The Flipkart-Cleartrip deal, which will be a mix of cash and equity, is likely to value the travel portal at $40 million in what is considered to be a distress sale for the 15-year-old firm amid the pain that the pandemic has inflicted.
The Walmart-owned online retailer continues to make strategic investments across sectors to strengthen its portfolio and build an ecosystem around it. The deal, which will be a mix of cash and equity, is likely to value the Mumbai firm at around $40 million in what is considered to be a distress sale for the 15-year-old firm amid the pain that Covid-19 has inflicted on the travel and hospitality industry.
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“Talks have been on and will likely culminate in a transaction soon. The exact terms of the deal are still in the works but an announcement may come through soon. The Covid-19-caused shake up led to the Cleartrip deal,” said a person close to the matter who did not want to be named as the talks are private.
Cleartrip’s investors include Concur Technologies, a provider of integrated travel and expense management solutions, DAG Ventures and Gund Investment. Some of its early backers—Kleiner Perkins, Sherpalo Ventures and DFJ—have exited the company. Cleartrip last raised funds in 2016 and has in all picked up about $70 million in investor capital. Sources said it was valued around $300 million when it last raised funds.
Flipkart and Cleartrip did not comment on the potential acquisition deal.
Founded in 2006 by Hrush Bhatt, Matthew Spacie and Stuart Crighton, Cleartrip was positioned as a hotels and air travel booking marketplace. It has been fighting bigger competitors with larger cash pools such as Makemytrip and GoIbibo for the past decade. Competition in the sector further intensified when Naspers orchestrated a merger between Makemytrip and its portfolio firm GoIbibo in 2016. But in 2019, Naspers sold its shares in the joint entity to China’s Ctrip, an existing investor in Makemytrip, and exited as the industry continued to face headwinds.
“Flipkart now wants to invest in Cleartrip and push the pedal on this category. They will back Cleartrip so that it can take on the bigger players in the highly crowded online travel booking industry, which has not been able to clock profits due to the low margins in air travel,” said another person privy to the discussions.
For Cleartrip, it has been tough going, more so because it mainly relies on airline travel and less so on hotel bookings. The company laid off 400-500 employees in the thick of the pandemic last year, when the travel industry was completely shut. In FY20, Cleartrip’s revenue stood at Rs 318 crore with losses of Rs 14 crore.
Flipkart intends to retain the management and staff and continue the Cleartrip brand independently, said a person cited earlier. But Cleartrip’s backend engine will start to power Flipkart’s travel and hotel bookings.
Partnerships to acquisitions
Both e-commerce majors—Flipkart and its chief rival Amazon—have been aggressively pushing travel and hotel bookings on their sites as they diversify into new services that also include food delivery, pharma e-tailing, and selling financial products.
Until now, these companies have by and large forged partnerships with companies in sectors outside their ambit. Flipkart had earlier struck a partnership with Makemytrip and later announced a similar tie-up with Ixigo in 2019. “With an aim to provide simplified access to quality airfare, Flipkart and Ixigo have come together to solve an ever-growing consumer demand and have built a product that is India-first,” it had said at the time. Amazon, too, had announced it had partnered with Cleartrip in 2019. “With Flipkart now investing in Cleartrip, the travel booking site will become exclusive to the ecommerce platform,” said another person familiar with the talks.
Other than travel, Flipkart has made a number of strategic investments across fashion, supply chain and logistics in the past two years in an attempt to create an ecosystem around these.
Last October it picked up a 27% stake in Arvind Fashions Ltd subsidiary Arvind Youth Brands, which owns the Flying Machine brand, for Rs 260 crore. Flipkart also enhanced its portfolio by backing ShadowFax, a logistics startup, as it led a $60-million investment round to accelerate hyperlocal deliveries. Flipkart has also been doubling down on its investment in Ninjakart, a fresh produce supply chain startup.