SaaS firm RateGain’s IPO opens tomorrow — should you invest?

• Software-as-a-service (SaaS) platform RateGain intends to raise ₹1,335 crore through this IPO.
• RateGain is seeking a valuation of ₹4,537 crore (about $600 million) at the upper end of the price band.
• RateGain’s grey market premium (GMP) was at ₹85 on December 6.

The initial public offering (IPO) of RateGain Travel Technologies will be launched tomorrow, December 7, and it is something that retail investors can get a scoop of, several stock brokerages have suggested.

The software-as-a-services (SaaS) platform, which solely focuses on the travel and hospitality segment, intends to raise ₹1,335 crore through fresh as well as offer for sale (OFS). The price band has been set at ₹405-₹425.

The lot size has been fixed at 35 shares, meaning a retail investor will have to shell out ₹14,175 to buy the shares. RateGain’s grey market premium (GMP), premium at which investors are comfortable buying the shares before it gets listed on a stock exchange, was at ₹85 on December 6.

RateGain is seeking a valuation of ₹4,537 crore (about $600 million) at the upper end of the price band.

The stock brokerages, who have previously raised concerns of valuation of digital businesses like Paytm and Zomato, too seem to be comfortable with the valuation being accorded to RateGain.

“While there is no listed peer available for a direct comparison to RateGain in the domestic market, its valuations at ~50% discount to unicorns like Zomato and Paytm give comfort on the valuation front. In the new era of internet and AI [artificial intelligence]-based software services, we believe the premium valuation of the company is likely to sustain,” Reliance Securities said in its latest report. A unicorn, in startup parlance, is a firm valued at or over a billion dollars.

The brokerage has also recommended retail investors to subscribe to RateGain’s IPO as there is “high growth potential, unique business proposition with minimal competition and valuation comfort.” The company, however, still is under threat of COVID-19 as well as any situation that may disturb the global travel scenario.

Similar views have been reflected by other stock brokerages in India as well.


Aditya Birla Capital highlighted that RateGain generates stable and recurring revenues with relatively low capital requirements, which leads to healthy free cash flow generation.

“Relationships with large enterprises and a wide array of product offerings would contribute to higher mining of existing accounts and robust growth,” the brokerage added, suggesting that this IPO can bring in long term gain.

Arihant Capital has noted that the company has been making a loss since fiscal year 2019 and aggressive investors can subscribe to the IPO for listing gains. The stock brokerage also highlighted that the growth trajectory of the industry looks promising.

Founded in 2004 by Bhanu Chopra, RateGain offers travel and hospitality software solutions. Its softwares covers an entire set of data points including pricing, rating, ranking, availability, room description, cancellation policy, discounting and packages, among other things. The company has over 1,434 customers spread across 110 countries.

The company counts Lemon Tree, OYO, InterContinental Hotels Group, Kessler Collection, and several other hotels and online travel aggregators (OTAs) as its clients. It also works with online ticketing platforms like GroupOn and distribution companies like Sabre GLBL Inc.

“RateGain’s profitability has not been encouraging over the years, due to the acquisition of loss-making entities and higher depreciation (impairment of goodwill),” Reliance Securities added. The company was profitable till FY2019.

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