Cleartrip Travel Services Pvt. Ltd has received a third round of funding of $18.5 million (Rs73.58 crore), which brings the total investment in the Mumbai-based travel company to $30.2 million.
Venture capital firm Draper Fisher Jurvetson India Advisory Services Pvt. Ltd (DFJ) led the round with a $10 million investment—the firm’s largest in India. DFJ was joined by the Mahindra Group and all the four firms that had previously invested in Cleartrip.
India’s travel portals have received a flurry of investment over the past two years since the sector came up in 2005. Since then, the industry has been moving towards consolidation, though the top players are yet to turn profitable.
With this investment, Cleartrip joins New Delhi-based Makemytrip India Pvt. Ltd which also got a third round of funding in August. Both are aiming for profitability in 2008 and are on the road to an initial public offering in the next two years.
Some venture capital investors have said this sector became mature in 2007 along with matrimonial and job search sites. Yet, new ventures such as AtYourPrice.in and iXiGO.com continue to be launched in 2008, backed by seed investors. Larger foreign players such as Expedia.com and Travelocity.com are also expected to enter the space.
Investors continue to pump money into this industry as they see potential for greater growth. The online travel industry in India was estimated at $2 billion in revenues (the value of transactions as opposed to the earnings of travel firms) in 2007 and is expected to grow to $6 billion in 2010, according to travel research group Eye For Travel.
More importantly, investors are banking on exponential future growth once the use of the Internet increases, the number of first- and second-time travellers goes up with more disposable income, airport infrastructure improves and more hotels come on the scene to address the excess demand.
Besides, “there is potential for this to extend beyond India (to South Asia),” said Mohanjit Jolly, executive director of DFJ, adding that he backed industry leader Cleartrip because its team has experience in the sector, been efficient with money and has plans to role out attractive technology to attract and retain customers.
Sandeep Murthy, chief executive officer of Cleartrip (and a partner at Sherpalo Ventures), said now that the company has taken more funds than required, it will use the money to improve the website’s services. He also wants money on hand to build the company’s “offline” presence and for acquistions—both online and on the ground.
Murthy already has a tie-up with the diversified Future Group for in-store servicing at five Big Bazaars stores, which will later be expanded. Cleartrip will also look to partner with or acquire travel agencies.