Cr in revenue (14.2% of revenue) in FY21. “We have forayed into the MarTech (marketing tech) segment with a particular focus on the hospitality sector through our acquisition of BCV Social in 2019,” the company stated.

The filing mentions that RateGain’s customer base has grown from 1,190 active customers as of March 2019 to 1,337 as of March 2021 and the company has 1,434 active customers as of June 30, 2021. The company has customers in 110 countries and 459 permanent employees as of June 2021. It has incorporated subsidiaries in the United Kingdom, USA and Spain and has six offices across three continents.