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Manish Hemrajani212 [email protected]
Paul [email protected]
Oppenheimer & Co. Inc. does and seeks to do business with companies covered in its research reports. Asa result, investors should be aware that the firm may have a conflict of interest that could affect theobjectivity of this report. Investors should consider this report as only a single factor in making theirinvestment decision. See "Important Disclosures and Certifications" section at the end of this report forimportant disclosures, including potential conflicts of interest. See "Price Target Calculation" and "Key Risksto Price Target" sections at the end of this report, where applicable.
Stock Price Performance
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1 Year Price History for MMYT
Created by BlueMatrix
Company Description
MakeMyTrip Limited, an online travel company,founded in 2000, provides travel products andsolutions in India and the US. Its products andservices include air tickets, hotels, packages,rail tickets, bus tickets and car rental. Thecompany, through its online channel,makemytrip.com, and othertechnology-enhanced distribution channels,such as call centers, travel stores, and travelagents' network allow travelers to research,plan, and book a range of travel services andproducts in India and internationally.
September 23, 2010 INDIA/INDIA
Stock Rating:
PERFORM12-18 mo. Price Target NA
MMYT - NASDAQ $34.07
3-5 Yr. EPS Gr. Rate 150%
52-Wk Range $41.47-$14.00
Shares Outstanding 34.1M
Float 5.8M
Market Capitalization $1,162.9M
Avg. Daily Trading Volume NA
Dividend/Div Yield NA/NM
Fiscal Year Ends Mar
Book Value ($1.42)
2011E ROE NA
LT Debt $0.1M
Preferred NA
Common Equity ($25M)
Convertible Available No
EPS Diluted Q1 Q2 Q3 Q4 Year Mult.
2010A 0.02 0.00 0.02 0.00 0.05 NM
2011E 0.05A 0.01 0.04 0.07 0.18 NM
2012E -- -- -- -- 0.46 74.1x
MakeMyTrip LimitedInitiating at Perform on India's OTA Market Leader
SUMMARY
We are initiating coverage on MakeMyTrip (MMYT), India's largest online travel
agency (OTA), with a Perform rating. We are bullish on the growth prospects of
India's largest OTA (48% share of 2009 gross bookings) on both revenues and
margins. We forecast 52% top line growth in FY11/FY12 and expect margins to
expand 40bps from FY10 to FY12. Growth levers such as LCC growth, rise in
credit/debit card penetration levels and increasing internet penetration are positive
for the name, in our view. However, we believe at current levels the shares appear
fully valued. Since its IPO, MMYT has catapulted nearly 150% from its offer price of
$14, and we believe the upside from current levels is limited.
KEY POINTS
■ Market Leader in a Nascent OTA Space : MMYT is the market leader in the
Indian OTA space, with 48% share of 2009 gross bookings. The Indian travel
market is expected to grow at a 15% CAGR to $54B in 2012 with online travel
increasing at a 27% CAGR to $8.7B in 2012 per WTTC.
■ Several Growth Levers : We identify several growth levers ahead for the
business as MMYT grows its presence in the nascent OTA market in India: 1)
rise in number of LCCs; 2) rise in discretionary spending; 3) rapid rise in internet
adoption; and 4) margin expansion from a favorable mix shift to higher margin
hotels.
■ Investments Risks: 1) supplier relationships risk; 2) highly competitive market;
3) longer-term Air Commission pressures; 4) driving the hotel business growth
online could be challenging; 5) internet penetration may not rise at rates
expected; and 6) credit card penetration growth may slow.
■ Relative Valuation: At its current price, MMYT trades at a rich P/E multiple of
85x our CY11 $0.40 EPS estimate vs. peer average of 33x with an CY11 PEG
of 1.5x compared to its closest peer CTRP's PEG of 1.2x and peer group
median of 1.3x.
■ We are establishing a FY11 net revenue estimate of $61.6M and non-GAAP
EPS of $0.18 on transaction volume of 2.5M and gross bookings of $724.5M.
