Will MakeMyTrip gain from investment in Ixigo?

By Kapil Ohri , afaqs!, New Delhi | In Digital | August 12, 2011
Makemytrip.com and venture capital firm SAIF Partners (investors in Makemytrip.com) have acquired significant stakes in the travel search engine, Ixigo.com, recently.

Makemytrip.com, the NASDAQ-listed online travel agent (OTA) of India, has acquired a stake in the travel search engine, Ixigo.com.

In a statement issued by Makemytrip.com on August 10, the company discloses, "On July 4, 2011, we entered into a share purchase agreement to acquire 19.9 per cent of Le Travenues Technology, which owns and operates Ixigo.com, an online travel search engine. We have agreed to pay cash consideration of US$4.8 million for the purchase of new shares as well as existing shares. SAIF, our largest shareholder, has also agreed to acquire 56.7 per cent of Le Travenues Technology for US$13.7 million. We expect to complete this share acquisition in August 2011. We believe this investment has synergies with and benefits our online travel business."

Ixigo.com is a four-year-old portal that enables users to search and compare prices (real-time) of air tickets (international airlines and domestic flights), luxury hotels and bus tickets across various online travel portals such as Cleartrip.com, Travelguru.com, Yatra.com and Expedia.com, which are actually competitors of MakeMyTrip. Post search, users can either go (directly) to the final destination (airline or OTA site), or click on any result to get redirected to the (airline or OTA) site to book hotels/buy travel tickets.

afaqs! spoke to a few industry experts to find out what MakeMyTrip will gain from its investment in Ixigo.

Mahesh Murthy, managing partner, Seedfund, thinks that MakeMyTrip will benefit slightly from the acquisition of Ixigo. His reasoning is that MakeMyTrip gets about 15 times more traffic than Ixigo. Even if we assume that Ixigo diverts all its traffic to MakeMyTrip (instead of routing traffic to its competitor sites), the gain in total traffic (addition of Ixigo traffic to MakeMyTrip) won't be much.

Also, the possibility of Ixigo gaining significantly from the acquisition is not much, Murthy believes. He says, "Ixigo is a source of traffic to airline sites and other online travel agents (OTAs). Much of this traffic was monetised on a per-conversion basis. This basic business model of Ixigo may be impacted because some OTAs and airlines might find it odd to buy traffic from a site part-owned by their rival (Makemytrip.com)."

Amit Bhartiya, business head of online audience measurement firm Vizisense.com believes that Ixigo's acquisition will not make a major difference in the business of MakeMyTrip initially as the traffic on Ixigo is not much. Ixigo gets only 5 lakh unique users per month, according to Vizisense.

However, Bhartiya adds that the deal could benefit MakeMyTrip later, when the demand and usage of travel search engines grow in the market. He says, "If we assume that Ixigo will favour MakeMyTrip and give it preferences like good visibility and leading position on the search results page, the possibility of MakeMyTrip gaining significant traffic from Ixigo will become higher. Thus, it will allow MakeMyTrip to capture a significant share of value-conscious travellers, who will be on the lookout for valuable travel deals."

Alok Kejriwal, chief executive officer, Games2win, says that the MakeMyTrip-Ixigo deal will not add any major real value to MakeMyTrip. He says, "It's a case where a balance sheet (cash and market capitalisation) is trying to buy profit and loss (revenues). I think this is being done to please the Street (NASDAQ) more than adding some real value to the business. Consolidation is always a natural fallout of such a hyper-competitive and massively funded space -- so it's a good direction in terms of where things will go.

"This acquisition also proves the might of a gorilla called Makemytrip.com versus Yatra.com and Cleartrip.com, which don't have that might of market capitalisation to buy smaller competitors."

Search Tags

© 2011 afaqs!