Rategain - Fast Growing SaaS Leader

aainahatredtillend · April 26, 2025, 10:15am

Hi Yug,

Good questions.

I also do not have any concrete evidence about how historical prices give them a moat here.

Yeah, for the quarter ended December 2024, MMT increased revenue by 25% y-o-y. Rategain grew the distribution business by 4.2% y-o-y (Page 11 Q3FY25 Investor Presentation). The management attributed this mostly to impact of losing one big customer. It seems they are not able to cover up for it from other customers and expect this to hurt them for three more quarters. Excerpt below is from Page 7 of Q3FY25 Earnings Call Transcript.

It’s one of the larger OTAs that is a sub-brand of one of the biggest OTAs that is sort of sunsetting, and we continue to see the volumes decline on this sub-brand that is being sunset and we will continue to see some pressure on that over the next three to four quarters till it’s completely sunset.

Finally,

In their public communication they keep repeating about how they are embedded into the travel and hospitality industry. See the below excerpt from Page 15 of Q3FY25 Earnings Call Transcript.

Now, Satya Nadella might think that Microsoft has the ability to build a hotel AI agent as well. That is right. We can build a hotel AI agent as well. But what they don’t have is integration into the hotel ecosystem which RateGain possesses, which is integration to the hotel CRS, hotel PMS. So, if you call the hotel and you are speaking to the AI agent and you ask them, what are the rates for the next three days, we have the ability to cull out that information because we have integration to all the systems in place.

In my opinion that is their only moat, that they are already connected to many players in the industry. So there is a switching cost of moving away from them. I am not sure though how prohibitive it is and therefore what is really the width of this moat. For MarTech too they are banking on being able to cross sell. So what this company does is it keeps buying new companies and then keeps selling to the same set of customers the new offerings from the company just purchased.

yug · April 29, 2025, 9:17am

Thanks for the answers! They were helpful.

In MarTech, they are basically engaging with the hotels to improve their social media strategy and to convert customers from Metasearch platforms into direct bookings. Do we know on approximate basis, the mix of these 2 in this segment?

Also, I am trying to understand the importance of advertising & social media for the hotels. As per me, reviews are the important drivers for customers than social media. Hotels are a commodity, I am wondering that apart from reviews, can anything else influence a traveler?

I can understand that social media can be helpful to spread awareness. But I don’t think people will be enticed to take a trip simply because they saw a post from a hotel! Hotels can best spread their awareness through OTA, because whenever someone is planning a trip, they will go to OTA sight and Metasearch engine.

As per my understanding, Rategain can try to convert traveler from Metasearch to hotel’s platform, not through OTA, which is not possible. Can anyone confirm?

Converting a traveler from metasearch engine could be a different business where Rategain can add value to the hotels. Thoughts?

yug · April 29, 2025, 9:35am

Also since company does not give split up of organic vs inorganic growth, it is difficult to take a call when it is dependent on acquisitions for growth.

aainahatredtillend · May 1, 2025, 10:26am

The company does not disclose this in its filings.

My belief is that hotels do not want to be too dependent on OTAs. And they actively try and get as much direct business as possible. Here are some numbers.

Lemon Tree: 64% non-OTA bookings (Page 12, Q1FY25 Investor Presentation)
Indian Hotels: 74% non-OTA bookings (Page 4, Q1FY22 Earnings Call Transcript).

So they definitely have a requirement for marketing software which would help them cut out OTAs as much as possible. I think hotels work very hard on not depending on leisure travellers whom you are referring to. They try and get most business from business travellers.

Yes the company does not disclose this. But here are a couple of numbers which give some idea.
They have made the following four acquisitions in past few years

Now you should look at the revenue that these companies were making at the time of being acquired.

DHISCO 118 crores in FY19
BCV Social 67 crores in FY20
Myhotelshop 50 crores in FY21
Adara 200 crores in FY22

Source: Page 24 of IPO note by Prabhudas Lilladher, Acquisition Conference Call by Rategain on January 3, 2023
PL_Rategain-Travel-Technologies-02-12-21-prabhu.pdf (1.2 MB)
RG_Adara_Transcript_03012023.pdf (187.8 KB)

Hence it looks like the company has a playbook of being dependent on inorganic growth.

kunalshirodkar · May 1, 2025, 5:28pm

Hi Varun, this information is quite useful! Putting the ‘Acquired Growth’ and ‘Organic Growth’ numbers in perspective, we get below pointers/insights;

