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MakeMyTrip-Ibibo Deal Signals Maturing of Indian Online Space

While the biggest deal in India’s online travel aggregation space signals a maturity in the sector, providing an exit path to investors, it would also lessen cash burn. With this deal, all three large brands in OTA space – Yatra, MakeMytrip and GoIbibo will be on path to be listed entities on Nasdaq.

Moneycontrol.com

Updated:October 27, 2016, 1:09 PM IST
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MakeMyTrip-Ibibo Deal Signals Maturing of Indian Online Space
Representative Image. (Photo Credit: Getty Images)

In a move that signals the maturing of India’s consumer internet space and likely lesser cash burn in the online travel space, Nasdaq-listed MakeMyTrip on Tuesday announced it will acquire rival ibibo Group which is owned by South African media firm Naspers Ltd.

This is expected to be one of the most significant deal in the online space, post the Flipkart-Jabong deal earlier this year, pointing towards the herald of an era of overall maturity in the online space. This is by far the largest deal in Indian online travel aggregation space. Estimated by analysts to be of around USD 600 million to USD 700 million, paid for by MakeMyTrip in stock to acquire Ibibo Group.

The two companies had been fighting a bitter discounts and promotions war since early this year. MakeMyTrip announced USD 180 million fund raise through convertible bonds from China’s Ctrip in January. Following the move, the next month, Naspers Group announced its plans to invest an additional USD 250 million in Ibibo Group.

"Even though the number of deals in India have not increased this year in e-commerce, we have seen significant consolidation. This can be considered as a sign of the industry maturing, said Sreedhar Prasad, partner, e-commerce, research and consultancy firm KPMG.

"This could give a clear strategic advantage to the combined entity on multiple counts – category level dominance which could lead to better bargaining power, back end integration helping in reducing overall costs and enhancing the scale of operations," he added. Ad spending by the rivals to lessen This led to huge price games.

The two companies then got on to big ticket advertising games, as well.

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