Mumbai, Dec 10 (IANS): The reported decision by Reliance Capital to exit Yatra.com, pocketing an eye-popping 12-fold return on its initial investment, may well be the sign of a smart investor striking it rich when valuations are at their peak rather than speculate over an uncertain future growth, analysts maintain.

The Anil Ambani-led Reliance Group had bought a 16-percent stake in Yatra.com, when this leading consolidator of travel products was launched in August 2006, for Rs.40 crore. Now as its network has spread to 12,000 domestic and 40,000 overseas hotels, the same 16-percent valuation is being touted at Rs.500 crore.

With this deal, the sources said, the total valuation of Yatra.com would be pegged at $500 million. Reliance Capital, the investor company, is said to be in advanced talks with two-three global investors for the deal and hopes to conclude it in four-six weeks.

Asked for a comment on the matter, a spokesperson for the Reliance Group, said: "I have nothing to say on any specific deal. We constantly evaluate opportunities that will unlock shareholder value, notably for our minority investors."

Besides Reliance Capital of Anil Ambani, Yatra.com has some other investors of repute, notably Norwest Venture Partners, Network 18, Intel Capital, Vertex Venture Holdings and IDG Ventures, as per information available with the portal's web site.

Analysts term such deals like the one being negotiated by Reliance Capital, potentially, as “a smart move”.

In this specific case, they said, travel trade accounted for nearly 90 percent of the total e-commerce market in India till about seven-eight years ago. Today, its share has dropped to around 60-70 percent of the $16 billion market. Margins are also being squeezed.

This apart, the present bottomlines of travel portals are not particularly exciting.

Sources in the know said Yatra.com's earnings before interest, taxes and amortisation margin was valued at $11 million on an operating income of around $50 million, and a transaction value of nearly $765 million.

Its Nasdaq-listed rival MakeMyTrip had an ebitda margin of $13 million on an operating income of $116 million and a transaction value of nearly $1.4 billion. This company is valued at around $1.2 billion.

Declining comment on the specific Yatra.com deal, Gaurav Gupta, senior director of Deloitte in India, gave a general view of the industry and said when supply exceeds demand, there is either a consolidation or a shake-out and such situations determine the true potential of the sector.

"The main thing is to see if there are any buyers at the time of shake-outs. If there are, it shows that the industry has potential to grow, which is attracting other players to enter it and acquire capacity through an inorganic way," Gupta told IANS.

Recent months have seen some dramatic rise in valuations of e-commerce companies. Flipkart had said it was raising $1 billion in funding. Overnight, its valuation jumped manifold to around $6 billion.

This was before Japan's Soft Bank said in October it will invest $627 million in SnapDeal, a major player in India's e-commerce space, and pick a $210-million stake in Ola that offers car rentals in 19 Indian cities through its mobile platform, web site and call centres.

The investment was said to take the valuations of the two companies to $2 billion and $1 billion, respectively.

In Yatra.com, besides Reliance Capital of Anil Ambani, some other investors include Norwest Venture Partners, Network 18, Intel Capital, Vertex Venture Holdings and IDG Ventures, as per information available with the portal's web site.

The portal provides information, pricing, availability and booking facility for both domestic and international air travel, hotel bookings, holiday packages and bus and rail reservations. It also offers a host of travel services designed to make business and leisure travel easier.

The portal claims an impressive 20,000 domestic air tickets and 5,000 hotels and packages a day.

Ashvin Vellody, partner with the management consultancy firm KPMG India, while not commenting specifically on the Yatra.com deal, said going forward niche players were the ones in the travel trade segment that were likely to attract money for consolidation.

“Basically, it depends on the acquiring company on what exact opportunity, capacity or capability are they looking for by acquisition in this sector," he said.

For an investor, on the other hand, what matters is an exit at the right time, optimising the early-mover advantage when the going is still good. This appears to hold true when an investment fetches 12-fold return in eight years.