“The company has posted another quarter of well-rounded performance with healthy revenue growth, margin expansion and new contract wins. The team continues to deliver across key parameters leading to improvement in key metrics.”
– Tanmaya Das, Chief Financial Officer, RateGain Travel Technologies
Stock data
| Ticker | RATEGAIN |
| Exchange | BSE and NSE |
| Industry | IT – Software |
Price Performance:
| Last 5 days | -4.8% |
| YTD | +8.75% |
| Last 1 year | -7.38% |
Company description:
Founded in 2004, RateGain Travel Technologies Limited is a global provider of SaaS solutions for travel and hospitality that works with 2600+ customers and 700+ partners in 100+ countries helping them accelerate revenue generation through acquisition, retention, and wallet share expansion.
It is one of the largest Software as a Service (SaaS) providers in the travel and hospitality industry in India. The firm offers travel and hospitality services across different verticals like hotels, airlines, online travel agents, meta-search companies, package providers, car rentals, cruises, and ferries
Business verticals:
RateGain provides subscription based services to hotels, Online Travel Agents (OTA) like Booking.com, Make My Trip, Cleartrip etc., car rental companies etc. The company operates under three business verticals namely:
- Data as a Service (DaaS):
The company collects the data through their business, analyzes them and then this data is sold to hotels, car companies, airlines etc for predicting the future demand and and recommending them the prices to be set for their services. A lot of major airlines use their services. Recently Akasa air even before their full launch has started using their product in this category for their dynamic pricing.
It covers the entire set of data points such as pricing, ratings, rankings, availability, room descriptions, cancellation policy, payment policy, discounting, and package inclusions. It operates on a subscription model wherein customers subscribe to DaaS products such as Optima and Parity.
- Distribution:
This segment acts like a bridge between the Online Travel Agencies and Hotels. So RateGain helps with the real time updation of bookings done on any OTA to the database of the hotel. It also updates the details of any hotels like its photos, room rent etc automatically on the OTA apps.
It helps hotels to sell the right product at the right price on the right channel by serving the right content through demand partners. RateGain has two products in this space -RezGain & DHISCO.
- Marketing Technology (MarTech):
In this segment, the company does the social media marketing of various hotels. This helps the hotel focus on a concentrated audience and increase their sales. Recently they launched a product called “Engage AI” which basically is a whatsapp bot and acts as a personal concierge on behalf of hotels. This helps the user with online checkin/checkout, restaurant services etc. The hotels can also upsell their products using this technology thereby increasing their topline.
IPO Details:
During FY22, RateGain raised INR 1,335 Crs through the IPO of which 960 Crs was an offer for sale and the remaining INR 375 Crs was a Fresh issue which the company has utilized towards:
a) Repayment and/or prepayment of loans availed by RateGain UK.
b) Making a payment of deferred consideration for the acquisition of DHISCO.
c) Strategic investments, acquisition, and inorganic growth.
d) To make an investment in technology innovation, artificial intelligence, and other organic growth initiatives.
e) Purchase of capital equipment for the company’s data center.
Financials:
What we like:
- Leading SaaS player in Travel and Tourism industry:
RateGain Travel Technologies is one of the leading distribution technology companies globally and the largest Software as a Service (SaaS) provider in the travel and hospitality industry in India. It offers a suite of interconnected products that manage the revenue creation value chain for its customers by leveraging its big-data capabilities and integration with other technology platforms helping hospitality and travel providers acquire more guests, retain them via personalized guest experiences and seek to maximize their margins.
- The company holds a list of marquee clients:
RateGain serves over ~2200 customers across 100+ countries, including the top 23 of 30 hotel chains, 25 of 30 OTAs, and all the leading car rentals along with 8 Global Fortune 500 Companies. Six Continents Hotels, InterContinental Hotels Group, Kessler Collection, Lemon Tree Hotels, Oyo Hotels, and Homes Pvt Ltd are some of the marquee customers served by the company and its top 10 customers accounted for 32% of the revenue in FY22.
- The company has a high customer retention rates:
The company’s AI-enabled platform and technology-focused offerings, 24×7 customer support, quick resolution of issues, and customer feedback mechanism to improve customer satisfaction have led to consistent customer retention rates. RateGain has established relationships of over 5 years with 415 + customers. The Gross Revenue Retention rate stood at 90% in FY22.
- Moat:
The biggest moat is the integrations the company has on both supply side and demand side with close to 1000+ partners allowing them to scale their business with high ROI. The other moat RateGain has is the high degree of interoperability – which means that their products can talk to each other to share deeper insights which its competitors cannot provide or replicate at the scale on which RateGain is operating.
- No single company has presence across all three businesses:
There is no direct competitor of RateGain as no single company is involved across its all three businesses. In their DaaS business Rategain competes with
- Fornova in OTAs segment,
- Rate Highway in Car rental segment
- OTA Insight, Amadeus, Sabre in the hotel segment.
- In the Distribution segment, its largest competitor is DerbySoft.
- In the MarTech segment, competitors on the social selling side are ad agencies and other peers like Casual Fridays, Destination Think, Lodging Interactive etc.
Factors to consider:
- Covid-19 impact on the business is uncertain.
- Market of SaaS solutions in the hospitality & travel industry is new and evolving.
- The company may not derive anticipated benefits from strategic investments and acquisition.
Industry Analysis:
The global travel industry in terms of gross bookings is expected to reach US$ 1,381 Bn in 2024, at a CAGR of 25.5% over CY 20-24, on a benign base hit by COVID 19. The online portion of the travel market has grown from 26% in 2010 to nearly 52% in 2020. The pandemic accelerated the shift and online is further estimated to reach 56% by 2024. Mobile part of the online travel market and has grown from a miniscule 0.2% to nearly 47% in 2020 as travelers adopted technology across the travel lifecycle.
We believe these numbers will increase over the next few years because of advances in technology as well as from COVID-19 impacts. Technology impacts include cloud adoption because of the basic benefits of uptime, availability, and high level of support in the cloud, as well as the superior development environment for building applications and platforms that can auto-scale through microservice architectures. After some initial skepticism, We can expect more companies migrating to the cloud and staying there (or operating in a hybrid mode), which reduces the need for a hardware footprint on premises or with a third-party provider