MUMBAI (NewsRise) -- South African media and e-commerce conglomerate Naspers will invest $250 million more in Indian online travel company Ibibo Group, in a sign of growing investor interest in the booming online travel and hospitality business in the south Asian nation.
With rising disposable incomes and an explosion in the use of smartphones, more people are relying on the Internet for travel bookings in the world's second-most populous nation. A host of global investors, including Japan's SoftBank and China's Ctrip.com International and New York-based Tiger Global Management have poured millions of dollars in recent years into online travel businesses in India betting on the market's growth potential.
Last month, Ctrip.com, the largest online aggregator of accommodation and transportation tickets in China in terms of transaction volume, said it will invest $180 million in Indian online travel agency MakeMyTrip, a rival to Ibibo. These online travel companies are now facing stiff competition from relatively newer entrants such as budget hotel accommodation provider OYO Rooms, backed by SoftBank.
"The Indian ecommerce market, and the online travel segment in particular, offers exciting growth prospects for us as a group," Naspers Group Chief Executive Bob van Dijk said in a statement.
India's travel and tourism industry is likely to grow at about 12% annually to $27.5 billion this year, from $19.7 billion in 2013, making it the fastest-growing market behind China, according to a research report by Aranca last year. Use of internet in travel and tourism bookings is estimated to increase to 46% in 2017 from 41% in 2014, according to Phocuswright, a travel data aggregator.
"We want to penetrate deeper in the budget accommodation and alternate accommodation category. And all of this means we want to penetrate the smallest of towns and cities in the country," Ibibo Group founder and CEO Ashish Kashyap said in an interview. "That's really where the huge opportunity is."
The funds will also be used to invest in new technologies and to expand the presence among smartphone users, Kashyap said.
Ibibo Group, which owns several online travel properties including Goibibo.com, a hotels and airlines reservation platform and redBus.in, a bus-ticketing platform, is majority-owned by Johannesburg-listed Naspers. Naspers and its Chinese partner Tencent Holdings together had invested $100 million in Ibibo in 2013.
Naspers, the largest shareholder in the Chinese company, is also among the top investors in Flipkart, India's largest e-commerce company.
Ibibo said it processed more than 6.5 million transactions in the last quarter of 2015 and is the largest online travel company in India, generating more than twice the transaction volumes of its nearest competitor. The company's hotel bookings surpassed 1.6 million room nights during that period, it said.
Naspers' announcement comes in the backdrop of resurging confidence among global investor to bankroll startups in India. Earlier this week, serial entrepreneur and investor Dave McClure said his investment firm and incubator 500 Startups has started a $25 million India fund called "500 Kulfi" to invest in fledgling companies in financial technology, off-the-shelf software service, health and data analytics sectors, among others. Investors pumped in $7.4 billion into India's startup companies in 2015, a 57% rise from the previous year, according to Tracxn, a company which offers data on startups.