Retail Research IPO Note

Sector: Travel & Tourism Price Band (Rs): 875 - 920

Recommendation: Subscribe for
08th May 2024
Long Term Investment Horizon

TBO Tek Limited

Company Overview: Issue Details
TBO Tek Limited is a top travel distribution platform operating in 100+ Date of Opening 8th May 2024
countries. The company’s platform connects suppliers (hotels, airlines, car Date of Closing 10th May 2024
rentals, cruises, etc.) and buyers (travel agencies, tour operators, etc.) Price Band (Rs) 875 - 920
through a two-sided technology platform. The company simplify the Offer for sale (Equity
1,25,08,979
business of travel by allowing suppliers to display and market their shares)
inventory to a large global buyer base. Buyers can easily discover and book Fresh Issue (Rs cr) 400
travel for various segments such as leisure, corporate, and religious travels Issue Size (Rs cr) 1,550 @ Upper band
etc. The company is committed to provide buyers with a comprehensive No. of shares 1,70,80,408 – 1,68,56,805
Face Value (Rs) 1
travel inventory according to the needs of their customers.
Post Issue Market Cap
9,520 – 9,990
Key Highlights: (Rs cr)
Axis Capital Limited, Jefferies India
1. Revenue model: BRLMs
Private Limited
(A)B2B Rate Model: The company receive inventory from suppliers at a Registrar KFin Technologies Limited
special B2B rate. The company apply a certain mark-up on this rate and
pass this price on to Buyers. Bid Lot 16 shares and in multiple thereof
(B) Commission Model: The company’s suppliers fix the price at which they QIB shares 75%
want to sell to the end traveller. The company receive commission on each Retail shares 10%
such transaction from the supplier, part of which they retain and part of NIB shares 15%
which they share with the buyer.
Objects of Issue
2. Platform creating value for both buyers and suppliers: The platform Estimated utilization from
seeks to address various issues experienced while making travel bookings net proceeds (Rs cr)
which provides sticky revenue source. It gives real time access to global Growth and strengthening of our
travel inventory (hotels and airline) to buyers at the same time suppliers platform by adding new Buyers 260.0
get instant access to a global buyer base without making any additional and Suppliers
investments in technology or manpower. Unidentified inorganic acquisitions 40.0
General corporate purposes* -*
3. Platform creating network effect with interlinked flywheels to enhance Total proceeds from fresh issue 400.0
the value proposition for partners: The company’s platform provides *To be determined after finalisation of the Offer Price and updated in the
Prospectus prior to filing with the RoC.
instant access to a global network of partners for suppliers and buyers. As
the buyer base grows, the company conducts more transactions, attracting
more suppliers. This leads to better pricing, wider product ranges and Shareholding Pattern
higher supply volumes. By analyzing search data, the company prioritizes Pre-Issue No. of Shares %
onboarding suppliers from the most interesting destination markets to Promoter & Promoter Group 5,34,33,436 51.3
their source markets. This creates a virtuous cycle of network effects, Public & Others 5,08,06,525 48.7
resulting in more transactions and an enhanced partner base. Total 10,42,39,961 100.0

4. Capital efficient business model with a combination of sustainable

Post Issue @Lower Price Band No. of Shares %
growth: The Company has developed a capital efficient business model
Promoter & Promoter Group 4,82,21,436 44.3
with operating leverage and strong cash generation. The company has
been generating positive operating cash flow for FY22/FY23/9MFY24 at Rs Public & Others 6,05,89,954 55.7
48.1 cr/ Rs 204.4 cr/ Rs 200.6 cr respectively. The company generates RoE Total 10,88,11,390 100.0
and RoCE of ~42% and ~50% respectively as of FY23. The fixed asset
turnover ratio is in double digit (15x for FY23). Post Issue @Upper Price Band No. of Shares %
Promoter & Promoter Group 4,82,21,436 44.4
Valuation: The company is valued at a P/E multiple of 70.7x of its upper price
band based on FY23 earnings on post issue capital while on 9MFY24 Public & Others 6,03,66,351 55.6
annualised adjusted EPS, the company is valued at 46.0x. The company plans Total 10,85,87,787 100.0
to raise Rs 400 crore through fresh issue, for investment in technology, data Source: RHP, SSL Research
solutions, and sales and marketing infrastructure. The company's revenue
has registered a CAGR of 174% from FY21 to FY23. Global Tourism industry is
expected to grow at the CAGR of 8.2% from FY23 to FY27, which will give an
edge to the company’s growth. While comparing the valuation with its close
peer (Rategain Travel), the company looks fairly priced. We recommend to
subscribe the issue for long-term investment horizon.

