South African media conglomerate Naspers' Indian arm ibiboGroup (MIH India), has formally announced the acquisition of Bangalore-based Pilani Softlabs Pvt Ltd that runs online bus ticketing business, redBus.in. The firm did not disclose the deal amount but media reports last week pegged the deal value over $100 million.
redBus is backed by Seedfund, Inventus Capital and Helion Venture Partners and the deal would mean an exit for the VC firms. Given the rumoured deal value the VC firms would have churned out a multi-bagger exit in the deal.
Post the acquisition, redBus.in will continue to run independently and operate as separate business. Contrary to rumours, the founders and management team will stay put in the startup and continue to drive the business, as per the company statement. (Read our quick Q&A with redBus co-founder Phanindra Sama here)
Founded in 2006, redBus.in aggregates around 228,000 seats per day, sells more than a million tickets a month and has 600 full time employees. The core business model of redBus is commission revenues on successful transactions.
The firm grew its net revenues (actual revenues from commission against gross revenue booked from sale of tickets) from Rs 43 lakh in FY08 to Rs 32.8 crore for the year ended March 31, 2012 with EBITDA of Rs 2 crore which means at a deal valuing it at over $100 million, the firm was valued over 18x its one year old revenues and more than 300x on its one year old EBITDA.
"Our key motivations to acquire redBus are strong management and founding team that will continue to run redBus as an independent operation. Second, significant leadership and market share of redBus in the online bus ticketing space," said Ashish Kashyap, CEO, ibiboGroup.
He added that this acquisition will further help ibiboGroup to become an even stronger online travel player in India. With redBus.in's daily transaction volumes and GMV the combined scale of ibiboGroup will increase manifold.
Kashyap also denied any rumors of redBus.in's APIs being shut for other OTAs. "redBus.in is not only about selling bus tickets. Its B2B as well as B2C. Also, post acquisition it will run independently and thus no APIs will be shut. Whatever it has been doing in association with other OTAs will remain per se," he shared.
This transaction will expand and diversify ibiboGroup's existing travel assets: Goibibo.com (a B2C online travel aggregator) and TravelBoutiqueOnline (a B2B online travel platform that enables thousands of small and medium agents).
Kashyap added that online penetration of the bus market is only 5.7 per cent compared with 28 per cent for air travel, suggesting headroom for rapid future growth.
Mahesh Murthy of Seedfund, one of the early investors in redBus, said, "We are very thrilled; this is probably the biggest exit for a VC in India so far." He said there was no hurry to sell redBus and the firm was exploring various opportunities for quite some time and then this came along and it was something all stakeholders were comfortable with.
"This talks about our style of investing which is somewhat conservative. Small amounts of money, large amounts of risks and handholding as opposed to putting big money and a small exit," he said.
Murthy said redBus has been doing well and has the capacity to go even 10-20 times from where it is today. "They already had cash and they were profitable. Founders were looking to raise funds to buy more companies and expand," he added.
Amarchand and Mangaldas, Mumbai and Indus Law, Bangalore were the law firms associated with the deal. Avendus was the financial advisor while Deloitte India was the due diligence partner and KMPG, Mumbai was the tax advisor.
For Naspers this would mean further exposure to India. Besides ibiboGroup, it has invested in Flipkart.com which runs India's largest consumer e-com portal. Earlier, Naspers had also invested in BuyThePrice.com which was later acquired by another group firm Tradus.
Founded in 1915, Naspers is a leading multinational media and Internet group with operations in more than 133 countries. Listed on the Johannesburg Stock Exchange (JSE) since September 1994, it also has an ADR listing on the London Stock Exchange (LSE). The group's principal operations are in e-commerce, pay-television and related technologies, and print media. It also has minority investments in listed, integrated social-network platforms Tencent and Mail.ru.