TBO Tek is a leading travel distribution platform in the global travel and tourism industry in terms of GTV and revenue from operations for FY 2023. The company provides a wide range of offerings operating in over 100 countries by providing buyers with a comprehensive travel inventory according to the needs of their customers and supports a wide range of currencies along with forex assistances.

The company’s business solutions aim to solve problems of discovery, reliability, transactions, and services by aggregating global travel supply and global travel demand on one platform, thereby enabling buyers and suppliers to transact seamlessly.

The company classifies buyers into two broad categories: Retail Buyers and Enterprise Buyers. Retail buyers are typically small businesses such as travel agencies or travel advisors operating independently. They use the company’s retail selling platform to search, book and pay for global travel supplies. On the other hand, enterprise buyers comprise large travel businesses such as tour operators, travel management companies and online travel agencies as well as digital native businesses such as e-commerce portals and super apps. Enterprise buyers usually use the company’s Extensible Markup Language (XML) or JavaScript Object Notation (JSON) application programming interface (API) to transact through the company’s platform.

Through the company’s platform, hotels across the world can share live inventory and pricing information with the company in multiple ways, including through XML feeds, JSON feeds, or through its extranet platform. The company’s supplier universal API engine aggregates hotel data from all sources and performs multiple data cleaning and consolidation processes. Once ready, the company’s analytical models assess the data and push pricing and personalization recommendations to the retail buyers’ interface of its platform. The company’s buyers, while searching to make bookings through the platform, view geo-centric recommendations personalized for them, facilitating a fast-booking experience. The platform also settles payments on both the buyer and supplier fronts, managing multiple currencies at both ends.

As on December 31, 2023, the company had sold over 7,500 destinations in more than 100 countries and employed over 2,000 people.

Acquisitions:

In 2019, the company acquired Island Hopper, a destination management company with access to island inventory in the Indian Ocean, including Maldives. In May 2021, the company acquired Gemini, an India-based destination management company, to further consolidate its position in the Indian outbound market and, particularly, Maldives.

The company on 31 March 2022 entered a share purchase agreement to acquire BookaBed AG (BookaBed), a B2B accommodation supplier, through the company’s material subsidiary, Tek Travels DMCC, to increase its presence in Ireland and the United Kingdom. The company through its subsidiary acquired 51% of the outstanding equity share capital of BookaBed on 1 April 2022. Subsequently, Tek Travels DMCC acquired BookaBed’s remaining 49% outstanding equity share capital with effect from 31 January 2023.

Also, the company entered into a share purchase agreement with Jumbo Tours Espana S.L.U. (Jumbo) for purchase of 100% share capital of the entity and got incorporated by giving effect of de-merger of Jumbo’s online travel distribution business. The acquisition was completed with effect from 18 December 2023.

The company is backed by General Atlantic(Private Equity), holding 15% equity share capital in the company pre-IPO.

Object of the offer

The IPO consists of a fresh issue of Rs 400 crore and 1,25,08,797 equity shares through offer sale.The promoter stake, at 51.26%, will dilute post-IPO to 46.8%.

Out of the proceeds from the fresh issue, Rs 135.0 crore will be used for investment in technology and data solutions, Rs 100.0 crore towards investment in material subsidiary, Tek Travels DMCC, for on-boarding platform users through marketing and promotional activities, Rs 25 crore towards building sales and marketing infrastructure, Rs 40 crore towards inorganic acquisitions, and the remaining for general corporate purpose.

Strengths

The company’s platform creates a network effect with interlinked flywheels to enhance value proposition for partners. One of the key value propositions of the company’s platform for both suppliers and buyers is providing instant access to a global network of partners on the other side of the transaction. As the buyer’s base grows, the company channels additional demand and, therefore, conducts more transactions through its platform. This attracts more suppliers, enablingit to offer better pricing, a wider range, and higher volume of supply across both existing and new products.

The company’s business has demonstrated strong operating leverage across the years, except during covid-19, and high buyer retention. In addition, there are global network effects in the company’s business, resulting in transaction growth outperforming the growth of the number of yearly transactions of the buyer. Due to the company’s technology platform, the cost to serve a new transaction is minimal, enabling the company to drive its revenue and profit.

The company has designed its platform to be modular for developing and launching solutions serving specific buyer and supplier segments efficiently. These improvements leverage the company’s platform’s core capabilities, including supplier and buyer modules, payment infrastructure, with data assets and analytics, to quickly go-to-market and scale with minimal investment.

TBO Tek platform generates large volumes of data. The company has developed an enterprise-wide data warehouse, segmenting data into various subject areas such as searches, bookings, invoices, and payments. Data received on the company’s platform is curated and verified for accuracy before being subjected to data analytics. The company endeavors to protect data through its privacy and data security practices. Further, the company has democratized access to data from the frontline sales executive to the product manager and encourages all its decisions to be data driven.

