Deal Radar 2008: Cleartrip

As part of our extensive coverage of online travel, this week, we will take a look at the Indian Online Travel industry. We begin with Cleartrip.

Cleartrip was started by Hrush Bhatt, Stuart Crighton and Matthew Spacey in July 2006, with one aim – to make travel simple. It is an online travel portal for airline reservations in India and hotel reservations worldwide. Domestic train availability for India is in the process of being offered. The site also has a section, Small World, in association with Lonely Planet, which gives a summarized description of different places in the world.

Cleartrip received its first round of financing in early 2006 for $3.7 million from Sherpalo Ventures and Kleiner, Perkins, Caufield and Byers. In November 2006, Cleartrip raised $8 million from DAG Ventures, KPCB, Sherpalo Ventures and Gund Investment. In their third round of funding in February 2008, led by Draper Fisher Jurvetson, Mahindra Group and its previous four investors, Cleartrip received $18.5 million. In the last three years, the company has raised a total of $30.2 million from high quality investors and now has “more money than required,” as Sandeep Murthy, CEO, exuberantly states. On their first anniversary, the company had a market share of 25%, which has since grown to 35%. He told VC Circle in an interview that they plan to use the funds to improve the website services, increase the company’s offline presence (their first comprehensive travel desk has been set up at Hyderabad airport) and for acquisitions of various companies like a car rental, cruise or a meta search company. The online travel industry in India is expected to grow to $6 billion in 2010, as stated on WATBlog.

Cleartrip boasts a 70% repeat transaction rate. This has a lot to do with the user-friendliness of the site. A recent consumer research report by JuxtConsult, voted Cleartrip as #1 for Website User Friendliness in the online travel category. (See: Trak.in) In March 2007, Sanjay Murthy told m-Travel that his company was expecting to close one year with gross sales of $100 million and 480,000 transactions, which was way over their goal of 400,000 transactions, coming in a close second in the domestic online travel space. Based on these figures, the value of each transaction would be around Rs 8,500 ($220 approx) which seems a little steep in a country where average airline tickets are Rs 5,000. A press release states the company has projected a transaction revenue, of $300 million in 2008-2009. With this projected volume and commissions in the range of 1.5%, the revenue for 2008-2009 can be estimated at over $4.5 million. This, however, isn’t confirmed.

Like other travel agencies, Cleartrip’s revenue model is based on the commissions they receive from their various partners. Most of their ticket sales come from Air Deccan, where they make about 1%. Their site is uncluttered and free of pop-up and banner ads. In an interview with The Economic Times, Sanjay Murthy stated that the company plans to go public in the next 12-24 months.

If they succeed in preserving 35% market share of the $6 Billion total transaction revenue, their revenue number would be more like $30-$32 Million. The company will probably grow at a 150%+ CAGR in the next 24 months, so an IPO is not out of the question in the Indian market in 2010.

This segment is a part in the series : Deal Radar 2008