Wait for Ixigo to list before taking a call

Le Travenues Technology, promoter of the online travel agency Ixigo, is raising ₹740 crore through an initial public offering. This includes a fresh issue of ₹120 crore and an offer for sale (OFS) of ₹ 620 crore.

The company's existing investors who are offloading shares in the OFS include SAIF Partners, Peak XV Partners, Aloke Bajpai (the company's chairman, MD and group CEO), Rajnish Kumar (director and group co-CEO), Micromax Informatics and Placid Holdings.

The company operates in a fiercely competitive industry and has a limited operating history along with rich valuations. Investors will be better off waiting for Le Travenues Technology to list and assess its post-listing financial performance before taking an investment call.

Business: Ixigo offers air, rail, bus and hotel reservations on its platform. Among online travel agencies, it is a leader in train reservations, with a 51% market share as of FY23. As of March 31, 2023, it had 429 million annual active users. In FY23, 490 million transactions were booked through its platform. The company plans to focus on 'next billion users' spread across tier-II and tier-III cities in India. In 2023, the 'next billion users' formed 60-65% of the total travel market in India.

Financials: Between FY21 and FY23, the company's revenues grew to ₹501.2 crore from ₹135.5 crore. In the same period, the company's profit jumped to ₹23.3 crore from ₹7.5 crore. In the nine months ended December 2023, the company recorded revenue of ₹491 crore and profit of ₹65.7 crore.

Valuation: There has been a spurt in demand for travel after the Covid-19 pandemic. Investors should look at how well the company will grow if the growth drivers of the travel industry are sustained in the next few years.

At the upper end of the price band, considering its FY23 financials, the issue commands a price-to-earnings multiple of 41.9. During the same period, its listed peers such as Easy Trip Planners (EaseMyTrip) and Yatra Online (Yatra.com) traded in the price-to-earnings multiple range of 54-188. Considering its post-issue fully diluted equity and after annualising its nine-month profit of FY24 (including extraordinary items), the issue commands a price-to-earnings multiple of 41.1.