Deep Kalra attending a conference in Berlin in early June. Among the delegates he met, three had chosen to drive down from Poland, Austria, and Switzerland, in spite of Europe’s bevy of airlines and fast rail networks. It made Kalra, 45, founder and group CEO of India’s No. 1 online travel agency (OTA) MakeMyTrip (MMT), ponder the European way of travelling. “European travellers worry more about booking their hotel rooms rather than reaching a place,” says Kalra, who blazed a trail in India’s digital businesses by getting MMT listed on the Nasdaq in 2010. “But in India, it’s just the opposite. We’re probably the only market in the world where travellers book their trips first, and then book hotels,” he says.

Launched in 2000, MMT emerged as the Big Daddy of online air bookings in the age of desktop PCs, at a time when India’s domestic aviation was itself in its infancy. It would take Air Deccan three more years to launch no-frills flights, unleash a price war, and open up the mass market. By 2005, Kalra’s company was firmly astride the low-cost aviation wave; today, one in seven domestic fliers is MMT’s customer.

The company, ranked 122 on the Fortune India Next 500, clocked $1.65 billion or Rs 10,492 crore in gross bookings (air travel, hotels, and packages) around the world in FY15, and had a 40%-plus share of gross bookings in the $8 billion OTA sector, per Goldman Sachs Global Investment Research. That’s more than double the share of unlisted rivals Cleartrip and Yatra, who reportedly hold about 20% each.

Now, MMT wants to establish its dominance by building on the full-service play, which has seen OTAs pivot from only airline bookings to air, bus, and rail, and, most significantly, hotels. Kalra also wants MMT to be the first port of call on mobile. But it won’t be placid sailing, even for a company that survived a treacherous dotcom crash soon after its inception.

Deep Kalra
Deep Kalra

The No. 1 reason for that: Mobile is breeding competition and levelling the playing field like never before. Mary Meeker of venture capital fund Kleiner Perkins Caufield & Byers is famous for her annual outlook on Internet businesses globally. This May, her presentation identified India as the leader in net Internet-user additions. (Her headline question: “USA -> China ... India Next?”) India, Meeker notes, gets 65% of its Internet traffic via mobile, compared with 30% in China. It’s a truism that the fight for eyeballs now takes place across screens, a project much more complex than the traditional traffic wars on the Web.

Ergo, MMT’s decorated history won’t carry it too far in this world. Cleartrip is already some distance ahead in mobile. “Nearly two-thirds of our new customers are mobile users, and nearly half of them use mobile browsers,” says Samyukth Sridharan, president and chief operating officer of Cleartrip.

Seen in isolation, MMT hasn’t done too badly on mobile: 40% of its 7.5 million unique visitors per month access it via its app or mobile browser; a third of its domestic hotels business also comes from mobile. The MMT app has been downloaded 5.5 million times as of last December.

But Kalra doesn’t have too much patience for those numbers, or the current competition. The rise of mobile and the ubiquity of apps means suppliers of travel-related inventory (airlines, hotels, even individuals letting out space Airbnb style) can flourish independent of OTAs, and competition can come from anywhere. “The changes happening are dramatic,” says Kalra. “Imagine someone in one corner of the globe is building an Uber-like interface. Developers in India can look at it and say, ‘Hey, we can do that!’”

While negotiating the fast-moving pieces on mobile, MMT also has to manage the massive industry-wide shift from air travel to hotels—a highly fragmented $7.8 billion market which offers better margins. OTAs’ income from domestic air tickets has slumped, thanks to bruising price-based competition. A look at MMT’s revenue mix tells the story: Hotels and holiday packages (H&P), which made up only 18% of its global revenue in 2010-11 compared with 82% from air bookings, has gone up to 45% in FY15. (‘Packages’ refer to pre-booked fixed or customised vacations and include travel as well as accommodation.) Net revenue margin (revenue less service costs as a percentage of gross bookings) from air ticketing has fallen from 7.9% three years ago to 6.1%. In contrast, H&P improved from 11.9% to 13.2%.

