MakeMyTrip announced in its second quarter FY23-24 results that it has entered into an agreement to acquire a majority stake in Savaari Car Rentals Private Limited. Through this deal, Intercity Car Rental service provider Savaari begins a transformative journey in the currently unorganized and fragmented inter-city cab rental market. Savaari will continue to operate as an independent entity led by the existing leadership team.

By assimilating Savaari's expertise, MakeMyTrip is strategically positioned to structure and explore the extensive potential of the fragmented intercity market, also estimated to be in the $5-6 billion range. The partnership aims to combine MakeMyTrip's extensive travel network with Savaari's specialized car rental services, offering customers a unique travel experience. This initiative is a step towards achieving MakeMyTrip's goal of being the ultimate solution for all travel needs, reinventing the Indian Car Rental Industry with all-encompassing travel solutions.

Insight into the deal structure

1. Can you provide details on the structure of this acquisition? What percentage of the Savaari Car Rentals is being acquired by the larger travel company?
2. What prompted the decision to pursue this acquisition at this particular time?

MakeMyTrip (MMT) has strategically acquired a majority stake in Savaari Car Rentals, a key player in India's Car Rental market that extends across more than 2000 cities. This acquisition transcends being just a business deal, symbolizing MakeMyTrip's strong ambition to become India's leading outstation car rental service. The merger of Savaari Car Rentals into MakeMyTrip's portfolio is set to revolutionize the largely unstructured Intercity Car Rental market, valued at more than $3 billion.

“This acquisition marks a pivotal moment in the $3 billion-plus, yet largely unorganized, intercity market. We are now looking to transform this space by leveraging technology as well as deeper consumer understanding from MakeMyTrip. The timing of the acquisition couldn’t be better, as it coincides with the improved road infrastructure in the country and a wider acceptance among travellers to book intercity cab services online,” Gaurav Aggarwal, Founder and CEO of Savaari Car Rentals, stated.

With India on the brink of a significant surge in domestic travel, Savaari and MMT are ideally situated to capitalize on this trend. Government initiatives like Incredible India and Dekho Apna Desh, aimed at encouraging exploration of both popular and lesser-known destinations in India, complement this growth. The Ministry of Tourism reports a 20.7% annual increase in domestic travel, with the number of travellers reaching 1.7 billion in 2022, and a projection to hit 4 billion by 2027.

The collaboration between MakeMyTrip and Savaari is not just a crucial business venture but also represents a visionary approach to transforming the shared mobility sector. “The inter-city cab service remains largely offline, with low online penetration, fragmented supply, and a lack of standardization in service. We have encountered similar issues in intercity private bus transport where we now have a leadership position through redBus. With this majority stake in Savaari, we seek to extend that leadership to adjacent segments in ground transport,” said Rajesh Magow, Co-founder and Group CEO of MakeMyTrip. Focused on innovation, offering comprehensive solutions, and committed to providing unparalleled travel experiences, MakeMyTrip and Savaari are ideally positioned to lead the Indian Car Rental Industry into a new phase of organized, customer-focused travel services.

Involvement of market dynamics:

1. How does Savaari anticipate this acquisition influencing the broader market?
2. Were there considerations about market share and growth opportunities that played a role in the decision?

The acquisition of Savaari Car Rentals by MakeMyTrip is a pivotal moment that is expected to profoundly influence the broader market. Savaari, India’s largest intercity-focused car rental company, views this acquisition as a turning point, likely to initiate widespread changes not only within its sphere but also across the entire Car Rental sector. The merger is poised to establish new standards in service quality and innovation, potentially catalyzing a transition towards more customer-focused and technologically driven offerings across the market. This is particularly crucial in the intercity Car Rental space, a segment that has remained largely unstructured and is now on the brink of significant evolution.

Savaari's merger with MakeMyTrip, a major player in more than 2000 cities across India, offers a significant opportunity to enlarge their presence in the car rental market. This strategic move is driven by the prospect of reaching untapped markets, particularly in tier-2 and tier-3 cities. As the leading intercity car rental company in India, Savaari regards this acquisition as a pivotal moment in its growth strategy. This development presents them with a chance to capitalize on unexplored market opportunities, broadening their scope and enhancing services in response to the changing dynamics of the travel industry. The fusion of Savaari's specialized services with MakeMyTrip's technological capabilities is expected to create innovative customer offerings, fueling growth in a fiercely competitive market.

More than just a business move, this alliance embodies a vision to transform travel experiences in India. The shared vision of MakeMyTrip and Savaari focuses on enhancing road travel across India, offering unique journeys that showcase the country's diverse landscapes and cultural richness. This collaboration aims to transform road travel into more than just transportation, deepening travellers' engagement with India's scenic and cultural diversity.

The targeted business goals through the deal:

1. What are the future plans for Savaari under this deal?
2. Are there discussions about expanding services, entering new markets, or introducing innovative offerings?

Savaari and MakeMyTrip (MMT) are on the path to revolutionizing the travel sector by launching a variety of specialized services designed to meet the varied needs of their customers. This partnership will introduce the option for customers to purchase extra kilometres, adding an element of flexibility for those planning longer journeys. Enhanced services will also include assisted pickups and the provision of cabs fitted with carriers, all aimed at ensuring a smooth and comfortable travel experience.

Understanding the critical role of last-mile connectivity in travel, Savaari and MMT are dedicated to providing comprehensive services that span the entire travel journey. They aim to expand their reach from the existing network of 2,000 cities to an ambitious 4,000 cities in the next six months, highlighting their dedication to increasing accessibility and reaching a broader customer base.

To bridge the gap in domestic leisure travel, the partnership will also introduce experiential round trips. This innovative concept blends the latest digital travel technologies with the personal touch of trained chauffeurs, aiming to create a fully immersive and holistic travel experience. This initiative is designed to transform every trip into an unforgettable adventure, enriching the leisure travel landscape. Also integral to this vision is the fusion of advanced technology, with Artificial Intelligence (AI) as a key component. AI is anticipated to transform customer support, improve user interaction, and create a customized travel experience. Through the adoption of AI-powered solutions, the collaboration seeks to enhance trip planning, personalize content suggestions, and fine-tune pricing approaches to meet the diverse needs of its clientele. An important aspect of this technological progress involves improving the process of selecting vehicles and drivers. AI algorithms will be utilized to perfectly align customer preferences with the optimal choices available, boosting service quality and customizing the travel journey. Moreover, Savaari intends to leverage MakeMyTrip's significant advancements in AI for travel services. The planned investments in chatbots and automation reflect Savaari's dedication to a technology-first approach, aiming to set new benchmarks in the structured intercity car rental sector.

Speaking about this significant development, Samir Kumar, MD & General Partner at Athera Venture Partners, who were early investors in Savaari and redBus, shared his insights: “The acquisition of Savaari by MakeMyTrip not only affirms Savaari’s dedication to excellence but also heralds a new era of growth and possibilities. I've witnessed MakeMyTrip’s remarkable intercity private bus travel transformation with redBus. This innovation and expertise, I firmly believe, will be replicated in reshaping intercity cab services with Savaari, continuing their trajectory of redefining travel in India.”

Overall, the alliance between Savaari and MMT transcends the traditional boundaries of car rental services. With their commitment to innovation and inclusivity, this partnership is set to redefine industry standards in the travel sector.