[What The Financials] Traveltech Startup RateGain’s Profit Recedes 92%; Revenue At INR 106 Cr In FY20

Noida-based travel and hospitality software-as-a-service (SaaS) startup RateGain has reported another profitable year on a standalone basis, but with 92% reduction in margins. Its profit dropped down to INR 76 Lakh in FY20 from INR 10.3 Cr in FY19. This was majorly due to nearly 10% increase in the company’s expenses, from INR 95.5 Cr to INR 104.6 Cr, in the same time frame.

RateGain’s revenue dipped marginally year-on-year from INR 106.6 Cr to INR 105.7 Cr in FY20, even though its operational income through sale of services grew 5%. The company’s operational revenues were at INR 91.9 Cr in FY20 compared to INR 87.6 Cr in FY19, as reported by RateGain Travel Technologies Private Limited.

The fall in revenue was due to a 27% decrease in non-operating income, from INR 18.9 Cr to INR 13.7 Cr. This non-operating income was earned through mutual funds, fixed deposits and interest income.

The increase in RateGain’s expenses was due to employee benefits expenses, which grew 11.5% from INR 66.8 Cr in FY19 to INR 74.5 Cr in FY20. The company paid INR 65 Cr as salaries and bonuses in FY20 compared to INR 49.1 Cr in the previous year. Besides this, INR 6.4 Cr was paid as employee compensation expenses in FY20 compared to INR 15.4 Cr in FY19. It has over 550 employees across the globe.

The company’s expenses on contractual manpower cost also went up to INR 4.8 Cr in FY20, representing a 30% hike from FY19’s to INR 3.7 Cr. Its software and license fee grew 129%, from INR 83 Lakh to INR 1.9 Cr in the same time frame.

RateGain Leverages 240 Bn Data Point To Help 12K Customers

RateGain, founded in 2004 by Bhanu Chopra, 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 based on what competitors or other hotels in the vicinity are charging. It also provides hotels information on what people are saying about their property or concept online.

It also helps hospitality businesses 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, OTA ranks and pricing strategy into logical insights. Once the pricing is set, RateGain’s distribution partners bring the hotel products to online ticketing platforms.

The travel and hospitality startup claims to have over 240 Bn data points, helping over 12,000 customers. RateGain’s customer list includes OTAs like MakeMyTrip, Travco and Expedia; airlines like Brussels Airlines, Azul Airlines, OYO and Volotea; hotels like Archipelago International Hotels, Banyan Tree Hotels & Resorts, Indigo and Tauzia Hotels, and others.

RateGain’s Revenue Expected To Slide Further In FY21 Due To Raging Pandemic

While RateGain’s performance in FY20 wasn’t great  the company’s financial performance is likely to take a further hit in FY21(April 2020 to March 2021) as the period was clouded by Covid-induced travel restrictions. FY21 was was one of the worst years for travel tech companies, where even big giants reported massive decline in revenues.

MayMyTrip, which is one of the biggest OTAs, reported a 95.5% annual drop in its revenue in Q1 of FY21. The company only earned  $6.4 Mn versus $141.7 Mn in the quarter ended June 30, 2020. The performance recovered only 69% in the next quarter, amounting to a revenue of $21 Mn. Similarly, Yatra.com’s revenue too dropped down 91% to INR 19.2 Cr ($2.5 Mn) in Q1 of FY21 versus INR 225 Cr ($32.7 Mn) in Q1 FY20.

The year was filled with salary cuts, furloughs and layoffs for companies like OYO, which had its operations spread across 80 countries. The company’s revenue dropped 50-60%. The profit and loss statement for all travel and hospitality companies is expected to  have a similar story for FY21, which may further continue in FY22 as the ongoing second wave of Covid has kept all the companies in the sector under pressure.