MakeMyTrip Ltd said it has signed an agreement with fellow NASDAQ-listed firm Ctrip.com International Ltd where the Chinese travel services firm will invest $180 million (Rs 1,200 crore) through convertible bonds in India's largest online travel agency.
Ctrip will separately buy shares of MakeMyTrip on the open market. It will own as much as 26.6 per cent of MakeMyTrip's outstanding shares after the open-market purchases and the bond conversion. This would make it the single-largest shareholder of MakeMyTrip, ahead of SAIF Partners, T Rowe Price, Tiger Global and company founder and CEO Deep Kalra.
The Chinese company, which offers accommodation reservation, transportation ticketing, packaged tours and corporate travel management services, will have the right to appoint a director on MakeMyTrip’s board upon completion of the investment.
"Ctrip is the dominant market leader in the online travel market in China. We believe there are many similarities in the Indian and Chinese online travel markets and we expect this strategic relationship between two market leaders to be mutually beneficial," Kalra said.
Ctrip CEO and co-founder James Liang said the transaction helps the company to gain exposure to India's fast-growing online travel market.
MakeMyTrip’s growing presence worldwide makes it a particularly lucrative investment for Ctrip
Morgan Stanley acted as the exclusive financial advisor to MakeMyTrip while Latham & Watkins LLP served as the legal advisor to MakeMyTrip on this transaction.
The Chinese invasion
The deal adds to the growing list of Chinese internet firms making a strategic investment in Indian peers.
E-commerce behemoth Alibaba has made big investments in online marketplace Snapdeal as well as mobile payments and e-commerce venture Paytm. Cab-hailing firm Didi Kuaidi recently invested in top Indian peer Ola.
MakeMyTrip did not share details on the pricing of securities. Its share price shot up almost 30 per cent in early trades on NASDAQ on Thursday. The company commands a market cap of just under $700 million, a far cry from the highs of the past when it was valued well over $1 billion.
MakeMyTrip leads an industry where domestic firms such as Yatra, Cleartrip and Via dominate the business with the sole exception of Goibibo, a venture under South Africa's Naspers. The company has been facing heavy competition, especially in the more lucrative hotels booking business, from Goibibo.
In addition, a new generation of online branded budget hotel aggregators has been trying to chip into the budget accommodation business of legacy online travel agencies like MakeMyTrip.
MakeMyTrip comes across as a particularly lucrative investment for Ctrip given the Indian company’s growing presence across Asia as also other parts of the world through inorganic expansion.
In February 2014, it had acquired EasyToBook.com Group for $5 million. Established in 2004, EasyToBook.com offers its customers online hotel reservations in Europe, North America and other key global travel destinations. Headquartered in Amsterdam, Netherlands, the company also has a technology development team based in Herzliya, Israel.
In November 2012, it had acquired the Hotel Travel Group (HT Group) for $25 million. The HT Group, under the brand ‘Hotel Travel’, had been operating the website www.hoteltravel.com for more than a decade in Southeast Asia, although its booking platform offers hotel reservation across the world. In the same month, the company had also acquired an effective majority equity interest in Thai hotel aggregator comprising a group of companies known as the ITC Group for $3.2 million. The ITC Group comprised International Tour Center Co Ltd, ITC Bangkok Co Ltd and ITC South Co Ltd. It has also made other smaller acquisitions and strategic investments.