China's Ctrip Will Own Nearly Half of India's MakeMyTrip After Share Swap

Ctrip.com is increasing its foothold in India.

China's largest online travel group intends to raise its position in India's MakeMyTrip to 49 percent in a share swap deal with Naspers, the company said Friday.

Naspers offered Ctrip even more shares, which would have given it control of MakeMyTrip, noted analysts at Goldman Sachs, but Ctrip opted for a minority position to avoid regulatory scrutiny.

Ctrip's concerns centered around a foreign company taking over a brand in India. Naspers will own about 6 percent of the Chinese travel agency's outstanding ordinary shares after the maneuver.

In 2016, Shanghai-based Ctrip had invested about $180 million in MakeMyTrip, gaining it one board seat. With this deal, it will get Naspers four board seats. It now has five of the 10 board seats.

"With the investment, we can get more exposure to the Indian travel market," said Ctrip CEO Jane Sun on Friday. "MakeMyTrip can now leverage our experience and knowledge at Ctrip and Skyscanner. We'll explore more ways to work together."

Ctrip will invest certain ordinary shares and class B shares of India's largest online travel agency group MakeMyTrip in a third-party investment entity, which will hold class B shares of MakeMyTrip, representing approximately 4 percent of MakeMyTrip's class B shares, plus ordinary shares, giving it 49 percent of its outstanding stock.

Sun highlighted MakeMyTrip's fast growth, experienced management, the Indian population's size and youthfulness, and how fast India's economy is growing as key appealing factors driving Ctrip's interest. MakeMyTrip claims a 43 percent a year compound annual growth in gross merchandise value processed in the past few years. India's gross domestic product has recently grown faster than China's.

Naspers, a South African tech and media investor, obtained its shares in MakeMyTrip after MakeMyTrip acquired Ibibo, an online travel agency Naspers had backed. Naspers plans to spin out some of its internet businesses shortly, which may partly explain the timing of the share swap.

Ctrip has an acquisitive streak. In 2017, it acquired Skyscanner for $1.74 billion.

However, Ctrip also competes internationally against companies like MakeMyTrip via its Trip.com brand.

CEO Sun said Ctrip prefers to grow "organically" overseas via its brands. However, when it sees a company in a market that has a fast-growing market of potential online travel buyers, a company that's the leader in its vertical, and a company at a price that's attractive, it will consider an acquisition, she said, without commenting on the odds of any future acquisitions.

Presumably Ctrip will bring more MakeMyTrip inventory into its brands. It controls at least half of China’s online travel market bookings if you include its 45-percent owned partner Qunar.

To complicate matters, Booking Holdings owns a strategic stake in Ctrip that before this deal was about 9 percent of Ctrip's outstanding shares.

For more context, see Skift's deep dive, What India Reveals About the Future of Online Travel.