Travels & Rentals coming with IPO to raise Rs 12.24 crore

Travels & Rentals

• Travels & Rentals is coming out with an initial public offering (IPO) of 30,60,000 equity of face value of Rs 10 each for cash at a fixed price of Rs 40 per equity share.
• The issue will open on August 29, 2024 and will close on September 2, 2024.
• The shares will be listed on SME Platform of BSE.
• The share is priced 4 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Finshore Management Services.
• Compliance Officer for the issue is Jaya Jain.

Profile of the company

Travels & Rentals offers a comprehensive range of travel-related products and services for end-to-end travel solutions, including airline tickets, hotels and tour packages, rail tickets as well as ancillary value-added services such as travel insurance, passport & visa processing and tickets for activities and attractions. The company is bestowed with more than 25 years of experience and presents India in a distinct manner by designing personalized tour packages. The company is accredited by IATA (International Air Transport Association, Geneva, Switzerland), recognized by Ministry of Tourism, Government of India, member of TAAI (Travel Agent Association of India) and member of IATO (Indian Association of Tour Operators).

The company’s business is completely dependent on the geographical changes. The current environmental conditions going on in the destination is very important for a customer. Customers choose a destination depending upon the month of travel, as not all destinations are travelable in all seasons of the year. The company offers best services to all its customers by understanding its client’s needs and strive to deliver beyond their expectations. It is always committed to fulfil the requirements of its clientele according to their needs. In order to meet these requirements, it has adapted to best measures in the industry. A professional approach and constant interaction ensure client requirement is met with high standard within the agreed guidelines of time and cost. Its impressive growth has been largely due to confidence in its own capability and impressive infrastructure it has created over the years. The company has been steadily diversifying as well as adding new packages to its portfolio.

Proceed is being used for:

• Meeting working capital expenses
• General corporate purposes

Industry Overview

With a total area of 3,287,263 sq. km extending from the snow-covered Himalayan heights to the tropical rain forests of the south, India has a rich cultural and historical heritage, variety in ecology, terrains and places of natural beauty spread across the country. This provides a significant opportunity to fully exploit the potential of the tourism sector. India being one the most popular travel destinations across the globe has resulted in the Indian tourism and hospitality industry emerging as one of the key drivers of growth among the services sector in India. The tourism industry in India has significant potential considering that Tourism is an important source of foreign exchange in India similar to many other countries.

According to WTTC, India is ranked 10th among 185 countries in terms of travel & tourism’s total contribution to GDP in 2019. According to WTTC, the contribution of India’s travel and tourism sector to India's economy was worth Rs 15.9 trillion ($191.25 billion) in 2022. According to WTTC, over the next decade, India’s Travel & Tourism GDP is expected to grow at an average of 7.8% annually. In 2020, the Indian tourism sector accounted for 39 million jobs, which was 8% of the total employment in the country. In 2021, the travel & tourism industry’s contribution to the GDP was $178 billion; this is expected to reach $512 billion by 2028. By 2029, it is expected to account for about 53 million jobs. In India, the industry’s direct contribution to the GDP is expected to record an annual growth rate of 7-9% between 2019 and 2030.

Staycation is seen as an emerging trend were people stay at luxurious hotels to revive themselves of stress in a peaceful getaway. To cater to such needs, major hotel chains such as Marriott International, IHG Hotels & Resorts and Oberoi hotels are introducing staycation offers were guests can choose from a host of curated experiences, within the hotel. India’s travel and tourism industry has huge growth potential. The industry is also looking forward to the expansion of e-Visa scheme, which is expected to double the tourist inflow in India. India's travel and tourism industry has the potential to expand by 2.5% on the back of higher budgetary allocation and low-cost healthcare facility according to a joint study conducted by Assocham and Yes Bank. It is irrefutable that the tourist industry is becoming a more significant economic force and has the potential to be used as a tool for development. The tourist industry not only drives growth, but it also raises people’s standards of living with its ability to provide significant amount of diverse employment opportunities. It promotes environmental preservation, champions diverse cultural heritage, and bolsters international peace. By 2028, Indian tourism and hospitality is expected to earn $50.9 billion as visitor exports compared with $28.9 billion in 2018.

Pros and strengths

Scalable business model: The company’s business model is order driven, and comprises of optimum utilization of its resources and thereby enabling it to achieve consequent economies of scale. This business model has proved successful and scalable for the company in the last financial years. It can scale upward as per the requirement generated by the company. The business scale generation is basically due to the development of new markets, by adopting aggressive marketing, adding more packages also by maintaining the consistent quality of the services it offers.

Wide range of product offering: The company offers complete travel solutions and serve as an integrated provider of all travel and travel related products. Its wide choice of product offerings caters to all the travel needs of an Indian and International traveller. It provides service for all the travel requirements from visa to ticketing, to holidays, to insurance, to foreign exchange, under one roof. This cross selling of products facilitates its customers, thereby, making it its unique selling proposition. Besides, its constant innovation in its product offering and flexibility to meet the ever-changing needs of its customers, are some of the key differentiating value propositions that has enabled it to grow. It has helped the company to differentiate its products vis-a-vis the products offered by its competitors.

