Ctrip, the Chinese travel booking site valued at over $10 billion, has taken a big step in India after it agreed to invest $180 million in MakeMyTrip, a fellow booking service that covers flights, hotels and bus ticketing in the South Asian country.
The investment is in convertible bonds but MakeMyTrip, a 15-year-old company that is listed on the Nasdaq, will allow Ctrip to own up to 26.6 percent of its existing shareholding. Ctrip will also get a seat on the MakeMyTrip board. News of the investment sent the Indian company’s share price soaring — it rose by 23.5 percent at the close of trading on Thursday to give MakeMyTrip a market cap of $689.4 million.
Statements from both companies indicated that they will work closely together going forward.
“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,” commented Deep Kalra, founder and group CEO at MakeMyTrip.
Ctrip closed out the year with a partnership with long-term rival Qunar, which is controlled by majority shareholder Baidu, in October. The deal, which wasn’t one of the many consolidation mergers that happened in China in 2015, gave Ctrip a 45 percent voting interest in Qunar in exchange for Internet giant Baidu taking 25 percent of Ctrip.
Together, Ctrip and Qunar are estimated to account for 70-80 percent — iResearch claims Qunar leads flight bookings with 32 percent marketshare, while Ctrip is winning on hotel bookings with 39 percent marketshare — so, with a dominance in China secured thanks to their alliance, Ctrip’s foray into India makes sense.
India is increasingly an attractive market for Chinese tech companies. Economic uncertainties at home coupled with the slowing growth of smartphone sales run in stark contrast to India, where the economy is growing fast and accelerating smartphone sales have the potential to bring hundreds of millions of the population online for the first time.
That’s caused Chinese tech firms — in both the hardware and software spaces — to move into India over the past year or so.
Phone-maker Xiaomi is perhaps the most visible example, but China’s top internet firms BAT — an acronym that covers Baidu, Alibaba and Tencent — have done so, too, illustrating that the industry in general is casting glances westwards towards India and its billion-plus population.
Tencent made a major India-based investment last year — backing medical booking startup Practo by leading its $90 million Series C round — while Alibaba increased its holding in mobile payments and e-commerce company Paytm, which was valued at over $1 billion from an earlier injection of capital from Alibaba affiliate Ant Financial. Baidu, is yet to make an investment, but the company has reportedly been scouting India for potential opportunities.
Now we can add Ctrip to that list.
“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,” James Liang, co-founder, chairman and CEO of Ctrip, said in a statement.