For the list of our branches refer to the website: www.sbisecurities.in

 TBO Tek Limited Sector: Travel & Tourism

Key Financials
FY21 FY22 FY23 9MFY24
Revenue from operation (Rs cr) 142 483 1,065 1,024
EBITDA (Rs cr) (23) 32 182 193
PAT (Rs cr) (34) 34 144 156
Adjusted PAT (Rs cr) (5) 26 141 163
EBITDA Margin (%) (16.0) 6.6 17.1 18.8
Adjusted PAT Margin (%) (3.4) 5.4 13.3 15.9
Adjusted EPS (Rs) (0.5) 2.5 13.6 15.6
ROE (%) (16.7) 14.5 42.4 30.8
Adjusted ROE (%) (2.4) 11.2 41.5 32.2
ROCE (%) 0.5 19.2 51.5 36.8
Total Debt / Equity (x) - 0.0 0.0 0.0

* Not Annualized
Source: RHP, SSL Research

Risk Factors
• Relationship with suppliers: The company’s business depends on relationships with a limited range of suppliers and
any adverse changes in such relationships or inability to enter into new relationships, could adversely affect the
business.
• Pricing pressure: The company’s business is exposed to pricing pressure from suppliers who may modify
arrangements, including reducing or eliminating compensation. This could adversely affect operations.
• Technology-driven: The company's proprietary technology is critical to its operations, and failure to properly maintain
or promptly upgrade it may lead to service disruptions or lower quality. This may affect the operation of the business.
• Competitive industry: The company operates in a highly competitive industry and any inability to compete effectively
may adversely affect the business and results of operations.

Growth Strategy
• Expanding Buyer and Supplier base.
• Continue to amplify the value of the platform.
• Growing operations through selective acquisitions.
• Use data as a corporate currency.

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 TBO Tek Limited Sector: Travel & Tourism

Performance Parameters
Particulars FY21 FY22 FY23 9MFY23 9MFY24

Monthly Transacting Buyers (number) (1)

- India 8,558 15,349 17,897 17,779 18,606
- International 1,843 4,029 6,633 6,500 7,830
Total 10,401 19,378 24,530 24,279 26,436
GTV (Rs cr) - Source Market (2)
- India 2,491 6,865 13,408 9,841 11,019
- International 595 3,392 8,916 6,316 8,006
Total 3,086 10,257 22,324 16,157 19,025
GTV Mix (%) - Source Market (3)
- India 80.72% 66.93% 60.06% 60.91% 57.92%
- International 19.28% 33.07% 39.94% 39.09% 42.08%
GTV (Rs cr) - Product (4)
- Air 2,346 6,305 12,360 9,076 9,865
- Hotels and Ancillary 739 3,951 9,963 7,081 9,160
Total 3,086 10,257 22,324 16,157 19,025
GTV Mix (%) - Product (5)
- Air 76.03% 61.47% 55.37% 56.18% 51.85%
- Hotels and Ancillary 23.97% 38.53% 44.63% 43.82% 48.15%
Revenue from operation (Rs cr) - Product (6)
- Air 85.6 193.6 320.5 239.5 259.6
- Hotels and Ancillary 50.6 275.5 722.2 529.3 741.9
- Others 5.6 14.2 21.9 14.3 22.3
Total 141.8 483.3 1064.6 783.2 1023.8
Take Rate (%) - Product (7)
- Air 3.65% 3.07% 2.59% 2.64% 2.63%
- Hotels and Ancillary 6.84% 6.97% 7.25% 7.48% 8.10%
Total 4.60% 4.71% 4.77% 4.85% 5.38%
Gross Profit (Rs cr) - Product (8)
- Air 59 109 190 146 130
- Hotels and Ancillary 42 203 524 387 511
- Others 5 13 18 12 20
Total 106 325 733 545 661
Revenue from operations (Rs cr)
- India 97 225 398 296 339
- International 45 258 666 487 684
Total 142 483 1,065 783 1,024
Take Rate (%) - Source Market (10)
-India 3.88% 3.27% 2.97% 3.01% 3.08%
-International 7.57% 7.62% 7.47% 7.71% 8.55%
Tota/l 4.60% 4.71% 4.77% 4.85% 5.38%
Gross Profit (Rs cr) - Source Market (11)
-India 64 126 235 178 179
-International 42 199 497 367 492
Total 106 325 733 545 671

