July 14, 2016 10:30 pm JST
India Online travel

Yatra to Merge with NASDAQ-listed Terrapin amid booming demand

MUMBAI (NewsRise) -- Yatra Online has agreed to merge with a special-purpose acquisition company Terrapin 3 Acquisition Corp. in a deal that estimates the Indian company at an enterprise value of $218 million, highlighting growing investor interest in the booming online travel industry in the world's second-most populous 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 south Asian country. A host of global investors, including Japan's SoftBank and China's Citrip.com International and New York-based Tiger Global Management have already poured millions of dollars in recent years into startup online travel ventures in the country, betting on the market's growth potential.

"This transaction gives us substantial additional resources to support our growth and the continued improvement of our integrated online and mobile platforms," Yatra Chief Executive and Co-founder Dhruv Shringi said in a joint statement.

Under the deal, the existing shareholders of Yatra, including Norwest Venture Partners, Intel Capital and Reliance Venture Asset Management, will continue to own at least 35% stake in the company. Cash payments to these shareholders will be capped at $80 million, it added.

Post the deal, Yatra, which runs the website Yatra.com, will be listed on the Nasdaq stock exchange under the symbol "YTRA," and the combined company will be led by the Indian firm's CEO Shringi.

For Yatra Online, founded in 2006 by Shringi, Sabina Chopra and Manish Amin, the acquisition offers the much-need fillip to go public-a feat which it has been trying to achieve for a long time-- and raise funds in a cash-starved Indian ecommerce market.

A number of Indian start-ups are facing pressure on their valuations in a tough private-funding environment, as investors whittle down their valuations.

In the fiscal year that ended in March, Yatra, which competes with the likes of MakeMyTrip and Goibibo, had more than 2.8 million air travel reservations and hotel stays on its platform, with a total transaction value of more than $900 million, up 25% from the previous year. Nearly three-fourth of those transactions came from repeat clients, it said.

Terrapin 3 Acquisition is one of the three special purpose acquisition companies of Terrapin Partners, a money management firm co-founded and led by Nathan Leight and Jason Weiss.

The company, which raised roughly $213 million through a listing on the Nasdaq in 2014, is backed by Macquarie Capital.

MIHI, an affiliate of Macquarie Capital, will buy an additional $20 million of Terrapin 3 equity as part of the transaction, the companies said.

The existing shareholders of Yatra may also receive an additional up to $35 million, on achieving certain financial targets during the 18 months after the completion of the deal. The deal, approved by the boards of both the companies, is likely to be completed in October.

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.

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