Yatra gets more funds to fight rising Indian online travel startups

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India’s second largest online travel aggregator (OTA) Yatra will now have access to public funds, thanks to a reverse merger with Nasdaq-listed Terrapin 3 (TRTL), a special purpose vehicle that was created in the US to effect a merger with an existing business.

TRTL had raised US$212.75 million in its IPO in 2014. With the merger, Yatra Online will also start trading on Nasdaq with “YTRA” as its ticker symbol.

Founded in 2006, Yatra offers online reservations on flights, trains, buses, hotel rooms, and cruises.

Yatra investors likely to gain

Some investors of Yatra Online, namely Norwest Venture Partners, Intel Capital, TV18 Group and Reliance Venture Asset Management, IDG Ventures India, and Vertex Venture Holdings are likely to get a return on investment, provided Yatra meets certain targets, as per the terms of transaction. Norwest’s first funding in Yatra Online took place 10 years ago in 2006.

Yatra is likely to be valued at about US$218 million with this deal, as per a company press release. However the amount is lower than expected as Yatra’s bigger rival MakeMyTrip is valued at US$717 million on Nasdaq.

“Under the terms of the proposed transaction, it is estimated that the current shareholders of Yatra will continue to own at least 35 percent of the issued and outstanding shares in the combined company,” Yatra said in a statement. The first US$100 million of cash from TRTL will be allocated entirely to the combined company’s balance sheet and to pay transaction expenses to the bankers brokering the deal.

“The remaining cash beyond the US$100 million mark will then be allocated 80 percent to current Yatra shareholders and 20 percent as cash to the combined company’s balance sheet,” Yatra said. Cash payments to current Yatra shareholders will be capped at US$80 million.

“In addition, existing shareholders of Yatra may receive additional consideration of up to US$35 million upon the achievement of certain financial objectives during the 18 months after closing,” the press release added. The transaction is expected to be complete by October 2016.

Money to help Yatra fight startups

Yatra’s biggest rival MakeMyTrip raised US$180 million by selling a 26.6 percent stake to China’s CTrip in January.

Another big one in India, GoIbibo, raised US$250 million from Naspers via its holding company Ibibo Group.

Budget hotel player OyoRooms has received over US$100 million from Softbank and others. Venture capital funding in this space has sparked a discount war by young players to gather market share in India from incumbent leaders such as Yatra and MakeMyTrip.

Consolidation a global theme