IPO: TBO Tek

TBO Tek, a travel distribution platform company, will launch its IPO (initial public offering) on March 8, 2024. Below is a breakdown of the company's strengths, weaknesses and growth prospects to help investors make an informed decision. In a nutshell Quality: Its three-year average ROE and ROCE are 14 and 12 per cent, respectively. Growth: Its revenue grew 174 per cent annually between FY21-23. Valuation: The stock is valued at a P/E and P/B of 54.8 and 11 times, respectively, compared to its peers' median and average of 61.1 and 5.6 times. Overview: Rising demand for travel and tourism should help the company scale up. However, the industry is highly price-sensitive, and the company depends on a few suppliers. About TBO Tek TBO Tek is one of the leading travel distribution platforms in the travel and tourism industry. Its platform allows its suppliers (such as hotels, airlines, car rentals, transfers, cruises, insurance, and rail) to display and market inventory to the large and fragmented global buyer base (independent travel advisors/agencies, tour operators, travel management companies, online travel companies). For buyers, TBO Tek serves as a one-stop solution for exploring travel options for worldwide destinations. As of December 31, 2023, the company has sold over 7,500 destinations in over 100 countries. Strengths of TBO Tek Network effect: The platform provides services to both suppliers and buyers, offering instant access to a global network of partners. As the buyer base expands, more suppliers are drawn, leading to better pricing, a wider range, and increased supply across existing and new products. As of December 31, 2023, the company has boarded 1.59 lakh buyers and facilitates searching and booking from over 750 airlines, covering more than 3 lakh origin-destination combinations. Weaknesses of TBO Tek Dependent on few suppliers : As of FY23, 68 per cent of the company's revenue comes from the top five suppliers. As the number of suppliers is limited, the business is exposed to pricing pressures from suppliers. Dependent on hotels and airlines: The company's operations depend highly on the hotel and airline industries. Any downturn in these industries may significantly impact the business. IPO details Total IPO size (Rs cr) 1,551 Offer for sale (Rs cr) 1,151 Fresh issue (Rs cr) 400 Price band (Rs) 875-920 Subscription dates May 8-10, 2024 Purpose of issue To invest in technology, its subsidiaries and future acquisitions Post-IPO M-cap (Rs cr) 9,990 Net worth (Rs cr) 906 Promoter holding (%) 44.4 Price/earnings ratio (P/E) 54.8 Price/book ratio (P/B) 11 Financial history Key financials 2Y growth (% pa) TTM FY23 FY22 FY21 Revenue (Rs cr) 173.9 1305 1065 483 142 EBIT (Rs cr) - 201