“Airlines can easily invest in Internet marketing and drive traffic to their websites and apps. Hotels can’t do that in a hurry,” says Kalra. Every leading OTA is mindful of this opportunity. “We have flight-booking customers to whom we can cross-sell bus, rail, and hotel bookings—basically extend and monetise,” adds Dhruv Shringi, co-founder and CEO of Yatra.

MMT lags substantially on the hotels front. Compared with its inventory of 24,000 hotels and guesthouses in India (Cleartrip’s number is similar), Yatra has 36,000. Since 2012, when it acquired Travelguru, a pioneering hotel-aggregation portal, Yatra has grown its inventory six times. It also raised $23 million in funding last year, as part of a larger trend that saw Indian tech startups soak in over $3 billion in the past three years.

In fact, travel is attracting the most investor love after e-retail and cab aggregation. Startup data tracker Tracxn says the sector has received $71 million (about Rs 440 crore) in funding this year, mostly in early-stage and seed money, as opposed to $55 million in all of 2014.

The surfeit of funding has spawned a whole different species of challengers: aggregators specialising in the lucrative budget-hotels segment, led by the likes of Oyo Rooms, Zo Rooms, and FabHotels, with backing from storied investors Kalaari Capital and Accel Partners, Sequoia Capital, and Tiger Global, respectively. While the newbies have tie-ups with OTAs to expand their footprint and are not yet seen as reason for worry, the incumbents are gearing up to protect their turf. For instance, Cleartrip built Quickeys, a fast-growing feature on its website for exclusive last-minute hotel deals.

MMT says it is alive to all the excitement, but having been around for 15 years, an eternity on the Internet, it is immune to its excesses. The sobering influence of being a public company helps: MMT is valued at about $830 million while far younger, privately held ventures like Flipkart, Snapdeal, and Ola are raging unicorns, feeding exuberant comparisons of India’s startup scene with Silicon Valley. The big difference: Unlike the somewhat opaque metrics used by private companies to justify their astronomical valuations (e-retailers use gross merchandise value, which has come under scrutiny), public companies have no room to hide.

Consider MMT’s roller-coaster ride on the Nasdaq, which reflects the reality of web businesses operating in a nascent Internet market like India vis-à-vis those that ply the mature American market. Compared with the Nasdaq Composite Index, which more than doubled from 2,298 in August 2010 to 5,029 in May 2015, MMT’s stock fell from $36.82 to $20.48, as India’s domestic aviation sector was hit by turbulence with the collapse of Kingfisher Airlines and the financial troubles of SpiceJet. The Indian market, where only 60 million of the total Internet user base of 300 million actually transact online, is far from being deep enough for online players to absorb such shocks.

Wisdom like that has made MMT pragmatic in its priorities. “We don’t want to develop an app just for the heck of it”, says chief operating officer (online) Mohit Gupta, in a veiled reference to the growing chatter that cash-rich upstarts often end up becoming ‘me-too’s, contributing to a valuation bubble in India’s consumer Internet industry.

That’s why it is taking its time with things like Hotel Right Now, a beta-stage app for last-minute deals, initially envisaged as a platform where MMT would feature the inventory selling on its website. The app debuted on Google Play earlier this year to mostly positive reviews, but MMT tore up the script and went back to the drawing board because it wanted to pack in more features and differentiation. (Another app, Trip Ideas, has got mixed reviews on Google Play.)

At various stages of our conversation, the company impresses upon me that its strategy is to invest in technology to address gaps in the market that can help drive volumes sustainably. For instance, it has started to offer flight and rail bookings in Hindi and is planning to introduce more regional languages, keeping in mind the demography of the next wave of Internet users in India. It has also set up a $15 million innovation fund to spot and finance more such opportunities.

