- #TBOTek sets #IPO price at Rs 875-920/share
- Fund utilisation strategy
Sajeet Manghat in conversation with #TBOTek's Co-Founders Ankush Nijhawan and Gaurav Bhatnagar. #IPOAdda
For the latest news and updates, visit: http://ndtvprofit.com
- Fund utilisation strategy
Sajeet Manghat in conversation with #TBOTek's Co-Founders Ankush Nijhawan and Gaurav Bhatnagar. #IPOAdda
For the latest news and updates, visit: http://ndtvprofit.com
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TVTranscript
00:00 Hello and welcome to IPO Addah, you are watching NDTV Profit and my guest today on IPO Addah
00:08 is from TBO Tech.
00:11 The company is coming out with an IPO which opens on May 8th and closes on May 10th, priced
00:15 between 875 to 920 rupees.
00:18 The IPO comprises of fresh issue of 400 crores and an OFS of 1150 crores, so the total size
00:24 being more than 1500 odd crores.
00:26 And joining me today is Ankush Nijhawan, who is a co-founder and joint MD and Gaurav Bhatnagar,
00:32 who is a co-founder and joint MD.
00:33 Gentlemen, thank you very much for joining us on NDTV Profit.
00:37 Let me start with you, Ankush.
00:39 Give me a sense of the business model that you have, what kind of revenue mix that you
00:48 get from this model.
00:50 Sanjeev, thank you for inviting us here today.
00:56 We are basically primarily a travel distribution tech platform which is actually powering travel
01:03 agents across the world in about 100 countries.
01:06 We are a mediator in between the supply, and supply typically is airline and hotels, and
01:12 on the demand side, which is primarily the travel agents and the travel operators.
01:16 So we are the platform in the middle between these two, demand and supply, and the revenue
01:22 basically for us comes from our airline business and hotels.
01:26 Hotels obviously is our global business, which is a higher margin business per se, and airlines
01:32 we only sell outbound airlines from India as well as domestic.
01:37 Gaurav, you are raising 400 crores.
01:41 Give me a sense of where you're going to use this amount.
01:47 Yeah sure Sanjeev.
01:48 Look, because we are a platform business, there are three elements of growth strategy
01:54 for us.
01:55 One is increasing our buyer base.
01:57 So like Ankush said, we have travel agencies across 100 countries using a platform.
02:01 So we'll continue to grow our market footprint across all the five continents, which means
02:07 adding more buyers.
02:08 So there is investment in creating a global sales team, feet on feet, operational support,
02:14 etc.
02:15 Similarly, on the supply side, there will be investment in increasing our supplier base
02:18 and by supplier base, not just depth of supply, which means more hotels and better rates on
02:22 those hotels, but also new types of supply, for example, car rentals, transfers, rail
02:28 products, etc.
02:29 And then the third big thing for us is the platform itself, which requires a fair bit
02:34 of tech and data investment to make sure that the platform continues to scale with the business,
02:39 become more and more user friendly and reduces more friction for our travel agents.
02:43 Apart from this, the business has been growing via the inorganic route in the past as well.
02:49 So we will be looking at some acquisitions as well.
02:53 Any particular area where you're looking at looking at the acquisition?
02:56 Because I think if you're not, if I'm not wrong, around 40 odd crores has been marked
02:59 for that kind of acquisition.
03:01 So is there a specific area that you're looking at?
03:06 Look, our business, the industry is very fragmented.
03:12 You know, there are thousands of companies who either aggregate supply on one side, which
03:17 is aggregating hotel supply in different parts of the world.
03:21 And there are hundreds of companies which aggregate travel agent demand on the other
03:24 side, right?
03:25 So these are small businesses across the globe.
03:27 And where it makes sense, we'll be looking at business of these, these types to roll
03:32 up into our main business.
03:34 Ankush, you mentioned that you mainly look at outbound travel from the country and domestic
03:40 travel.
03:41 Why is that?
03:42 Why don't you look at inbound travel as well?
03:44 Because there's a lot of travel that comes into India as well, right?
03:50 So Sanjeev, our core thesis of the business is the outbound business, which is basically
03:57 people living in their own residence and traveling overseas.
04:01 That's our core.
04:02 And I think that's a focus which we have been doing in the past and will continue.
04:05 So inbound is something I agree with you, but I don't think it's a focus for the company
04:08 at the moment.
04:09 Is there not enough margins of business in that segment, just to understand how it works?
04:18 The margins are healthy there.
04:19 But I think, you know, as I said, you know, our story is still outbound.
04:23 You know, so I think there's a lot of expansion plans.
04:26 You know, the market is very, very large for us to keep growing here.
04:29 So I think that's where our focus would be.
04:31 Gaurav, you know, I was looking at your revenue mix.
04:35 It has concentrated towards hotels and ancillaries over the last three to four years.