Between 2018-2023, RateGain spent ~$55mn (~Rs385cr @ $1 = Rs70) to acquire revenues of Rs435cr (DHISCO 118cr + BCV Social 67cr + MyHotelShop 50cr + Adara 200cr) at P/S of 0.9x.
RateGain’s Revenue increased from Rs262cr (FY19) → Rs957cr (FY24). This was an increase of Rs 695cr over 5yrs.
However, when we factor in the ‘Acquired Growth’ of Rs 435cr during the same period, it appears that Organic Growth was miniscule! (Rs695cr - Rs435cr = Rs260cr, which is pretty damn close to FY19 Revenues of Rs262cr)
In recent calls, management has indicated that they are unable to find decent acquisition targets due to competition in valuations. Over similar periods, guidance has been gradually reduced from 20% → 15% → 12%, implying that Acquisitions are a key pillar/necessity of the growth strategy at RateGain, and possibly in the industry due to its fragmented nature.
RateGain will likely fall under the ‘Serial Acquirer’ category of Peter Lynch framework and needs to be viewed/researched accordingly.

Above calculations are estimates to arrive at a general view and surely there will be variations in actual numbers. Also realize that RateGain might be able to improve the operations/technology of acquired company which could lead to better operating profit growth. Please do own diligence as necessary.

Regards,
Kunal

lohiyaakshay08 · May 1, 2025, 6:11pm

So, company doubled its revenue in 5 years, which comes to CAGR of 14%, which is decent. Further, we should also see growth in bottom line, may be EBITDA, data for which might not be available.

0.9x P/S looks cheap for tech companies

Unknowninvestor · May 1, 2025, 6:21pm

Sales are 1200 crore and market cap is 4000 cr plus. How is p/s 0.9 ?

Sudeep_Chhaukar · May 3, 2025, 4:21am

Hi all,

As a percentage of total revenue (calculated from the FY2024 figures):

• DaaS: Approx. 32.9% (3145.6 / 9570.31)
• Distribution: Approx. 22.1% (2117.3 / 9570.31)
• Martech: Approx. 45.0% (4307.4 / 9570.31)

I couldn’t find numbers how each segment is contributing to the overall PAT, does anyone have that number ?

GauravT · May 4, 2025, 9:56pm

What are the views on valuation and bottom in current market? Should we expect further downside to below 20 PE?

rranjan · May 22, 2025, 2:50pm

while another travel b2b co TBO Tek is doing much better
https://www.bseindia.com/xml-data/corpfiling/AttachLive/04092b2c-c813-4c41-ab9f-cbffe964d13e.pdf

garg.saurabh1975 · May 24, 2025, 6:47am

Are they comparable from business model perspective wherein TBO is an OTA while Rate gain is the vendor to likes of such OTA?

rranjan · May 24, 2025, 11:09am

their market complement each other- this can help in understanding if growth is above market or below at par

kunalshirodkar · May 24, 2025, 3:45pm

TBO and Rategain business models are different even if they operate in same industry. Check out this thread on TBO Tek for details

https://forum.valuepickr.com/t/tbo-tek-ltd-travel-boutique-online/

Deven · May 28, 2025, 6:40am

Now the Fy 26 growth guidance is 6-8% and OPM guidance is 15-17% which is down from 22%. The company used to grow ~ 50% in the past. They have recurring revenue, with such growth, they are surely losing market share to competitors.

Very disappointing numbers. Company is making story around AI, however numbers and narrative are not matching.

Aloysius_De_Sa · May 28, 2025, 5:16pm

Yes. Decided to exit the stock. 6-8% makes no sense on a PEG level and I feel these guys are too conservative. They have been holding back acquisitions for more than a year now in hopes of good price.

himanshu_pastagiya · June 17, 2025, 9:39am

Looking P/E of 26 at FY26 CAGR 6-8% makes stock expensive (PEG 3.7) however I believe it’s at least 3/4 year play. Management has achieved guidance in the past except FY25. Company is investing on GTM. They are hiring people at Key positions at different Geographies. M&A is also an area which can drive further growth.

Q4FY’25 Concall Excerpt:
(On Revenue Projection)
So, net net, I believe that we should be able to get to about 6% to 8% growth this year. And with the investments that we are making into GTM, my view is over a three-year period, we want to beat the rule of 40, which is an aggregate of our growth and our EBITDA margin. And as we continue to sort of grow and invest in our GTM, I am very, very confident that we can get into high double-digit growth rates organically. And hopefully with some of the opportunities we are chasing on the M&A side, that would be additional growth.

