India's largest travel portal MakeMyTrip’s scrip gained 3% on Wednesday at Nasdaq after beating street expectations in its earnings for the quarter ended December’10, thanks to bustling travel bookings in the world’s second fastest growing major economy.

The company’s net profit for the third quarter more than doubled to $1.62 million compared to $0.63 million in the same quarter the previous year. Adjusted net profit (excluding employee share-based compensation costs, one time costs relating to listing of shares, interest expense on the liability portion of preference shares and changes in the fair market value of embedded derivatives in the preference shares) also rose over two-fold to $1.77 million.

This translated into earnings per share of 5 cents a share or about 25% more than analyst estimates of 4 cents a share for the quarter.

Revenues also beat expectations with 56.7% rise to $35.79 million for the quarter. Revenues after factoring out service costs rose 59% to $17.28 million.

This was much stronger compared to the performance in Q2, partly due to high travel season in the last quarter of a calendar year. Note that the results are reflective of seasonality in the travel industry. Deep Kalra, Chairman and CEO of MakeMyTrip Limited said, in the investor conference call following the announcement, that the company typically experiences two high season quarters and two low and they alternate, so this quarter was a high season for MMT and the next will be low.

MakeMyTrip’s revenues grew 40.5% year over year to $23.8 million in the quarter ended September’10 with revenue less service cost increasing 41.5% to $12.9 million. The company’s share price had plunged after it reported its results for the second quarter which also had partly to do with the firm reporting a loss of $1.8 million compared to a profit of $0.02 million in the same quarter the previous year.

The company had gone public in Nasdaq in August last year at $14 a share. The shares had zoomed to above $40 commanding market cap of over $1 billion. It closed at $26.8 at Nasdaq on Wednesday.


MakeMyTrip has also entered into a deal to initially purchase 79% stake of Singapore-based travel & tour firm Luxury Tours & Travel Pte Limited for $3 million from its existing shareholders. This will be completed by April 2011, subject to approvals. Thereafter MakeMyTrip will invest approximately $0.75 million in one or more tranches until June 2012 to subscribe fresh shares and will acquire from the existing shareholders, their remaining shares in three tranches over a three-year earn-out period ending June 2014. Kalra said, "The acquisition is a major strategic move for MMYT, since it broadens our presence in other emerging markets beyond India. South East Asia region is a highly popular destination of choice for Indian travellers and among the biggest and fastest growing markets for our outbound tours and packages business. Through this acquisition, MMYT intends to build a position of strength in the region through strong relationships with local hotels."

"The acquisition is in line with our strategy to expand into the greater India region where destinations like Hong Kong, Thailand and Malaysia are seeing over 25% annual growth of inbound Indian visitors. It will allow us leverage Luxury's existing relationships with local hotels and suppliers in Singapore and Malaysia," he added in the investor concall. 

Luxury Tours & Travel Pte had revenues of $2.7 million last year and recorded a 15% year on year growth. Expected revenues are $3.1 million for the year ahead. Kalra clarified that the acquisition was a strategic one to obtain suppliers with direct connect with hotels, tour operators and ground handlers.

Luxury has 90 relationships in Singapore and 25 in Malaysia. Additionally, MMT also signed a strategic partnership with UAE-based Sharjah National Travel & Tourism agency (SNTTA) which will allow its customers to have access to MMT's travel offerings.


Technology Development & Mobile Strategy

It has made several enhancements to its technology platform and website including a new engine that allows customers to search and book hotel and domestic packages online. It also added a flight and hotel staff directory on the homepage to highlight the value and savings on bundled bookings.

Two weeks ago, MMT launched its Blackberry application which has seen 20,000 downloads. The app allows domestic flight bookings and cancellations on the go and automatically synchronises booking details with the use of calendar, said Kalra. Now the company is developing similar apps for Android OS phones and the iPhone. Its affiliate program or B2B network has seen a 5x increase in bookings since its inception in early 2010 and has 7000 travel agents.

