MakeMyTrip Ltd, widely seen as India’s top online travel booking service provider, has reached an agreement to buy rival Ibibo Group, consolidating its position in the world’s fastest growing major smartphone market.
Nasdaq-listed MakeMyTrip, founded by entrepreneur Deep Kalra, will acquire all of Ibibo Group from its investors including South African internet and technology 0company Naspers Ltd and China’s Tencent Holdings Ltd In exchange, Ibibo’s investors will get shares giving them control of about 40 percent of the combined entity, MakeMyTrip said in a press release on Tuesday.
“We expect this deal to create an even more scalable business with the expertise to transform the booking experience for Indian travellers,” Kalra said in the press release. He will continue as group CEO, and Rajesh Magow, CEO of MakeMyTrip India, the local subsidiary, will remain in his position as well. Ashish Kashyap, Ibibo’s founder CEO, will join Make My Trip as co-founder and president.
China’s ecommerce and internet companies are taking an aggressive stance in India’s nascent online commerce scene — from Alibaba, which has invested in payments company One97 Communications Ltd, to Tencent which has Indian investments including mobile messaging startup Hike Messenger, to Xiaomi, which has invested in India’s digital entertainment content distributor Hungama Digital Entertainment.
MakeMyTrip is yet to turn a profit, but is seeing bookings on its platform rise rapidly. It ended the first quarter of the current April-March fiscal year with revenues of $121.2 million, a 29.4 percent increase over the $93.7 million for the year-earlier period. Hotels booked online in India via MakeMyTrip rose 478 percent, and hotels booked via MakeMyTrip on smartphones rose 870.8 percent according to an investor presentation on the company’s website.
MakeMyTrip also claims about 28 percent share of all hotel bookings made online in India, and a 30 percent share of all online bookings of air tickets. Overall online bookings, however, still account for only 10.4 percent in case of hotels and 44 percent in case of flights, which suggests a lot of potential for growth, MakeMyTrip says.
In a transaction related to the Ibibo acquisition, $180 million in five-year convertible notes — issued by MakeMyTrip to China’s online travel booking provider Ctrip.com International, Ltd in January — will be converted into common equity, the company said in the release. This will result in Ctrip having an approximately 10 percent stake in the combined entity.
The transaction is expected to close by the end of December 2016 and is subject to shareholder and regulator approvals.