Le Travenues Technology Ltd. (IXIGO) (Subscribe)

Highlights

Issue Size –: 79,580,900 sharesIssue Open/Close – 10 June / 12 June, 2024Price Band (Rs.)  88 – 93Issue Size (Rs.) – 7,401 mnFace Value (Rs) 1Lot Size (shares) 161

Le Travenues Technology Limited (IXIGO), incorporated in 2006, is a technology company focused on empowering Indian travelers to plan, book and manage their trips across rail, air, buses and hotels. According to the F&S Report, IXIGO is the leading OTA for the ‘next billion users’, with their focus on localized content and app features that aim at solving problems of Tier II/ Tier III travelers.

Their OTA platforms allow travellers to book train tickets, flight tickets, bus tickets and hotels, while providing travel utility tools and services developed using in-house proprietary algorithms and crowd-sourced information, including train PNR status and confirmation predictions, train seat availability alerts, train running status updates and delay predictions, alternate route or mode planning, flight status updates, automated web check-in, bus running status, pricing and availability alerts, deal discovery, destination content, personalized recommendations, instant fare alerts for flights, AI-based travel itinerary planner and automated customer support services.

They have the highest app usage among OTAs with 83 mn Monthly Active Users cumulatively across their apps, as per data.ai in September 2023. They were also the fastest growing OTA in terms of app downloads, with 4.9 mn monthly app downloads. As of FY23, they had 429.38 mn Annual Active users, and 49.07 mn transactions were booked through their OTA platforms in FY23. As of 9M2024, they had 213.21 mn registered users, i.e., users who have provided their unique mobile number or email address, as applicable, on their platforms as of the relevant date, and 42 mn transactions were booked through their OTA platforms.

Out of the total proceeds of Rs. 7,401 mn, Rs. 450 mn would go towards Part-funding working capital requirements of the company, Rs. 258 mn would go towards Investments in technology and data science including on cloud and server hosting, technology on artificial intelligence and customer engagement, ~Rs. 492 would go towards funding inorganic growth through unidentified acquisitions and other strategic initiatives and general corporate purposes and Rs. 6,201 mn would go towards existing selling shareholders of the company.

Key Highlights

The total Indian travel market as represented by modes of air, rail, road and hotel is estimated at around Rs. 3.8 trillion in FY23 and expected to grow at a CAGR of around 9 pct to reach Rs 5.8 trillion by FY28. As of FY23, the ‘next billion users’ (NBU) travel market is estimated to be approximately 90 pct of the train and bus segment each, and between 50 pct – 55 pct of the flights and hotels segment. This weighed in at over 60 pct – 65 pct of the overall travel market in 2023. IXIGO’s NBU focused strategy, position them well to capitalize on the burgeoning Indian travel market

IXIGO was initially launched as a meta search website for flights in June 2007 and went mobile first in 2013. Later, it added the convenience of booking tickets for trains and flights, in addition to hotel and cab booking services, to foray into the OTA market.

They are a technology-focused company. Technology forms the basis for operating leverage and is instrumental in achieving significant efficiencies in their business processes and operations. They use artificial intelligence, data science and machine learning to transform their travel information and crowd-sourced data into business intelligence that enhances their travel offerings and improves operating efficiency.

IXIGO was one of the first players to launch innovative AI-based data-driven features, such as a multilingual, travel assistant (TARA), live running status, Siri shortcuts, and an AR coach position feature, which allows train passengers to locate their coach positions at more than 7,000 railway stations across the country.

As a part of their strategy, they continue to: (i) deepen penetration and enhance their offerings for the ‘next billion user’ market segment (ii) Increase monetization through cross-selling and up-selling (iii) Improve operating leverage through investment in deep tech and artificial intelligence and (iv) Drive value creation through selective strategic partnerships and acquisitions.

Sales of the company has grown by ~92.33 pct CAGR during the period FY21–23, while adjusted EBITDA and profit grew ~132 pct and ~76 pct CAGR over the same period respectively. During FY23, company reported sales of Rs. 5,012 mn which increased by ~32 pct YoY, while adjusted EBITDA increased by 614 pct YoY to Rs. 443 mn as adjusted EBITDA margin improved from 1.63 pct in FY22 to 8.85 pct in FY23. As of FY23, the company reported profit of Rs. 233 mn against the loss of Rs. 211 mn. During 9MFY24, the sales/adjusted EBITDA/Profit came at Rs. 4,910 mn/Rs. 382 mn/Rs. 657 mn (including the exceptional item of Rs. 297 mn) which was up by 34.78 pct YoY/39.72 pct YoY/252.12 pct YoY.

Key Risk

Their train ticketing services depend on their agreement with IRCTC. The termination of their agreement with IRCTC could preclude them from undertaking train ticketing services and could otherwise have a material adverse effect on their business.

They have limited experience and operating history in certain of their businesses, particularly their hotels offering, which makes it difficult to accurately assess their future growth prospects.

Some of their travel suppliers may reduce or eliminate the commission, incentive and other compensation they pay to IXIGO for the sale of tickets and this could adversely affect their business.

Financial Performance and KPI’s

ParticularsFY21FY22FY239MFY239MFY24Gross   Transaction   Value (Rs. mn)21,53356,15274,52454,62675,929Gross Ticketing Revenue) (Rs. mn)1,4954,3396,0634,4175,858Revenue from operations (Rs.  mn)1,3563,7965,0133,6434,910Total income (Rs.  mn)1,3843,8495,1763,7874,971Adjusted EBITDA (Rs.  mn)82.162443.45273.25381.79Adjusted EBITDA Margin (%)6.06%1.638.85%7.50%7.78%Profit (Rs.  mn)75.33210.94233.96186.62186.62Contribution Margin (Rs.  mn)5191216218115172221Contribution Margin (%)38.29%32.05%43.51%41.65%45.24%Total assets (Rs.  mn)1,8515,3855,8595,7516,787Total equity (Rs.  mn)2993,4273,8713,7864,371Monthly Active Users (mn)21.5944.262.8362.0177.04Annual Active Users (mn)136.26291.22429.38326.58374.94Percentage of Organic Users (%)92.82%89.04%90.29%90.25%87.57%Number of transactions (mn)8.5641.6549.0736.4742Passenger Segments (mn)14.8170.2882.7461.6171.01Repeat Transaction Rate (%)87.18%87.83%85.14%85.24%86.06%Gross Take Rate (Transactions)6.94%7.73%8.14%8.09%7.71%Ancillary Attachment Rate (%)15.43%26.41%28.87%27.96%31.65%% of Customer Queries resolved by84.20%85.71%89.86%90.01%88.54%Monthly Screen Views (mn)1,4182,7693,8333,7864,121App Downloads(mn)43.890106.077881.86Average Transaction Value2,5161,3481,5191,4981,808

Valuations

Le Travenues (LTTL), the parent company of the popular travel brand IXIGO, is one of India’s fastest-growing online travel agencies (OTAs). While LTTL boasts impressive revenue growth between fiscal 2020 and 2023, solidifying its position as India’s fastest-growing OTA, it has a history of negative cash flows from operations. This trend may continue in the future, which could be a concern for some investors. However, long-term investors might find LTTL’s growth potential attractive, considering their ability to tolerate the risk associated with negative cash flow. At the upper end of the price band of Rs. 93, the stock is priced at PE of 75x its annualized FY24 earnings. The issue looks fully priced. However, long term investors can Apply.

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