Business Context and Reporting Period
Company: MakeMyTrip Limited (MMYT)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended March 31, 2014
Business Overview: MakeMyTrip is the largest online travel company in India, offering air ticketing, hotels, packages, rail, and bus tickets. The company operates primarily through its Indian subsidiary, MakeMyTrip (India) Private Limited, and has expanded internationally through acquisitions including the Hotel Travel Group, ITC Group, and the ETB Group (acquired in February 2014).
Accounting Basis: International Financial Reporting Standards (IFRS).
Key Financial Metrics (Fiscal Year 2014)
| Metric | Value (in millions USD) |
|---|---|
| Total Revenue | $255.4 |
| Revenue Less Service Cost (Non-IFRS) | $106.4 |
| Results from Operating Activities | $(15.3) |
| Net Loss for the Year | $(20.9) |
| Adjusted Operating Loss (Non-IFRS) | $(3.5) |
| Adjusted Net Loss (Non-IFRS) | $(7.3) |
| Cash and Cash Equivalents | $38.0 |
| Term Deposits | $105.2 |
| Total Assets | $269.8 |
| Loans and Borrowings | $0.3 |
Segment Performance
- Air Ticketing: Revenue of $66.5 million (up 9.3% YoY). Net revenue margin improved to 6.6% from 6.0% in 2013.
- Hotels and Packages: Revenue of $184.5 million (up 12.4% YoY). Revenue less service cost grew 44.9% to $40.0 million. Net revenue margin increased to 12.6%.
- Other Revenue: $4.4 million, primarily from rail/bus tickets and travel insurance.
Material Changes vs. Prior Period
- Profitability Trend: The company recorded a net loss of $20.9 million in 2014, an improvement from the $27.6 million loss in 2013. This follows a profitable year in 2012 ($7.0 million profit).
- Revenue Growth: Total revenue increased 11.6% year-over-year, driven by growth in both air ticketing and hotels/packages segments.
- Margin Expansion: Air ticketing margins recovered due to better negotiated rates and incentives. Hotels and packages margins expanded due to increased supplier base from acquisitions (ETB Group, Hotel Travel Group, ITC Group).
- Acquisitions: The acquisition of the ETB Group in February 2014 contributed to the growth in the hotels segment and resulted in a $1.2 million gain on bargain purchase.
- Currency Impact: The Indian Rupee depreciated approximately 10.3% against the US dollar in 2014 compared to 2013, resulting in a foreign exchange loss of $2.7 million.
Guidance, Outlook, and Risks
Management Commentary and Outlook
Management expects to continue investing in the hotels and packages business to shift the revenue mix toward higher-margin segments. The company plans to expand into new geographic markets and pursue strategic partnerships. Capital expenditures for fiscal 2015 are expected to be between $7.0 million and $9.0 million, primarily for technology infrastructure.
Key Risks and Contingencies
- Tax Proceedings: Significant disputes with Indian tax authorities regarding income tax and service tax.
- Income Tax: A demand of approximately $12.6 million for the assessment year 2010-11 is under appeal. Previous years' assessments have resulted in partial relief or dismissal due to carried-forward losses.
- Service Tax: Aggregate claims of approximately $29.1 million for fiscal years 2006-2012 are pending appeal. The company does not recognize these as contingent liabilities, believing the likelihood of them being upheld is remote.
- Supplier Relationships: Reliance on a small number of domestic airlines in India. Reductions in airline commissions (as seen in 2013) or supplier bankruptcies (e.g., Kingfisher Airlines) pose significant risks.
- Currency Fluctuation: Exposure to USD/INR exchange rates. A 10% appreciation of the USD against the INR would increase the loss by approximately $2.6 million.
- Legal Disputes: Ongoing arbitration with former shareholders of the Hotel Travel Group regarding a $2.5 million indemnification dispute.
- Competition: Intense competition from other online travel agencies and direct distribution channels by airlines and hotels.
Investor Verification Checklist
- Tax Liability Exposure: Verify the status and potential financial impact of the pending Indian income tax and service tax disputes, specifically the $12.6 million income tax demand and $29.1 million service tax claims.
- Non-IFRS Reconciliations: Review the reconciliation of "Adjusted Operating Loss" and "Adjusted Net Loss" to understand the impact of share-based compensation, acquisition amortization, and foreign exchange losses on reported profitability.
- Airline Commission Trends: Monitor the stability of commission rates from Indian domestic airlines, as reductions in these rates were a primary driver of losses in 2013.
- Currency Sensitivity: Assess the impact of continued INR depreciation on future US-dollar reported earnings, given the company's heavy reliance on INR-denominated revenue and costs.
- Acquisition Integration: Evaluate the integration progress and financial contribution of the ETB Group, Hotel Travel Group, and ITC Group to the hotels and packages segment.