Rajesh Magow 
Rajesh Magow 

But through it all, Kalra’s focus is to ready MMT for ever-deepening uncertainties and invisible threats. Over the past 18 months, say his associates, he has been chanting the same epiphany at every meeting: “Our biggest competitor is not out there yet.”

Kalra’s epiphanies have earned a prophetic status in the industry. It was his razor-sharp focus on running a tight ship that helped MMT ride out the dog days between 2000 and 2005, when funding completely dried up. Sanjeev Bikhchandani, another Internet pioneer and the founder and executive vice chairman of the two-decade-old digital classifieds company Info Edge, refers to MMT as the last online venture to get any kind of funding in that era of scarcity. But when Kalra looks back, he can’t forget how painful the growing pangs were.

In the aftermath of the dotcom bust, News Corp and SoftBank pulled out of a $1 million commitment. This left the startup with $2 million that eVentures had invested. And when eVentures folded, MMT had to halve the staff from 42 to 20. Kalra’s take on the market for domestic air bookings at the time: “We had tonnes of lookers, not bookers,” as ticket prices were prohibitively high for most travellers. To compensate for the dead domestic market, he eyed the inbound passenger traffic from the U.S.

“We were maniacal about conversion,” recalls Kalra. “When you are pushed to a corner and bootstrapping because you have so little money, you measure where every rupee is going.” MMT had one sales guy in the U.S. and the rest of the team—largely call-centre staff managing a toll-free hotline—in India.

Kalra’s fiscal prudence, along with his bet on the growing NRI customer base, kept MMT afloat and even helped it break even in 2003, until investors returned two years later. “Deep has that ability to think strategically, and entrust talent with the right mandate,” observes Gupta who joined the company in 2008 from PepsiCo India. “But over the past two years, he has become more experimental, reading the tea leaves even better, in terms of not just what we want to do but how we can do it.”

The company is not cutting corners when it comes to its abiding credo: investing time and resources in building differentiation. Consider RoutePlanner, a product built in-house, which helps users optimise the route to their destination (through a combination of air, rail, road, bus, and car), based on different parameters such as time, distance, convenience, and cost. “It was a long project and took more than a year to complete. Four guys locked themselves up in a room, just focussing on a new product,” says Kalra. But now, there’s also a real focus on speed, borne out by a spate of aggressive acquisitions and investments in companies that have specialist skills. “We want to take early positions,” explains Kalra.

The biggest investment so far has been the 2014 buyout of Amsterdam-headquartered hotel-booking platform for $5 million. Global expansions through a few more M&As (see graphic) have boosted MMT’s hotel inventory outside India to more than 225,000 properties.

From a revenue standpoint, overseas bookings accounted for a healthy 17% of its revenue in FY14. There has been a raft of technology-focussed deals in India too. The company has picked up a 17% stake in Bengaluru-based travel-tech startup Simplotel Technologies, which builds websites and booking engines for hotels. It has also acquired a minority stake in the travel-planning website Inspirock, which develops technologies for customisable itineraries.

Among the bigger domestic deals there’s ixigo—MMT and VC firm SAIF Partners hold stakes in this travel meta-search engine and apps developer. For the uninitiated, meta-search engines compile query results from several third-party search engines and can have a substantial multiplier effect on OTA traffic. OTA-meta partnerships are hot in the global travel tech space these days, thanks to American discount-travel giant Priceline’s $1.8 billion acquisition of meta-search specialist Kayak last year. (“In the first quarter of 2014, Kayak contributed disproportionately to Priceline’s profits,” says industry watchdog Skift.)

And finally there’s the April acquisition of Mygola, a travel-planning app that specialises in quick, customised itineraries and was picked up as a “Best New App” by Apple, climbing to #3 in the travel section in Singapore—above Uber and Airbnb. With its large captive user base, Mygola will be an asset in MMT’s mobile foray, but its real value lies in strengthening the company’s social identity: Travel is, after all, a deeply social activity, but few Indian OTAs have managed to crack the social code. Suresh Babu, founder of Web Marketing Academy in Bengaluru, argues that while most companies routinely use social media for advertising, none has managed to build a great social brand, which, he says, is “all about becoming part of the conversation”. Mygola’s draw is precisely this nous over conversation; it gives MMT a hub where travellers converge and share authentic content (think TripAdvisor).

