TBO Tek IPO opens for subscription: Should you bid for this IPO?

The initial public offering (IPO) of TBO Tek kicks-off for bidding on Wednesday, May 8, 2024 and can be subscribed till Friday, May 10. The company will be offering its shares in the range of Rs 875-920 apiece. Investors can bid for a minimum of 16 equity shares and its multiples thereafter.

TBO Tek, formerly known as Tek Travels, is a travel distribution platform that offers travel inventory according to the needs of its customers and supports a wide range of currencies along with forex help.  The Rs 1,550.80 crore IPO of TBO Tek includes a fresh share sale of Rs 400 and offer-for-sale (OFS) of up to 1,25,08,797 equity shares by its promoters and existing shareholders.

TBO Tek intends to utilize the net proceeds from the issue towards expansion of the Supplier and Buyer base; amplification of value of our platform by adding new lines of businesses; inorganic growth through selective acquisitions and building synergies with our existing platform; and leveraging data procured to offer bespoke travel solutions to buyers and suppliers.

TBO Tek raised Rs 696.51 crore via anchor book it allocated 75,70,807 equity shares at Rs 920 per equity share. Abu Dhabi Investment Authority, Government Pension Fund Global, Neuberger Berman Investment Funds, Nomura Funds, Blackrock Global Funds, Fidelity Funds, Goldman Sachs, HSBC Global and other took part in the anchor book.

Established in 2006, The New Delhi-based company simplifies the travel business for suppliers such as hotels, airlines, car rentals, transfers, cruises, insurance, rail companies, and others, as well as for retail customers such as travel agencies and independent travel consultants, and corporate customers

TBO Tek's platform enables sellers to show and market their inventory and set prices for buyers. For buyers, the platform is an integrated, multi-currency, and multilingual, one-stop solution that helps them discover and book travel to destinations around the world, across various travel segments. It had sold over 7,500 destinations in over 100 countries as at December 31, 2023.

For the nine-months ended on March 31, 2023, TBO Tek reported a net profit of Rs 154.18 crore with a revenue of Rs 1,039.56 crore. The company's bottomline came in at Rs 148.49 crore with a revenue of Rs 1,085.77 crore for the financial year ending March 31, 2023.

TBO Tek has reserved shares worth Rs 3 crore for its eligible employees, while 75 per cent of the net offer shall be reserved for the qualified institutional bidders (QIBs) and 15 per cent shares shall be allocated towards non-institutional investors (NIIs). Retail investors will have only 10 per cent of the allocation in the issue.

Axis Capital, Goldman Sachs (India) Securities, JM Financial and Jefferies India are the book running lead managers of the TBO Tek IPO, while Kfin Technologies is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE with May 15, Wednesday as the tentative date of listing. Here's what a host of brokerage firms said about the IPO of TBO Tek:

Anand Rathi Research
Rating: Subscribe
TBO Teck is a platform creating network effect with interlinked flywheels to enhance value proposition for partners. One of the primary benefits of their platform offers to Suppliers and Buyers alike is granting them immediate entry to a worldwide network of partners involved in the transaction, said Anand Rathi.

"TBO Tek has structured their platform to be modular, a design choice they believe allows them to efficiently create and introduce solutions tailored to specific Buyer and Supplier segments. With an ever-increasing tourism industry, the company will surely benefit from the boom in the industry. We believe that valuations of the company are fairly priced," it added with a 'subscribe' tag.

Swastika Investmart
Rating: Subscribe
TBO Tek, a leading travel distribution platform, stands out with its modular and scalable proprietary technology platform. This allows the company to generate and leverage valuable data assets while operating on a capital-efficient business model. TBO Tek has demonstrated a strong financial turnaround after FY21, with consistent growth over the past two fiscal years, said Swastika.

"However, potential risks require careful consideration. It relies on a limited range of suppliers and third-party systems, which could pose vulnerabilities. Additionally, the tourism industry itself is highly sensitive to external factors and intensely competitive. Considering TBO Tek's growth potential and potential listing gains, we have a subscribe rating for this IPO," it said.

Marwadi Financial Services
Rating: Subscribe
Considering the FY24 annualized EPS of Rs 18.93 on a post-issue basis, the company is going to list at a P/E of 48.59 times with a market cap of Rs 9,990.1 crore, whereas its peer namely Rategain Travel Technologies is trading at a P/E of 61.2 times, said Marwadi Financial Services.

"We assign a 'subscribe' rating to this IPO as the company has a capital efficient business model with a combination of sustainable growth. Also, it is available at a reasonable valuation as compared to its peers, it added.

Sushil Finance
Rating: May Subscribe
The opportunity for TBO Tek lies in how the Travel and tourism have evolved, with travellers now engaging in travel to offbeat Insta-Worthy destinations, adventure trips, spending on experiences. TBO TEK’s Strategies include expanding Buyer and Supplier base, and growing the operations through selective acquisitions, said Sushil Finance.

"The business is exposed to pricing pressure from the Suppliers who may withhold inventory or modify the terms of arrangements, including for a reduction or elimination of commission. Looking at all the factors, risks, opportunities and valuation, investors may apply for the issue with a long-term view," it said.
 

Ventura Securities
Rating: Subscribe
Rather than disrupting the travel supply and buyer ecosystem, TBO Tek acts as a synergistic enabler. Airlines and hotels see the company as an extension of their distribution network, aiding them in expanding their reach into smaller, high-growth markets, said Ventura Securities, with a 'subscribe' rating on the issue.

"Travel agents benefit from the platform by digitizing their operations, gaining visibility into inventory, and accessing deals comparable to larger enterprises. With an estimated 1.5 to 2 million buyers, including travel agencies and independent travel advisors, the market remains highly dispersed. This fragmentation is expected to persist, leading to increased market friction," it said.
 

Arihant Capital Markets
Rating: Subscribe for long term
TBO Tek has a global footprint of over 159,000 buyers across over 100 countries as of December 23, and a technology-driven supplier onboarding strategy. TBO Tek is well-positioned to drive additional growth by facilitating seamless global travel transactions on its platform, said Arihant Capital Markets.

"With the increasing diversity of travel preferences and destinations, the company is well-positioned to capitalize on the growing opportunities in the assisted travel segment, which caters to first-time travelers and those with complex itineraries. We  recommend a 'subscribe for long term' rating for this issue," it said.