04:41 And now, if I'm not wrong, roughly 50, 60 or more than 60% is coming from hotels and
04:48 ancillaries.
04:49 So is that going to be the core going forward?
04:52 And you know, India's travel market, which is the airline market, is also a booming market.
04:57 So you don't see much of a potential coming in there because your revenue concentration
05:02 has moved gradually from, you know, air towards the hotels and ancillaries.
05:11 So look, Sanjeev, the hotels business is fundamentally more fragmented than the airline business
05:17 and hence the margins are better.
05:21 From our perspective, we continue to grow our top line in terms of gross sales, both
05:26 on air and hotels.
05:28 But because the margin is better on hotels, hence you see the revenue mix is changing
05:31 rapidly towards hotels.
05:33 But we have absolute belief both in the hotels business and the growth of the airline business.
05:37 In fact, in India, as you know, the aviation industry is booming and will continue to boom
05:41 for the, you know, for many years to come.
05:43 So we'll continue to grow both the businesses.
05:45 But fundamentally, because the margin profile is different in the between the two businesses,
05:49 the share of revenue will continue to move towards hotels.
05:53 Give me a sense of the margin profile as well, Ankush.
05:57 18.8% in the nine month period and it has grown from FY23.
06:03 But is there enough room to go beyond the 20% mark in this business?
06:07 Absolutely, there is, Sanjeev, you know, and we will try to build our margins.
06:17 But I think what's important for us is, you know, our focus will remain on, you know,
06:21 sharing a lot of margin for our travel agents, you know, because I think it's very important
06:25 as if they make money, you know, all of us will grow.
06:27 I think a bit of expansion in our margins will come, you know, from the operating leverages.
06:31 But I don't see, you know, that we should be, we'll be increasing our margins in the
06:35 airline as well as the hotel business.
06:39 Give me a sense of the kind of revenue mix that you have, you know, because especially
06:43 with respect to the model that you have, markup which is there and the commission business
06:48 which is there.
06:49 You know, if I'm not wrong, it's coming to roughly a good amount is coming from that,
06:59 from the markup business where your take away rates could be as much as 7.25% and for commission
07:06 is 2.59% which is coming in.
07:08 So, if you can give us a break up, there is a commission business only limited to airlines
07:15 or it can, it is also there in some way in the hotels and ancillary business.
07:21 So, largely the airline business works on a commissionable model where airlines set
07:28 the pricing for the air tickets and then they give us a commission out of it, which we share
07:32 with our travel agents.
07:33 Hotels business for the most part runs on the markup model and hence you will see significantly
07:38 more revenue coming from the markup model.
07:41 However, there are certain suppliers who do provide a commissionable model as well within
07:45 the hotels business.
07:47 So, your business mix which is moving towards hotels business is also one of the reasons
07:53 why the EBITDA margins are also moving higher, right?
07:57 Yes, absolutely.
08:00 Look, the EBITDA margins are moving higher because it's an internet business and the
08:04 operating leverage is also kicking in.
08:06 You know, beyond a certain point, our most of our costs are fixed in nature.
08:11 So, beyond a certain point, all the gross profit that the top line generates can directly
08:17 go to the bottom line and hence you see our EBITDA margins grow faster than our GTV.
08:24 Give me a sense of your top customers because you know the top supplier is around 27% of
08:29 your revenues and top 5 is around 57% of your revenues.
08:33 How sticky are these suppliers for you and has there been any churn in them over the
08:40 last 3 to 4 years?
08:43 No, look, the suppliers, you know, fundamentally the suppliers see value in what we provide
08:50 and there is no cost for the suppliers to participate on the platform.
08:54 You know, they pay us only when a transaction happens.
08:59 You have to see that the problem that we are solving for a supplier is pretty complex for
09:03 them to solve themselves.
09:04 Imagine you are a hotel in London and you need to market yourself to travel agents and
09:09 travelers in 100 countries.
09:11 How do you do that?
09:12 Right?
09:13 And that is a problem that EBO solves and because we don't even charge an onboarding
09:16 fee or a subscription, we are making money purely on a transaction.
09:19 So, our suppliers are very sticky from that perspective.
09:24 And the top supplier has been, I think, constant between 27 to 30% of your revenues.
09:31 So, you know, Ankush, if you can give us a sense of which segment this supplier is from
09:36 or who the supplier is?
09:39 So, see, out of this also, you know, one of the largest suppliers you see in the percentage
09:47 what you are saying, Sanjeev, is the airline IATA, you know, which is a one single supply.
09:52 However, IATA is basically a collection house or the body which actually collects money
09:56 from various airlines through us, right?
09:59 So, it's fair to say that, yes, you see a lot of supply concentration there, you know,
10:04 but if you actually see there are 30-40 airlines which operate from India, it's more of a payment
10:08 clearing house.
