TBO Tek, a leading travel technology platform, has just opened its Initial Public Offering (IPO) for subscription. Travel enthusiasts and investors alike are buzzing with the question: should you buy in?
This blog will dissect the TBO Tek IPO, analysing its potential and the key factors to consider before you decide to invest.
We will explore the company’s business model, financials, and market position to help you determine if TBO Tek’s IPO is a first-class ticket to opportunity or a potential red-eye to disappointment.
About TBO Tek
Founded in 2006 and headquartered in New Delhi, TBO Tek, previously known as Tek Travels, revolutionises the travel industry by streamlining operations for various suppliers, including hotels, airlines, car rentals, and more. It also caters to retail clients like travel agencies, independent consultants, and corporate entities.
TBO Tek is a comprehensive travel distribution platform that curates travel inventories tailored to customer needs, supporting various currencies and providing forex assistance.
It empowers sellers to showcase and price their offerings while buyers benefit from a unified, multi-currency, and multilingual portal that facilitates the discovery and booking of global travel options across various segments.
By the end of December 2023, TBO Tek had enabled travel arrangements to upwards of 7,500 locations across a network spanning over 100 nations.
As a leader in the global travel and tourism sector, TBO Tek stands out for its gross transaction value (GTV) and operational revenue for FY23. Operating in over 100 countries, it offers buyers a vast travel inventory that meets their customers’ needs with currency and forex support.
TBO Tek plays a crucial role as a travel distribution intermediary, linking over 750 airlines and roughly 1 million hotels worldwide with buyers, including travel agencies and independent advisors. Its modular design allows for customised solutions, and its asset-light approach guarantees scalability.
The platform’s capacity to introduce new services creates a network effect, bolstering its market position and operational efficiency.
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TBO Tek IPO
TBO Tek is preparing for an IPO that will open for subscription on May 8, 2024, and will remain open until May 10. The price range of the shares is ₹875-920 each. An investor needs to subscribe for at least 16 equity shares.
The total IPO value is ₹1,550.81 crores, comprising a fresh issue of shares amounting to ₹400 crores and an offer-for-sale totalling ₹1,150.81 crores.
The distribution of the net offer includes 75% for Qualified Institutional Bidders (QIBs), 15% for Non-Institutional Investors (NIIs), and a 10% allocation for retail investors.
Axis Capital, JM Financial, Goldman Sachs (India) Securities, and Jefferies India are the IPO’s book-running lead managers. Kfin Technologies has been designated as the registrar for the offering.
| IPO opening date | May 8, 2024 |
| Date of closure | May 10, 2024 |
| Face value | ₹1 per share |
| IPO price band | ₹875-920 |
| Lot size | 16 shares |
| Issue size | ₹1,550.81 crores |
| Fresh issue | ₹400 crores |
| Offer-for-sale | ₹1,150.81 crores |
| Listing date | May 15, 2024 |
Source: TBO Tek Ltd RHP
Fund utilisation plan
The company will use the IPO proceeds from the fresh issue worth ₹260 crore to develop and build its platform and add new buyers and suppliers. In addition, unidentified inorganic acquisitions will be taken care of using ₹40 crore and the remaining funds for general corporate purposes.
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TBO Tek IPO GMP (Grey market premium)
Market analysts report that the grey market is currently valuing TBO Tek’s shares at a premium of ₹529.
TBO Tek financials
(All amounts in ₹ millions)
| Financials | 9M FY24 | FY23 | FY22 |
| Revenue | 10,237.53 | 10,645.87 | 4,832.68 |
| Profit after tax | 1,541.78 | 1,484.91 | 337.17 |
| Net worth | 5,012.12 | 3,371.92 | 2,319.04 |
| Total borrowings | 29.32 | 63.60 | 26.94 |
Source: TBO Tek Ltd RHP
Shareholding pattern pre-issue
| Shareholder | Shareholding percentage |
| Promoters | 51.26% |
| Public Shareholders | 46.43% |
| TBO ESOP Trust | 2.31% |
Source: TBO Tek Ltd RHP
Investment considerations
Strengths
- TBO Tek has developed a platform that fosters a virtuous cycle of network effects, enhancing the offerings for its partners. TBO Tek’s modular platform architecture is strategically designed to allow for the agile development and deployment of solutions that cater to the distinct needs of different buyer and supplier groups. As the tourism sector continues to grow, TBO Tek is well-positioned to capitalise on the industry’s upswing.
- Instead of causing upheaval in the travel supply chain and buyer ecosystem, TBO Tek serves as a collaborative facilitator. The company is regarded by airlines and hotels as a valuable addition to their distribution channels, helping them penetrate emerging markets with high growth potential.
Likewise, travel agents are empowered by the platform’s ability to digitise their business processes, enhance their visibility of available inventory, and secure competitive deals that are on par with those of larger corporations.
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Weaknesses
- The company’s reliance on a small number of suppliers and third-party systems exposes it to risks. Moreover, tourism itself is a sensitive industry that thrives through intense competitiveness.
- The business faces pricing pressure from suppliers, risking withholding inventory or altering the terms of arrangements, including for reduction or removal of commission. Considering all factors, opportunities, risks, and valuation, investors may submit applications for the offer with a long-term perspective.
Bottomline
In conclusion, TBO Tek has great prospects for investors who might be thinking of how travel technology can grow in the long run. Undoubtedly, its strong financial performance, extensive global network and robust platform are some of the major strengths that place it favourably within the fast-growing tourism industry.
Nevertheless, prospective shareholders must also understand that TBO Tek is exposed to high risks due to its dependence on a small number of suppliers and the volatility experienced in the travel market.
