Flipkart is looking to expand its services as it continues to compete with one of the biggest companies that have ever existed-Amazon. A fight like this does not come without the need for some serious firepower, and today, the Indian e-commerce giant has added another tool to its arsenal. It looks like Flipkart is looking to expand its presence travel business, according to a recent announcement which states that the Walmart backed company has agreed to acquire Cleartrip, the online travel agency.
This comes at a time when companies like Cleartrip have been facing a never-seen-before depreciation, after facing a financial crunch due to the pandemic, since people don’t want to travel around much anymore.
Cleartrip has been fighting it out against bigger competitors like GoIbibo and MakeMyTrip for around 15 years. According to the most recent data (which just so happens to be from back in 2016), the company, which operates in the UAE, Egypt, and Suadi Arabia as of now, apart from the Indian subcontinent, had apparently managed to raise up to 74 million dollars via financing from its investors which include Concur Technologies (valuing it at around $300 million back then), but it seems that the sum was unable to keep it afloat amid the recent economic crisis.
As such, Flipkart will likely be able to acquire the stakes at a not-so-high amount of 40 million dollars, in a deal that’s part cash and part equity, according to TechCrunch. That’s quite a hefty discount!
While the valuation took many off guard, the deal itself does not come as much of a surprise. Reports claiming that the two companies were in talks had first emerged last month, wherein it was revealed that Flipkart is looking to expand its presence in the travel business, which once was very competitive, and has the potential of becoming similarly competitive post the pandemic. Even now, as the Indian economy works to get back up on its feet, people are trying to take trips, even if they are to nearby places.
An insider had first revealed the news in March, saying, “Negotiations are on and the proposed deal is for the sale of a majority stake in Cleartrip. This is in line with Flipkart’s strategy to diversify and expand into product lines and categories via acquisitions and drive more GMV (gross merchandise value). If it is sealed, this deal can be seen as an opportunistic acquisition in the Covid-19 era.”
However, this deal goes deeper than just Flipkart expanding its offerings. Cleartrip is a partner for the India branch of Amazon, helping in the platform’s ticketing portal/engine. Now that Flipkart has acquired it, we highly doubt that the Cleartrip-Amazon partnership will stay intact.
Moreover, Amazon is already fighting a legal battle with Reliance over its acquisition of Future Group, and thus, it has bigger fish to fry at this moment. Therefore, the Flipkart acquisition could not have come at a better time.
Cleartrip is all set to retain its originality and function as a separate brand while keeping all its employees post acquisition. A separate unit might be set up to work with Flipkart to “further develop technology solutions to make travel simple for customers,” according to a statement released by the two companies.
Commenting on the issue, Kalyan Krishnamurthy, the CEO of Flipkart, said, “The Flipkart Group is committed to transforming customer experiences through digital commerce. Cleartrip is synonymous with travel for many customers, and as we diversify and look at new areas of growth, this investment will help strengthen our wide range of offerings for customers. We welcome the Cleartrip team with their deep industry knowledge and technology capabilities to the Flipkart Group and look forward to providing deeper value and travel experiences for customers together.”