IPO Size: Rs. 1,551 cr 

• Rs. 1,151 cr Offer For Sale (OFS) by the promoters (51% to drop to 44%) and PE Affirma Capital (TBO Korea, Augusta TBO - 31% to reduce to 23%)
• Rs. 400 cr Fresh Issue for (i) Rs. 135 cr technology investment (ii) Rs.125 cr for business growth in India and internationally (iii) Rs. 40 cr unidentified acquisition.  

Price band: Rs. 875-920 per share

M cap: Rs. 9,990 cr, implying 16% dilution

• 75% for institutional investors and 10% for retail, as cash balance exceeds net worth

IPO Date: Wed 8^th May to Fri 10^th May 2024, Listing Wed 15^th May 2024

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

Online Travel Platform

TBO Tek is an online B2B travel distributor connecting suppliers (airlines and hotels) with buyers (travel agents), facilitating 45,000 bookings per day, on an average, on its platform tbo.com. All revenue earned is on transaction basis, with no fixed subscription or on-boarding fees. Take rate (commission on gross transaction value / GTV which is the revenue) is much higher in international market (8% over 3% for India). Therefore, even on a lower GMV, international market revenue and profit is much higher than India. Similarly, hotel business, being fragmented, is more profitable than airlines, with 7%-8% and 2.5%-2.6% take rate respectively.

High Growth Financials

FY23 revenue stood at Rs. 1,065 cr, with PAT of Rs. 148 cr. During 9MFY24, revenue of Rs. 1,024 cr was nearly as much as full year revenue. Also, 9MFY24 PAT of Rs. 154 cr exceeded FY23 PAT of Rs. 148 cr, due to scale and operating leverage. Thus, 9MFY24 EPS rose to Rs. 15, from Rs. 14 in FY23.

Business Risks

• While top supplier accounts for 27-30% of revenue, it is not material being an airline body comprising 30-40 airlines.
• Case is pending with RBI and Enforcement Directorate, since 2022, for alleged money laundering in Bangladesh worth Rs. 49 cr, transacted on company’s portal.

Truly a Tech Business

Since inception in 2006, company has raised only Rs. 60 cr of primary capital. As of 31.12.23, it is cash rich, with cash equivalents of Rs. 545 cr exceeding net worth of Rs. 488 cr. Thus, true benefits of technology platform have been leveraged and demonstrated by the company in past 18 years of existence.  

Money Left on the Table

On comparison with peer Rategain, TBO valuation is seen  attractive – last 12 months PAT of Rs. 130 cr, Rategain has a m cap of Rs. 7,900 cr, implying historic PE multiple of 61x. On the other hand, TBO is priced at pre-money PE of 53x, implying room for growth.

Even on forward basis, FY25E EPS is at Rs. 22, implying current year PE multiple of 41x, which is not expensive for growing technology driven cash-rich business. Other technology enabled internet business such as Affle, although not a peer, is ruling at FY25E PE of 47x. 

Last transaction price in Oct 2023, comprising secondary sale by Affirma Capital to General Atlantic, was at Rs. 575 per share. However, current secondary markets conditions ascribe premium to well-run growing companies, which supported by travel industry tailwinds, justifying current pricing, even though it is up by 60% up in 7 months.