Organizational stability along with management expertise: The company has an established track record of more than 30 years which indicates the company’s ability to weather economic and business cycles. The promoters have over 3 decades of experience in diverse industries. This indicates its ability to maintain business viability and steer the business through operational hurdles. The company’s promoters are the guiding force behind the operational and financial decision of the company. The company’s promoters are responsible for the entire business operations of the company along with an experienced team of executives who assist them.

Risks and concerns  

Topline is highly dependent on clients located in India: The company majorly provide services to clients located in India. If the economic conditions of India become volatile or uncertain or the conditions in the financial market were to deteriorate, especially in recent times due to the COVID19 pandemic, or if there are any changes in laws applicable to its services and operations or if any restrictive conditions are imposed on it or its business, the pricing of its services may become less favourable for it. Further, its clients located in these geographies may reduce or postpone their spending significantly which would adversely affect its operations and financial conditions. Any reduction in spending on third party logistic services may lower the demand for its services and negatively affect its revenues and profitability.

Exposed to payment delays and defaults by its customers: The company is exposed to payment delays and/or defaults by its customers and its financial position and financial performance are dependent on the creditworthiness of its customers. Delays in customers’ payments may require the company to make a working capital investment. If a customer defaults in making payments where it has devoted significant resources or where it has invested significant resources is delayed, cancelled, or does not proceed to completion, it could have an adverse effect on its operating results. For the Fiscal ending March 31, 2024, 2023 and 2022, its trade receivables were Rs 1,345.91 lakh, Rs 876.27 lakh and Rs 598.95 lakh, respectively. However, in the past, the company has not faced any such instance of default but there is no guarantee that the timeliness of all or any part of its customers’ payments and whether they will be able to fulfil their obligations, which may arise from their financial difficulties, cash flow difficulties, deterioration in their business performance, or a downturn in the global economy. If such events or circumstances occur, its financial performance and its operating cash flows may be adversely affected.

High working capital requirements: The company’s business requires significant amount of working capital and major portion of its working capital is utilized towards debtors. Its Trade Receivables for the financial year March 31, 2024, March 31, 2023, March 31, 2022 were Rs 1,345.91 lakh, Rs 876.27 lakh and Rs 598.95 lakh respectively. The results of operations of its business are dependent on its ability to effectively manage its trade receivables. To effectively manage its trade receivables, it must be able to accurately evaluate the credit worthiness of its customers and ensure that suitable terms and conditions are given to them in order to ensure its continued relationship with them. However, if its management fails to accurately evaluate the terms and conditions with its customers, it may lead to write-offs bad debts and/ or delay in recoveries which could lead to a liquidity crunch, thereby adversely affecting its business and results of operations. A liquidity crunch may also result in increased working capital borrowings and, consequently, higher finance cost which will adversely impact its profitability. 

Outlook

Travels & Rentals provides a wide range of travel-related products and services for complete travel solutions. The company offers airline tickets, hotels, tour packages, rail tickets, as well as additional services like travel insurance, passport & visa processing, and tickets for activities and attractions. The company has a strong network with travel agents across Europe, the USA, South and Southeast Asia, the Middle East, Africa, and Australia. The company is accredited by the International Air Transport Association (IATA) in Geneva, Switzerland. It is also recognized by the Ministry of Tourism, Government of India and is a member of both the Travel Agent Association of India (TAAI) and the Indian Association of Tour Operators (IATO). On the concern side, the company’s revenues are highly dependent on clients located in India. Any decline in the economic health of India could adversely affect its business, financial condition and results of operations. Moreover, the company’s operations are subject to high working capital requirements. If it is unable to generate sufficient cash flows to allow it to make required payments, there may be an adverse effect on its results of operations.

The company is coming out with a maiden IPO of 30,60,000 equity shares of Rs 10 each at a fixed price of Rs 40 per share to mobilize Rs 12.24 crore. On performance front, the revenue from operations of the company for FY 2023-24 was increased to Rs 752.83 lakh as against Rs 567.05 lakh in the FY 2022-23. This increase was mainly due to increase in sales of its services. The restated profit after tax for FY 2023-24 has been increased to Rs 296.55 lakh as against Rs 150.64 lakh in the FY 2022-23.

The company is trying firmly to set foot in the offline market, it has also created its space in the online arena with its existing website www.travelsandrentals.com, www.lcc-travelsandrentals.com and www.travelsandrentals.in. This primarily offers an additional channel of reaching out to its existing and potential (users) customers. It offers various options to the customer giving him the flexibility to customize the tour packages as per their choice. The website offers complete travel solutions offering the user a choice to book an airline ticket, hotel accommodation, logistic support, to a complete tour package. With the rise in the number of internet users and better acceptability of the internet as a convenient medium for making travel related purchases, the company is well positioned to capture a whole new client base.