VC firms SAIF Partners, Helion Ventures and Sierra Ventures besides certain management executives including founder Deep Kalra are making a part exit in the Nasdaq float of travel services firm MakeMyTrip.

The firm is looking to raise around $43 million from the sale of fresh shares besides the offer for sale by existing investors in the issue that is expected to peg the valuation of the firm around $450 million post issue. The company has indicated that the issue would be priced in the $12-14 per share bracket.

Post issue SAIF Partner’s 51.2% stake would come down to 43.79%, Kalra’s holding(14.45% to 11.62%), Helion(11.97% to 10.2%), Sierra Ventures(7.98% to 6.81%).

If the firm manages to get a valuation of $14 per share, SAIF’s stake would be valued at $209 million(post IPO & its partial selloff). This could be as much as 10x SAIF’s total investment till date.

Gurgaon based MakeMyTrip has raised over $40 million through multiple rounds of venture capital funding. SAIF Partners made the first major round of fund infusion of $10 million five years ago when the travel services firm started its India operations.

The company raised $13 million from SAIF Partners, Sierra and Helion in series B funding and another $15 million series C funding that included $8 million from Tiger Fund and $7 million from existing investors SAIF Partners, Sierra Ventures and Helion Venture Partners.

Although individual breakup of various investors average cost of ownership is not available, the company has disclosed that average per share for all existing shareholders is pegged at $1.8 per share.

The total issue of 5 million shares including 1.15 million shares offered for sale at the upper end of the indicative offer price would peg the issue size at $70 million.

Meanwhile, one of its existing investors is looking to participate in the issue. Tiger Global intends to purchase upto a tenth of the total shares up for sale in the issue and is likely to get the shares at the public offer price.


Deep Kalra the founder, group chairman and CEO is likely to be holding shares worth $55 million post the issue. The IIM-A graduate who prior to founding the company in April 2000 worked with GE Capital for little over a year, is selling some marginal shares that could net him around $0.5 million. Kalra who was vice president of business development at GE Capital had previously worked with AMF Bowling Inc and ABN AMRO Bank.


Of the estimated $44.3 million to be available to the company from the issue, MakeMyTrip plans to use it to expand operations by acquiring or investing in strategic businesses or assets that complement its service and product offerings, to enhance its technology, as well as for working capital and other general corporate purposes.


For the quarter ended June’10, its revenues increased 49% to $33.7 million over the year ago period. Sales from air ticketing business rose 27.8% to $10 million primarily due to a 63.6% growth in gross bookings to $146.5 million in the quarter which was partially offset by a reduction in net revenue margins from 7.9% in the quarter ended June 30, 2009 to 6.8%. The reduction in air ticketing net revenue margins was due to reduction in service fees charged on domestic air ticketing business to attract more customers.

Meanwhile, revenues from hotels and packages business increased 59.5% to $23.2 million in the quarter ended June primarily due to 74.8% increase in our hotels and packages gross bookings to $28.2 million in the quarter. This business also saw reduction in net revenue margins from 13.6% in the quarter ended June 30, 2009 to 11.9% in the quarter ended June 30, 2010.

Reduction in net margins in the two key businesses indicate increased pressure in the market that has now half a dozen online travel services firms, some of them also backed by other venture capital investors. The key to its earnings in the future would be how closely it is able to control cost while leveraging its dominant position in the market to grow its topline.

"Excluding the effects of employee share-based compensation costs in both quarters, we would have recorded an operating profit of $1.4 million in the quarter ended June 30, 2010 and $1 million in the quarter ended June 30, 2009. Our profit/(loss) before tax, including the effects of employee share-based compensation costs, improved to a profit of $1.3 million in the quarter ended June 30, 2010 from a loss of $(5.6) million in the quarter ended June 30, 2009," it said in the SEC disclosure.

The firm had been able to cut losses over the last two years despite tough market conditions. Net loss fell from $18.8 million in year ended March’08 to $7.3 million(12 months ended March’09) and further to $$6.2 million for year ended March’10. In the same two year period, its revenues has grown from $38.3 million to $83.5 million.


According to PhoCusWright, the Indian online travel market grew 11% to reach $3.4 billion in 2009. Netscribes has cited sources stating that, in 2009, approximately 34% of air tickets and 14% of train tickets booked in India were sold online.

PhoCusWright estimates that the total "business-to-customer" online travel agency market (i.e. businesses serving end consumers with travel products and/or services through an online channel) in India is valued at $1 billion and is dominated by four players — MakeMyTrip, Yatra, Cleartrip and Travelguru (acquired by Travelocity in August 2009). Of these, MakeMyTrip commands a market share of 48%, followed by Yatra at 24% and Cleartrip at 18%, based on gross bookings for 2009. These online travel agencies face competition from traditional travel agents as well as meta search engines, such as Ixigo, Ezeego1 and Zoomtra.

According to PhoCusWright, air ticket bookings contributed to approximately 70% of the online travel market in India in 2009. However, the non-air ticket segments are also growing in the Indian online travel market. Online rail revenues grew in excess of 25% in 2008-2009 according to PhoCusWright.


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