The company is also learning to use social media in unusual ways: It has recruited more than 1,000 well-travelled homemakers, many off Facebook, to respond to customer queries. “We gave them a week’s training and access to backend tools,” says Gupta, pointing at MMT’s focus on using technology that can deliver high impact without a lot of cash burn.

Technology became a priority for mmt in 2008, the beginning of the search engine marketing (SEM) era in India, spearheaded by the likes of Flipkart. Back then, every digital company had trouble finding search talent. MMT’s SEM team had two members with a combined experience of less than three years “We didn’t even have enough internal experts to know what to look for while hiring,” says Gupta.

To get a hang of things, the marketing team started meeting digital agencies like Interactive Avenues and Pinstorm, which undertake search engine optimisation. “We learnt what kind of technologies people were using and became voracious blog readers,” says Gupta. In three months, the company built a crowdsourced SEM framework. This may sound primitive today, but it was the kind of initiation that many of India’s first-generation online companies had to go through. MMT got good at it—enough to pull back marketing spend from over 30% of its revenue during 2006-09 to 18% to 20% in 2010-11.

Rajesh Magow, an early investor in MMT and the CEO of MMT India since August 2013, told me in an interview last year that most of the company’s first $1 billion gross bookings happened despite India’s abysmal broadband infrastructure. In its growth years, the biggest challenge was constantly optimising the search results to make them more accurate and cutting down the latency (time taken to process results when customers ask for fares), while ensuring that the website wouldn’t collapse under the weight of traffic.

Perhaps it’s an outcome of such modest beginnings that Magow says the company has always been wary of overdoing technology. You can sell a room to a customer through an app, but if hotel owners mess up availability information, you have lost face. At MMT, a lot of work has thus been happening on the basics, like rechecking and revalidating hotel inventory, as hotel owners come to terms with the demands of the online medium.

Shringi of Yatra says “hotels are hyperlocal products” and call for a boots-on-the-ground approach. Of Yatra’s nearly 2,000 employees, 300 have deep relationships with a network of 14,000 travel agents across the country. These agents, in turn, help the company build relationships with hotels in their territories.

Magow says MMT’s early experience of liaising with air carriers and global distribution system providers like Amadeus gives it a template for the hotels business. “We had to stay connected with [the partners] to mirror the inventory accurately and in real time,” he says. The big picture: Building a good-looking website isn’t enough.

People who know kalra say no conversation with him is complete without a few references to the “big picture”. Raghunandan G, founder of cab aggregator TaxiForSure which was recently acquired by Ola, is from Kalra’s alma mater, IIM Ahmedabad. He says Kalra grilled him on the big picture years ago when he was an excitable entrepreneur chuffed with his biz plan. Long before that, in 2007, the same penchant for the big picture made Kalra convince Flipkart co-founder Sachin Bansal to call Lee Fixel, partner at private-equity fund Tiger Global and now a legend in the investment circuit. Tiger Global was an investor in MMT, and Fixel had repeatedly tried to contact an elusive Bansal. The call was a gamechanger, as Tiger Global went on to become Flipkart’s biggest shareholder.

What’s the big picture for MMT? “The overarching goal is never to lose market leadership,” says Kalra. And what about all the prickly, unseen competition? Kalra says the company needn’t worry till it has a clear grasp over its “value proposition”.

“When we started air bookings, many argued that the airlines would induce customers to book tickets through their own websites. But our value proposition was very clear,” he says. “For the first time, we allowed customers choice in what they wanted to buy and how much they wanted to save. We put the customer in control. We’ll be all right if we can keep doing that”.

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