Travel Food Services IPO Opens — 'Subscribe' Says DRChoksey

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DRChoksey Report

Travel Food Services Ltd. launched its initial public offering today and the offer closes for subscription on July 09.

The Rs 2,000 crore IPO comprises only of offer for sale with no fresh issue component. The company runs quick service restaurants and lounges at airports and its has fixed the price band in the range of Rs 1,045 – 1,100.

Kotak Mahindra Capital Compan, HSBC Securities and Capital Markets (India) Private,. ICICI Securities Limited 4. Batlivala & Karani Securities India Private Limitedare the book-running lead managers for the public issue.

The allotment for the Travel Food Services IPO is expected to be finalized on July 10.

The shares will be listed on both the National Stock Exchange and the BSE on July 14.

Outlook:

Travel Food Services, is one of the major travel QSR operator in India. It operates about 442 QSR outlets spanning across 127 partner and inhouse brands and 37 premium lounges at key airports in India and other countries. Travel QSR is one the fastest growing consumer segment, led by increasing consumer spending capacity, travels spends accounting for bigger wallet share driven by high aspirations and faster addition of airport and railway infrastructure.

Travel Food services, has been able to grow its revenue and Ebitda at a CAGR of 25.8% and 21.7% between FY23-25, led by scaleup in addition of outlets. Despite operating on high fixed costs, the Company has been able to improve its Ebitda margin, led by expansion in gross margins.

The company boasts higher margin profile (~2x) compared to comparable QSR peer average, led by its premium realization for similar products available outside airports, driven by the regulated price environment. Travel Food Services’ initial issue is priced at 26.1x trailing twelve months EV/Ebitda, below the QSR peer average of 31.9x TTM EV/Ebitda.

We believe the issue is priced attractively, compared to its listed peers. Not only it has been able to scale up its operations and overall revenue in-line with it peers but has also managed to improve gross and Ebitda margins.

We expect the company to continue expanding its presence over the country and overseas both into QSR outlets and lounges. We assign a “Subscribe” rating to the issue and advice the investors to remain invested for the long-term.

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