MakeMyTrip to complete acquisition of Ibibo group; issue ~$960 million shares

MakeMyTrip, India’s largest online travel portal, is in the process to complete its acquisition of rival Ibibo Group. The company is expected to issue 38.97 million shares estimated at ~$960 million, or a 40% stake of MakeMyTrip, to the stakeholders of Ibibo Group. Naspers, South African media and internet giant, which holds more than 90% stake in Ibibo is expected to corner a third of the combined entity after the all-stock deal. Ibibo Group Holdings will also carve out its 14% stake in Naspers’ payments business PayU and 52% in business-tobusiness (B2B) online travel company Tek Travels before the transaction closes, with MakeMyTrip entitled to a payout on these assets in five years.

While MakeMyTrip and Ibibo were two of the largest online travel portals in India, both the firms were suffering from significant losses. In FY16, MakeMyTrip recorded $169 million of net revenues with $88.5 losses. Ibibo, on the other hand, was fairly aggressive during the year, and incurred losses of $106.5 million losses on net revenues of only $38. 9 million. The primary reason behind the losses was ramp up in spending for marketing and discounts. Ibibo tripled its advertising and sales promotion spending to $99 million in FY16, while MakeMyTrip also increased the expenses by 155% during the same period.

The travel portal space is expected to get more competitive in future as Yatra.com has strengthen its cash position by completing a reverse merger on Nasdaq, and OYO rooms, a Softbank backed portal, raised $60 million in a capital raising round in FY16.