Investor interest in Indian travel sites takes off
REUTERS India - January 16, 2006

MUMBAI (Reuters) - An Indian online travel firm founded by the creators of Ebookers will launch this year, tapping investor interest in a sector that stands to benefit both from India's economic growth and rising stature as a tourist destination.

Yatra Online, which offers reservations for airlines, trains, hotels and car rentals via mobile phone and its Web site, said on Monday it received initial funding from Norwest Venture Partners, Reliance Capital Ltd. and broadcaster Television 18 Group.

The estimated $5 million in funding comes after last year's $10-million investment in makemytrip.com by Softbank Asia Infrastructure Fund Partners for its expansion in India and the acquisition of a local travel firm.

"In India we have a situation where the IT infrastructure is improving, mobile phone penetration is growing, purchasing power of the middle class is rising, and there are more people travelling everyday," said Vab Goel, a partner at Norwest.

An estimated 19 million domestic passengers travelled by air in India in the year to March 2005, and India's domestic air travel market is forecast to grow 20 percent a year over the next five years, boosted by new airlines and lower fares.

Palo Alto, California-based Norwest estimates India's travel market will be worth about $40 billion in 2006 and expand to $50 billion by 2009, with revenues from foreign travellers in India quadrupling to $24 billion by 2015.

But India's travel industry is fragmented and dominated by family-run firms. Also, Internet penetration and credit card usage are low, and there is a shortage of quality budget hotels.

"But if you look at e-commerce, travel makes up the bulk of the business and has the highest value per transaction, as compared to say, music or books," said Vibhor Mehra, an associate with SAIF Partners.

The founders of www.yatra.in helped build leading European online travel business Ebookers Plc, which agreed to be acquired by Cendant Corp. for $410 million in late 2004.

Cendant also owns the popular Orbitz, which competes with online travel leader Expedia Inc., Priceline.com Inc. and Travelocity, owned by Sabre Holdings.