Fiscal Year 2011 Outlook

Meanwhile, the company marginally raised its forecast for the year ending March’11. It said it expects fiscal year 2011's revenue less service cost to be between $59-61 million compared to previous forecast of $58-61 million.


Gross bookings for air ticketing and hotels and packages combined increased by $87.2 million to $210.6 million, representing growth of 70.7% year over year. Net revenue margin for air ticketing and hotels and packages combined remained steady at 7.8%. Rajesh Magow, Co-Founder & CFO Makemytrip, said its total air net revenue margin was steady at 7.4% as the company earned more volume related incentives from travel partners for exceeding contract sales targets.

Air Ticketing

Makemytrip's market share has increase from 8% last quarter to 10%, due to growth of online versus offline bookings, the growing Indian aviation market as a whole and - Kalra said - also due to steadily increasing market share taken from other competitors. The addition of features such as allowing users to select fares as per their requirements and improvements in booking flow has helped increase their conversions.

Revenue from air ticketing business increased by 60.9% to $13.5 million in the quarter ended December 31, 2010 from $8.4 million in the year ago period. This was due to increase in gross bookings by 71.4% partially offset by a reduction in net revenue margin from 7.7% in the quarter ended December 31, 2009 to 7.4% in the quarter ended December 31, 2010. But air ticketing net revenue margin in the quarter remained at the same level as in the previous quarter.

Hotels and Packages

MMT saw a dilution in net revenue margins from hotels and packages on a quarterly basis to 10.8%. "This temporary decline was in line with our internal expectations as we strategically invested in developing new holiday destinations," said Magow, in the investor conference call.

On competition in the hotels and packages space and MMT's approach, Kalra said, rising promotional discounts from competitors in the quarter caused MMT to respond to it in order to keep transactions and booking growth high. It has direct connect with 4000 Indian hotels in the budget category. "We have been aggressive in pricing to keep our market share up, the year to date margin right now is about 11.5% and we expect it to keep at that level or slightly go up by the end of the year," said Kalra. MMT witnesses competition from airline carrier sites, online ticketing sites and traditional offline travel agencies.  The other prominent players in the space are Cleartrip, Yatra and B2B site Via. Revenue from hotels and packages business increased by 52.0% to $21.5 million in the quarter ended December 31, 2010 from $14.1 million in the quarter ended December 31, 2009. This was due to an increase in gross bookings by 65.5%, partially offset by reduction in net revenue margin from 14.0% in the quarter ended Decemb r 31, 2009 to 10.8% in the quarter ended December 31, 2010 as net revenue margins normalized from levels experienced in fiscal 2010 when travel suppliers provided favourable rates during the slowdown in India's economy.

Transaction volumes increased by 52.2% reflecting strong demand for holiday travel by Indian middle class, according to Magow. MMT witnessed a 65.5% increase in gross hotel and packages bookings year on year as customers flew more during the Diwali and winter vacations. International hotels and packages bookings grew 70% year on year driven by its packages and offers to S.E.Asia, Middle East and Europe in response to customer preferences. Packages to Indian destinations such as Kerala, Goa, Ladakh, Rajasthan and the Andaman Islands continue to be top sellers for the quarter.

Personnel & Operating Expenses

On the costs side, personnel expenses increased to $3.9 million in the quarter ended December 31, 2010 from $2.4 million in the quarter ended December 31, 2009, mainly as a result of annual wage increases and increases in average employee headcount year over year in the quarter ended December 31, 2010. Other operating expenses increased by 56% to $11.5 million in the quarter ended December 31, 2010 from $7.4 million in the quarter ended December 31, 2009, primarily as a result of an increase in payment gateway charges, advertising and business promotion expenses and outsourcing fees in line with the growth in business. People costs as a percentage of net revenue has reduced year on year. Overall operational expenditures as a percentage of net revenues has reduced, Kalra said. In the same quarter last year, it was 22.3% and is now at 21.5%.

Full results can be viewed at


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