MakeMyTrip to raise $330 million to grow hotel booking biz

BENGALURU/ NEW DELHI: India's largest online travel firm MakeMyTrip is raising $330 million in a new funding round from its existing investors Ctrip and Naspers as it tries to bolster its position in the high margin hotel booking space. The news of the raise comes at a time when Oyo, backed by Softbank is in the process of racking up $250 million, half of what was earlier proposed by its Japanese investor, as reported first by TOI in its April 24 edition.

The Nasdaq-listed MakeMyTrip, which merged with the Naspers-backed Goibibo last year, said it was raising the capital through a mix of private placement of shares and issuance of fresh stock to the investors.

A company statement said MakeMyTrip will issue 3.6 million Class B shares to Naspers' subsidiary MIH Internet at a price of $36 per share totalling to $132 million. These class B shares will be convertible to ordinary shares on a one to one basis, the company said in its filing . The company is also issuing 916,666 ordinary shares to China's Ctrip International at $36 per share, totalling additional funds worth $33 million.Morgan Stanley India is the sole advisor with this placement.

“We will deploy the new funds in strengthening our portfolio of international hotels and flights as well as alternative budget and luxury accommodation. Our main focus will be on increasing the contribution from hotels from 50% at present to 70% by 2020. There is a tremendous headroom for growth in the hotel category because online penetration is just 15% at present and the market is fragmented. Hotels also offer higher margins,” said Rajesh Magow, CEO, makeMyTrip. Under the terms of the share purchase agreement, the company will issue 4,583,334 ordinary shares in the aggregate to investors at a price of $36 per ordinary share. This will generate additional funds worth $165 million making the overall fund raise reach $330 million mark.

We are also open to growing inorganically and will be on the lookout for acquisitions., he said. TOI reported in its April 25 edition that in its latest bid to make a dent in the online budget hotels market, MakeMyTrip had held talks with FabHotels and Treebo Hotels to pick up a strategic stake. While discussions with the Bengaluru-based Treebo had fallen through, MakeMyTrip may be finalising an investment of $5-10 million in FabHotels.

The latest deal would mean South Africa's Naspers will continue to be the single largest shareholder in MakeMyTrip while Ctrip will get an additional hold in India's OTA market through its increased stake in the company. Last year, Naspers merged the ibibo group with MakeMyTrip cementing the latter's position as the largest player in the market.

OTAs have been pushing to get a larger share of the online hotel booking segment as the margins in this business are far higher ranging between 12-18% compared to airline bookings which fetch them a lowly 5-6% margin. In a recent presentation to investors, MakeMyTrip said bookings for hotels and packages formed 51% of its net revenues for financial year 2017 similar to the year before. MakeMyTrip expects to close the transactions with Ctrip and MIH to occur on or around 5 May 2017.


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