IPO Size: Rs. 740 cr

• Rs. 620 cr Offer For Sale (OFS) – 36% by 2 founders (17% combined stake to shrink to 10%), 30% of OFS is sale by SAIF Partners (23% stake to drop to 18%), 20% by Peak XV (16% to reduce to 12%) and balance by other financial investors 
• Rs. 120 cr fresh issue for working capital (Rs. 45 cr), technology investment (Rs. 26 cr) and balance for unidentified acquisition and general corporate purposes

Price band: Rs. 88-93 per share

M cap: Rs. 3,603 cr, implying 21% dilution

• 75% allocation to QIBs and only 10% for retail, as operating profit below Rs. 15 cr in FY21 and FY22

IPO Date: Mon 10^th Jun to Wed 12^th Jun 2024, Listing: Tue 18^th Jun 2024

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

Indian Online Travel Agent (OTA)

Le Travenues Technology, operating under brand name Ixigo, enjoys a 6.5% overall market share in online travel bookings in India, comprising flight, rail and bus bookings. It is India’s largest OTA for rail bookings, which accounts for nearly half of Rs. 600 cr annual revenue. Flight and bus bookings account for about 21% and 17% of revenue respectively.

Business Model

Company’s revenue is the commission earned on gross transaction value i.e. take rate, which is at  6-6.5% average, on a net basis. For 9MFY24, gross transaction value was Rs.7,600 cr with revenue of Rs.491 cr. Excluding one-time exceptional gain of Rs. 30 cr, 9MFY24 profit before tax stood at Rs. 19 cr. Reported PAT of Rs. 66 cr includes Rs. 17 cr deferred tax credit, hence not appropriate to extrapolate. Thus, company currently clocks Rs. 25 cr of annual profit, on Rs. 660 cr of topline, implying 3.8% net margin.

Not Sizeable for a 17 year Old Business

Company has raised over Rs. 425 cr in equity capital till date, and yet the current annual profit run rate is barely Rs. 25 cr. And this is for a ‘technology’ business, with an asset light model. There is not much operating leverage, as contribution margin (similar to gross profit margin) is just 44%. Ixigo’s EBITDA margin of 9% also trails peers – Yatra (13%) and Easy Trip (41%). Incidentally, net worth as of 31.12.23, is Rs.437 cr. But capital turnover ratio is barely at 1.5x.

No Valuation Comfort

M cap of Rs. 3,600 cr and enterprise value of Rs.3,480 cr leads to a PE multiple of 80x, even if Rs. 45 cr PBT is estimated for FY25E. Peers are ruling much lower - Easy Trip at 50x while Nasdaq-listed Makemytrip at 60x. Yatra’s revenue multiple of 4.3x is also lower than Ixigo’s 5.3x, with the former being down form IPO price undertaken 8 months ago, despite travel sector booming. Thus, Ixigo’s valuation does not provide any comfort.

Secondary sale of Ixigo shares was undertaken in Feb 2024, majorly at Rs. 84.52 per share. A higher price in 3 months, when Easy Trip and Yatra share prices are down seem unjustified.

Other Red Lights

• This is company’s 2^nd attempt at IPO, with a lower size, while the first filing was in Aug 2021.
• 2 founders are cashing out Rs. 111 cr each, via OFS, with their combined holding shrinking to just 10% post listing.
• As the company is professionally managed with no identifiable promoter, post listing selling overhang will remain (9% of post issue shares have no lockin at all, 30% held by PE investors for over 8 years, while another 15% is held by the financial investors).