Source: RHP, SSL Research

(1) Monthly Transacting Buyers are the average number of Buyers with net positive sales (which is calculated as fresh bookings minus cancellations) during
each month computed for the relevant year / period from Buyers in a particular source market.
(2) GTV - Source Market is computed as total transaction value net of cancellations during the year / period generated from a particular source market.

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 TBO Tek Limited Sector: Travel & Tourism

(3) GTV Mix % - Source Market is computed as GTV of a particular source market divided by total GTV for the relevant year / period.
(4) GTV – Product is computed as total transaction value net of cancellations during the year / period generated from sale of airline tickets and hotel and
ancillary bookings on all our platforms.
(5) GTV Mix % - Product is computed as a particular product GTV divided by total GTV for the relevant year / period.
(6) Revenue from Operations - Product means revenue recognized on (a) sale of airline tickets (b) Hotel and Ancillary bookings and (c) other miscellaneous
products like TBO Academy and white label services, on all our platforms.
(7) Take Rate % - Product is computed as revenue from operations from particular product divided by such product’s GTV for the relevant year / period.
(8) Gross Profit - Product is computed as revenue from operations from the product less service fee for the relevant year / period.
(9) Revenue from Operations - Source Market means revenue recognized on sale of airline, hotel and ancillary bookings created by buyers in the relevant source
market.
(10) Take Rate % - Source Market is computed as revenue from operations from a particular source market divided by GTV from such source market for the
relevant year.
(11) Gross Profit - Source Market is computed as revenue from operations from a particular source market less service fee for the relevant year / period.

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 TBO Tek Limited Sector: Travel & Tourism

Industry Overview
Global travel and tourism industry
The global travel and tourism market was USD 1.7 tn in 2017. In 2023 the travel and tourism industry recovered, growing 18.2% YoY from
2022 to USD 1.9 tn, and expected to grow at a CAGR of 8.2% to reach USD 2.6 tn in 2027.

Global Travel and Tourism Industry (USD tn)

3
2.6
2.5

2 1.9 1.9
1.8
1.7
1.6
1.5

1 0.9
0.8

0.5

0
2017 2018 2019 2020 2021 2022 2023 2027P

Source: RHP, SSL Research

Global air travel market

There are over 5,000 airlines across the world (estimate based on the global number of airlines after removing the airlines ceased / defunct
or merged, Inclusive of all airlines (cargo, passenger, charter, and commercial)), out of which IATA represents about 300 member airlines,
which carries 83% of the world’s traffic. The global air travel market (passenger market) was USD 740 bn in 2019 and reached at USD 709
bn in 2023. The air travel industry is expected to grow at 5.7% CAGR between 2023 and 2027 to reach USD 885 billion by 2027 at the back
of increasing leisure travel and cross border trade and commerce.

Global Air Travel Market (USD bn)

1000
885
900

800 729 740

700 709
700

600
518
500

400
288
300 230
200

100

0
2017 2018 2019 2020 2021 2022 2023 2027P

Source: RHP, SSL Research

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 TBO Tek Limited Sector: Travel & Tourism

Global accommodation market

The accommodation industry is subdivision of the hospitality industry that specializes in providing customers with accommodation services.
There are about 3.5 mn to 4 mn hotels estimated globally (estimate based on the total number of global hotels across regions using
information from UNWTO, government websites) of which only 1.2% are affiliated to top 10 global or regional hotel chains in the world.
The overall global accommodation market is at USD 855 bn in 2023. The global accommodation market has grown at CAGR of 7.5% over
2017 to 2019. In 2023, North America had the largest accommodation market share with 34% share of global accommodation, followed by
Europe (32%) and Asia-Pacific (26%). The market, driven by strong economic fundamentals, is expected to growing at a CAGR of 10% rising
from USD 855 bn in 2023 to USD 1,250 bn by 2027.

