IN many ways, the proposed acquisition of Cleartrip by Flipkart, known as the “Amazon of India” was inevitable – inevitable because the pandemic has no doubt devastated the 15-year-old company’s India business, leaving it vulnerable, and inevitable because of the ambitions of e-commerce marketplaces to get into the travel vertical.
And what better time than now when travel companies, built up over long years of hard work, sweat and tears, only to see their business crushed overnight by a pandemic, are struggling to last this long, protracted winter and need financial resources to get through it.
In what is being described as a distress sale in the media, Flipkart will acquire 100% of Cleartrip’s shareholding. This article in The Economic Times pegs the valuation at US$40m and reports that the deal will be a mix of cash and equity.
Under the terms of the agreement, Cleartrip operations will be acquired by Flipkart. Cleartrip will continue to operate as a separate brand, retaining all employees while working closely with Flipkart to further develop technology solutions to make travel simple for customers.
Founded in 2006 by Hrush Bhatt, Matthew Spacie and Stuart Crighton, Cleartrip has been fighting hard as the number two in the Indian market, behind MakeMyTrip. The competition got harder when MakeMyTrip merged with GoIbibo in 2016. Three years later, Naspers which orchestrated the merger, sold its shares to the Chinese giant, Ctrip.
Cleartrip had brought in its own investors, including Concur Technologies, DAG Ventures and Gund Investment. It last raised funds in 2016 and has in all picked up about $70 million in investor capital.
In an obvious effort to diversify, it went into the Middle East and has built up a fairly solid business, following the acquisition of Flyin in Saudi Arabia in 2018. In later years, it invested more resources in the Middle East, clearly recognising its early starter advantage in this fairly new market. It is interesting that last year, amid the pandemic, MakeMyTrip followed in its footsteps and entered the Middle East.
It remains to be seen what will happen to the Cleartrip’s Middle East business, with sources saying it is also up for sale. It should have no shortage of potential suitors for sure, as global and regional brands gear up to dig deeper into this promising market post-Covid.
To survive Covid, Cleartrip laid off the bulk of its staff and was focusing on building up the tech to work on automating customer care as much as possible, something Crighton said the crisis had exposed.
In May 2020, it partnered with Amazon to add a flight-booking option to Amazon Pay in India, showing its willingness to work with marketplaces and perhaps recognising the inevitability that travel will eventually become a niche within these giant marketplaces.
It is already happening across Asia, the absorption of travel into marketplaces and superapps – Rakuten the first to jump in with Rakuten Travel and expanding into tours and activities by acquiring Voyagin and LINE investing in LINE Travel.jp. South Korea’s Coupang entered Singapore last week, to set up a beach-head for entry into the South-east Asian market, currently dominated by Chinese tech giants.
Grab, heading for an IPO via SPAC at a valuation of US$40 billion, is already offering hotels through partnerships with Agoda and Booking.com. You can imagine that it will be inevitable that marketplaces like Lazada and Shoppee will be getting into travel, if they haven’t started already.
This moment when the world is primed and waiting for travel to recover is a ripe one for giants wanting to step into a space that is complex and fragmented, such as what Flipkart, which is itself preparing for a US$10 billion IPO/SPAC deal, has done with Cleartrip.
“Flipkart and Amazon will start giving away travel as a feature of their bigger bundles. This will make it tough for the standalone guys, even MakeMyTrip who are minnows by comparsion,” said one industry observer.
In a press release issued by Cleartrip, Kalyan Krishnamurthy, CEO, Flipkart Group said, “The Flipkart Group is committed to transforming customer experiences through digital commerce. Cleartrip is synonymous with travel for many customers, and as we diversify and look at new areas of growth, this investment will help strengthen our wide range of offerings for customers.”
Crighton said, “Cleartrip has been a pioneer in capitalising on technology to simplify the travel experience for our customers. This product-driven focus has enabled us to become the preferred travel partner of choice for consumers in a wide range of markets in the region. We are delighted to be part of the Flipkart family and are excited about the positive impact this collaboration can have for our customers and the travel industry in general.”
The deal closing will be subject to applicable regulatory approvals.