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Ixigo Joins the IPO Trend

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Updated: Jun 9, 2024




After three startups went public in May, it's now ixigo’s turn to maintain the IPO momentum in June. Opening for subscription tomorrow, the ixigo IPO will again gauge public market investors' interest in new-age tech stocks. Given the recent IPOs of TBO Tek, Go Digit, and Awfis last month, ixigo’s subscription is expected to be strong, though competition in the travel tech sector is intense. However, ixigo’s profitability and sustainable model are seen as key advantages despite this competition.

The ixigo IPO includes a fresh issue of shares worth INR 120 crore and an offer for sale (OFS) of 6.67 crore shares worth INR 620 crore. The price band is set at INR 88-93 per equity share, aiming to raise a total of INR 740 crore at the upper price band. The company has already secured over INR 333 crore from 23 anchor investors at INR 93 per share.

Analysts suggest that ixigo’s biggest challenge will be the competition from players like EaseMyTrip, MakeMyTrip, Yatra, Flipkart-owned Cleartrip, as well as travel ticketing verticals from Paytm, Amazon, and PhonePe. The travel tech market in India is highly competitive and still largely underpenetrated, with significant use of travel agents and agencies for corporate bookings in smaller towns and large cities.

Some analysts express concern that investors might hesitate to move to ixigo, given their established travel portfolios over the past two years. However, the IPO is expected to see healthy oversubscription. A travel segment analyst from a Big Four firm noted that large investors might already have significant exposure to travel stocks, and the current geopolitical situation might deter further investments. Nonetheless, ixigo’s strong position in the railway ticketing business presents a unique opportunity, especially since it is an untapped market for investors post-IRCTC.

Yet, this advantage in railway ticketing could also pose a risk for ixigo, as IRCTC is both its key partner and a major competitor for direct train bookings. The company’s DRHP highlights that any changes or termination of its agreement with IRCTC could negatively impact its business. Train ticketing accounts for nearly half of ixigo’s revenue. For the nine months ending December 2023, train ticketing revenue of INR 265 crore made up 45.3% of its total ticketing income of INR 585 crore. Ixigo reported a consolidated net profit of INR 65.7 crore in the first nine months of FY24, tripling from INR 23.4 crore in FY23.

This strong revenue base gives ixigo an edge over competitors like EaseMyTrip or Yatra. Analysts believe it could be a good investment opportunity from a long-term perspective, given ixigo’s profitability track record. However, for long-term value creation, ixigo needs to compete with major players like EaseMyTrip, Yatra, MakeMyTrip, Cleartrip, and others primarily focused on flights and hotels. Diversifying beyond railway ticketing will help reduce ixigo’s heavy dependence on IRCTC, which analysts consider the biggest risk for investors.

While ixigo has grown its user base through railway ticketing, it needs to apply the same effort to air ticketing, hotels, and packages. Its core customer base in Tier 2 and Tier 3 India is price-sensitive, requiring significant spending on customer acquisition. Advertising and sales promotion expenses constituted 24% of total revenue as of December 2023, up from 18.6% in FY23. Other risks include ixigo’s limited experience as an online ticketing agent, having transitioned to ticketing in 2019-20 from a travel aggregator and only recently expanding into hotel bookings in 2024, thus having limited operational experience in these areas.

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