(On GTM investment)
On the GTM investments, so additional investments that the Board has approved is about $5 million in FY ‘26, with bulk of it about $4 million, close to $4 million going into GTM. So, we do think that our margins, as a result, will come down in this year. So, it will be more around 15% to 17%.
But as we sort of look to scale the company and see the impact of the GTM investments in terms
of new bookings and how they impact our revenue, in FY '27 and '28, because of the operating leverage that you have seen, we should come back to that 19% to 22% kind of EBITDA range as we see the impact of operating leverage as a result of new bookings.

(In terms of what went wrong, Management admits sort of complacency but now moving forward)
I think the other thing is in terms of the outlook that we had given, maybe we underestimated the effort involved, especially from a new sales perspective. And I think we were always doing really, really well. Something asked about the LTV to the CAC and our sales and marketing costs as a percentage of revenue, they are quite modest compared to our other SaaS peers. And
we felt that that sales efficiency that we had could continue to operate in that fashion. And when I look back, I do feel that we were consistently winning large deals, which helped that. And my view on looking at those large deals is to look at them as cherry on top, but have like a very predictable engine that continues to have a momentum of deals coming in irrespective of a large deal or not. So, I am quite confident we will solve for that. I am very confident about a lot of the investments that we have done. And some of these things also get underestimated when things are going really, really well, right? As you have indicated, our growth was just phenomenal, over 50% over the last 3 years. And when there are structural and fundamental issues, when the going is
good and it’s not addressed, they come back to bite you and that’s what seems to be happening.
But it’s okay. I think we are all in it for the long term. I am very pleased with all the corrective action that we are taking and personally and even with the team, there is a very, very high degree of confidence. The stability and the fundamental strength that we are building in the company that position us, really will position us to march forward to being a billion dollar in revenue company.

My takeaway: Downside risks are limited. Company can improve Revenue and margin from FY27 as it’s working on right strategy of hiring competent persons at senior position, Focusing on Sales etc. Hence Medium Risk High Reward Case.
I am invested and hence may have bias opinion.
Let me know if I am missing anything here.

Aloysius_De_Sa · June 17, 2025, 4:45pm

No doubts, good company and phenomenal Corporate Governance. But when the turnaround in growth does happen, I feel the market will give time to enter. Usually the case in beaten down stocks and most investors are apprehensive. So will be looking for any green shoots.

Pallabs · June 20, 2025, 7:37am

Q4Fy25

This is the third Quarter of bad results & downgrade. OPM maintained at 20%+ but revenue were flat. On positive side, significant reduction in employee cost. Mgmt. is pointing towards slowdown in FY26, revenue guidance of 6-8%, margin may take a hit of 3-5% (i.e. OPM 15-17%). Beyond product development, RateGain is leveraging AI internally, describing it as driving a shift towards an AI-first culture.

Till now M&A had been a key value enabler, however, company is now sitting on ~1300Cr cash, but, not finding opportunities with good IRR, it seems they are in a M&A winter and hoping that those who are buying at such crazy valuation will come back and sell it to RateGain one day. They have seen such cycle play out in the past.

Going into FY26, company is Investing $5 million to ramp up investments in both AI native products as well as GTM. Aspiring to grow at 20% organically by focusing on creating brand awareness, selling products already developed. Mgmt also mentioned the focus on making new bookings a more “predictable engine” rather than being dependent on large deals. (one key driver that we really need to solve for is the new bookings.). Instituted a new team, Sales Development Reps. Introduced an inside sales team, to focus on smaller deals so that the bigger enterprise deals get attention of the enterprise teams.

On the significant reduction of employee cost, company has commented that, performance based bonuses has been clawed back. And that, they don’t anticipate adding a lot of people going forward due to productivity gains achieved through use of AI. Have introduced an AI employee: REMO. Expect operating leverage at some point in time.

Specific issue company faced in this quarter; CY Q1 is seasonally a slow quarter for MarTech division (48% Sales). There has been renegotiation in some accounts for pricing but this is not generalized. However, mgmt has commented that, most of our contracts actually have CPI increases.

On Q1Fy26, mgmt is quite hopeful that this quarter will be the best sales quarter in the history of the company. Expect DaaS and Martech, to grow in double-digit, but Distribution is projected to be going a bit negative.

Mgmt had got some requests from some very, very large financial institutions on a lot of the pricing data because a lot of hedge funds are very keen to use that data to decide on their investment strategy. However, they are reactive to such opportunity & not proactive. This seems like company is doing some original data analytics, which attracted the likes of Hedge Funds.

