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In a significant development, the world’s leading travel portal Expedia has acquired a majority stake in India’s top online hotels aggregator TravelGuru for $17 million. The deal values TravelGuru and Desiya.com (which was acquired by the former in December last year) at about $30 million, which, according to industry sources, is a modest valuation…Update: another source says the valuation is around $75 million, which sounds more reasonable. Expedia, which recently launched its India operations, has also retained the option to buy more of Travelguru in the future, according to sources. The deal is believed to have been signed a few days ago.
Travelguru is funded by Sequoia Capital India and Battery Ventures. According to the earlier announcements made by the investors, Travelguru had landed a total funding of $25 million ($10 million committed capital in first round by Sequoia and $15 million by Battery and Sequoia). It’s not clear how much of this capital has been drawn by the company.
However, when asked on the rumours about Travelguru selling out, KP Balaraj of Sequoia Capital India declined to comment. In fact, Travelguru has been in search of a deal since last year. The company had approached several other players in the Indian market like Cleartrip.com and MakeMytrip.com for a sale or a merger, according to industry sources. This information is, however, not verified with Travelguru or the investors of the company.
Travelguru’s stake sale to a global company may be the beginning of a consolidation in the Indian online travel space. The industry has several venture funded companies, although the market is led by MakeMyTrip.com, which arguably commands a larger market share, and others like Yatra.com and Cleartrip.com.
Travelguru, a Harvard Business Plan contest winner, was launched in 2006 with the backing of Sequoia Capital India. The company initially focused on air ticketing, however, soon after changed its focus to hotels aggregation. In December last year, it also acquired a B2B hotels aggregator Desiya.com in a stock deal rumoured to be valued at $25 million. Since the market for hotels aggregation is too early in India, the company would have faced tremendous challenges in staying fit in the hyper competitive online travel space.
US-based travel services provider Expedia began its India operations only in March 2008, targeted at outbound tourists. The Indian online travel market is the fifth biggest in Asia and is likely to become one of the top three in the continent over the next five years, touching $6 billion in revenues.