ixigo IPO: 10 key risks investors should consider before subscribing to the ₹740-crore issue

ixigo IPO: Le Travenues Technology Ltd, which operates the trip booking website ixigo, began subscriptions today (Monday, June 10) and end on Wednesday, June 12. ixigo IPO stated on Friday that it raised ₹333 crore from anchor investors ahead of its first public offering. ixigo revealed that its existing shareholders  have sold shares worth little more than ₹176 crore in a pre-IPO transaction.

Le Travenues Technology Limited, established in 2006, is an online travel agency (OTA) that allows passengers to purchase rail, airplane, and bus tickets, as well as hotels, using its OTA platforms under the brand name "ixigo".

Also Read: ixigo IPO to open on June 10; here's what GMP indicates ahead of public issue

The company allocated 75% of the issue size to qualified institutional buyers (QIBs), 15% to non-institutional investors, and 10% to retail investors. Investors may bid on a minimum of 161 shares or multiples thereof. Ixigo IPO price band has been set in the range of ₹88 to ₹93 per equity share of face value of 1 each.

According to Arun Kejriwal, founder of Kejriwal Research and Investment Services, ixigo generates revenue from three major verticals: ixigo trains and the Confirmtkt app, ixigo-flights mobile app, and the Abhibus app. Compared to its listed peers, who are mostly flightticket aggregators, the firm posted losses in 2022 before turning profitable in March 2023. However, earnings per share (EPS) are very negligible, less than Re 1, making the issue extraordinarily expensive when compared to its listed peers.

Also Read: Ixigo IPO to open on June 10; here are 10 key things to know from RHP before subscribing to the ₹740-crore issue

The company's listed peers are Easy Trip Planners Ltd (P/E of 54.96) and Yatra Online Ltd (P/E of 187.83). The company's total income rose to ₹517 crore in the fiscal year ended March 2023, from ₹385 crore the previous year. The company's profit for the fiscal year ending March 2023 was ₹23.4 crore, up from a loss of ₹21 crore the year before.

Here are some of the key risks listed by the company in its Red-Herring Prospectus (RHP):

ixigo IPO - Key Risks

• The Offer Price, market capitalisation to revenue multiple, and price-to-earnings ratio based on the Offer Price of the firm may not be indicative of the company's market price upon listing or later.
• The firm began operations as a meta search website before transitioning to an OTA. It has minimal experience functioning as an OTA.
• The company's train ticketing services are based on their arrangement with IRCTC. The termination of their agreement with IRCTC might prevent them from providing train ticketing services and have a significant negative impact on their operating performance, cash flows, financial condition, and commercial prospects.
• Any failure to maintain satisfactory performance of their technology infrastructure, including our OTA platforms, particularly those resulting in service disruptions, could have a material and negative impact on their business and reputation, and their business may suffer if their technology infrastructure or technology is damaged, fails, or becomes obsolete.
• The firm has previously sustained net losses, and they expect increasing costs in the future. Any future losses might have a severe effect on their operations and financial circumstances, as well as the market price of their equity shares.

Also Read: ixigo IPO: Gurgaon-based company garners ₹333 crore via anchor book ahead of public issue

• To improve user experiences, the firm introduced products and features such as ixigo Assured, ixigo Assured Flex, and Abhi Assured, and they plan to continue adding new features and products. If the introduction of new goods and services, features, enhancements, and strategies fails to fulfill their goals or client expectations, it may have a negative influence on their business and financial situation.
• If they fail to maintain and improve their brands "ixigo", "ConfirmTkt", and "AbhiBus", or if they fail to maintain the quality of customer service, the company may struggle to retain existing and acquire new customers and business partners, and their business may suffer.
• The company's Customer Acquisition Cost has steadily climbed, and they may not be able to meet the Customer Acquisition Cost that they expect.
• The company's sales and marketing attempts to recruit clients may be futile.
• The company's limited experience and operating history in certain of its businesses, particularly its hotel offering, makes it difficult to accurately assess their future growth prospects and may have a negative impact on their business, financial condition, cash flows, and results of operations.

Also Read: Ixigo IPO: From price band to GMP - here are 10 things to know before you subscribe to the issue

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.