Deep Kalra, chairman and group CEO of India’s homegrown travel giant MakeMyTrip, has come a long way since he founded the firm in 2000. The dot-com bust, hyper-competition, evolution in user behaviour due to social media, and many other changes later, he says the journey is still far from being over.
“The best is yet to come. We need to evolve our business with time. We are making a sustained investment in artificial intelligence (AI) to understand user intent better.”
Over the years, the company has made a spate of acquisitions, consolidated its market share and transformed from a small startup in a nondescript Okhla building in New Delhi to a Nasdaq-listed company.
After its IPO in 2010, the company has raised about $770 million from public investors and predominantly institutional investors such as China’s travel behemoth Ctrip and South Africa-based media group Naspers Limited.
MakeMyTrip recently made headlines when Ctrip increased its ownership in the company to 49 per cent in a share exchange transaction, paving an exit for Naspers.
“We will leverage this investment to benefit from the tremendous growth potential in travel and tourism between our two countries,” says Kalra.
Going forward, MakeMyTrip is open to making acquisitions. “For us, it’s all about India or where Indians are travelling,” says Kalra. “Revenue isn’t the key thing…the full stack is important.”
The company has made as many as five acquisitions after its IPO, the most recent ones being bus ticketing firm Bitla Software and Quest2Travel.
“While they are smaller players, the acquisitions helped us tap different segments within the travel sector.” While Bitla provides technology that is used by bus operators domestically and internationally, Quest2Travel is a corporate travel firm.
The acquisition of its biggest competitor Ibibo Group in 2016 was a gamechanger for the company that marked a watershed moment for the entire online travel industry in India. It signalled the birth of an online travel giant with two valuable brands, Goibibo and redBus, coming under the MakeMyTrip umbrella.
“The acquisition of Ibibo was driven by hyper-competition in the market that was hurting our business and putting pressures on it. We did the acquisition since all our margins and financials were coming under stress.
MakeMyTrip’s gross bookings stood at over $5.4 billion in FY2019, a constant currency growth of over 28 per cent. The company claims to have catered to 39 million customers to date.
Edited excerpts of an interview:
Of late, a lot of Chinese companies are investing in the Indian travel and tourism sector. While Ctrip has increased its stake in MakeMyTrip, Oyo and Treebo hotels are also receiving funding from Chinese investors, and these are not the only examples. What is the rationale behind this trend? Aren’t Chinese investors running the risk of creating rivals on a global platform?
I would say it’s a natural progression for Chinese investors to look at India as a market. If you go across all sectors, the big investors today are Alibaba, Tencent, amongst a few others. They have done really well in China, they have surpassed everyone’s expectations at a time when more and more people in China are getting online, living their primary life online, and spending online. There are about 800 million people in China who are online today. After this, there has to be a natural slowdown. Beyond a certain point, you cannot grow more. Growth will be there, but it will not be as fast. So where else? Where can they replicate the success story?
The similarities between China and India are many. The population in both countries is huge. They are both emerging markets. Besides, their GDP growth is going up dramatically – China obviously is far ahead. Also, what’s worthwhile to note is the fact that both are mobile-first markets or app-first markets. This is significant since even countries in Europe or the US are still dominated by the desktop.
Both China and India today have innovative payment gateways. So, I would say they understand our ecosystem quite well, and therefore, it’s rather obvious that they would want to invest in India. Another country which is emerging as a significant investment hub in Asia is Indonesia. That aside, there are Vietnam and Thailand as well.
Is the India opportunity also pertinent since a lot of countries such as the US are getting averse to Chinese investments due to data security concerns?
Yes, after a spate of recent issues, China has also realized that they need to create other markets for investments. In fact, many people are saying that the ongoing US-China issues could actually provide a fillip for India. They (US and China) were the largest trading partners for each other. So, going forward, India can become a big sourcing market, and also a place for them to market their goods.
MakeMyTrip has recently entered the carpooling segment with redBus’s new intra-city service rPool. Given that there are quite a few players in this market such as Ola Share, UberPOOL, sRide, and others, do you think you are a late entrant?
Our model is slightly different. We are not looking so much into the commercial space. We are rather looking at the corporate market. For us, it’s not about a commercial taxi driver becoming a pooled one. Our app is more about discovering 3-4 people who do the same route every day around the same time.
While the government is already evaluating multiple options to tackle congestion in cities, we believe customers will soon see value in our app. People have to register on the app through their corporate id since it’s open to working professionals only. rPool ride givers can give only two rides a day and charge only Rs 5 per km for a hatchback and Rs 6 per km for a sedan.
Carpooling offers a systematic solution, not only to decongest roads but also to offer commuters a viable option that helps them save fuel and time.
With the right implementation and adoption at scale, carpooling can significantly reduce vehicular traffic during peak hours in urban cities. redBus has already launched the service across Bengaluru, Hyderabad and Pune. As an inaugural offer, for the first 500 givers in these cities, it will not charge a commission for the first five years.
Over the past few years, MakeMyTrip has been actively following the inorganic growth route to expand. It has made quite a few acquisitions in the country with the most prominent one being Ibibo. How has that worked out?
Ibibo was the only big one. Rest of the companies that we have acquired are primarily technology players and not revenue generators as such.
The acquisition of Ibibo was driven by hyper-competition in the market that was hurting our business and putting pressure on it. We did the acquisition since all our margins and financials were coming under stress. Having said that, by and large, we are focused on organic growth now.
We have done a few acquisitions, the most recent ones being Quest2Travel (a corporate travel firm) and Bitla Software (a pure technology provider) that caters to bus operators in the domestic and international market. So, revenue isn’t the key thing. For us, the full stack is important.
So, what next? Are there more acquisitions on the radar? Any plans to tap the Southeast Asian market?
We are open to acquisitions. We have a team within the company that is constantly scouting for opportunities, we get a lot of inbounds but we are very selective there.
As far as the global market is concerned, we may want to tap countries where Indians are travelling. redBus is the only exception where we have actually taken the company to other markets like Indonesia, Malaysia and Singapore. It is also there in South America, a market that it had entered even before we acquired Ibibo.
We do get proposals from the global market and it’s tempting to go and set up a MakeMyTrip there but to restart in a new market is also expensive. So, for us, it’s primarily about India or any other market where Indians are travelling. It could perhaps be a market like the UAE where there are a lot of non-resident Indians.
You pioneered online travel in India, thereby changing the entire contour of the industry. Having started MakeMyTrip in 2000, you survived the dot-com bust, the growing competition, and more. What is your take on entrepreneurship?
If you manage the first part, let’s say if you have done the pre-Series A or Series A round, you need to focus on creating a team. There are very few businesses where the initial founders can do everything and that is where some people stumble upon, even as some do well. One needs to let go at a very fundamental level, and build a company based on talent. Creating a good leadership team is absolutely critical. Entrepreneurs should also know what to focus on is key. Taking away the friction on ambiguity is key.
What do you think about startup valuations today?
The private market is pretty steep right now, while public space is rational. India is still an overheated market but going forward, one can expect the valuations to come down. The Uber IPO not becoming a blockbuster has been an eye-opener for the entire startup ecosystem across the world. Valuations for the number one player in every segment is high. But, finally, it’s about demand and supply. If a deal clicks, it does!