Thread by @alphaspotcap

Rategain - A long term play?

Here’s our analysis of RateGain, the SaaS sector, it’s clients, risks and more!

A thread below🧵👇🏻
#investing #stocks

(1/18)

About -

Rategain offers a suite of interconnected software products that helps travel and hospitality companies acquire more guests, retain them via personalized guest experiences and maximize their margins!

(2/18)

What is SaaS?

SaaS is a method of delivering software and applications over the internet via a subscription model, where a software is located on an external server. Examples - Adobe Creative Cloud, Microsoft Office 365.

(3/18)

Indian Saas Sector

The Indian SaaS landscape continues to mature rapidly, Investment in SaaS has increased 170% over 2020 comprising 8% of overall private equity & venture capital deal value in India

Indian SaaS are poised to capture 8% to 9% share of the global market

(4/18)

Rategain’ Clientele -

They works with more than 2200 clients across large hotel chains such as Six Continents, InterContinental; Kessler Collection, a luxury hotel chain; Lemon Tree Hotels Ltd, Oyo Hotels & Homes Pvt Ltd & several prominent OTAs (online travel agencies

(5/18)

Businesses of Rategain-

1. Martech - 34% Revenue share

2.Distribution -30% Revenue share

3. DaaS - 36% Revenue share

(6/18)

Martech -

• Single source provider of social media management
• Subscription based model
• AI to personalize guest experience

•136 New Clients added

•65% Increase in Properties

•99.9% Recurring Revenue

•Launched 5 new offerings
including Social e-commerce

(7/18)

Distribution-

• 81 New clients added

• 97.9% Recurring Revenue

• 10% Volume reduction due to Omicron

• Amongst the largest processors of electronic hotel transactions

• Runs both subscription & transaction model through RezGain and DHISCO respectively

(8/18)

DaaS-

• Provide data & information to suppliers & demand providers

• Deliver insights including competitive intelligence & parity intelligence

• 67 New clients added 97.9% Recurring Revenue

• 161% Growth in AirGain Revenue

• OTA processing 120% PreCovid Volumes

(9/18)

RateGain’s financials-

• Gross revenue retention at 91%

• Recurring revenues at 99%

• Client count 2241 at 9MFY22 vs 1337 at FY21

• LTV to CAC ratio (Higher the better) at 11.3 vs 8.5 in FY21

• EBITDA at 10.7% vs -1.9% YOY basis

• PAT at 6.3% vs -9.1% YOY

(10/18)

Use of Funds from IPO

1. Repayment of Debt availed by RateGain UK to Silicon Valley Bank

2. Payment of Deferred Consideration – DHISCO

3. Strategic Investments, Acquisitions & Inorganic Growth

4. Investment in Tech Innovation, AI & other Organic growth initiatives

(11/18)

Travel is recovering fast!

Travel Industry is set to grow by 26% annually in the next 5 years.

Key reasons-

1. 6% global GDP growth rate
2. More than 50% vaccinations done
3. Travellers are more tech savvy now
4. 82% travel demand is for leisure

(12/18)

• RateGain’ Roadmap for the future

1. Significant opportunity to expand in US, UAE, India & EU
2. Focused GTM play – the company continues to invest in sales
3. Focus on airlines with benefit from innovations made to AirGain
4. Entering ferry companies & holiday parks

(13/18)

5. Building capabilities through inorganic opportunities
6. Partner of choice to large customer chains by tapping on new emerging OTA channels
7. Become the universal content platform of choice
8. Bundled offerings eg. Demand.AI offers knowledge of travel

(14/18)

RateGain’s Key M&A focus area -

1. Domain Expertise

2. Industry Compatible

3. Presence in Target Markets

4. New Capabilities for Existing Customers

5. Innovative technology Infrastructure & Offerings

(15/18)

Key Risks to know about RateGain-

1. Ongoing COVID-19 pandemic and its impact on business;

2. Inability to renew customer contract

3. Inability to attract new customers in a manner that is cost-effective and assures customer success;

(16/18)

4. Failure of Distribution products to satisfy customer demands

5. Uncertainty in market for SaaS solutions in the hospitality and travel industry

6. Adverse developments in markets from which they derive a significant portion of revenues from.

7. Currency risk.

(17/18)

Conclusion-

RateGain has a good potential to grow because of the volume & growth in the travel & hospitality sector.

They offer SaaS services to well established business working in travel and hospitality which shows their ability to provide services to big chains!

(18/18)

However, they do have number of risks and uncertainties involved as they cater to developed markets that has more competition then India in this space!

Do you think RateGain is a long term play?
@datta_arvind @caniravkaria @itsTarH @AvadhMaheshwar2

Comment down below!