The internet is buzzing with the news of Ctrip investing USD 180 Million in the Indian OTA MakeMyTrip. Ctrip will take an initial position through convertible bonds and MMT also gave them permission to acquire the common stakes in open market. The news of investment has pushed the stock prices of MakeMyTrip northwards with a growth of over 20 percent on Thursday. Ctrip will eventually build a stake of up to 26.6 of MMT’s shares giving them right to name a director.
The entire travel industry has got eyes set on China and India as both the markets hold huge potential for growth. MakeMyTrip clearly stands to gain more as the investment comes soon after they announced that they plan to bear losses for another two years in a bid to acquire more customers. They plan to push the hotel and packages business for it to account for around 70% of their total revenues over the next two years. This was important for the company as the number of internet users in India is growing fast (17% in first half of 2015) and every ecommerce company is aggressively trying to attract the new customers. The capital from Ctrip would help them have an upper hand in the competition.
India is an interesting proposition for Ctrip and many other Chinese brands for the same reasons mentioned above. The smartphone sales and number of internet users are going up fast and nobody wants to give the huge opportunities a pass. Another reason for the interest of Chinese giants in India is because of the fast growing economy. In contrast, pessimism is clouding the Chinese economy which is clearly indicated by the stock market.
Commenting on this new association, James Liang, Co-founder, Chairman, and CEO of Ctrip, said, “Today’s announcement marks the beginning of the strategic relationship between Ctrip and MakeMyTrip. Through this transaction, Ctrip has now gained exposure to India’s fast growing online travel market.”
Ctrip was earlier working with Alibaba but the association came to an end recently. It could be because Alibaba’s own product Alitrip competes with Ctrip and also because Ctrip had partnership with Qunar which was partially owned by Baidu. Even though the combination of Ctrip, Qunar, Baidu and Priceline (invested USD 500 million in Ctrip recently) is a strong force in travel industry, there is hardly a prediction one can make. The industry is fragile and the size and scale of Alibaba can be a major problem for Ctrip.
Alibaba has been an investor in the mobile payment platform Paytm and recently increased its holding in the company. Backed by Alibaba, Paytm is also making moves in the Indian travel industry. It was also reported that the Chinese search giant Baidu is planning to invest in Indian startups. With these Chinese companies fast moving outside of their home country, we can certainly expect an interesting year for the Indian travel industry.