MakeMyTrip acquires HotelTravel.com for $25M

NASDAQ-listed online travel services firm MakeMyTrip India Pvt Ltd (MMT) has acquired the Hotel Travel Group (HT Group) for $25 million. HT Group, with the brand ‘Hotel Travel’, has been operating the website www.hoteltravel.com for more than a decade in South East Asia, though the booking platform offers hotel reservation across the world. The acquisition will help MakeMyTrip to further strengthen its presence in the hotel and holidays segment internationally specially in South East Asia, a market which comprises a good chunk of outbound travel from India.

The total consideration payable to the promoters of the HT Group by MMT for the acquisition is $25 million, of which $15 million was paid in cash in the first closing on Tuesday November 6. The balance $10 million will be paid in the form of MMT shares, in three annual tranches through March 2016. BMR Advisors acted as the exclusive transaction advisor to MakeMyTrip for this deal.

Two of the promoters of the HT Group will continue in their roles at the South East Asian travel services firm, and will be eligible for additional earn outs and incentives for the next 3-4 years based on the HT Group meeting certain revenue and Earnings Before Interest, Taxes, Depreciation and Amortization (EBIDTA) targets. The additional earn outs can range up to $35 million and are payable partly in cash and partly in the form of MMT shares.

The HT Group has its presence in Thailand, Singapore and Malaysia in the South East Asia region and has tie ups with around 80,000 hotels across the world. While the reservation and call centre is located at Thailand it has offices in Malaysia, Hong Kong and the UK. MMT disclosed the acquisition in a release along with its financial results for the second quarter ended September 30.

The company’s share price crashed on Tuesday after it slipped back into losses with slowdown in air ticketing business and lowered revenue guidance for FY13. The shares last changed hands at $12.58 a share, down over 17 per cent and below the IPO issue price of $14.

Net loss for the quarter ended September 30 was $1.2 million, compared to a profit of $0.07 million in the year-ago quarter, while adjusted net income declined to $1.2 million from $1.6 million in the year-ago period. Revenue for the second quarter rose 4.3 per cent to $45.7 million from $43.8 million in the year-ago period.

Its revenue less service costs decreased 5.5 per cent Y-o-Y to $20.2 million in second quarter largely due to decline in its air ticketing revenue, which was partly offset by strong growth in its hotels and packages revenue.

MMT also sharply cut its revenue growth guidance for the current financial year ending March 2013.

The firm has said it expects to see revenue (less service costs) to grow in the range of 13 per cent to 16 per cent on a constant currency basis. This growth guidance is based on average actual Indian Rupee to dollar exchange rate of 48.23 for full fiscal year 2012. On a dollar basis, it expects revenue (less service cost) to be in the range of $89 million to $91 million, reflecting the 3Q13 average exchange rate of Rs 54 to a dollar.

As per the previous guidance range, which had assumed an average exchange rate of Rs 55 to a dollar, the firm expected revenue (less service costs) growth to be in the range of 30 per cent to 32 per cent on a constant currency basis. On a US dollar basis, it had previously said it is expecting revenue (less service cost) in the range of $99 million to $102 million.

Last month, in an exclusive chat with VCCircle, Deep Kalra, chairman and CEO of MakeMyTrip, had talked about three areas where the company is focused as far as acquisitions are concerned. Read here for more on that.

Last year, MMT had struck another deal in the region by acquiring majority stake in Luxury Tours & Travel and later hiked its stake to near 100 per cent.

It had also been active in inorganic expansion within India. Late last year, MMT had entered into a shareholders’ agreement and share subscription and purchase agreement with My Guest House Accommodations Pvt Ltd (MGH) and its existing shareholders to acquire 100 per cent of MGH’s ordinary shares through an earn-out structure based upon the achievement of various business parameters spread over eight years.

Prior to that, it teamed up with its largest shareholder private equity firm SAIF Partners, to acquire a majority stake in Gurgaon-based Le Travenues Technology Pvt Ltd, which owns and operates travel search engine iXiGO.

In another deal in the same space, Yatra acquired the online hotels aggregator Travelguru.com from Travelocity for an undisclosed amount in June this year. This was Yatra’s third acquisition within a year. Last August, Yatra had snapped up Bangalore-based Magic Rooms Solutions India Pvt Ltd, a hotels aggregation site backed by Nexus Venture Partners. In October 2010, the OTA also acquired Delhi-based Travel Services International for an undisclosed sum and entered the ticket consolidation space.

(Edited by Prem Udayabhanu)

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