MMYT

Business Context and Reporting Period

Company: MakeMyTrip Limited (Mauritius-incorporated, operating primarily in India)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended March 31, 2012
Accounting Standards: International Financial Reporting Standards (IFRS)
Business Overview: MakeMyTrip is the largest online travel company in India based on gross bookings. It operates through a website, call centers, travel stores, and a network of travel agents, offering air tickets, hotels, packages, rail tickets, bus tickets, and car hire services.

Key Financial Metrics (Fiscal Year 2012)

Material Changes vs. Prior Period (FY 2011)

• Revenue Growth: Total revenue increased 57.6% to $196.6 million from $124.7 million. Air ticketing revenue grew 60.0%, while hotels and packages revenue grew 56.5%.
• Profitability: Net profit increased 46.0% to $7.0 million from $4.8 million. Operating profit remained relatively flat at $4.0 million (down slightly from $4.1 million) due to increased personnel expenses, primarily driven by $6.9 million in share-based compensation costs compared to $0.5 million in the prior year.
• Transaction Volume: Air ticketing transactions increased 31.5% to 3.7 million. Hotels and packages transactions surged 95.1% to 343,141.
• Margins: Air ticketing net revenue margin improved to 7.9% from 7.4%. Hotels and packages margin improved to 11.9% from 11.5%.
• Liquidity: Cash and cash equivalents decreased slightly to $43.8 million from $51.7 million, while term deposits increased significantly to $44.3 million from $16.9 million.

Guidance, Outlook, Risks, and Unusual Items

Management Commentary and Outlook

Management expects continued growth driven by the expanding Indian middle class and increasing internet penetration. Strategic focus areas include expanding the hotels and packages business, increasing direct connections with hotel suppliers, and expanding into new geographic markets (e.g., Singapore, Malaysia, UAE, Canada). The company plans to invest in technology to enhance service platforms and mobile offerings.

Key Risks

• Supplier Relationships: Reliance on airlines and hotels; risk of commission reductions or termination of agreements (e.g., temporary suspension of Jet Airways and IndiGo ticket sales in April 2012 due to "opaque fare" allegations).
• Competition: Intense competition from other online travel agencies, traditional agencies, and meta-search engines.
• Regulatory and Tax: Ongoing disputes with Indian tax authorities regarding transfer pricing and service tax assessments. Potential for adverse tax rulings.
• Foreign Exchange: Exposure to fluctuations between the US Dollar and Indian Rupee. A 10% appreciation of the USD against the INR would decrease FY2012 profit by approximately $0.8 million.
• Technology and Security: Dependence on third-party systems and risks associated with online security and credit card fraud.

Unusual Items

The filing notes a significant increase in personnel expenses due to Restricted Stock Unit (RSU) grants ($6.9 million in FY2012 vs. $0.5 million in FY2011). Additionally, the company recognized a deferred tax asset of $6.1 million in FY2012, contributing to the net profit increase.

Investor Verification Checklist

• Supplier Disputes: Verify the status of relationships with major airline suppliers (Jet Airways, IndiGo) following the April 2012 dispute.
• Tax Litigation: Review the status of pending Indian income tax and service tax assessments, which involve significant potential adjustments to taxable income.
• Share-Based Compensation: Assess the sustainability of operating margins excluding the one-time impact of large RSU grants.
• Acquisition Integration: Monitor the integration and performance of recent acquisitions (Luxury Tours & Travel, My Guest House, Le Travenues/Ixigo).
• Currency Exposure: Evaluate the impact of continued Indian Rupee volatility on future earnings, given the lack of hedging strategies.