MakeMyTrip raises $300 m from Ctrip, Nasper and others
Portal to use funds to expand overseas
BENGALURU: Online travel company MakeMyTrip Ltd has raised $330 million in fresh funds from existing investors Ctrip.com International Ltd and Naspers Ltd and a clutch of undisclosed investors, in a move that will help it counter rivals in the ticketing segment.
MakeMyTrip said in a statement on Wednesday that it had entered into a definitive share purchase agreement with unnamed investors for ordinary shares worth $165 million (it plans to issue 4.58 million shares at $36 apiece). The company added that it plans to issue 916,000 ordinary shares to Ctrip at $36 per share, and 3.66 million Class B convertible ordinary shares at the same price to MIH Internet SEA Pte, a subsidiary of Naspers.
The shares issued to Naspers will be convertible into ordinary shares of the company on a oneto-one basis, MakeMyTrip said.
The fresh capital infusion comes after MakeMyTrip, one of India’s first consumer Internet companies, which is also listed on NASDAQ, bought rival Ibibo Group’s travel business in India in an all-stock deal in October 2016 for about $720 million. The move created the country’s largest online travel firm which, according to a note by Morgan Stanley, is worth $1.8 billion.
The money will come in handy for MakeMyTrip, which is seeing increasing competition in its ticketing business from rivals including Yatra and Cleartrip, as well hospitality startups including SoftBank-backed Oyo (Oravel Stays Pvt Ltd).
Over the years, MakeMyTrip has also started focusing on tours and hotel bookings that have higher profit margins than ticketing. According to industry executives and experts, air ticket bookings offer a gross margin of 5-7%, against 10-20% for hotel bookings.
According to an investor presentation by MakeMyTrip in April, the company’s air ticketing transactions grew 28% in 2015-16 and tours and hotel bookings by 126%. Net revenue in the air ticketing business grew 14% year-onyear; that in the tours and hotels business rose 45%.
A senior executive at MakeMyTrip said the company would invest in its hotels business and in redBus, the bus ticketing platform it acquired from Ibibo.
“As we penetrate deeper into tier II/III cities, budget hotels and homestays will be important,” said Rajesh Magow, co-founder and CEO, India, at MakeMytrip, adding that this segment would drive growth.
MakeMyTrip’s revenues are currently split almost equally between ticketing and tours and hotel bookings, he said.
MakeMyTrip plans to use the funds to expand overseas, especially in South-East and West Asia, and strengthen its businessto-business vertical to cater to small and medium enterprises.
“This capital is meant to grow the combined entity in an accelerated pace. The focus on hotels is understandable as this is an unsolved problem,” said Rutvik Doshi, director at Inventus (India) Advisors.