MakeMyTrip Limited — FY2020 Form 20-F
Reporting period: Annual report for the fiscal year ended March 31, 2020, prepared under IFRS. The filing also provides unaudited quarterly data; “2019 Q4” refers to the quarter ended March 31, 2020, not a standalone quarterly filing. Amounts below are in U.S. dollars.
Business context and financial performance
MakeMyTrip operates online travel platforms and brands MakeMyTrip, Goibibo and redBus. Its principal businesses are air ticketing, hotels and packages, and bus ticketing, largely serving India.
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | $511.5 million | $486.0 million |
| Operating loss, IFRS | $429.4 million | $152.9 million |
| Net loss, IFRS | $447.5 million | $167.9 million |
| Adjusted operating loss, non-IFRS | $69.9 million | $98.8 million |
| Adjusted net loss, non-IFRS | $86.5 million | $103.7 million |
| Diluted loss per share | $4.26 | $1.61 |
| Operating cash flow | $(112.7) million | $(78.9) million |
Revenue grew 5.3%. Air ticketing revenue rose 4.6% to $174.4 million, hotels and packages declined 0.7% to $235.8 million, bus ticketing increased 21.0% to $65.0 million, and other revenue grew 29.7% to $36.3 million. Gross bookings increased 11.9% to $6.09 billion.
Adjusted Margin, a company-defined segment measure, was $723.4 million, up from $673.4 million. Adjusted Margin percentages were 7.0% for air ticketing (7.3% prior year), 22.1% for hotels and packages (23.2%), and 8.5% for bus ticketing (8.2%). These non-IFRS measures add back customer inducement costs and should be read alongside IFRS results.
Liquidity, debt and cash flow
At March 31, 2020, cash and cash equivalents were $129.9 million and term deposits were $38.0 million, totaling $167.9 million. Net current assets were $99.2 million, down from $236.1 million. Total assets were $1.08 billion, total equity $862.3 million and total liabilities $220.9 million.
Loans and borrowings totaled $25.6 million, including $24.6 million of lease liabilities recognized upon adoption of IFRS 16. The filing reports $1.0 million of secured bank loans and no outstanding amounts under overdraft facilities. Operating cash outflow was $112.7 million; investing activities provided $73.8 million, largely reflecting net term-deposit redemptions; financing activities used $11.0 million. Management said cash, operating cash flows and working-capital facilities were expected to cover regular needs for the next 12 months, while it was evaluating additional facilities.
Material changes and unusual items
- FY2020 IFRS net loss widened by $279.6 million. The largest items were a $272.2 million goodwill impairment, primarily related to Goibibo, and a $30.8 million litigation provision related mainly to the Hotel Travel Group acquisition dispute.
- Excluding specified items, adjusted operating loss and adjusted net loss improved year over year. These company-defined measures exclude items including share-based compensation, goodwill impairment and litigation provisions.
- In the quarter ended March 31, 2020, revenue was $104.9 million versus $120.2 million in the prior-year quarter; net loss was $338.6 million versus $40.4 million. The quarter included the goodwill impairment and litigation provision.
- IFRS 15 was adopted from April 1, 2018. Customer incentives previously included in marketing expense were generally recorded as reductions of revenue, so reported revenue comparisons are affected and prior-year figures were not restated.
- IFRS 16 was adopted from April 1, 2019, adding right-of-use assets and lease liabilities and replacing much rent expense with depreciation and interest.
Outlook, risks and contingencies
COVID-19 caused severe travel disruption in the fourth quarter and subsequent periods. The filing reports first-quarter FY2021 revenue declined by more than 90% year over year. Management described the outlook as highly uncertain and said it could not reasonably estimate the pandemic’s future financial impact. Cost actions included executive and employee pay reductions, lower marketing and discretionary spending, reduced outsourced call-center staffing, and closure of company-owned offline retail stores in India.
Key risks include prolonged travel-demand weakness, supplier and airline commission pressure, intense competition and discounting, foreign-exchange exposure, and reliance on technology and third-party service providers. The company disclosed ongoing competition investigations concerning allegations by hotel associations and a hotel operator; no final determination was reported. It also disclosed substantial contested tax and service-tax proceedings, which management generally considered unlikely to result in upheld claims, and a separate approximately $35 million earn-out dispute with former Hotel Travel Group shareholders. The company recorded a $30.8 million provision in connection with litigation.
Management identified a material weakness in controls over forecasts and assumptions used in goodwill impairment testing. Management and the auditor concluded internal control over financial reporting was ineffective as of March 31, 2020; the auditor issued an adverse opinion on internal controls but an unqualified opinion on the IFRS financial statements. Management described remediation plans. No specific revenue or earnings guidance is provided.
Important facts for investors to verify
- How travel demand, bookings, refunds and supplier capacity evolved after the reported greater-than-90% FY2021 first-quarter revenue decline.
- Liquidity runway, cash burn, accessibility of term deposits, and whether additional working-capital or guarantee facilities were secured.
- The assumptions behind the Goibibo goodwill impairment and whether further impairment is possible.
- The status, exposure and potential cash impact of the Hotel Travel Group arbitration and tax/service-tax proceedings.
- Progress in remediating the material weakness and the auditor’s subsequent assessment of internal controls.
- How reported revenue and margins compare after accounting for IFRS 15 customer inducements and IFRS 16 lease accounting.