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RateGain Travel Technologies IPO opens; should you subscribe?

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RateGain Travel IPO: RateGain Travel Technologies' initial public offering (IPO) to raise Rs 1,336 crore opens for subscription on December 7, and closes on December 9. The IPO is a combination of fresh issuance and an offer for sale by promoters and existing shareholders.

RateGain Travel Technologies IPO opens; should you subscribe?
RateGain Travel Technologies' initial public offering (IPO) to raise Rs 1,336 crore hit Dalal Street on Tuesday, December 7. RateGain Travel is a software as a service (SaaS) company in the hospitality and travel industry. The RateGain IPO is a combination of fresh issuance and an offer for sale (OFS) of shares.
The IPO will close for subscription on Thursday, December 9. On Monday, RateGain Travel Tech raised Rs 598.8 crore from anchor investors at Rs 425 per share.
Should you subscribe to the RateGain Travel Tech IPO? Here's what brokerages suggest:

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Reliance Securities
The brokerage has a 'subscribe' rating on the RateGain Travel Technologies IPO from a long-term perspective, citing the company's high growth potential, unique business propositions with minimal competition and valuation comfort.
"The IPO is valued at 18.1x the FY21 price-to-sales and 15.1x FY22 annualised price-to-sales, which is at a discount of 27.3x to Paytm and 31.7x to Zomato (at CMP). While there is no listed peer available for a direct comparison to RateGain in the domestic market, its valuations at a discount of around 50 percent to unicorns like Zomato and Paytm give comfort on the valuation front," Reliance Securities said.
In the era of the internet- and AI-based software services, we believe the premium valuation of the company is likely to sustain. COVID-19 has accelerated the digitization process of customer interactions with hospitality and travel companies. These changes are likely to lead to a shift in business practices by hospitality and travel companies from an in-house solution model to third party software and services model.
RateGain serves a large and rapidly-growing total addressable market. Third-party travel and hospitality technology are likely to clock a CAGR of 18 percent over the next five years and indicates a healthy growth in the long run," the brokerage added.
Choice Broking
The brokerage recommends subscribing to the RateGain Travel Tech IPO with caution.
At the upper end of the price band, the issue is valued at P/S of 18.1 times on FY21 sales and 15.1 times on FY22E annualised sales, which seems expensive, according to Choice Broking.
"There are no listed peers in India having the same business profile. Given the re-emergence of the pandemic fear and its impact on the global travel and hospitality industry, there is higher uncertainty about the business growth outlook," the brokerage added.
Prabhudas Lilladher
The brokerage recommends subscribing to the RateGain IPO for long-term gains.
The company's premium valuations are justified given its superior product portfolio, which is integrated across all value chain partners and enables it to access data at a granular level that cannot be easily replicated, and its high predictability, scalability and profitable business model, according to Prabhudas Lilladher.
Anand Rathi
The brokerage has a 'subscribe (long term)' rating on the RateGain Travel IPO. At the upper end of the IPO price band, RateGain Travel Technologies is offered at 18.1x its FY21 revenue, with a market capitalisation of 4,536.7 crore, according to Anand Rathi.
"There are no listed companies in India that engage in a similar business. The company has marquee global customers with long-term relationships, innovative AI driven industry relevant SaaS solutions, diverse and comprehensive portfolio of business solutions. However, the company is subject to risks related to travel restriction in wake of new COVID-19 variant, which may hamper its revenue growth in near term as a majority of the company’s clientele are from travel and hospitality industry," it said.
"The company’s business is unique, scalable and provides growth opportunities in the long term. Considering the company's past financial year performance and near-term headwinds/uncertainty the company’s IPO is priced at rich valuations," Anand Rathi added.
Swastika Investmart
The brokerage recommends subscribing to the RateGain Travel IPO for a moderate listing gain and for the long term. "RateGain is the largest SaaS company in the travel and hospitality industry. The company suffered losses in the last two years. However, as things will normalise post-COVID; we see bright prospects for the
company. The company has an asset-light business model with a strong
management team," Aayush Agrawal, Senior Analyst at Swastika Investmart, said in a report.
"The company is valued at a P/BV multiple of 16x on its NAV of Rs 26 for FY21," he added.
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