SUMMARY
Yatra Originally Issued The Equity Warrants To BCCL In 2011
Bennett Coleman & Co. Ltd (BCCL) has exited from its investment in online travel portal Yatra Inc. The stake (equity warrant) was sold for about $6 Mn (INR 39 Cr), according to the Yatra’s annual report for FY17.
The equity warrants were originally issued to BCCL in 2011. These warrants were convertible into the equity shares in Yatra India upon the occurrence of certain events. The company filings list that these events were-
(a) an IPO of the Parent or its subsidiaries (Yatra online Pvt Ltd/Yatra Online (Cyprus) Limited) Or
(b) Prior to a proposed event resulting in a Change of Control of the Company or Ultimate Parent, at any time, within a period, of 4 years from June 21, 2011, which was further extended until September 30, 2017.
As per the agreement, BCCL had a right to exercise a put option in respect of such equity shares against THCL Travel Holding Limited (“THCL” formerly known Yatra Online (Cyprus) Limited). A put option is an option provided to sell assets at an agreed price on or before a particular date.
So, on conversion to equity, BCCL has put option that requires Yatra Cyprus to purchase all the shares held by BCCL at a price per share calculated as per the terms of the agreement.
However, if BCCL decides to not exercise its put option within the period stipulated therein, THCL will have the right to mandate BCCL to sell all the above-stated equity shares held in Yatra to THCL at a price per share calculated as per WSA (Warrant Subscription Agreement).
The company’s RoC filings further state that on March 31 2017, BCCL agreed to waive its right to exercise the Warrants under WSA. Following this development, Yatra India would settle BCCL outstanding with the payment of an aggregate sum of about $6 Mn (INR 39 Cr) under the terms of Advertisement Agreement with no further liability on Yatra. This amount paid to BCCL also includes an interest of about INR 90,000 as per the company filings.
Yatra: The Journey So Far
Founded in 2006 by Sabina Chopra, Manish Amin, and Dhruv Shringi, the travel search marketplace will turn 11 this August.
The company’s total revenue went from $134.04 Mn (INR 837.8 Cr) to $150.28 Mn (INR 939.3 Cr) in 2016-17. But the Gurugram-based company has long been grappling with losses that soared to an all-time high of $94.99 Mn (INR 593.7 Cr) during the same period. This is an estimated 377% increase from $19.88 Mn (INR 124.3 Cr) the previous year.
As per media reports, Yatra stated that it was running low on funds in its latest annual report. Given the burn rate at the time, it had less than a year of cash runway and was in dire need of external investment to stay relevant and develop new technologies. The report said, “We (Yatra) may need to raise additional funds, and we may not be able to obtain additional debt or equity financing on favourable terms, if at all. If we raise additional equity financing, our shareholders may experience significant dilution. If we engage in debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness. In addition, the availability of funds depends in significant measure on capital markets and liquidity factors over which we exert no control.”
At present, Yatra is backed by an admixture of venture capital, private equity, and strategic investors. Its current strategy is focussed mainly on promoting inorganic growth through acquisitions and mergers. Among its acquisitions are Travelguru and WhatsApp-based concierge app Dudegenie. Dudegenie was an acqui-hire. It also acquired Bengaluru-based auto rickshaw aggregator MGaadi in 2016.
In July 2016, Yatra forged a reverse merger agreement with NASDAQ-listed special purpose acquisition firm Terrapin 3 Acquisition Corp (TRTL), which allowed it to start trading on NASDAQ, a global electronic marketplace for buying and selling securities.
To expand its customer base, it also granted Reliance Industries Ltd. a small portion of an equity stake. As part of the deal, Reliance agreed to pre-install the Yatra app on all its Lyf 4G phones.
The Ongoing Game In The Indian Online Travel Market
Owing to the flow of funds from overseas investors, the online travel sector is slated to expand further in the coming years. The Indian travel industry (both offline and online) is poised to become a $48 Bn market within the next three years, a recent Google India-BCG report predicts. According to a report by IBEF, the online travel realm will likely account for 40% to 50% of total transactions by 2020.
Yatra Inc’s biggest competitor, MakeMyTrip recently raised $330 Mn from South African Internet and media conglomerate Naspers and Ctrip as well as other investors. The company also completed the merger of its Indian travel business with Naspers-owned Ibibo group, which was announced last October. To that end, the Ibibo Group has contributed around $82.8 Mn cash to MakeMyTrip. Also, MakeMyTrip Investor SAIF Partners exited the company gaining 16X returns.
In March 2017, Gurugram-based travel search engine ixigo, which turned ten this year, obtained $15 Mn in Series B round of funding led by Sequoia Capital. Chinese investment firm Fosun Kinzon Capital Pte Ltd also participated in the round. Prior to that, Bengaluru-based online Wanderlust platform WanderTrails secured $1 Mn Seed funding from Earlsfield Capital, a UK-based venture capital firm.
Other players in this segment that compete with Yatra include TravelTriangle, YuMiGo, HolidayIQ, etc.
(The development was reported by VCCircle.)