For FY12, we estimate net revenue/non-GAAP EPS of $93.8M/$0.46 on
transaction volume of 3.3M and gross bookings of $1B.
EQUITY RESEARCH
INITIATION OF COVERAGE
Oppenheimer & Co Inc. 300 Madison Avenue 4th Floor New York, NY 10017 Tel: 800-221-5588 Fax: 212-667-8229
2
Contents INDIA’S ONLINE TRAVEL LEADER WITH SEVERAL GROWTH LEVERS AHEAD ... 3 RISE IN NUMBER OF LOW COST CARRIERS ................................................. 3 RISE IN DISCRETIONARY INCOME TO FUEL TRAVEL GROWTH ....................... 3 RAPID RISE IN INTERNET ADOPTION ........................................................... 4 MARGIN EXPANSION FROM A FAVORABLE MIX SHIFT ................................... 4 KEY RISKS FOR MMYT ............................................................................. 4
INDIAN ECONOMY ____________________________________________ 7 INDIA’S RISING MIDDLE-CLASS .................................................................. 8 WALLET-SHARE SHIFT FROM BASIC NECESSITIES TO DISCRETIONARY ITEMS9 TRAVEL DISTRIBUTION CHANNELS IN INDIA ............................................... 13 GDS IN THE TRAVEL ECOSYSTEM ............................................................ 14 AIRLINES (77% OF NET REVENUE) .......................................................... 16 HOTELS & PACKAGES (20% OF NET REVENUE) ........................................ 18 OTHER (3% OF NET REVENUE)................................................................ 19 TRAVEL STORES ..................................................................................... 20 TRAVEL AGENTS’ NETWORK .................................................................... 20 MOBILE .................................................................................................. 21 GROWTH IN LCCS .................................................................................. 21 GROWTH IN INTERNET PENETRATION ....................................................... 22 RISE IN CREDIT CARD PENETRATION LEVELS ........................................... 23 INDIA BASED AIRLINES SHARE GROWING AS A % OF INTERNATIONAL TRAFFIC MIX
.............................................................................................................. 24 HOTEL BOOKINGS GROWTH .................................................................... 25 BRAND RECOGNITION LEADS TO MARKET SHARE GAINS ........................... 26
COMPETITION ______________________________________________ 27 FINANCIAL AND OUTLOOK _____________________________________ 30
FY09 REVIEW......................................................................................... 30 RECENT RESULTS/NEWS ......................................................................... 31 FY10 RESULTS ....................................................................................... 31 FY11 OUTLOOK ...................................................................................... 31 FY12 OUTLOOK ...................................................................................... 32 FX IMPACT ............................................................................................. 34
AREAS OF CONSIDERATION ____________________________________ 35
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Executive Summary
We are initiating coverage on MakeMyTrip Limited, India’s largest Online Travel Agency,
with a Perform rating. We are confident regarding the growth prospects and potential of
India’s largest OTA (48% share of gross bookings in 2009) in terms of both revenues and
margins. We forecast top line growth of 52% in FY11 and FY12 and expect blended gross
margins to expand 40bps from FY10 to FY12, which translates in to non-GAAP EPS
growing from $0.05 in FY10 to $0.46 in FY12. Growth levers such as LCC (low cost
carrier) growth, especially at the domestic level, significant rise in credit/debit card
penetration levels, and increasing internet penetration from the abysmally low current
levels are positive for the name, in our view.
MMYT currently trades at a multiple of 85x our CY11E EPS of $0.40 vs. peer average of
33x and a PEG of 1.5x estimated revenue growth of 56% in CY11 vs. its closest peer
CTRP at 1.2x and a peer median PEG multiple of 1.3x. Our DCF analysis yields a share
price of $35 rendering the shares fairly valued at current levels. We arrive at our DCF
using an 11% WACC and a terminal value of $2.8B in FY20. Since its IPO (August 12,
2010), MMYT has catapulted ~150% from its offer price of $14, and we believe the upside
from current levels is limited. In addition, we believe volatility due to a small float size
remains a near-term risk.
