In contrast to what the street and grey market expected, RateGain Travel Technologies made a disappointing stock market debut as shares listed at a discount to IPO price. Despite most of the IPOs witnessing a handsome return, the timing of RateGain IPO doesn’t fit despite as Covid is hurting its business in the near term, according to analysts. “As we see the company is among leading distributors of SaaS software technology in hospitality and travel industry, the negative listing was because the company incurred losses for the last two years during Covid-19, and reduction in GMP of the shares,” said Manoj Dalmia, Founder and Director, Proficient Equities. The stock opened for trade at Rs 364.8 per share, down Rs 60 or 14.16% from the IPO price of 425 per share. Few minutes after the poor listing, Rategain Travel Technologies share price dipped further to Rs 361.60, 15.46% down from the issue price.
Should you buy, hold or sell? What analysts suggest
RateGain saw a weak listing with losses of up to 20%, which is even lower than our expectations of “at par” listing as we anticipated deterioration in conditions on account of Omicron scare and accelerated Fed tapering. Although RateGain is reporting losses, the same is due to depreciation and impairment charges and the company is comfortably profitable and generates cash. It is a vertical specific platform company, is one of the largest aggregator of data points, and has comprehensive and inter-operable solutions which would do well as the travel & hospitality industry rebounds globally. Hence, we recommend Holding the stock as long-term prospect are strong given the growing importance of revenue maximisation and digital transformation in T&H industry, said Milan Desai, Lead Equity Analyst, Angel One Ltd.
Despite being the first mover, the company saw a moderate subscription of 17 times. On the back of a pandemic, the company has been losing money for the last two years, and rising COVID cases are still a concern. The company debuted at Rs 360 against the issue price of Rs 425, which is a 15% discount. For short-term investors, a stop loss of 325 should be put in place, while long-term investors are encouraged to hold it. When things return to normal, the company should show great growth potential. Investors looking for buying opportunities should watch for a decline of 25-30% in the stock price, said Parth Nyati, Founder, Tradingo.
The timing of RateGain IPO doesn’t fit despite most of the IPOs witnessing a handsome return because Covid is hurting its business in the near term while worry of the Omicron variant is another challenge. Long term outlook of the company is promising therefore long-term investors can stay invested while those who applied for listing gain can keep Stop Loss of 330. New investors can look for entry opportunities at 25-30% correction, said Santosh Meena, Head of Research at Swastika Investmart Ltd.
The grey market premium was indicating potential listing gains around 12 to 15 percent. However, the issue got listed at a discount of nearly 15 percent as compared to its issue price of Rs 425 owing to the weaker sentiments of Indian markets amid increasing volatility. It is currently trading at Rs 372.90. The issue has disappointed investors who subscribed the issue solely for the listing gains. But investors who are allotted with these shares can consider holding them for medium to long term as the proceeds from the issue will be utilized to invest in growth opportunities apart from debt repayment. Its valuations are in line with its global peers and the company has been able to generate stable revenues and the cash flows are healthy. Therefore, one can hold this stock for 3 to 5 years in their portfolio., said Likhita Chepa, Senior Research Analyst, CapitalVia Global Research Ltd.
Rategain Travel tech is the largest SAAS company in the Hospitality and travel industry in India. We find the company attractive since it has no listed peers currently. Company has a niche set of products & technology backed by AI and is deriving 95% of its revenue from leisure travel including 65% from the US. Investors can accumulate stock for a longer run but keeping in mind the volatile nature of the sector due to prevailing covid related developments. Overall, any restrictions in travel can be a dampener for the stock since this can be a frontline sector to be hit. Hence, we advise buying with caution & for the long term, based on the risk profile of the investor, said Mohit Nigam, Head – PMS, Hem Securities.
Investors are advised to book their quantity and wait for positive quarterly earnings coming ahead which might drive prices higher. Holding onto position might be risky as the market sentiment seems to be negative. At the same time, the hospitality industry is bullish going ahead, making this stock a good bet,” said Manoj Dalmia, Founder and Director, Proficient Equities.
Currently, market sentiment is weak, and because of losses incurred due to covid, the company needs more time to recover. New investors can buy the stock near 320. For short-term investors, a stop loss of 277 should be put in place. The target for the share is 425, said Ravi Singhal, Vice Chairman, GCL Securities Limited.