Business Context and Reporting Period
Company: MakeMyTrip Ltd (Mauritius-incorporated, principal operations in India)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended March 31, 2015
Accounting Standard: International Financial Reporting Standards (IFRS)
MakeMyTrip is the leading online travel company in India, offering air tickets, 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 ETB Group.
Key Financial Metrics (Fiscal Year 2015)
| Metric | Value (USD) | YoY Change |
|---|---|---|
| Total Revenue | $299.7 million | +17.3% |
| Revenue Less Service Cost (Non-IFRS) | $138.9 million | +30.6% |
| Results from Operating Activities | $(14.5) million | Improvement of $0.8M |
| Net Loss for the Year | $(18.4) million | Improvement of $2.5M |
| Adjusted Operating Profit (Non-IFRS) | $0.5 million | Turned positive from $(3.5)M loss |
| Cash and Cash Equivalents | $49.9 million | +31.1% |
| Term Deposits | $93.5 million | -11.1% |
| Total Assets | $280.4 million | +3.9% |
| Loans and Borrowings | $0.5 million | +57.0% |
Note: The company reports a net loss under IFRS but achieved an adjusted operating profit of $0.5 million when excluding share-based compensation, acquisition-related amortization, and other non-recurring items.
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 17.3% to $299.7 million, driven by a 19.5% increase in Hotels and Packages revenue and an 11.7% increase in Air Ticketing revenue.
- Transaction Volume: Air ticketing transactions rose 35.8% to 5.4 million, while Hotels and Packages transactions surged 59.3% to 1.4 million.
- Margin Trends:
- Air Ticketing: Net revenue margin decreased to 6.1% from 6.6% due to domestic Indian airlines reducing base commissions.
- Hotels & Packages: Net revenue margin improved to 13.2% from 12.6%, aided by higher volumes, better negotiated rates, and the full-year impact of the ETB Group acquisition.
- Expense Increases: Other operating expenses rose 27.4% to $102.1 million, primarily due to increased advertising spend for mobile platforms and international hotels. Personnel expenses increased 19.1% to $44.3 million.
- Currency Impact: A 1.1% depreciation of the Indian Rupee against the US dollar resulted in a foreign exchange loss of $5.2 million for the year.
Guidance, Outlook, and Risks
Management Commentary and Outlook
Management expects to continue investing in marketing and technology to expand the Hotels and Packages business, which yields higher margins than air ticketing. The company plans to spend approximately $8.0 million to $10.0 million on capital expenditures in fiscal 2016. The company believes its current cash and cash equivalents are sufficient to meet working capital and capital expenditure needs for the next 12 months.
Key Risks and Contingencies
- Supplier Commission Reductions: Continued reduction of base commissions by Indian domestic airlines poses a risk to air ticketing margins.
- Regulatory and Tax Proceedings: The company is involved in multiple tax disputes with Indian authorities regarding service tax and income tax assessments (transfer pricing, depreciation, withholding tax). Aggregate claims for service tax disputes total approximately $26.7 million, though the company does not recognize these as contingent liabilities, believing the likelihood of them being upheld is remote.
- Foreign Exchange: Significant exposure to fluctuations between the US Dollar, Indian Rupee, and Euro. A 10% appreciation of the USD against the INR would increase the fiscal 2015 loss by $1.9 million.
- Competition: Intense competition from other online travel agencies, meta-search engines, and direct supplier channels.
- Legal Proceedings: Ongoing disputes regarding domain names (e.g., Tata Sons) and criminal complaints from competitors (e.g., Ezeego1).
Investor Verification Checklist
- Profitability Definition: Verify the reconciliation between IFRS Net Loss ($(18.4)M) and Adjusted Operating Profit ($0.5M) to understand the impact of non-cash items like share-based compensation and amortization.
- Airline Commission Trends: Monitor announcements from major Indian domestic airlines regarding commission structures, as this directly impacts the core air ticketing margin.
- Tax Dispute Status: Review updates on the pending service tax and income tax assessments in India, specifically the potential liability of ~$26.7 million in service tax claims.
- Currency Hedging: Confirm if the company has initiated any hedging strategies to mitigate the impact of INR/USD volatility, as they currently have no hedging agreements.
- Mobile Growth: Assess the conversion rates and profitability of the mobile platform, which contributed 16.1% of total transactions in fiscal 2015 but incurred significant marketing costs.