MakeMyTrip, Goibibo and Naspers’ India Reset

It was sometime last year that Kalra and Rajesh Magow, MakeMyTrip’s CEO (Kalra is Chairman and Group CEO), first broached the topic of a potential merger with Naspers’ CEO Bob van Dijk. It didn’t lead anywhere as Naspers didn’t appear interested in either a sale or merger.

Why would they? In the space of just a few years Goibibo had gone from being a company that didn’t exist; wasn’t a travel company; and didn’t merit a market share figure of its own (up till 2015 it was clubbed under “Others”, after MakeMyTrip, Yatra and Cleartrip) to becoming the second largest OTA (online travel agency) in India and finally, becoming number one in the lucrative hotels booking space.

Meanwhile, MakeMyTrip, though the pioneer and consistent market leader in the OTA space, was going through the woes of being an internationally listed company and quarter after quarter of losses. From a peak valuation of $1.2 billion (yes, it was a “unicorn” before the term became popular), it had fallen to $500 million.

Taking advantage of MakeMyTrip’s apparent weakness, Goibibo had opened the discount taps to steal further market share.

Using GoCash, its virtual wallet, it was giving discounts of 50%, 60%, 70% and even 80% on hotel bookings. Customers were able to book 3-star hotel rooms in Goa for rates as low as Rs.1000 a night.

The Beginning

“During the first 6 months of 2015 Ibibo took away market share from MakeMyTrip,” says Alok Bajpai, CEO of travel search engine Ixigo (in which MakeMyTrip is incidentally an investor). This was especially true in the budget hotels (zero to three stars) space.

And at an internal town hall meeting in India around the middle of 2015, van Dijk reassured his group employees that neither resources nor money were an issue when it came to making it big and winning in the market.

Having pushed the knife into MakeMyTrip’s leadership, perhaps Naspers felt it had a chance to twist it too.

How quickly things change, though.

In January MakeMyTrip announced that it had raised $180 million from Ctrip, China’s leading OTA via a convertible offering. And with that, the gloves were off.

MakeMyTrip started offering discounts aggressively to match Goibibo, eye for an eye, tooth for a tooth. It started to claw back some of the market share it had lost.

Then in February Naspers seemingly upped the ante with the announcement of a $250 million funding round into Ibibo.

The very next month MakeMyTrip launched a massive new TV campaign featuring actors Ranveer Singh and Alia Bhatt, targeting the very segment that Goibibo had gained the upper hand in: hotels.

For months, there was intense competition around hotels from both companies, with each one keeping an eye programmatically on the others inventory and prices on a daily basis.

It was in the midst of this that Kalra, ever the pragmatic survivor, once again broached the topic of a ceasefire and merger to his opponent. But this time instead of Bob van Dijk, to Ashish Kashyap, the founder of Ibibo and the person responsible for all of its strategy and execution in India.

“I floated the idea to him and told him he hadn’t been part of the same conversation last year (but he was aware of it),” says Kalra.

Kashyap, uncharacteristically, responded positively to Kalra’s suggestion. He told Kalra that he was particular about safeguarding the Ibibo brand that he had built while seeing the value in the liquidity Kalra’s listed company could provide. The discussions then progressed.

“This time there was far more vigour from their side,” says Kalra.

Naspers and the India Reset

Sometime in the last 12 months, Naspers seems to have made a strategic decision to change the way it operated in India.

Till last year, its playbook was to bring on board smart and experienced executives; incentivize them with salaries and Naspers stock; empower them to make their own decisions, and most importantly – provide a clear and easy line of funding for investing in growth.

“They’re good people, the Naspers folks. They trust local leadership and genuinely believe in them,” says a former senior executive with one of its group companies in India.

None of the group companies had to worry about valuations or fund raising. All executives had to do was communicate their budgets and goals to Naspers and the money to execute it would be wired. Simple.


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