Ecommerce major Flipkart, which is owned by US retail behemoth Walmart, has entered the final stage of discussions to buy a controlling stake in online travel aggregrator Cleartrip and expand its footprint in a cut-throat segment that has been battered by COVID-19, people with knowledge of the matter told Moneycontrol.
Moneycontrol was the first to report the deal discussions on March 1, 2021, and had indicated that the proposed transaction was in line with Flipkart’s strategy to diversify into product lines and categories via the M&A route and drive more GMV (gross merchandise value).
“The discussions between both parties have reached the final stage and once the deal formalities are concluded, an official announcement on the proposed transaction is likely soon,” one of the persons cited above told Moneycontrol.
A second person confirmed the same to Moneycontrol.
“The deal thesis for Flipkart would be to leverage their formidable and loyal base and look to tap customers from rivals,” a third person elaborated, adding that “the deal is on track.”
All the three persons cited above spoke to Moneycontrol on condition of anonymity.
Moneycontrol sent email queries to all parties but could not elicit an immediate response from Flipkart, Cleartrip and its investors.
THE FLIPKART M&A STRATEGY
Flipkart has been busy stitching up deals in recent times and the Cleartrip buyout would be the fourth transaction sealed by the e-commerce major in the last year.
In October 2020, it picked up a 7.8 percent stake in Aditya Birla Fashion & Retail for Rs 1,500 crore. Three months earlier, it had pumped in Rs 260 crore in Arvind Youth Brands, an arm of Arvind Fashions. It has also struck niche buyouts by acquiring augmented reality firm Scapic and social media gaming startup Mech Mocha.
Most of the large ecommerce players like Flipkart, Amazon and Paytm want to embrace the super-app strategy and have a presence in every business segment, be it retail, food delivery, payment services and travel. Amazon and Ant Financial-backed Paytm are also present in the online travel segment. In May 2019, Amazon India tied up with Cleartrip to add a flight booking option to its payment service, Amazon Pay.
In October 2016, Makemytrip acquired rival Ibibo Group, backed by Naspers and Tencent, for around $1.8 billion in a sign of consolidation in the fast-growing Indian online travel industry. Tencent is also an investor in Flipkart.
The Moneycontrol report published on March 1 had also mentioned that if deal talks fructify, Flipkart would absorb a firm with strong recall value along with its members and customer base and that the buyout would ensure the presence of an in-house brand with direct supply of business from airlines and hotels.
To be sure, Flipkart ventured into the online travel space in April 2018 when it struck a partnership with Makemytrip to offer the latter’s travel services on its platform.
With this acquisition, Flipkart will be better positioned to take on rivals MakeMyTrip, Yatra, Booking.com, EaseMyTrip and IPO-bound ixigo.
On April 5, Moneycontrol was the first to report that ixigo was planning to go public in 2021 and was looking to raise Rs 1,500 crore to Rs 1,800 crore via the IPO.
Cleartrip’s financial performance had been hit seriously due to travel and border restrictions imposed post the outbreak of COVID-19. Besides India, it operates in the UAE, Saudi Arabia and Egypt. Its key investors include Concur Technologies, DAG Ventures & Gund Investment Corporation. The firm was established in 2006 by Founder & CEO Stuart Crighton. Prior to founding Cleartrip, Stuart worked with Abacus Distribution Systems, Asia’s leading GDS (global distribution system) as Head, South and West Asia.
Walmart acquired about 77 percent of Flipkart for around $16 billion in 2018, ratcheting up competition with Amazon Inc in the booming Indian ecommerce market. At the company’s 2021 investment community meeting, president and CEO Doug McMillon said, “This (India) is a market where we will step on the gas to ensure we have the appropriate level of investments in areas like the supply chain.”
“We are well positioned to grow as an emerging middle class spends more money through mobile phones. In India, our momentum and potential for growth make this a unique opportunity,” McMillon added.
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