Mumbai/Bangalore: Ibibo Group, a subsidiary of South African mass media company Naspers Ltd, has acquired Pilani Soft Labs Pvt. Ltd, which runs bus ticketing website redBus.in.
While the companies did not disclose the deal amount, two people familiar with the transaction pegged it at about $135 million. They didn’t want to be named.
Ibibo largely focuses on air tickets and hotel bookings. The acquisition of redBus gives the company access to customers who do not travel by air, said Ashish Kashyap, chief executive of Ibibo group.
RedBus will be run independently and operate as a separate business. Its founders and management team will continue with the firm.
Founded by Phanindra Sama, Sudhakar Pasupunuri and Charan Padmaraju in 2006, redBus has grown to be the country’s largest bus ticketing service, selling tickets worth more than Rs.600 crore on over 10,000 bus routes in fiscal 2012. Its revenue that year was Rs.350 crore.
Mumbai-based investment bank Avendus Capital was the adviser on the transaction.
Investors in redBus—Seedfund, Inventus Capital Partners and Helion Venture Partners—hold a little over 50% in the company, and have committed to invest Rs.43 crore. RedBus has only utilized Rs.8 crore of this corpus till date, said Pilani Soft Labs chief executive officer Sama.
“On the basis of the amount that went into the company and the returns offered now, redBus is giving the highest returns ever offered through an M&A (merger and acquisition) transaction in the consumer Internet space,” he said.
Though other online travel agencies such as MakeMyTrip.com and Yatra.com also sell bus tickets, redBus dominates the business. Rival websites sell a fraction of the tickets redBus does.
Investment bankers say the acquisition is an affirmation of the growing acceptance of Indian consumer Internet companies globally. “This transaction shows that Indian Internet companies can attract buyers from overseas,” said Deepak Srinath, director, Allegro Capital Advisors, an investment bank.
According to Srinath, what is encouraging is the interest of a company like Naspers in Indian firms. “Naspers is known to pick up market leaders in emerging markets. They invested in Chinese Internet firm Tencent Inc. in 2001 and it has grown into a multi-billion dollar firm today,” he said.
In February, redBus launched a mobile application for Android and Windows phones, under the guidance of chief products officer Alok Goel, who joined the company in November from Google Inc., where he was heading search and mobile products.
The ibibo group’s existing travel assets include Goibibo.com, a travel aggregator, and TravelBoutiqueOnline, a business-to-business travel service.
“We were working with redBus and were witness(ing) traction growth on a daily basis,” Kashyap said.
“We realized that if we wanted to scale with a multiplier effect in the bus ticket space, M&A was the way out... We could build something like this on our own but redBus has a network effect due to its relationship with bus owners and operators and breaking that is difficult,” he added.
The success of redBus helped precipitate a shift in Indian start-up investors’ aims, from “concept” models—importing a winning US model—to start-ups that are uniquely local, said Parag Dhol, a partner with Inventus Capital.
South Africa’s Naspers has a track record of establishing, acquiring and growing businesses in emerging markets.
Last year, MIH (a part of Naspers group), and three other investors invested an undisclosed amount in India’s largest and most-funded e-commerce company Flipkart Online Services Pvt. Ltd.