Global Accommodation Market (USD bn)

1400
1,250
1200

1000
846 855
787 813
800 732

600 499
401
400

200

0
2017 2018 2019 2020 2021 2022 2023 2027P

Source: RHP, SSL Research

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 TBO Tek Limited Sector: Travel & Tourism

Financial Snapshot
INCOME STATEMENT
(Rs cr) FY21 FY22 FY23
Revenue from Operations 142 483 1,065
YoY growth (%) - 240.8 120.3
Cost Of Revenues (incl. Stock Adj.) 36 159 332
Gross Profit 106 325 733
Gross margins (%) 74.6 67.2 68.8
Employee Cost 60 133 228
Other Operating Expenses 62 156 313
EBITDA (16) 36 191
EBITDA margins (%) (11.3) 7.4 18.0
Other Income 35 29 21
Net Interest Exp. 1 4 7
Depreciation 11 16 25
Exceptional Items (29) 8 3
PBT (23) 53 184
Tax 5 12 26
Adj PAT (5) 26 141
Adj. PAT margin (%) (3.4) 5.4 13.3
Adj. EPS (0.5) 2.5 13.6

BALANCE SHEET
(Rs cr) FY21 FY22 FY23
Assets
Net Block 10 67 71
Capital WIP 0 0 0
Intangible Assets 13 22 29
Intangible Assets under development 9 0 0.00
Right of use assets 0 0 0
Other Non-current Assets 10 15 52
Current Assets
Trade receivables 120 531 1,566
Cash and Bank Balances 332 504 661
Short-term loans and advances 1 2 1
Other Current Assets 81 129 177
Total Current Assets 535 1,167 2,406
Current Liabilities & Provisions
Trade payables 173 727 1,803
Other current liabilities 178 240 336
Total Current Liabilities 351 968 2,139
Net Current Assets 184 199 267
Total Assets 225 304 419
Liabilities
Share Capital 2 10 10
Reserves and Surplus 202 221 330
Total Shareholders Funds 204 232 340
Minority Interest 0 0 -3
Total Debt 0 3 6
Lease Liabilities 8 61 64
Other Long Term Liabilities 13 8 11
Total Liabilities 225 304 419

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 TBO Tek Limited Sector: Travel & Tourism

Cash Flow (Rs) FY21 FY22 FY23

Cash flow from Operating Activities 51 198 237
Cash flow from Investing Activities -27 -31 -106
Cash flow from Financing Activities -5 -16 -14
Free Cash Flow 50 192 231

RATIOS
FY21 FY22 FY23
Profitability
Return on Assets (%) (0.8) 2.0 5.5
Return on Capital (%) 0.5 19.2 51.5
Return on Equity (%)* (2.4) 11.2 41.5
Margin Analysis
Gross Margin (%) 74.6 67.2 68.8
EBITDA Margin (%) (16.0) 6.6 17.1
Net Income Margin (%) (3.4) 5.4 13.3
Short-Term Liquidity
Current Ratio (x) 1.5 1.2 1.1
Quick Ratio (x) 1.5 1.2 1.1
Avg. Days Sales Outstanding 309 401 537
Avg. Days Inventory Outstanding – – –
Avg. Days Payables 446 549 618
Fixed asset turnover (x) 14.8 7.3 15.0
Debt-service coverage (x) (19.0) 5.1 13.4
Long-Term Solvency
Total Debt / Equity (x) – 0.0 0.0
Interest Coverage Ratio (x) 0.8 12.7 24.9
Valuation Ratios
EV/EBITDA (x) - 283.8 49.1
P/E (x) - 370.8 67.8
P/B (x) 47.0 41.4 28.2
EV/Sales (x) 65.3 18.8 8.4
*Based on Adjusted PAT.