10:09 So, that is something, you know, which I personally feel is not a risk in a way.
10:15 And within the hotels and ancillaries, is there any concentration risk there as well?
10:20 Because the rest, next four is around 20% of your revenues.
10:27 See, you have to look at it from a perspective that hotels are fundamentally fragmented,
10:33 right?
10:34 There are more roughly a million hotels listed on the platform.
10:38 Some hotels we work with direct, some we often buy through third party.
10:42 So, it is not so much the intermediary supplier that we are buying from, but the question
10:46 is that does the end hotel find value in the platform?
10:49 And I think the answer there is yes.
10:51 So, as long as we keep creating value for the hotels, they will definitely continue
10:55 to work with us and historically we haven't seen any sort of major attrition happen on
10:59 that.
11:00 Is it a trend that we are seeing with respect to the GTV mix which is coming in because
11:07 for the 9-1 period, 57% was from India, 57.9% was from India and 42% odd was from overseas
11:15 and that's the overseas percentage is growing as we see.
11:19 So, is that a trend that we can look at?
11:23 Ankush?
11:25 Yeah, definitely.
11:27 You know, when it comes to outbound travel, so when you look at outbound travel as a segment,
11:36 our GTV mix will eventually start to mirror global trends and from an outbound travel
11:40 perspective, India is an emerging market growing at a fast pace, but today as in absolute dollar
11:46 terms it's a relatively small market compared to say Europe or Middle East or Latin America.
11:51 So, you would definitely, you would expect the mix to continue to change in the foreseeable
11:58 future.
11:59 Most of the business, Sanjeev, what you are seeing that 57% is also because the airline
12:05 business is basically we only sell airlines in India.
12:08 We don't do any airline business outside India, very miniscule, but majority of the business,
12:13 98% of the airline business is done in India.
12:15 India when I say meaning, India international and India India, domestic India.
12:19 So is it fair to say that of the 57 or 58% revenue that comes in from India, 38% is from
12:28 airlines, right?
12:33 I think revenue is, I think what you're saying is mostly GTV.
12:38 Yeah, GTV.
12:39 What the 57 is what you're saying.
12:41 I think revenue is much higher because obviously the hotel mix is bigger, you know, I mean
12:46 the revenue is much higher, therefore the revenue is, if you see would be 70 in favor
12:50 of global markets of ours and 30% India.
12:53 But the GTV is almost 55-45 is primarily because of the airline business, what we do in India.
12:58 Since you earn a good amount of margins from hotels and ancillaries as compared to airlines,
13:03 can you give us an idea of what is the kind of margin picture for both of them?
13:07 Gaurav?
13:08 See, the hotels business operates at a gross margin of about 8% and a gross profit of about
13:21 5.5% out of that 8.
13:23 The airline business happens around about 2.5-2.6% and a gross profit of about 1.4%.
13:30 Okay.
13:31 I just want to need an update on one of the risk factors which I saw in your RHP, which
13:37 is with respect to an ED case involving, you know, bookings from Bangladesh and then the
13:43 compounding that you have applied to RBI for.
13:46 Can you give us a status check on that and what is the kind of contingent risk that can
13:50 come in and have you provided for that risk in the balance sheet?
13:59 So Sanjeev, the application is to be filed with RBI, this is the show cause we had received.
14:10 It creates some potential cost of the compounding fee which has been duly disclosed in the prospectus.
14:19 It has not been specifically provided for as yet.
14:24 Ankush, since your business also deals with a lot of inbound travel, especially for the
14:30 tourism industry, what is the kind of growth rate that you are seeing with respect to the
14:34 travel which is happening?
14:36 Sanjeev, we don't do any inbound business.
14:43 I am talking about hotels and other stuff.
14:46 So there is no business as TPU.
14:48 So you mean from India?
14:51 So I think the market in India, as Gaurav mentioned, obviously is growing rapidly as
15:04 more prosperity increases and the economic growth happens and I think the young India
15:09 today really wants to travel out and have experiences.
15:14 So I think we are significantly a decent player in the outbound hotel business in India but
15:19 I think there is a lot of opportunity for us to scale and grow as India prospers I am
15:23 sure and more and more aircrafts being added.
15:26 The outbound stories only from here on will grow and I am sure we will be one of the biggest
15:30 takers in the coming years.
15:32 Gentlemen, it was a pleasure talking to you today.
15:34 Thank you very much for joining us on NATV Profit.
15:37 Your IPO is opening on May 8th and closes on May 10th priced between Rs. 875 to Rs.
15:42 920.
15:43 Total IPO size of Rs. 1550.8 crores which includes a fresh issue of Rs. 400 crores.
15:49 Thank you for joining us on IPOda.
15:51 Thank you.
15:51 Thank you.
15:52 Thank you.
15:52 (dramatic music)
15:55 (music)