Rising Internet Access, Disposable Incomes In India - Profit Through MakeMyTrip

With so much travel being booked online, travel may finally be the sector where we see e-commerce successes in India. Flipkart.com has done well enough, but it operates in retail and is not listed. A travel company that IS listed on Nasdaq is Makemytrip.com (MMYT). The company offers pretty much everything you need as far as travel is concerned, including airline tickets, hotel booking, domestic and foreign packaged tours, bus tickets, corporate travels, visa assistance, foreign exchange, travel insurance, and more. In May 2013 the company counted all major domestic airlines as partners, along with over 10,000 hotels and guesthouses in India and more than 80,000 hotels internationally.

Revenues expanded at a Compounded Annual Growth Rate (CAGR) of a whopping 48% from FY2008 to reach $124 mn in FY2011, and grew some more to cross $228.8 mn in FY13, up 29.7% y-o-y. However, the rise in revenues was not enough to keep the company in the green, and it reported a net loss for the year. This was despite all segments rising except the low-margin air travel segment, which decreased by 20% y-o-y. India's air travel industry is struggling, valuations are low and foreign majors including Japan's Air Asia and the Middle Eastern Etihad have taken the opportunity to enter the market recently. MMYT has been coping by increasing focus on other segments, which are delivering. Hotel and packages bookings rose more than 50% y-o-y (constant currency) in FY13 to reach $164 mn, and while the margin on air bookings for the company dropped by 1.9% as Indian air companies dropped the commissions they offered, the margins for the hotel business rose marginally. The company's business mix has reflected the better profitability in the hotels segment, and the contribution of hotels to MMYT's revenues rose from 15% in FY08 to 20% in FY12, and in FY13 it was even higher at 30%. Clearly, the company is focusing more on higher margin segments, and it expects hotels to make up 50% of revenue in two years time. MMYT has been fairly acquisitive towards that end; it acquired a hotel booking operator in both 2011 and 2012, expanding its global hotel inventory.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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Alpha Stockman 3 years ago Member's comment

Good read, thanks.