TBO Tek Ltd IPO : 7 things to know about

TBO Tek Ltd, is a B2B player that designs and produces travel applications allowing users to search and book tickets through the web. They had filed the draft red herring prospectus (DRHP) in late December 2021 and SEBI is yet to give its observations and approval for the IPO.

Normally, the IPOs are approved by SEBI within a period of 2 to 3 months unless there are other queries or clarifications that the regulator has. The IPO of TBO Tek Ltd will be a combination of a fresh issue and an offer for sale and the next steps in the IPO process will start once the approval from SEBI is received.

7 interesting facts to know about the TBO Tek Ltd IPO

1) TBO Tek Ltd has filed for an IPO with SEBI which comprises of a fresh issue of Rs.900 crore and an offer for sale of Rs.1,200 crore taking the total issue size to Rs.2,100 crore.

However, since the price band for the proposed IPO has not been announced still, the size of the fresh issue / IPO / offer for sale is not precisely know.

For now, the draft red herring prospectus of the company has only disclosed the total amount of fresh issue and the offer for sale amount.

2) Let us talk about the offer for sale (OFS) portion of the IPO first. A total of shares worth Rs.1,200 crore will be sold by the promoters and the other early investors as part of the offer for sale.

The OFS component will not result in any fresh fund infusion or dilution of the capital or the EPS. However, it must be remembered that the selling of stake by the promoter will increase the free float of the company and facilitate listing of the stock.
 

3) The fresh issue portion of Rs.900 crore will be both; capital dilutive and also EPS dilutive. Also, due to the expansion of the capital base, the share of the promoters will come down and the public float will increase. Let us now look at how the company proposes to utilize the proceeds of the TBO Tek IPO.

It will use the proceeds from the IPO predominantly to strengthen the core building blocks of the platform. In the ecommerce support business, it is essential to add customers and supplies on a continuous business to keep the platform robust.

However, this requires a lot of upfront costs in the form or aggressive marketing, fronting ending of discounts and rebates etc. In addition, the company will also allocate part of the new issue proceeds for inorganic growth via the mergers and acquisitions route for niche area of operations where the company need not really reinvent the wheel all over again.

4) The company is also planning a pre-IPO placement of shares worth Rs.180 crore. This will either be done via rights or via private placement. These shares will be typically placed with QIBs, high net worth individuals and family offices.

If the pre-IPO placement is successful, then the company will proportionately reduce the size of the IPO and the fund raising from the public.

The pre-IPO placement is normally done with a longer lock-in period compared to an anchor placement but the leeway in pricing the issue is much higher in the case of a pre-IPO placement as compared to an anchor placement.

5) TBO Tek simplifies the business of travel for suppliers such as hotels, airlines, car rentals, transfers, cruises, insurance, rail and others by focussing on the B2B side of the business rather than focus on the overcrowded B2C segment.

TBO Tek has a presence spread across India, MEA, North America, Latin America, Europe, China and APAC. It allows the large fragmented base of suppliers to display and market inventory  and set prices.

6) TBO Tek brings to the table some unique advantages. It helps to create network effect with interlinked flywheels to fine-tune value proposition for partners. Modular technology platform allows adding new lines of business, markets and travel products. Capital efficient business model helps sustain growth.

7) The IPO of TBO Tek Ltd will be lead managed by Axis Capital, Jefferies India, Credit Suisse and JM Financial. They will act as the sole book running lead managers or BRLMs to the issue.

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