Their initiative, of annual survey with New York University through the state of distribution report have started giving them valuable insights into the problems faced by the industry. And to help hotels tackle these challenges, company has launched multiple new product. In line with this strategy company has, released 'State of Car Rental’ report in collaboration with Auto Rental News (the leading source of news and industry trends for car rental companies globally). This is the knowledge base, company is building.

As per mgmt., the industry is still very fragmented hence a lot of opportunity to grow inorganically. However, due to entry of certain player(Q3FY25) (possibly PE firm or VCs) who are aggressively doing acquisitions, Rategain is unable to get good value even though 1300 Cr+ cash & Investment is lying with the company.
Mgmt. comment, “Next year is going to be an year of investment in building sales and marketing infrastructure” is telling that, now they are going to focus on promoting the products they have already built, implying company is banking on organic growth to drive the revenue going forward.
Also, Company is prioritize expanding footprint in the mid & small market segment, which i think strategically, is to drive tech penetration in these category.

FY26 will be dull period for the company, and two factors which needs to be tracked closely is;

How organic growth is performing?,
And Whats happening to M&A.,
Other then that, how company is doing in small & mid market segment is also worth tracking.

drkshetty1 · July 3, 2025, 3:19pm

Ashish will oversee strategy, innovation, and adoption of UNO globally, with a focus on strengthening its AI
capabilities and delivering faster, insight-led actions to hotel partners. With over 17 years of experience
across strategy, transformation, and leadership, he has previously held key roles at Ecom Express, OYO,
Propstack, and Kearney, with cross-market exposure across India, Europe, and Southeast Asia.
“Ashish brings a rare blend of strategic foresight and operational excellence, along with a strong
understanding of AI-driven business models,” said Bhanu Chopra, Founder and Managing Director,
RateGain. “With AI continuing to redeϔine how the travel industry operates, Ashish’s leadership will accelerate
the growth of our UNO platforms—making them smarter, faster, and more effective for our customers globally.
We are delighted to welcome him to RateGain.” “Travel as a category is becoming more personalized, non-discretionary, highly segmented, and digitally led,”
said Ashish Sikka, Senior Vice President and Business Head – UNO Platforms, RateGain. “Hotels and
travel providers globally need credible SaaS partners who can deliver revenue-maximizing, efϔicient platforms
that offer real competitive advantage. RateGain is uniquely positioned to solve for the traveler journey with its
AI-ϔirst platforms, and I’m excited to join the team to build and scale these next-generation solutions.”
Ashish holds a bachelor’s degree from College of Business Studies, University of Delhi, and an MBA from IE
Business School, Spain. He is passionate about building innovative platforms and delivering customer-
centric growth.
This appointment follows RateGain’s recent launch of UNO VIV.

This is probably the trigger for the stock today

Folok · July 8, 2025, 4:53am

Given a lot has been already shared about the Co’s profile and recent prospects, I’d like to share on three things: Competition, Risks & Valuations

Competition

Before talking about competition, I would insist the reader to spend 5 mins on the Co’s website to understand their various products. If you don’t want to that’s fine; do check it out later.

Rategain competes in a robust marketplace with several key players such as OTA Insight, Fornova, TravelClick, SiteMinder, and DerbySoft. Each of these competitors operates in various segments like Data as a Service (DaaS), Distribution, and Marketing Technology (MarTech).

As seen from the above chart, what sets Rategain apart is its integrated coverage of all the segments combined with trust and scale. This enables Rategain to leverage vast amounts of data from different touchpoints in various parts of the value chain in two ways:

First, this extensive data collection enables more informed and effective decision-making, enhancing product development and customer service.
Second, this wide-ranging presence facilitates cross-selling opportunities, allowing Rategain to offer bundled solutions that are not possible for competitors who specialize in narrower fields.

All of this sounds good on paper!

Given Rategain competes globally with other providers we snooped around a bit to compare how does it fare against its competitors. We came across a report by Hotel Tech. Hotel Tech ranks each product within categories with a proprietary ranking algorithm, the HT Score. The linked article details their robust rating system which we understood to be highly indicative of best-in-class experience and user appeal. (The links for these reports are attached in the article below, I am getting an error in linking it here.)

Hotel Tech ranks each product in categories such as: Operations, Revenue Management, Guest Experience, Marketing, Meetings & Events, Vacation Rentals, Food & Beverage, HR & Staffing etc.