Source: RHP, SSL Research

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 TBO Tek Limited Sector: Travel & Tourism

Peer Comparison
Rategain Travel
TBO Tek Limited Technologies Limited
9MFY24 Annualised
CMP 875.0 920.0 670.0
Sales (Rs cr) 1365.0 1365.0 565.0
EBITDA (Rs cr) 256.9 256.9 87.0
Net Profit (Rs cr) 217.0 217.0 68.0
M.Cap (Rs cr) 9521.0 9990.1 7911.0
Enterprise Value (Rs cr) 8578.6 9047.6 7634.0
EBITDA Margin (%) 18.8 18.8 15.4
Net Margin (%) 15.9 15.9 12.0
EV/Sales (x) 6.3 6.6 13.5
PE(x) 43.9 46.0 62.7
EV/EBITDA (x) 33.4 35.2 87.7
RoE (%) 24.0 24.0 10.2
RoCE (%) 27.5 27.5 10.2

The data is based on FY23 financial data.

For TBO Tek Limited the P/E, Market cap and EV/EBITDA (x) are calculated on post-issue equity share capital based on the upper price band.

*CMP as on 7th May 2024.

Source: RHP, SSL Research

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 TBO Tek Limited Sector: Travel & Tourism

SBICAP Securities Limited

(CIN): U65999MH2005PLC155485 I Research Analyst Registration No INH000000602
SEBI Registration No.: Stock Broker: INZ000200032 | CDSL: IN-DP-314-2017 | NSDL: IN-DP-NSDL-369-2014 | Research Analyst: INH000000602
Portfolio Manager: INP000004912 | IRDA/RW/IR2/2015/081 | IRDA/RW/IR1/2016/041 | IRDA: CA0103
Registered & Corporate Office: Marathon Futurex, A Wing, 12th Floor, N. M. Joshi Marg, Lower Parel, Mumbai-400013.

For any information contact us:

022-6854 5555
E-mail: [email protected] I Web: www.sbisecurities.in

DISCLOSURES & DISCLAIMERS:

Analyst Certification: The views expressed in this research report ("Report") accurately reflect the personal views of the research analysts ("Analysts") employed by SBICAP
Securities Limited (SSL) about any and all of the subject issuer(s) or company(ies) or securities. This report has been prepared based upon information available to the public
and sources, believed to be reliable. I/We also certify that no part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendation(s)
or view(s) in this report.
The Analysts engaged in preparation of this Report or his/her relative:-
(a) do not have any financial interests in the subject company mentioned in this Report; (b) do not own 1% or more of the equity securities of the subject company
mentioned in the report as of the last day of the month preceding the publication of the research report; (c) do not have any material conflict of interest at the
time of publication of the Report.
The Analysts engaged in preparation of this Report:-
(a) have not received any compensation from the subject company in the past twelve months; (b) have not managed or co-managed public offering of securities for the subject
company in the past twelve months; (c)have not received any compensation for investment banking or merchant banking or brokerage services from the subject company in
the past twelve months; (d) have not received any compensation for products or services other than investment banking or merchant banking or brokerage services from the
subject company in the past twelve months; (e) has not received any compensation or other benefits from the subject company or third party in connection with the Report;
(f) has not served as an officer, director or employee of the subject company; (g) is not engaged in market making activity for the subject company.

Name Qualification Designation

Sudeep Shah MMS-Finance DVP- Technical & Derivative Research
Sunny Agrawal B.E, MBA (Finance) DVP - Fundamental Research
Rajesh Gupta PGDBM (Finance), MA (Bus. Eco) AVP - Fundamental Research
Monica Chauhan C.A. Research Analyst - Equity Fundamentals
Harsh Vasa CA Research Analyst - Equity Fundamentals
Sumeet Shah B.E., CFA Research Analyst - Equity Fundamentals
Sweta Padhi MBA (Finance) Research Analyst - Equity Fundamentals
Uday Chandgothia B-Tech, MBA (Finance) Research Associate - Equity Fundamentals
Gautam Updhyaya MBA (Finance) Research Analyst - Equity Derivatives
Vinayak Gangule BE (IT) Research Analyst - Equity Technicals
Pratik Patni BSc (Biotech Entire) Research Analyst- Equity Derivatives
Ghanshyam Gupta MBA (Finance) Research Analyst- Currency Derivative
Sagar Peswani B.Tech (ECE) Research Associate - Equity Technicals
Kalpesh Mangade B.Com MIS Analyst - Retail Research

For other Disclosures please visit: https://bit.ly/R_disclaimer02

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