Buy TBO Tek Ltd for the Target Rs.1,765 by Motilal Oswal Financial Services Ltd.
Scaling the global travel stack
Niche B2B global travel aggregator: Connecting supply, compounding growth
* TBOTEK is a technology-driven B2B travel platform that connects over 750 airlines, more than 1m hotels, and travel buyers worldwide. Its platform offers a one-stop solution for travel buyers, having evolved from a simple air ticketing platform for agents into a comprehensive global travel booking platform, with an annual GTV of INR368b (~16% from airlines and ~84% from hotels and ancillaries) and over 50k transacting partners.
* TBOTEK has built strong moats in the global B2B travel distribution ecosystem over time through deep supply aggregation across airlines, hotels, and ancillaries (transfers and sightseeing, car rentals, and cruises), targeting a highly fragmented travel agent universe of ~2m, spanning freelancers, home-based consultants, small independent agencies, and full-time professional firms.
* The global travel and tourism market, valued at ~USD1,869b, is expected to clock a CAGR of 8.2% over CY23–27E. Within this, the hotel segment is likely to expand at a faster CAGR of ~10%, while the ancillary and air segments are expected to record a CAGR of 8.5% and 5.7%, respectively. In terms of market composition, the segment mix currently stands at: 46% for Hotels, 38% for Air, and 16% for Ancillary Services. Notably, the hotels segment is highly fragmented, with over 80% of hotels (~4m) being independently owned, making it extremely difficult for intermediaries to establish direct reach.
* TBOTEK addresses the structural challenges faced by fragmented travel intermediaries by providing an integrated global travel distribution platform. It aggregates travel supply across 4,25,000+ source-destination pairs, supported by payment rails in 88 currencies, localized solutions, and 24×7 near-shore support in 16 languages. A multi-market compliance layer and streamlined booking infrastructure enable travel agents to broaden product access, improve operational efficiency, and compete more effectively, ultimately enhancing the end-traveler experience.
* We expect TBOTEK to deliver Revenue/EBIT/PAT CAGR of 29%/45%/43% over FY26-28E, primarily on the back of increased contribution from high-take-rate hotels and ancillary segments in the GTV mix, increasing to 70%. Contribution from CV, which is focused on luxury and premium hotel properties, is expected to drive overall profitability. We value the stock at 38x FY28E EPS of INR46.4 to arrive at a TP of INR1,765.
* On the operating profitability front, we expect EBITDA margins to expand gradually from FY27E onwards, led by operating leverage as the business continues to scale and a gradual tapering of SG&A expenses, with EBITDA margins rising from 14.1% as of FY26 to ~16.2% by FY28E end. A structurally negative working capital model is expected to support a strong FCF generation over FY25- 28
Scalable asset-light model
* In FY25, TBOTEK expanded into over 15 new countries and 40 cities to strengthen its distribution reach. Its cost-efficient India back-end, combined with localized front-end operations and local support across 55 countries, enhances agent stickiness.
* Notably, travelers often rely on offline agents for on-trip assistance and the convenience of paying in local currencies. This is particularly relevant for firsttime international travelers from Tier-2/3 towns, who typically require support with forex arrangements and complex multi-destination itineraries. Platforms like TBOTEK support agents in navigating these operational hurdles effectively.
Valuation and view
We believe TBO Tek has delivered a strong set of numbers despite a challenging operating environment. Over FY26-28E, we expect it to deliver a CAGR of 29%/45%/43% in revenue/EBIT/PAT, mainly on the back of increased contribution from high-take-rate hotels and ancillary segments in the GTV mix. We reiterate our BUY rating on TBO with a TP of INR1,765, valued at 38x FY28E EPS
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