Travel technology firm Ixigo is betting big on the Bharat story as it expects travellers from tier I, II markets to drive growth in the travel industry, especially the air segment.
As its parent company Le Travenues Technology hits Dalal Street on June 10, the travel firm plans to use some of the IPO (initial public offering proceeds) to grow its air business.
The company's flight ticketing revenue increased to Rs 53 crore in the nine months of FY24 from Rs 37.48 crore in FY23 during the same period.
"New people taking flights are those who travelled in third, second AC (air condition) trains. These people are bringing the growth in the air segment," said Aloke Bajpai, chairman, managing director and group chief executive officer during a press conference discussing the company's forthcoming IPO.
The share of travel between two Tier I cities has been consistently reducing and it is shifting towards Tier I to Tier II and between Tier II to Tier II/III during FY17 to FY22, according to official Airport Authority of India (AAI) data.
Within air, between two Tier I cities, traffic accounts for around 33 percent of all air traffic during the FY21 to FY22, as per AAI air traffic data. On the other hand, traffic between Tier I to Tier II or Tier III cities accounts for 56 percent of all air traffic, which is the bulk and driving force of air movement in India going forward, the company said.
It added that non-Tier I air travellers are outpacing Tier I air travellers and many Indians are migrating from rail to air due to the affordability of airline travel, along with investments in building airports, secondary airports, and increasing flight slots. "This is further supported by the almost 60 percent of the annual traffic of any low-cost carriers (LCC) comprising first-time fliers."
The number of air passengers travelling between a metro and non-metro route is as high as 65 percent of the total air traffic. In recent years, 35.58 percent of domestic air traffic was contributed by Tier II, III and IV cities such as Patna, Bhubaneswar, Varanasi, and Ranchi. Jammu and Leh also contribute a significant portion to air tickets, being one of the most popular holiday destinations in India. Traffic from non-metro airports accounted for 37.13 percent in FY22 and 35.58 percent in FY23 of overall domestic traffic.
There have been numerous first-time bookings from Tier II, Tier III, and Tier IV towns contributing to new user growth, the company said. Sectors like Srinagar and Varanasi have attracted first-time fliers.
In FY23 for Ixigo, Tier II-III airports constituted 42 percent of flight passenger segments, six percent higher share than the market. Similarly, in the first half of FY24, Tier II-III airports constituted 35 percent of all flight passenger traffic. However for Ixigo, Tier II-III airports constituted 43 percent of flight passenger segments, 8 percent higher share than the market.
Bajpai recalled the early days of launching Ixigo, which started as a train application and how they focused on the next billion users.
"We worked on the idea of Ixigo in 2006 and launched it in 2007. Back then, OTAs (online travel aggregators) focused more on flights. As mobile internet started to emerge for India, the core driver of growth was the next billion users, people coming from smaller towns and aspiring middle class in Tier I," he said.
Ixigo's IPO comprises a fresh issue of Rs 120 crore and an offer for sale (OFS) of up to Rs 620 crore. The total issue size is Rs 720 crore.
SAIF Partners India IV, Peak XV Partners Investments V, Aloke Bajpai, Rajnish Kumar, Micromax Informatics, Placid Holdings, Catalyst Trusteeship, and Madison India Capital HC are the selling shareholders in the OFS.
SAIF Partners and Peak XV are the largest shareholders in the company, with 23.37 percent and 15.66 percent stake, respectively
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