‘Sud­den­ness of FDI norm change sur­prises us’

Give enough time be­fore chang­ing goal­posts, says the founder-CEO of MakeMyTrip.com

The Hindu - - BUSINESS REVIEW - Yuthika Bhar­gava

Now is the great­est time to be a start-up in In­dia, says Deep Kalra, founder and group CEO, MakeMyTrip.com, one of the ear­li­est In­ter­net start-ups in the coun­try. Ex­cerpts from an in­ter­view:

What hap­pened dur­ing the re­cent stand-off be­tween MakeMyTrip, Goibibo and ho­tels?

■ The is­sue has now been re­solved. How­ever, it is good to in­tro­spect. So, we take a com­mis­sion from the ho­tel, and let’s say that com­mis­sion is 25%... in most cases it never went be­yond 30%… We in­vest a lot of that in the pro­mo­tions we run, in­clud­ing cash­backs. Op­ti­cally, it seemed like a lot. So, we said no prob­lem, let’s bring this down to 20% but if you don’t in­vest in pro­mo­tion, your busi­ness will come down. So, some groups got to­gether, but group ne­go­ti­a­tion makes no sense.

Our con­tracts are with in­di­vid­ual ho­tels or with chains. So, we can ne­go­ti­ate with in­di­vid­u­als but how can we do it within an as­so­ci­a­tion which has no own­er­ship or no right. That was our only point. You have to un­der­stand, we are pro­vid­ing a plat­form and there is a cost of run­ning busi­ness. Com­pe­ti­tion in the travel seg­ment is in­ten­si­fy­ing...

■ I think if you’re in a vi­brant and a ro­bust in­dus­try, you have com­pe­ti­tion. It’s the na­ture of the beast, which is a good thing. If there’s no com­pe­ti­tion, it means there’s not enough mar­ket. If you don’t want to have it, you would stop in­no­vat­ing. But what about too much com­pe­ti­tion?

■ Nor­mally, what tends to hap­pen is that weaker play­ers lose share with more com­pe­ti­tion. So, when­ever we find a new com­peti­tor com­ing in with a dis­count­ing strat­egy etc., we’ve have not seen much im­pact on our brands. I think that fight, that churn hap­pens be­tween num­ber four, five and six, and not so much be­tween num­ber one and two. In most of the ar­eas, our brands are ei­ther num­ber one or two. Are cash­backs and dis­counts still driv­ing the in­dus­try?

■ There is a cer­tain level of froth, there is no deny­ing that. Whether that is 10%, 20%, or 30% is any­one’s guess. We try and keep wean­ing peo­ple off. If you see our last quar­ter re­sults, we have grown 30% but have also brought down losses. But clearly dis­counts and cash­backs are giv­ing an ex­tra kind of lift to things. But where has this not hap­pened? Peo­ple ac­cuse In­ter­net of that, but what did Big Bazaar do for the long­est time, tel­cos did it… Reliance Jio has done the com­plete ex­treme say­ing you can get it for free. So, who doesn’t do it? It’s nor­mally meant to in­duce trial.

Af­ter that, it should be taken away. Right now, what is hap­pen­ing is that the pri­vate mar­ket is very deep. Some in­vestors are will­ing to put in a lot of money, so they’re us­ing cap­i­tal as a com­pet­i­tive ad­van­tage. Thank­fully for us we have a strong bal­ance sheet; we can fight that out. What do you think of the cur­rent start-up ecosys­tem in In­dia?

■ I think there is no greater time to be a start-up than now in In­dia. And, I am not talk­ing just about In­ter­net firms… con­sumerism is boom­ing.

If you take the whole world map, and if I have to point one place to­day, it would be In­dia. I ask my friends, who are in­vestors sit­ting in the U.S., where would you in­vest and the an­swer is In­dia. China is now slow­ing down.

There are some lit­tle pock­ets such as Brazil but you never know what will hap­pen, it just be­came okay be­cause of re-elec­tions. There is Turkey…the other big mar­ket is In­done­sia but In­dia is num­ber one for ev­ery­one.

We are getting closer to that prover­bial tip­ping in­flec­tion point of $6,000 per capita in­come. We are still at $2,000-odd, but in the next 3-4 years, you will see it ex­plode…what’s hap­pen­ing is just eco­nom­ics. The mid­dle class have dis­pos­able in­come for things be­yond just

roti, kapda and makan. They are buy­ing new phones, new clothes and want to travel.

So, fun­da­men­tally, if you’re bright, are will­ing to work hard and you have a good idea, I think there is op­por­tu­nity here. If you look at the Wal­mart deal, I ac­tu­ally see it is as a pos­i­tive. Look at the size of the exit. It’s hu­mon­gous and huge. Ear­lier, there was a big ques­tion mark around: ‘are there enough ex­its in In­dia?’ The other nu­anced point I have been mak­ing as head of In­di­at­ech — a lobby group for In­dian tech com­pa­nies — is that there should be a level-play­ing field. Do you think the new FDI norms can help cre­ate a level-play­ing field?

■ I think the way it has come, the sud­den­ness, has taken ev­ery­one by sur­prise. In all fair­ness, you shouldn’t change goal­posts like that. It [Wal­mart’s Flip­kart ac­qui­si­tion] was a very big deal of $16 bil­lion, and sud­denly, the goal­post changed. Even if you’re chang­ing it, then give enough time. By the way, there are many easy ways to work around this and they will… Maybe, what we did with Ikea is then bet­ter. We took our time but fi­nally we said okay, lo­cal, you have to source so much… So, I think this a lit­tle ad hoc.

And, we have to think long term. What will this do? This will im­me­di­ately put a brake on for­eign cap­i­tal. Is that the right way?

Or do you want to get it but en­able lo­cal en­ter­prise? The new age econ­omy is un­der­stood that much here. Look at all the in­vest­ments. How much has come from In­dian com­pa­nies? Very less. In­dian firms don’t re­ally in­vest in this. They don’t prob­a­bly know this sec­tor. Cap­i­tal is still com­ing from out­side and you are tak­ing away the cap­i­tal.

I think there is no greater time to be a startup than now in In­dia

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