The company has a diversified revenue base with most of the revenue from the airline and hotel industry. TBO Tek earns net commission fees from airlines. This is low at around 3%-4%. A mark-up is charged on commission fees or net rates received from hotels. Fees and mark-ups in hotels remain at 6%-8%. The company sells technical/ software related services to customers based in India and out of India to provide a shell website to be used as a B2B hotel service provider by adding their own suppliers.

The company has an established market position in the airline ticketing segment and the hotel segment. It currently services over 20,000 travel agents and has tie-ups with more than 7 lakh hotels across more than 100 countries. Although the company has a presence in several countries, most of the GMV is concentrated in Indian and Dubai operations. In FY2023, TTL earned 60%(PY: 66%) of its consolidated GMV from operations in India. Other than India, the company has presence in Dubai, Saudi Arabia, UAE,Kuwait, Qatar, Brazil, Egypt, China, and the USA.

The company has experienced promoters and managers. Ankush Nijhawan, co-founder of the company, is a BBA graduate from Boston and majored in marketing and psychology. Gaurav Bhatnagar, co-founder of the company, is a computer science graduate from Indian Institute of Technology, Delhi. The extensive experience of the promoters in the travel industry and information technology companies has helped in ramping up operations profitably.

Weaknesses

The company’s revenue is significantly dependent on the hotels and ancillary bookings,whose contribution has significantly increased from 35.69% of the company’s revenue from operations in FY 2021 to 67.83% in FY 2023. Factors that may negatively impact its hotels and ancillary bookings could have an adverse effect on the company’s business.

The company’s business depends on its relationships with a limited range of suppliers. Any adverse changes in such relationships, or inability to enter new relationships, could adversely affect the company’s business.

The company’s business is exposed to pricing pressure from its suppliers, who may withhold inventory or modify the terms of the arrangements, including reduction or elimination of commission, incentive, or other compensation payable to the company, which could adversely affect the results of operations.

The company is dependent on its proprietary technology for critical functions of its business. Failure to properly maintain or promptly upgrade its technology may result in disruptions, or lower the quality of services, and affect its business.

The company and Joint Managing Directors Ankush Nijhawan and Gaurav Bhatnagar have received a show-cause notice from the Enforcement Directorate. Compounding applications are in the process of being filed with the Reserve Bank of India. Consequently, the company may be subject to regulatory actions and penalties/compounding fees for such non-compliance and could adversely impact the company’s business.

The Indian tours and travel industry is highly fragmented, with many small un-organized tour operators as well as established players, resulting in intense competition within the tourism space.

The covid-19 pandemic, or any future pandemic or widespread public health emergency, could affect the company’s business and financial condition.

The company derives a substantial portion of its revenue from operations from its material subsidiary, Tek Travels DMCC. Any events that could impact the business of its material subsidiary could adversely affect the company’s business.

Contingent liabilities of the company stood at Rs 50.1 crore as on 31 December 2023.

Valuation

In the nine months ended Dec 2023, consolidated sales were up by 30.7% to Rs 1023.75 crore. The OPM increased 19 bps, leading to 32.1%increase in OP to Rs 192.69 crore. OI increased by 2.6% to 15.81 crore. Interest cost increased 21.4% to Rs 6.53 crore. Also,depreciation increased by 19.5% to 21.15 crore. PBT after exceptional items increased by 23.4% to Rs 173.62 crore. Net profit stood at Rs 154.18 crore as against net profit of Rs 120.28 crore in the same period last year.

For FY 2023, consolidated sales were up by 120.3% to Rs 1064.59 crore. The healthy growth in revenue was primarily due to increase in revenue from contracts with customers from India as well as international operations and due to the easing of covid-19-related travel restrictions. The OPM increased 1,046 bps to 17.09%, leading to 468% increase in OP to Rs 181.89 crore. OI declined 26.1% to 21.18 crore. Interest cost increased 102.5% to Rs 7.17 crore. Also, depreciation increased by 56.6% to Rs 24.56 crore. PBT increased by 278.4% to Rs 174.20 crore. Tax expenses increased by 108.7% to Rs 25.70 crore. Pat stood at Rs 148.49 crore as against net profit of Rs 33.72 crore.

In February ,2024, TBO Korea and Augusta TBO transferred 28,25,400 and 49,92,597 equity shares of face value Re 1 respectively to General Atlantic(Private Equity) at a premium of Rs 574.49 per share aggregating Rs 575.49 per share.

At the higher price band of Rs 920, the offer is made at around 54.8 times P/ TTM EPS, 7.3 times EV/ TTM Sales and 41.6 times EV/TTM EBITDA.

Listed industry peers of the company are Easy Trip Planners and Yatra Online. Easy Trip Planners offers comprehensive range of travel - related products and services under the flagship brand ‘Ease My Trip’ and Yatra Online provides information, pricing, availability, and booking facilities for domestic and international customers.

In comparison Easy Trip Planners trades at 49.5 times its P/ TTM EPS, 17.6 times EV/TTM Sales and 38.05 times EV/TTM EBITDA while Yatra Online is trading at 514.29 times its P/TTM EPS, 4.6 times EV/TTM Sales and 66.6 times EV/ TTM EBITDA.