RateGain Travel Technologies IPO
Despite trading at a premium of over 10 percent in the grey market since the issue was floated, RateGain Travel Technologies made a weak debut on the bourses on December 17 amid major selloff.
The largest software-as-a-service player in the travel and hospitality space in the country listed at a discount of 15 percent, and opened at Rs 364.80 on the BSE, against an issue price of Rs 425 per share, while the opening price on the National Stock Exchange was Rs 360.
The public issue had seen a lot of interest from investors with 17.41 times subscription during December 7-9. Non-institutional investors had bought shares 42.04 times the portion set aside for them and the qualified institutional buyers’ portion was subscribed 8.42 times. Retail investors had put in bids for 8.08 times the allotted quota.
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Experts had forecast the stock to list at a premium of at least 10 percent in line with the grey market trend.
Aditya Birla Money, Anand Rathi, Arihant Capital, Choice Broking, Dalal & Broacha, Prabhudas Lilladher, Religare Broking and Swastika Investmart had a ‘subscribe’ rating on the issue.
Now that it has listed at a discount, should investors hold on or exit? Here’s what analysts are saying:
Ajit Mishra, VP-Research, Religare Broking
We have a positive view from the long-term perspective and suggest investors to stay put. Several factors like positive sector tailwinds, niche presence in the segment, broad range of product offerings, comprehensive platform of industry-specific solutions and long-standing relationships with clients should work in its favour. We believe the prevailing challenges and uncertainty due to the new COVID variant will only persist in the short term, and expect financials to improve with growing demand and easing travel restrictions.
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Valuations look comfortable right now, so investors can start accumulating with a long-term perspective.
Yesha Shah, Head of Equity Research, SAMCO Securities
RateGain is financially resilient and despite the net losses, it has generated positive operating cash flows and EBITDA throughout the pandemic. The company’s difficult-to-replicate ability to cross-sell and scale its offerings, coupled with a rapidly growing addressable market, make its long-term growth prospects promising. However, it can experience short-term headwinds considering its presence in the travel and hospitality industry, which can further lead to a slump in its price. Therefore, only investors with decent risk appetite and long-term horizon should keep holding the stock.
While this company should definitely be on investors’ radar, one should wait for further clarity on the possible effects of the new strain before creating fresh positions.
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Likhita Chepa, Senior Research Analyst, CapitalVia Global Research
The issue listed at a discount due to the overall weak market sentiment amid increasing volatility. It has disappointed investors who subscribed solely for listing gains. But investors who are allotted the shares can consider holding them for the medium to long term as the proceeds from the issue will be utilised to invest in growth opportunities apart from debt repayment.
Its valuations are in line with global peers and the company has been able to generate stable revenues and maintain healthy cash flows. Therefore, one can hold the stock for three-five years in their portfolio.
Mohit Nigam, Head – PMS, Hem Securities
Rategain Travel Tech is the largest SaaS company in the hospitality and travel industry in India. We find the company attractive since it has no listed peers currently. It has a niche set of products and technology backed by AI, and derives 95 percent of its revenue from leisure travel, of which 65 percent comes from the US.
Investors can accumulate the stock for a longer run but must stay aware of the volatile nature of the sector due to COVID-related developments. Overall, any restrictions in travel can be a dampener for the stock since the industry will be hit. Hence, we advise buying with caution, and for the long term based on the risk profile of the investor.
Santosh Meena, Head of Research, Swastika Investmart
Even as most IPOs have been seeing handsome gains, the timing of RateGain’s IPO may have been a factor behind the weak debut. COVID concerns remain for the near-term prospects of the company, especially with the spread of the Omicron variant.
Long-term outlook for the company is promising. Therefore, long-term investors can stay put, while those who applied for listing gains can keep a stop loss at Rs 330. New investors can look for entry opportunities at 25-30 percent correction.
Parth Nyati, Founder, Tradingo
Despite being the first mover, the company saw a moderate subscription of 17 times even as other IPOs are seeing much better responses. Due to the pandemic, the company has been losing money for the past two years, and rising COVID cases are still a concern.
Short-term investors should keep a stop loss of Rs 325, while long-term investors are encouraged to hold the stock. When things return to normal, the company should show great growth potential. Investors looking for buying opportunities should watch for a decline of 25-30 percent in the stock price.