India’s Online Travel Leader with Several Growth Levers Ahead
According to PhoCusWright, MMYT is India’s online travel leader, with 48% share in 2009
when measured in terms of gross bookings. We identify several growth levers ahead for
the business as MMYT grows its presence in the nascent OTA (online travel agent)
market in India.
Rise in Number of Low-cost Carriers
The advent of LCCs (low-cost carriers) and increasing competition in the Indian airline
industry has lent affordability to air travel in India and made it a viable alternative for a
larger number of travelers to choose air travel over the traditional rail travel. With the
growing number of low-cost airlines, online air travel bookings have also increased since
low-cost airlines typically prefer to use cost-effective distribution channels such as the
internet, using it as their primary distribution channel, either directly or through online
travel agents.
In the next 12 months a majority of the LCCs will be eligible to add overseas routes. We
expect to see increased offerings from LCCs, especially in terms of near-shore
destinations in South East Asia (Hong Kong, Singapore, Malaysia, and Thailand) and
Dubai in the Middle East, driving prices down even further to these destinations and thus
rendering these overseas destinations more attractive to Indian vacationers.
Rise in Discretionary Income to Fuel Travel Growth
Progressive deregulation, rising income levels and supportive demographic trends make
India one of the world’s fastest growing markets for discretionary spending. As Indian
incomes rise, the share-of-wallet of consumer spending should also change significantly.
Today the largest Indian spending categories are food, beverages and tobacco, and
transportation and housing. According to McKinsey’s estimates, by 2025, food, beverages
and tobacco is still expected to be the biggest category, although its share is anticipated to
drop from 42% in 2005 to 25% in 2025. Transportation, which includes leisure travel in the
MakeMyTrip Limited
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mix, is expected to rise from a 17% share in 2005 to 20% in 2025—significant when
viewed in the context of wallet size potentially tripling from 2005-2025. The key takeaway
here is that discretionary spending is expected to rise to 70% of the total share-of-wallet
by 2025 vs. 52% in 2005.
Rapid Rise in Internet Adoption
India lags behind several Asia Pacific markets and well behind the developed markets in
terms of internet and broadband penetration with ~7% penetration levels (or 81 million
internet users) currently. Of that 7% we believe less than half are broadband users.
We believe, however, that internet penetration levels will continue to rise both in the near
and longer term with increased competition and the resultant pricing pressures in the
internet service provider market. Recent broadband spectrum auction by the Indian
government has produced a multitude of players who are looking to offer broadband
internet services and we should see a spate of broadband service offerings in the near
term. We believe true penetration levels to be higher than 7% given that a majority of
potential Travel consumers have broadband access at the workplace.
Margin Expansion from a Favorable Mix Shift
With a majority of its revenue (77% in FY10) currently derived from lower margin airline
business, we believe MMYT is poised for margin expansion both in the near and longer
term, as revenue mix shifts to the more lucrative (higher margin) Hotel and Packages
business. With Hotel and Packages margins close to 14% vs. airlines at around 7% we
estimate blended margin to rise 40bps from 8.6% in FY10 to 9% in FY12 as Hotel and
Packages revenue mix rises to 29.6% in FY12 from 19.8% in FY10.
Key Risks for MMYT
Supplier Relationships: Inability to maintain existing and establish new relationships with
travel suppliers could adversely affect the business.
Competition Risk: The travel industry in India is intensely competitive. MMYT may not
have the financial resources to maintain its competitiveness in the marketplace against
competitors with deeper pockets both from the OTA and Supplier Direct side. Additionally,
MMYT competes with all traditional travel companies who may also have online initiatives
given all travel agents are targeting the same customer.
Air Commission Pressures: Air suppliers (including Amadeus, the company’s GDS
provider) may reduce or eliminate commissions in the future, which could adversely affect
the profitability of the business.
Significant Shareholder Risk: We believe SAIF (South Asian Investment Fund) owning
over 43% of shares outstanding constitutes a risk.
