Yatra to merge with Nasdaq firm

Deal with TRTL values travel portal at $218 million; existing management to continue

In the third major deal in the Indian online travel space this year, domestic travel portal Yatra has entered into an agreement to merge with Nasdaq-listed American company Terrapin 3 Acquisition Corporation (TRTL).

The deal values the 10-year-old Indian portal at $218 million (Rs 1,465 crore). Yatra, like its rival Indian portal, MakeMyTrip, will also list at Nasdaq. The deal gives Yatra the capital to compete with the aggressive marketing spending of its rivals.

Taken together, MakeMyTrip and Ibibo raised $430 million this year.

In the case of the latest merger, the combined company will continue to be led by Yatra’s existing management, under chief executive and co-founder Dhruv Shringi. Yatra incurred a net loss of Rs 88.9 crore on revenue of Rs 354 crore in FY15. The FY16 numbers are not available. Yatra customers did 2.8 million air travel and hotel bookings worth a little more than $900 million during the year ended March, an increase of 25 per cent over the previous year.

TRTL is a special purpose acquisition company that raised $212.75 million in its Initial Public Offer (IPO) of equity, now held in a trust account.  MIHI LLC, an affiliate of Macquarie Capital, will infuse an additional $20 mn as part of the transaction.  Under the terms, it is estimated that the current shareholders of Yatra will continue to own at least 35 per cent of the issued and outstanding shares in the combined company. Yatra’s current investors include Reliance Venture Asset Management, TV18 Group, Norwest Venture Partners, Intel Capital, IDG Ventures and Vertex Venture Holdings.  

The first $100 mn of cash (including MIHI’s $20 mn) will be allocated entirely to the combined company’s balance sheet and to pay transaction expenses.  Any amount greater than $100 mn available from TRTL will then be allocated 80 per cent to current Yatra shareholders and 20 per cent as cash to the combined company’s balance sheet.  Cash payments to current Yatra shareholders will be capped at $80 mn.

Shringi said the transaction gives Yatra substantial resources to support growth and the continued improvement of its integrated online and mobile platforms. “We look forward to expanding our already extensive network of domestic and international partnerships with hotels, airlines, car services, and tour package promoters, as well as strengthening our brand presence and technology platform,” he said.

“Yatra not only gets access to capital but also hits the road towards an IPO, without the uncertainty of list pricing. Upon listing, Yatra will be the second major Indian online travel agency to go public, opening more avenues for future fund raising and potentially unlocking shareholder value,” said Chetan Kapoor, research analyst at travel research firm Phocuswright.

The online travel space in the country has attracted big dollars this year. In February, Ibibo secured an investment of $250 mn from Naspers, the South African Internet and media company, now one of its main shareholders, with Chinese internet firm Tencent. MakeMyTrip raised $180 mn from Chinese travel major Ctrip in January.

Both want to expand the high-margin hotel booking business. The share of online in overall hotel booking was 15 per cent in 2015, more than double from six per cent in 2014. There is huge room for growth, as half of hotel bookings could shift to online in the next few years.