Kotak initiates coverage with buy rating on RateGain. Check target price

Rategain Travel Technologies

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26 Aug, 2025 12:21

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Brokerage firm Kotak Institutional Equities has initiated coverage on RateGain Travel Technologies Ltd with a buy rating and kept a target price of Rs 450 a share from current market price.

The stock has jumped nearly 40% in the last one and half month amid higher volume. The stock, which had its IPO in December 2021, priced at Rs425, is still down 14 per cent from the issue price. RateGain is a leading travel & hospitality industry-specific SaaS player, focused on revenue maximization for clients.

According to a Kotak Report to investors, the company is expected to experience growth from the rebound in the travel industry and strengthened connections with hospitality clients following the end of the Covid-19 pandemic. The report states that the company's strong financial position allows for the potential acquisition of new businesses, which would broaden their product offerings and customer base.

"We forecast 20% organic US$ revenue CAGR for the company over FY2022-25E and adjusted EBITDA margin stabilizing in the ~20% range by FY2026E. Our DCF-based FV of Rs450 implies 4.3X EV/sales FY2025E, in line with trading multiples of global SaaS players", Kotak report said.

The stock has generated a lot of excitement in recent weeks due to its completion of the acquisition of Adara Inc, a leading travel data exchange platform based in the United States. Adara is known for its access to high-quality and ethical intent data, and the transaction was executed through a cash payment of $16.1 million rather than a share acquisition.

Analysts have noted that RateGain is acquiring Adara at a low multiple of 0.6x its FY22 revenue. This is despite the fact that Adara's FY22 revenue represents more than 50% of RateGain's total revenue.

RateGain has boosted the profitability of prior acquisitions by leveraging synergies, shifting technology and product development overseas, and streamlining operations. The acquisition of Adara has left the company with a net cash balance of Rs 320 crore. This, combined with robust free cash flow from its core businesses, gives it the capacity to acquire firms that possess strong skills but can be purchased at discounted valuations, in line with the company's acquisition strategy, Kotak report said.

" We build free cash flow CAGR of 36.2% over 2022-32E. However, we do not factor in any incremental contribution from acquisitions that have not been announced yet", Kotak report said.

With the Adara acquisition, RateGain can utilize its large pool of consumer travel intent data and integrate it with its DaaS products to reach targeted audiences and impact booking decisions. This integration will boost brand engagement and digital customer acquisition, leading to benefits for the MarTech industry.

In conclusion, Kotak expects that the combined contribution of DaaS and MarTech will exceed 75% of RateGain's revenue starting from FY2024E. On a long-term basis, the brokerage firm sees greater growth potential for the MarTech segment, driven by its untapped market potential, ability to cross-sell with existing products, and strong competitive positioning through domain expertise and platform capabilities. However, the success of this initiative will depend on effective execution and the ability to increase wallet share among major hospitality clients, and this should be closely monitored, Kotak added.