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, 2017
Key Event: On January 31, 2017, the company acquired 100% of the ibibo Group (including goibibo and redBus brands) from MIH Internet (Naspers). Results for the ibibo Group are consolidated for the two months ended March 31, 2017.

Key Financial Metrics (Fiscal Year 2017)

Note: The company utilizes "Revenue Less Service Cost" as a primary non-IFRS performance metric to reflect value addition, as revenue is recognized on a "net" basis for air ticketing and "gross" basis for packages.

Material Changes vs. Prior Period (FY 2016)

• Revenue Growth: Total revenue increased 33.2% to $447.6 million, driven by a 51.6% increase in air ticketing revenue and a 24.8% increase in hotels and packages revenue. The acquisition of ibibo contributed significantly to these figures.
• Transaction Volume: Air ticketing transactions rose 34.8% to 9.38 million; Hotels and packages transactions surged 119.1% to 6.87 million.
• Margin Expansion: Net revenue margins improved across segments. Air ticketing margins rose to 7.7% (from 6.0%), and Hotels and packages margins increased to 18.8% (from 15.3%).
• Expense Surge: Marketing and sales promotion expenses more than doubled to $224.4 million (up 106.0%), primarily due to aggressive customer acquisition programs (cash incentives, loyalty rewards) to compete in the Indian hotel market and integrate ibibo operations.
• Impairment: Depreciation, amortization, and impairment expenses increased 171.9% to $29.7 million, largely due to a $14.6 million impairment of goodwill and brands related to the Hotel Travel Group (operations significantly reduced).
• Finance Income: Net finance income turned positive at $27.0 million (vs. cost of $18.7 million in 2016), driven by a $42.4 million gain on the change in fair value of derivative financial instruments related to convertible notes.

Guidance, Outlook, and Risks

Management Commentary & Strategy: The company is focused on shifting its revenue mix toward the higher-margin hotels and packages segment. Management expects to continue investing heavily in mobile technology, marketing, and customer acquisition to maintain market share against intense competition (e.g., OYO Rooms, Paytm, Yatra). The integration of ibibo's goibibo and redBus brands is a key strategic priority.

Risks and Contingencies:

• Tax Litigation: Significant ongoing disputes with Indian tax authorities regarding income tax (transfer pricing, depreciation disallowances) and service tax. Aggregate potential claims exceed $100 million, though the company does not recognize these as contingent liabilities, believing the likelihood of them being upheld is remote.
• Regulatory Changes: Risks associated with the implementation of India's Goods and Services Tax (GST) and the General Anti-Avoidance Rules (GAAR), which could impact tax liabilities.
• Competition: Intense price competition and supplier consolidation (airlines reducing commissions) threaten margins.
• Currency Risk: Results are reported in USD, but operations are primarily in INR. A 10% appreciation of the USD against INR would increase the reported loss by approximately $5.5 million.
• Acquisition Integration: Risks related to successfully integrating ibibo operations and realizing anticipated synergies.

Investor Verification Checklist

• Non-IFRS Reconciliations: Verify the reconciliation of "Revenue Less Service Cost" and "Adjusted Net Loss" to IFRS measures to understand the impact of share-based compensation and acquisition-related costs.
• Marketing Spend Efficiency: Assess the return on the $224.4 million marketing spend and whether the aggressive customer acquisition strategy is sustainable long-term.
• Tax Exposure: Review the details of pending tax assessments (Income Tax and Service Tax) to gauge potential future cash outflows if appeals are unsuccessful.
• ibibo Integration: Monitor the post-acquisition performance of the ibibo Group (goibibo/redBus) to ensure it contributes to margin expansion as projected.
• Liquidity Position: Confirm the availability of cash and term deposits ($197.4 million combined) to fund continued operating losses and capital expenditures.