Yatra Online IPO booked only 10% on first day so far; retail portion subscribed 45%

The Rs 775-crore initial public offering (IPO) of Yatra Online continued to witness a lackluster response from the investors during the initial few hours of the bidding process on Day 1. The issue opened for bidding on Friday, September 15 and will close for bidding on Wednesday, September 20.

Yatra Online is selling its shares in the range of Rs 135-142 apiece during the three-day bidding process and investors can make a bid of a minimum of 105 equity shares and its multiples thereafter. The issue includes a sale of fresh equity shares worth Rs 602 crore, while an offer-for sale (OFS) of up to 1.21 crore equity shares worth Rs 173 crore.

According to the data, the investors made bids for 27,15,405 equity shares, or merely nine per cent, compared to the 3,09,42,356 equity shares offered for the subscription by 3.20 pm on Friday, September 15. Mostly retail investors participated in the bidding.

The allocation for retail investors was booked 45 per cent, while the portion for non-institutional investors saw a subscription of only two per cent. However, the portion reserved for qualified institutional bidders (QIBs) was not even off the mark at the same time.

Incorporated in 2005, Yatra Online provides information, pricing, availability, and booking facilities for domestic and international customers. The company provides domestic and international air ticketing on Indian and international airlines, as well as bus ticketing, rail ticketing, cab bookings, and ancillary services.

Brokerage firms have a mixed view on the issue as it has attracted both 'subscribe' and 'avoid' ratings from the analysts, considering the industry tailwinds improving the business and scalability. However, others have remained skeptical over the highly competitive market, seasonality in the leisure travel industry and high dependence on air ticketing business.

It will continue to invest in its common technology platform and introduce new product offerings in an efficient and timely manner. With the improvement in internet penetration, coupled with rising disposable incomes and 346 growing business travel in tier 2 and 3 cities it intends to leverage its existing travel agent network for growth opportunities, said Religare Broking with a 'neutral' tag.

"With the growth in the tourism industry, we expect the online travel market share (OTA) to increase faster than captive players, improving the company's profitability. With the company posting profits in FY23 and strong revenue growth in the past, we remain positive on the company from a medium to long-term perspective," said StoxBox with a 'subscribe' rating for the issue.

A day before its IPO, Yatra Online mopped up Rs 348.75 crore by allocation of 2,45,59,860 equity shares at a price of Rs 142 per share to 33 anchor investors including Morgan Stanley, Goldman Sachs, Societe Generale, BNP Paribas Arbitrage, Elara India Opportunities Fund, Whiteoak Capital, Quantum-State Investment Fund and various domestic mutual funds and insurance firms.

The company has reserved 75 per cent of the net offer for qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will get 15 per cent of the offering. Remaining 10 per cent of the offer shall go to retail investors.

Yatra Online is the largest corporate travel service provider and a well-known online travel company. It has a proven track record and a targeted marketing strategy.  But the travel industry is highly competitive, and such companies have to rely on various third parties as well. Additionally, it is heavily dependent on the airline ticketing business, said Swastika Investmart.

"The company has been at a loss for the last few years, but it became profitable in FY23. The P/E valuation is 205.7 times, while its revenue multiple is 5.6 times which is low. But After considering other risk factors, we will avoid this IPO," it said.

SBI Capital Markets, DAM Capital Advisors and IIFL Securities are the book-running managers to the issue, while Link Intime India has been appointed as the registrar to the issue. Shares of the company are likely to be listed on both BSE and NSE.

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