MakeMyTrip and Goibibo agreed to merge in stock transaction!!

MakeMyTrip.com was founded in the year 2000 by Deep Karla, an alumnus of Indian Institute of Management ,Ahmedabad. MMT was launched in the US market to cater the overseas indian community for their US-to-India travel needs. MMT started its Indian operations in september 2005.

On 13 August, 2010 MMT got listed on NASDAQ and went public in the US market.

MMT chairman and CEO Deep Karla's mission statement -"Passion for winning goes beyond merely chasing targets and achieving them. Its the Zest and zeal with which one goes about the achievement. its not only about winning, its about dominating" 

 

Online travel firm MakeMyTrip will acquire rival ibibo in an equity deal that will create one of the leading travel groups in india. In an interview with CNBC-TV18, Deep Karla told ; The objective of the merger is to bring the offline segments of the travel market online. It will be the largest acquisition of MMT since it was founded in 2000.

South Africa's Naspers and china's tencent holdings are selling ibibo group to MakeMyTrip in an exchange for an issuance of new shares by MMT. Upon closing of the transaction, MMT will own 100% of the ibibo group. the transaction is expected to get close by the end of December and is subject to approval by the shareholders. Shares of the loss making company soared by 46% to $29.75 on 18 october, 2016.

Ctrip.com international Ltd. wil have 10% stake in the combined entity as the 5 year convertible notes issued bby MMT to ctrip.com International ltd will also be converted into common equity stock.

The combined entity will bring together a consumer travel brands including MMT, Goibibo, redbus, Ryde, Gostays, Value+ and rightstay together under one group.

On Financial  and feasibilty Fronts:

The company has been posting quarterly loss in 8 of the last 13 quarters. NASDAQ Critcs say,'MMT is now a dinosaur age internet company and is reasonably expected to perform consistently, if not profitably. Revenues of the company, though are consistently on the rise, Service cost has been increasing year on year. So what explains these losses?

We have been investing to grow hotels and packages business organically by making investments in mobile and marketing as well as in our international hotel business, Says Magow the co-founder.

Airticketing business has suffered a major hit since december 2012 as the kingfisher airlines went down, Domestic airlines lowered commision on OTA, supreme court banned transaction fees, Margins in air ticket got grossly affected. Since the market in the air business were very low, they had to build the hotels and packages business. Currently its H&P segment is contributing to almost 50% revenue.

But the problem was that, the company is not the only player looking at this segment. the biggest acquisition done for Goibibo- Ashish Kashyap, CEO said that, the company is 2.5 times bigger than MMT in terms of volume booking and 5-6 times bigger than Yatra.com

Yatra, a rival OTA had acquired hotels aggregator Travelguru in 2012 to increase their foothead in the H&P space, which again proves that this acqusition could be the profitable  for the company as it has moved a step ahead of its rival making it the biggest aqcuistion in travel world

The founders say that the company is heavily investing in the hiring senior talents and technology to make the leap to the next phase. MMT announced that it would be investing in startups  in travel tech world. It has embarked on a series of the acquisition since january 2014 including companies Easytobook, HolidayIQ etc. Philosophy behind it is, startups will pick one problem and they will focus on it completely, so their chance of succeeding are simply higher.

Still, Acuisitions have not worked out as the company remains unprofitable and the stock prices has also been collapsing. Company has to fix its operating cost problems. head high on what results will this merger give for the fiscal year ending March 2017.

Income Declaration Scheme-2016

Amidst Country creating a ‘Clean India Movement’ Revolution, Income disclosure Scheme(IDS), a four month long window compliance allowed Tax Evaders to come clean their black stuff. Sources say; More than 64000 people declared  hidden assets worth around Rs.65,250 under (IDS).

The scheme came in to force on 1 June 2016 and became an opportunity for the people who didn’t disclose income in the past or evaded their taxes. Under the scheme, such person can declare the undisclosed income and pay tax, surcharge and penalty on the declared undisclosed income.The person making declaration under the scheme will have to pay income tax at the rate of 30% of the value declared plus surcharge 25% there on in addition to 25% penalty on the tax computed based on the above declaration which in totality amounts to 45% of the tax rate.

Finance Minister Arun Jaitly reported that 64,275 people revealed assets under the IDS. He further mentioned that this figure may slightly go up once the department is done with the final verification.

The biggest advantage of the scheme is that once assesse declares income under this, they will get immunity from penalty or prosecution proceedings under the income-tax act,1961. As per Section 271(1)(c) the tax payer shall be liable to pay penalty which could be 100%-300% of the tax evaded or sought to be evaded by concealing his income of furnishing inaccurate particulars of income. Which is then amended in the union Budget 2016 by proposing a new section 270A effective from 1st April 2017 in place of existing section 271. The new provisions proposed that penalty may be levied on under-reported income at the rate of 50% of the tax payable and 200% of the tax payable on mis-reported.

In case of company, firm, local authority, the tax payable on under-reported income shall be calculated as if such income is the total income. And in case of Individual and HUF tax rate would be 30%.

IDS would prove beneficial for those opting for it, as it would reduce tax and penalty burden along with prosecution proceedings. It also proved a win-win situation, as the government will earn about Rs. 30,000 crore from income taxes which is more than two third of the total budget of Rest. 38,500 crore kept aside for the Rural job guarantee scheme MGNERGA. Jaitley said, that most of those who availed the scheme were not small traders but “ people with significant resources”.

Even if good response has been received, yet the complete objective of the black money act has not been acheived. Still we can say, a good start off with an eye on the black money in the ocean where half of the market runs on parallel economy.

Source- www.moneycontrol.com