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Last month, the Indian startup ecosystem was taken by surprise when two online travel majors —MakeMyTrip and goibibo — decided to join hands. The merger has been touted as one of the biggest the ecosystem has ever seen. Talking about the motivation behind the deal, Deep Kalra, Chairperson and CEO, MakeMyTrip, said,
Till 2012–13, we were busy tackling competition from global players like Expedia.However, later, in 2013–14,goibibo emerged as a prominent player. It surprised us with its technological prowess and deep pockets.
According to Kalra, goibibo's technology is more contemporary than theirs, and this was the biggest motivation behind the merger.
Although the deal is done, MakeMyTrip is yet to get two approvals (shareholders voting and necessary approval from the Competition Commission of India).
During a fireside chat at MobileSparks 2016, Kalra spoke about some of the tough timesMakeMyTrip has seen. Kalra said,
We know the smell of money and the downside too. It's very painful for anyone who has made money in the past to be in the red.
So far, the online travel agency business in India has largely been about offering discounts. Answering a query about the domination of discounts in the trade, Kalra said,
"We stopped discounting for about a year but the market hated us for it. Now, with goibibo, we intend to bring discounts down and make more money in the coming time."
He added, “We had good revenue for two years (post 2012).However, when Kingfisher busted, it took a toll on the online travel agency business. The Kingfisher debacle and the fierce competition from goibibo led us into the red," he said.
Wafer-thin margins in online travel agencies are not enough. "Air tickets are a good way to acquire customers and then make a layer of services on top of it," added Kalra. MakeMyTrip did the same — after sensing saturation in the online travel agency business, the company launched hotels and other ancillary services.
Entrepreneurs regularly face new challenges and navigating through them is what makes them special. When quizzed about how he deals with such situations, Kalra explained,
I worked with phenomenal people at ABN Amro and GE Capital and I learnt that if you are in a problem, be calm. One can't arrive at a solution without calmness and a fire-fighting attitude.
When it came to the topic of losing one’s cool, Kalra admitted that he sometimes gets upset. "I lose my cool once in a few months. I make new mistakes but can't continue making the same mistakes. I get upset when I see individuals making the same mistakes time and again," he said.
Over the last couple of years, we have seen several companies hit a valuation of one billion or more. However, Kalra finds this term disgusting. "Using this term is disgusting because very often we do nothing to deserve this status. Pricing of a company is evaluated on demand and supply. Forget valuation and create value. Valuation is not actual. It's on paper and you can't afford to assume something that is not actual,” said Kalra.
Someone comes and says I will deploy $2 billion. Build your moat otherwise someone will come and eat your lunch. Build your competitive advantage.