RateGain Shares Command A Premium Of INR 60 In Grey Market

SUMMARY

The price band of the IPO was INR 405-INR 425 per share

It raised INR 598.83 Cr in the anchor investment round

For FY21, the Delhi NCR-based startup reported a net loss of INR 28.57 Cr, 42% higher on a year-on-year basis

The initial public offering (IPO) of travel tech startup RateGain closed on Thursday with 17.41 times subscription backed by healthy investor interest.

Shares of RateGain command a premium of around INR 60 compared to the issue price of INR 425, traders said. The price band of the IPO was INR 405-INR 425 per share.

The shares are expected to get listed on the exchanges by December 17, 2021.

RateGain is a Software as a Service (SaaS) company in the hospitality and travel industry in India with clients include some of the leading global airlines, hotel chains, cruises, car rental companies among others.

Traders are optimistic of the company’s shares given the prospects for the travel and hospitality industry in the long run.

A recent IPO review note by ICICI Securities said, “The company serves a large and rapidly growing total addressable market. Third party travel and hospitality technology is estimated to be a US$ 5.91 billion market in 2021 growing to an estimated $11.47 Bn in 2025 at a CAGR of 18%.”

Enterprise applications focused on guest acquisition, distribution, revenue maximisation and wallet share expansion in the hospitality and travel industry have a serviceable addressable market size of $4.34 Bn in 2021, growing to an estimated $8.45 Bn by 2025, it said.

“This is a large and rapidly growing addressable market opportunity for a vertical specific platform company like RateGain. The travel technology segment is further favoured by industry tailwinds of digitisation in the post Covid times,” ICICI Securities said in its note.

Anchor Investment

On Monday, RateGain raised INR 598.83 Cr in the anchor investment from 34 anchor investors at the upper price band of INR 425 per equity share.

Some of the key anchor investors included — the Government of Singapore, Monetary Authority of Singapore, Nomura, ICICI Prudential Mutual Fund, SBI Life Insurance, Nippon Mutual Fund, Pinebridge, Axis Mutual Fund, Birla Mutual Fund and ICICI Prudential Life Insurance.

Shareholding

As on filing of the red herring prospectus (RHP), promoters held a majority stake (68.35%) in the startup including 50.34%,16.12% and 1.90% stake held by Bhanu Chopra, Meghna Chopra and Usha Chopra respectively.

On the other hand, Wagner held 16.13% stake in the company.

Utilisation Of the Net Proceeds

As per the RHP, RateGain will use INR 85.26 Cr to repay a loan taken by RateGain UK from Silicon Valley Bank. Further, it will use INR 25.2 Cr of the proceeds in deferred consideration for the DHISCO acquisition from 2018.

The company has proposed to allocate INR 40.77 Cr to purchase capital equipment for its data centre.

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.

RateGain: The Financials

For the last financial year (FY21), the Delhi NCR-based startup reported a net loss of INR 28.57 Cr, 42% higher than INR 20.10 Cr of net loss registered in FY20. Its revenue from operations fell 37% to INR 250.79 Cr in FY21, compared to INR 398.71 Cr reported in FY20.

Founded in 2004 by Bhanu Chopra, RateGain offers a SaaS product that helps travel and hospitality companies streamline operations and sales. It enables them to determine the right pricing for their products based on the demand, the current market rates that help hotels and booking agents to maximise revenue.

Its clientele includes InterContinental Hotels, Lemon Tree Hotels, The Kessler Collection and another IPO-bound travel unicorn OYO Hotels and Homes.

IPO Bandwagon

As the travel tech startup is expected to get listed in the coming week, it will join the startups to have been listed on a stock exchange of late.

Recent listings of new age companies on the domestic exchanges include Nykaa, Fino Payments Bank, Policybazaar and Paytm

FSN E-Commerce, the parent company of lifestyle major Nykaa witnessed a bumper listing with a 79% premium last month. Insurtech unicorn Policybazaar got listed with a premium of 17%.

The mega IPO of Paytm, however, witnessed a weak market debut with a over 9% discount on November 18. Fino Payments Bank also listed with a discount of 5% on November 12.