MakeMyTrip (MMT) sold 26.6% stake in the company to its Chinese counterpart Ctrip on Wednesday, but its co-founder Rajesh Magow assure that they will continue to run the company.
“We will not let go of anything. We are not giving equity upfront, and no one from Ctrip will come and run this company,” says Magow, who is also the CEO of MMT’s India business.
The investment of $180 million (around Rs 1,200 crore) through convertible bonds will allow Ctrip to hold 16% in the company, and additionally, permission has been given to buy shares from the open market to take the stake up to 26.6%. Magow said that the bonds can be converted only after five years.
For MMT, which has a market cap of $852 million (Rs 5,676 crore) on NASDAQ, Ctrip’s investment can be a tipping point. Problems that plagued Ctrip years back is something MMT is facing in India — rise of over the top players such as Oyo Rooms and Zo Rooms. Elong and Qunar, which is a marketplace for holiday packages (also a focus area for MMT) was a threat for Ctrip’s business. So, Ctrip bought them out.
“We can learn a lot from Ctrip on how to build a packages, where travel agents can come and sell. Right now we do it all by ourselves,” Magow said.
MMT might also look at sharing its hotel inventory with Ctrip, and vice-versa. “We have kept that open. They have better inventory in South Asia, and they can have a soft entry into India,” he said.
Magow has earlier said that MMT will spend on customer acquisition as it plans to take its online hotel booking and packaging revenue from 45% to 70% in the next couple of year. So will MMT burn through the investment by increasing discounts and promotions?
“We consider it as an investment if we are spending on customer acquisition. If we can create stickiness, that’s great for us in the longer run,” Magow claims.