Within which Rategain’s category include Revenue Management and Marketing.

Revenue Management itself is sub-divided into various functions which are given in the below screenshot:

The winners for 2025 within each sub-category is as below (Rategain doesn’t feature in any):

However, it does grab 3rd place amongst the best Channel Manager and Rate Shopping Software category.

In 2024, the Co had a similar rating finishing runners up in the Channel Manager and Rate Shopping segment within the Revenue Management category, with no representation in the marketing segment as winner or finalist. Help yourself with the 2024 rankings.

However, the Co ranked amongst the top 10 companies (10th and 9th) in the 2024 and 2025 respectively Hotelier’s Choice Award.

In short, this means Rategain faces excessive competition from global players like Light House and SiteMinder among others in both the revenue management and marketing segments. They are quite far from the top players, and this should be indicative of keeping tempered expectations in the Co’s revenue growth.

In India, a notable competitor within this segment is STAAH Tech. Find the Co’s website here .

The Risks

While sectoral tailwinds, less cyclicality compared to other travel businesses, geographic diversification, integrated platform, the travel industry’s push towards data and digitization & scope for a strong acquisition etc. make a good case for Rategain, we are more inclined towards the risks.

The Co’s share price has seen a stark decline in share price in last 6 months with price falling from ₹750-ish levels to CMP of ₹430.

This recent fall in price is due to quite a few reasons:

Single digit revenue growth to the tune of 6-8% expected for FY26.
Huge investments in sales and marketing can keep pressure on the margin in the near term
A falling LTV to CAC ratio since 2023 attributed to lack of winning any big clients in the last year.
Since its QIP in Nov 2023, the Co hasn’t been able to materialize any acquisition targets stating its reluctance to overpay for any acquisitions.
Management also indicated that their distribution business will witness decline in revenues for the coming quarters. This partly due to wind up of one of the sub-brands of a large OTA and also due to repricing of legacy contracts in DHISCO.

Apart from the above, the Co also faces other significant risks such as:

Economic Slowdowns: Rategain’s revenue is closely tied to the health of the global economy, particularly the travel and hospitality sectors. An economic downturn can lead to decreased consumer spending on travel, reduced hotel stays, and overall lower demand for travel services.This is unavoidable as economic downturns are neither predictable nor avoidable.
Geographical concentration: While Rategain caters to customer’s globally, more than half of its revenues are from North America. Any economic slowdown, geo-political tension or internal political crisis can lead to reduced demand for the Co’s services.All that said, we do find it encouraging that the Co’s concentration in North America has been steadily coming down from 65% of revenues in FY21 to 54% in FY25.
Competition: As outlined earlier, the Co faces strong competition against various global players across many categories. Clients changing ships from Rategain to its rivals or competitors coming up with innovative products can derail Rategain’s future revenues.While Rategain faces a deluge of rivals, its products still stand out given its integrated platform and ability to process and analyze large volumes and data in real time continues to be a key differentiator.
The AI-angle: We are currently in the 1960’s of the AI revolution. In the years and decades to come we will likely see seismic shifts in various industries of the world. The travel sector won’t be an exception. The Co’s adaptability and edge to constantly innovate and launch new products would be a key monitorable.Amongst the many interviews and con calls, we skimmed through a recurrent theme was a commitment to being an AI-first company. In such spirits, the Co recently launched VIVA, an AI voice agent designed to help hotels convert more bookings by engaging guests in over 18+ languages, answering common and complex queries, processing reservations and confirming bookings.The Co also launched Smart ARI which uses AI to solve for overbookings and rate parity violations. While this is less than the tip of the AI iceberg and does not carry any future guarantee, Mr. Chopra’s forward-looking vision provides comfort.
Wrong/Weak acquisitions: An important driver of Rategain’s growth strategy is to acquire other companies to enhance its own products and market reach. M&As are tricky and often turn out to be unsuccessful. Misjudging the value of a business, overpaying for it or even poorly integrating it can lead to financial disruptions and operational strain for the Co.However, we find ease in Rategain’s approach to acquisitions. Mr. Chopra has been repetitive in stating that they are not willing to overpay for acquisitions. And that they will only agree to valuations that comply with the group’s required IRR of over 20% and a payback period of five to seven years. DHISCO’s turnaround to profitability post-acquisition or acquiring Adara at 0.7 times sales to significantly augment’s Rategain’s Martech solutions, offers testament to the company’s disciplined approach.