Naspers Ibibo mergers with MakeMyTrip

News in a couple of days ago, about Naspers, and this time on another business that the market doesn't seem to give a value to. Michael said something interesting yesterday, he said that he thought Naspers unlocking value by selling these non core assets is great for the most investors, particularly those who think the business is over valued. What he means is that many South Africans in their pension funds or in their index trackers (around 20% weighting now), own Naspers indirectly. In short, Naspers will combine their Ibibo business (Tencent also owns a stake) with another Indian travel website, MakeMyTrip. MakeMyTrip happens to be listed on the New York Stock Exchange. We will get into that in a second.

Here is the official release from MakeMyTrip - MakeMyTrip Limited and ibibo Group Announce Transaction to Consolidate their Indian Travel Businesses. The current makeup of the shareholding of Ibibo is 91 percent Naspers and 9 percent TenCent. In the combined entity, this holding company for Ibibo will hold 40 percent of the MakeMyTrip Limited. Naspers will have an effective 36.4 percent stake in this new combined business.

Before you start getting hugely excited, MakeMyTrip has a market cap of 1.71 billion Dollars as of last evening. Revenues of 336 million Dollars and still making a loss is not exactly the kind of business to get wildly excited about, for now. India is in early stages of development, even compared to many of their neighbours. Indian GDP per capita is up 6 fold in the last 25 years, back then growth rates were a stodgy 1.1 percent (1991 had a growth rate of 1.1%). Whilst growth rates have slowed to 5 odd percent, the base is set at a much higher level. The richer people are, the more they travel, the more they look for deals, the more they turn to their tried and tested platforms. Access to the internet, like most of the continent that we live on, is done via the mobile phone. I have actually booked flights on my mobile before. I felt quite chuffed after that!

According to Wikipedia entry - Telecommunications in India, there are only 24.6 million fixed lines in India, fixed line penetration is then set at 1.96 percent. Or less than 1 person out of every 50 has a fixed line. So I am guessing that the other 49 are going to use their mobile phones? Remembering that India still has a way to go with mobile subscribers, they could "have more". I think that Naspers will for the time being still be almost totally reliant on TenCent, in terms of investors determining what the stock is worth. There are signs that their TV business is under pressure, Koos Bekker even referred to it as a legacy business a few years ago, this is not entirely unexpected. Another step in the direction of diversification over the long run.