Driving the Hotel Business Growth Online Could Be Challenging: MMYT’s expansion
and growth in the hotel business brings a great risk and a great reward. The market
opportunity is significant, the margins are wider, but the sector is still immature and highly
fragmented.
Internet Penetration Risk: India lags several Asia Pacific markets and is well behind the
developed markets in terms of internet and broadband penetration, with ~7% penetration
levels (or 81 million internet users) currently. Internet penetration may not grow as
expected given various challenges in the marketplace.
MakeMyTrip Limited
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Credit Card Penetration Risk: According to Euromonitor and the Reserve Bank of India,
the number of credit cards in India was over 25.5 million in 2009, , while the number of
debit cards in India was over 130 million. Euromonitor expects the number of credit cards
in India to reach 73.7 million by 2014 (i.e., an annual growth rate of over 25%) and the
number of debit cards in India to reach 350 million by 2014 (i.e., an annual growth rate of
over 22%). Credit card growth may not pan out as estimated due to the highly risk averse
nature of the Indian consumer.
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Company Profile
Originally incorporated in April 2000 as International Web Travel Private Limited in
Mauritius, the company subsequently changed its name to MakeMyTrip Limited and
converted to a public company. Its registered office is located at the offices of Multiconsult
Limited at Rogers House, 5 President John Kennedy Street, Port Louis, Mauritius with
principal executive offices located at 103 Udyog Vihar, Phase 1, Gurgaon, Haryana
122016, India. Its principal website address is www.makemytrip.com.
Exhibit 1. MakeMyTrip Corporate Structure
Source: Company Reports
Based on gross bookings in 2009, MMYT is the largest online travel company in India,
according to PhoCusWright. MMYT’s services and products include air tickets, hotels,
packages, rail tickets, bus tickets, car hire and ancillary travel requirements such as
facilitating access to travel insurance. MMYT commenced operations in 2000, and in the
first five years following inception, it focused on the NRI (non-resident Indian) market in
the US, servicing mainly the need for the United States-India inbound air tickets. The
Indian business was launched in September 2005. In FY10, MMYT processed 1.6 million
transactions for domestic air tickets in India, which helped generate $31.1 million in net
revenue from the air ticketing business. Net revenue from hotels and packages business
totaled $8.0 million in FY10. According to comScore, www.makemytrip.com was the
second most visited travel website in India (after the Indian Railways’ website) in each of
the years from 2007-2009 and had an average of over 1.7 million unique visitors per
month in 2009. MMYT targets the end market through its various distribution channels
such as websites, call centers, travel stores and its strong 4,000–travel-agent network. It
provides end customers with access to all major domestic full-service and low-cost airlines
operating in India and all major airlines operating to and from India, over 4,000 hotels in
India and a wide selection of hotels outside India, Indian Railways and several major
Indian bus operators.
Employees
As of Mar-2010, MMYT had 757 employees on its payroll. Almost all employees are
located in India with just three based in the US.
MakeMyTrip Limited
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Exhibit 2: MakeMyTrip Employee Breakdown
Management 7
Product Development 20
Sales & Marketing 442
Technology 111
Others 177Total 757
Source: Company Reports
Indian Economy MMYT’s target market is India, the seventh-largest country in the world. It covers an area
spanning approximately 1.3 million square miles in Southeast Asia. The country shares its
borders with the People's Republic of China, Nepal and Bhutan in the north, Pakistan in
the west, and Myanmar and Bangladesh in the east.
Exhibit 3: World Population (in millions)
1330
1148
975
804
338
0
200
400
600
800
1000
1200
1400
China India Africa Europe North America
Source: Internet World Stats
According to the CIA factbook, India is one of the world’s most populous countries with an
estimated population of over 1.15 billion as of July 2009. India’s gross domestic product,
or GDP, on a purchasing power parity basis was approximately $3,561 billion in 2009,
making it the world’s fifth largest economy after the European Union, the United States,
China and Japan. Economic liberalization, including reduced controls on foreign trade and
investment, which began in India in the early 1990s, has served to accelerate the
country’s GDP growth, which has averaged more than 7% annually since 1997. The
Indian economy registered a GDP growth of 7.4% in FY10 (March fiscal year) despite the
weak global macro environment, making it the second fastest growing economy globally
as of March 2010 for countries with GDP over $150 billion. The Indian government
expects FY11 GDP growth between 8.5-8.75%.
