India’s duality on China is intriguing. On one hand, PM Narendra Modi does not mince words about his opinion on anti-India activities by China. India banned several Chinese websites and apps proclaiming it was in India’s interest and benefit. Popular app Tik Tok also is banned in India.
But on the other hand, India and China continue their trade, investments and acquisition deals.
In the latest such move, Chinese travel giant Ctrip is increasing stake in India’s largest online travel portal MakeMyTrip to about 49% from 10% through a share-swap deal in the largest transaction in the space in the country. Ctrip will acquire the 42% stake held by South African media giant Naspers, the largest shareholder in MakeMyTrip. In turn, Ctrip will issue its shares to Naspers, which comes to a stake of about 5.6% worth over $1.3 billion, according to the company’s current market capitalisation of $23.5 billion.
The deal will be the single largest investment by a Chinese internet company in an Indian one till date, exceeding Alibaba Group’s close to $1.2 billion in mobile payments company Paytm and its e-commerce unit Paytm Mall.
Ctrip was reportedly eyeing a majority stake of around 53%, but settled for 49% to “get a favourable result” in terms of regulatory approval for the deal. The additional 4% stake is expected to be sold to a third-party investor.
After the deal, Ctrip will get four of the board seats currently with Naspers in MakeMyTrip, taking its total board seats to five out of 10. But MakeMyTrip’s co-founders will have veto rights on the majority of the three independent directors.
Shares of MakeMyTrip were trading nearly 6% up at $28 on Friday, giving the Nasdaq-listed company a market capitalisation of $2.8 billion.
MakeMyTrip will work with Ctrip to bring the company’s technology, like real-time inventory and rates from travel agents, to India besides building products in a mobile-first market. The two companies will also look to work together on deals with hotels in markets like Thailand, Malaysia and Dubai, which see a large number of tourists from both India and China.
As part of the transaction, Ctrip has also signed a non-compete arrangement where it will not invest in any other travel company in India. While MakeMyTrip currently has $250 million cash in the bank, Ctrip will also come in as a potential backer in follow-on rounds.
Ctrip first picked up a 15% stake in MakeMyTrip for $180 million in January 2016 with plans to increase its shareholding to 26% through market purchases. But Ctrip’s shareholding fell after MakeMyTrip announced a stock merger with Ibibo, which was owned by Naspers. The MakeMyTrip-Ibibo merger pegged the valuation of the combined entity at $1.8 billion and Naspers got a 40% stake in the combined company as part of the deal. Naspers later invested more in MakeMyTrip to increase its shareholding.