By Biswarup Gooptu
NEW DELHI: Yatra.com, India's second largest online travel agency by market share, has raised Rs 140 crore in a deal that signals rising investor interest in consumer internet companies.
The funding led by new investors, technology investment firm IDG Ventures India and Vertex Venture Holdings, a wholly-owned subsidiary of Temasek Holdings, the investment arm of the government of Singapore is the fifth round of funding for travel services portal.
Yatra's existing backers, which include, Norwest Venture Partners, Intel Capital, TV18 Group and Reliance Venture Asset Management, also participated in the funding. With the completion of the transaction, institutional investors now hold an 80% stake in the company.
"We have allocated about one-third of our second fund for investments in technology companies that are expanding and will offer a clear path to exit within three to four years, Yatra is in this category," said Sudhir Sethi, founder-chairman and managing director of IDG Ventures India.
The investors have also committed an additional Rs. 140 crore, which will be used for acquisitions in future according to Yatra cofounder and chief executive Dhruv Shringi.
He declined to share the post-money valuation of the company, citing confidentiality agreements.
However people with direct knowledge of the negotiations said the Gurgaon-based venture was valued at about $400 million (Rs. 2,410.8 crore).
In 2012, Yatra had raised $14.5 million (Rs. 87.4 crore), the second tranche of a total funding round of $60 million (Rs. 361.6 crore). So far, the company has raised about $125 million (Rs. 753.4 crore), across multiple rounds since inception in 2006.
"We liked the company because it is aggressive, has a focus on margins and are leaders in the hotel category; (Their) capital efficiency is higher than the industry average," said IDG Ventures' Sethi.
Online travel agencies like MakeMyTrip, Yatra and Cleartrip kicked off the e-commerce boom in India. However in the last three years shopping websites such as Flipkart and Snapdeal have grabbed investor attention.
Yatra, which also counts Bollywood mega star Salman Khan as one of its investors and as its brand ambassador, will use the proceeds from this round of funding for branding, and expanding its hotels bookings business and to enhance its mobile platform.
"As the market becomes increasingly mass-based, with smartphone penetration heading towards 20%, we want to increase our brand presence, and ensure that we remain leaders in the category," Shringi said.
India's online gross bookings are expected to touch $12.5 billion in 2015, according to a report released by PhoCusWright, a leading travel research firm. Almost 40% of all domestic flight booking are booked online, according to industry data.
Founded in 2006 by Former Arthur Anderson and Ford Motor Co employee Shringi, Manish Amin and Sabina Chopra, Yatra.com has a market share of about 25%, and has been an active participant in the M&A stakes.
Till date, the company has made four acquisitions, including, event ticketing company Buzzintown and online hotel distribution network TravelGuru from Travelocity, both of which took place in 2012.
Prior to that it had acquired Bangalore-based Magic Rooms Solutions India and Travel Services International
According to Shringi, the company could spend between $1 million and $20 million (Rs 120.5 crore) for future purchases.
Yatra.com, which earned revenue of $50 million (Rs. 301.4 crore) for the financial year ended 2014, sees 30% of its topline coming from the hotels and holiday packages segment. According to Shringi, the company expects the revenue mix to be more balanced in the next two years.
"We want to increase the supply of hotels... We have around 15,000 hotels in our fold, and want to grow that to about 30,000 hotels by calendar year 2015. We want to double the inventory," Shringi said.
For fiscal 2015, the company, which is yet to break even, expects to post revenue of between $65 million (Rs 391.8 crore) and $70 million (Rs 421.9 crore).
Yatra, which competes with Gurgaon-based, publicly-traded MakeMyTrip.com, Cleartrip.com and Naspers Group-backed Goibibo.com, gets close to 50 lakh unique visitors monthly, with a third of them looking to book hotel packages, according to Shringi.
It also competes with US-based Expedia and offline and online companies such as Thomas Cook and Cox & Kings.
The latest round, however, will not be a pre-IPO round, as was reported earlier. The company expects to go public within the next 36 months, with a probable listing on the US exchanges.
"It's not of question of "if." But of "when..." Today's environment is a lot more positive, and our business has the scale and size to go public at any point," Shringi said.
Online travel agencies have faced headwinds due to a sluggish economy and with the closure of Vijay Mallya-owned Kingfisher Airlines, which has been grounded since December 2012, after running up debt of Rs. 7,200 crore, which it has, so far, failed to repay.
"That (Kingfisher shutdown) did have a major impact. But now with the entrant of Air Asia, as well as the growth of IndiGo Airlines, the breach should be filled," said Raja Lahiri a partner at advisory firm Grant Thornton.