TBO Tek IPO subscribed 2.8 times on Day 2 so far; GMP sees sharp uptick

The initial public offering (IPO) of TBO Tek saw a strong response from the investors during the second day of the bidding process. After being fully subscribed on the first day itself, the issue continued to attract investors from retial, HNI and employee categories.

 

The New Delhi-based TBO Tek is selling its shares in the price band of Rs 875-920 apiece. Investors can apply for a minimum of 16 shares and its multiples thereafter. It is looking to raise Rs 1,550.81 crore via IPO, which includes a fresh share sale of Rs 400 crore and an offer-for-sale (OFS) of 1,25,08,797 equity shares.

 

According to the data, the investors made bids for 2,58,38,512 equity shares, or 2.78 times, compared to the 92,85,816 equity shares offered for the subscription by 2.35 pm on Thursday, May 09. The three-day bidding for the issue will conclude on Friday, May 10.

 

The allocation for retail investors was subscribed 7.60 times, while the portion reserved for non-institutional investors saw a subscription of 4.83 times. However, the quota set aside for employees attracted bids for 7.62 times of their reservation, while qualified institutional bidders (QIBs) quota was booked only 14 per cent times as of the same time.

 

TBO Tek, formerly known as Tek Travels, is a travel distribution platform that offers travel inventory according to the needs of its customers and supports a wide range of currencies along with forex help.  The Rs 1,550.80 crore IPO of TBO Tek includes a fresh share sale of Rs 400 and offer-for-sale (OFS) of up to 1,25,08,797 equity shares by its promoters and existing shareholders.

 

The grey market premium of TBO Tek has remained firmed after the first day of the bidding. Last heard, the company was commanding a premium of Rs 555-560 in the unofficial market, suggesting a listing pop of about 60 per cent for the investors. However, the premium in the grey market stood around Rs 480-500 levels, before the bidding opened for the issue.

 

Brokerage firms are mostly positive on the issue suggesting investors to subscribe to it on niche business model, rising demand of traveling across in the world and limited competition in the sector. However, some analysts are skeptical over rich valuations and big chunk of OFS in the issue.

 

TBO Tek is one of the leading travel distribution platform in the global travel and tourism industry in terms of gross transaction value and revenue from operations for FY23 by providing buyers with a comprehensive travel inventory according to the needs of customers and supporting a wide range of currencies along with forex assistances, said Aditya Gaggar, Director at Progressive Shares.

 

"The issue is seeking a P/E of 48.60 times, which appears fully to be priced. The company is poised for bright prospects as global travel segment is poised for growth as indicated by recent trends. Investors can invest in the IPO on their own discretion for long term gains," he said.

 

TBO Tek raised Rs 696.51 crore via anchor book it allocated 75,70,807 equity shares at Rs 920 per equity share. For the nine-months ended on March 31, 2023, TBO Tek reported a net profit of Rs 154.18 crore with a revenue of Rs 1,039.56 crore. The company's bottomline came in at Rs 148.49 crore with a revenue of Rs 1,085.77 crore for the financial year ending March 2023.

 

The trend of increasing diversity in who is traveling, why they are traveling and where they are traveling to, creates a large opportunity for Buyers as well as Suppliers. TBO Tek being the prominent travel distribution platform takes advantage of an opportunity by aggregating global travel supply and global travel demand, said Vishnu Kant Upadhyay, Assistant Vice President - Research & Advisory at Master Capital Services.

 

"The business is currently seeing a huge tailwind from the booming travel and tourism sector post the pandemic which is currently fueling their growth, and businesses like this have a huge operating leverage as the business grows. We recommend subscribing to this IPO given the huge growth and margin expansion potential," he said.

 

TBO Tek has reserved shares worth Rs 3 crore for its eligible employees, while 75 per cent of the net offer shall be reserved for the qualified institutional bidders (QIBs) and 15 per cent shares shall be allocated towards non-institutional investors (NIIs). Retail investors will have only 10 per cent of the allocation in the issue.

 

The company positions itself ambitiously, yet its valuation aspirations, amidst comparisons to disparate peers and ambitious benchmarks, seem misaligned with its strategy and market realities, said Tarun Singh, Founder and MD at Highbrow Securities

 

"Investors are left evaluating the potential of this opportunity against a backdrop of financial manoeuvres favouring the insiders and regulatory scrutiny faced by the promoters. Despite support from renowned underwriters, the offering lacks the compelling clarity needed for a strong investment case, prompting me to pivot to SME IPOs that might better reflect value," he said.

 

Axis Capital, Goldman Sachs (India) Securities, JM Financial and Jefferies India are the book running lead managers of the TBO Tek IPO, while Kfin Technologies is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE with May 15, Wednesday as the tentative date of listing.