Flipkart is finalising the acquisition of Cleartrip, one the oldest travel booking portals in India, two people in the know said, as the Walmart-owned online retailer continues to make strategic investments across sectors to strengthen its portfolio and build an ecosystem around it.

The Flipkart-Cleartrip deal, which will be a mix of cash and equity, is likely to value Cleartrip at around $40 million in what is considered to be a distress sale for the 15-year-old Mumbai firm amid the pain that the pandemic has inflicted on the travel and hospitality industry.

“Talks have been on and will likely culminate in a transaction soon. The exact terms of the deal are still in the works but an announcement may come through soon. The Covid-19-caused shake up led to the Cleartrip sale,” said a person close to the matter who did not want to be named as the talks are private.

Cleartrip’s investors include Concur Technologies, a provider of integrated travel and expense management solutions, DAG Ventures and Gund Investment. Some of its early backers—Kleiner Perkins, Sherpalo Ventures and DFJ—have exited the company. Cleartrip last raised funds in 2016 and has in all picked up about $70 million in investor capital. Sources said it was valued at around $300 million then.

Flipkart and Cleartrip did not comment on the potential acquisition deal.

Founded in 2006 by Hrush Bhatt, Matthew Spacie and Stuart Crighton, Cleartrip was positioned as a hotels and air travel booking marketplace. It has been fighting bigger competitors, such as MakeMyTrip and GoIbibo, for the past decade.

Competition in the sector intensified when Naspers orchestrated the merger of MakeMyTrip and its portfolio firm GoIbibo in 2016. In 2019, Naspers sold its shares in the joint entity to China’s Ctrip, an existing investor in MakeMyTrip, and exited as the industry continued to face headwinds.

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Other players in the segment include Booking.com, EaseMyTrip that went public recently, and Yatra, among others.

“Flipkart now wants to invest in Cleartrip and push the pedal on this category. They will back Cleartrip so that it can take on the bigger players in the highly crowded online travel booking industry, which has not been able to clock profits due to the low margins in air travel,” said another person privy to the discussions.

For Cleartrip, it has been tough going as it relies on airline travel and less so on hotel bookings. The company laid off 400-500 employees in the thick of the pandemic last year, when the travel industry was completely shut. In FY20, Cleartrip’s revenue stood at Rs 318 crore and losses at Rs 14 crore.

Flipkart intends to retain the management and staff and continue the Cleartrip brand independently, according to a person cited earlier. Cleartrip’s backend engine will start to power Flipkart’s travel and hotel bookings.

From partnerships to acquisitions

Both e-commerce majors—Flipkart and its chief rival Amazon—are aggressively pushing hotel and travel bookings on their sites as they diversify into new services, including food delivery, e-pharmacy, and selling financial products online.

Until now, these companies have by and large forged partnerships with companies in sectors outside their ambit. Flipkart had earlier struck a partnership with MakeMyTrip and later announced a similar tie-up with Ixigo in 2019.

“With an aim to provide simplified access to quality airfare, Flipkart and Ixigo have come together to solve an ever-growing consumer demand and have built a product that is India first,” it had said at the time. Amazon had in 2019 announced that it had partnered with Cleartrip.

“With Flipkart now investing in Cleartrip, the travel booking site will become exclusive to the e-commerce platform,” said another person familiar with the talks.

To be sure, Flipkart has made a number of strategic investments across fashion, supply chain and logistics in the past two years in an attempt to create an ecosystem of online services.

In October, it picked up a 27% stake in Arvind Fashions Ltd.’s subsidiary Arvind Youth Brands, which owns the Flying Machine brand, for Rs 260 crore. Flipkart also enhanced its portfolio by backing ShadowFax, a logistics startup, as it led a $60-million investment round to accelerate hyperlocal deliveries. Flipkart has also been doubling down on its investment in Ninjakart, a supply-chain startup for fresh produce.

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