Indian travel booking platform ixigo has filed Thursday for an initial public offering to raise INR 16 billion (USD 215.5 million), according to the company’s prospectus with the Securities and Exchange Board of India (SEBI).
The offer comprises a fresh issue of equity share worth INR 7.5 billion and an offer of sale (OFS) by existing investors for INR 8.5 billion. The stakeholders offloading their shares in the IPO include ixigo co-founder and CEO Aloke Bajpai, co-founder and CTO Rajnish Kumar, Elevation Capital (formerly SAIF Partners), and Micromax, a local smartphone company. Though Sequoia, which has also been a backer of the company since 2016, is not listed among the stakeholders selling their stakes.
Co-founders Bajpai and Kumar hold 9.18% and 8.79% stakes, respectively, in ixigo, which is considered to be one of the few profitable internet companies in India.
The company was founded more than a decade ago in 2007 as a metasearch platform where users compare flight ticket prices. A metasearch platform aggregates travel inventory from multiple online travel agencies (OTAs) and redirects users to their sites to complete the booking. Ixigo elevated the game to become a marketplace by adding transactional capabilities for flight, hotel bookings, and train tickets by early 2017. However, it only became a full-fledged OTA itself in FY 2020 and began competing directly with the market leader MakeMyTrip, which had invested about USD 4.8 million in the platform back in 2011.
The travel and hospitality industry has been severely impacted due to the COVID-19 pandemic since March 2020. But ixigo has managed to keep itself afloat and grow inorganically, partially by making acquisitions to expand its service offerings. The Sequoia-backed company acquired train utility and ticketing company Confirm Ticket in February 2021 and bus ticketing firm AbhiBus earlier this month.
The company sees trains and buses as key growth drivers of the domestic travel industry, with major demand coming from lower-tier cities. With international travel still being off-limits, ixigo, like many other players, has been pinning its hopes on domestic travel, which showed signs of revival before the second wave of COVID-19 that erupted in April and May this year shattered those hopes.
“Domestic travel is expected to regain 60% of its capacity within six months by the end of 2021, and international travel could remain depressed for another 18 months until the end of 2022,” the company noted.
Last month, ixigo raised a USD 53 million round—in a mix of the primary and secondary share sale—from Singapore’s sovereign wealth fund GIC, Infoedge Ventures, White Oak, Bay Capital, Orios Venture Partners, Trifecta Capital, and Malabar Investments. The deal gave its long-term backer and bigger rival MakeMyTrip an exit with 8x returns.
The company said it has witnessed stable growth over the past couple of years despite the pandemic. Its revenue from operations stood at INR 1.1 billion and INR 1.3 billion in FY 2020 and FY 2021, respectively. Moreover, it managed to clock up a profit of INR 75.3 million in FY 2021 as compared to the loss of INR 266.11 million in FY 2020.
The company said it intends to set aside INR 5.4 billion out of the net proceeds from the IPO for organic and inorganic growth initiatives.
The organic growth initiatives will include discounts and other incentives to woo new users, sales, marketing, and investments in technology infrastructure development, among other things. A significant part of this earmarked amount will be used for potential acquisitions and strategic initiatives, the company said, adding that it will include spending INR 350 million for buying the remaining equity share capital of Confirm Ticket.
“As part of our growth strategy, we have in the past and intend to continue to invest in and acquire stakes in companies that are complementary to our business and technology offerings,” ixigo said in the filing.
The Bengaluru-based company plans to push for strategic investments and acquisitions to expand beyond trains, flights, and bus tickets to include hotels, travel packages, activities, experiences, travel insurance, and tours.
“We intend to expand into these new verticals through strategic partnerships and acquisitions,” it said. “By diversifying into new travel-related verticals, we seek to be able to attract more users to our OTA platforms, increase user engagement and serve as a comprehensive ‘one-stop’ travel solution.”
However, the company noted that its costs may increase over time that could lead to losses.
Challenges versus opportunities
The company warned that the detection of new strains and subsequent waves of COVID-19 infections in several states in India as well as throughout the world may adversely affect its business operations.
Business travel has been impacted the most during COVID-19. During the third quarter of FY 2021, India’s corporate travel only recovered to between 25% and 30% of pre-COVID levels, while leisure travel recovered by between 75% and 80%, according to the company.
“The second wave hit in March 2021 and the impact on corporate travel is going to be adversely affected even further,” it added. “Traditional corporate travel, such as for IT companies, has depleted due to the shifting lifestyles of working from home. Consequently, it will take longer to recover and may not ever go back to pre COVID levels.”
It expects the SME segment to contribute a major portion of corporate travel in the future, which may come back soon “because it consists of people who need to be on the ground to conduct their businesses.” Meanwhile, it expects leisure travel to revive the quickest once travel becomes safe and prices reduce.
ixigo expects India’s OTA industry will bounce back due to pent-up demand and accelerate especially in the rail and bus segments, reaching INR 1.7 trillion in 2024. Overall, India’s travel market is expected to grow by 7% to reach INR 5 trillion by 2024.