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8
Exhibit 4: India’s GDP Growth Rate
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010E
2011E
Source: Reserve Bank of India and Oppenheimer & Co
India’s Rising Middle Class
Economic liberalization in India, which began in 1991, transformed Indian demographics
through rising income levels and changing consumption patterns. According to McKinsey,
income levels are estimated to almost triple by 2025. The country’s income pyramid is
also expected to change, with India’s middle class (India’s middle class is defined as
households with annual income of between Rs. 200,000 to Rs. 1,000,000 or between
~$4000-$20,000) expected to grow by over ten times from 50 million people in 2005
(approximately 5% of the total Indian population) to 583 million people by 2025
(approximately 41% of the total Indian population). With a growing population, the
expansion of middle class and rising incomes, India should become one of the world’s
largest consumer markets by 2025. Consumption is expected to increase by 7.3%
annually over the next 20 years to reach more than Rs. 69.5 trillion, or $1.5 trillion, by
2025.
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Exhibit 5. India’s Rising Middle Class
0
200
400
600
800
1000
1200
1400
1600
0
20
40
60
80
100
120
1985 1995 2005 2015E 2025E
Upper Class
Middle Class
Underpriviliged
Total Population
Source: McKinsey and Oppenheimer & Co
Wallet-share Shift from Basic Necessities to Discretionary Items
Progressive deregulation, rising income levels and supportive demographic trends make
India one of the fastest growing markets in the world for discretionary spending. As Indian
incomes rise, the share-of-wallet of consumer spending should also change significantly.
Today the largest Indian spending categories are food, beverages and tobacco, and
transportation and housing. According to McKinsey’s estimates, by 2025, food, beverages
and tobacco is still expected to be the biggest spending category, although its share is
anticipated to drop from 42% in 2005 to 25% in 2025. Transportation, which includes
leisure travel in the mix, is expected to rise from a 17% share in 2005 to 20% in 2025—
significant when viewed in the context of wallet size tripling from 2005-2025. The key
takeaway here is that the discretionary spending is expected to rise to 70% of total by
2025 vs. 52% in 2005.
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Exhibit 6: India Discretionary vs. Non-discretionary Spending
61%48%
39%30%
39%52%
61%70%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1995 2005 2015E 2025E
Necessities Discretionary Spending
Source: McKinsey and Oppenheimer & Co
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India’s Travel Market
As recently as the mid-90’s, the Indian aviation and rail industries were government
owned monopolies. The entry of LCCs transformed the marketplace in 2005. The India
travel ecosystem consists of various industry suppliers, distributors and agencies. The
fragmented nature of the travel industry has created an opportunity for distributors to
capture value by developing and managing efficient systems that are capable of bridging
travel supply and demand on a nationwide, real-time basis. As consumers navigate online
travel sites, they dive into the online travel ecosystem. While a majority of travel booking in
India today is done the traditional way—offline through a retail travel outlet—there is a
growing number of online choices for consumers including supplier websites and OTAs.
The entire travel ecosystem in India, including air, hotel, OTA’s bus and rail is seeing
innovation. Surprisingly the first real online catalyst came from the government-owned
Indian railways which started offering online bookings back in 2005. The growth of LCCs,
which have now grown from just a single one back in 2004 to seven in 2010, has also
provided a major boost to the online travel market.
Exhibit 7: LCCs as a % of India’s Airline Mix
Source: TRAI
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Exhibit 8: India’s Domestic Airline Market Share July 2010
Jet
Airways, 26.60%
Kingfisher, 20%
NACIL, 17.30%
IndiGo, 16.90%
Go
Air, 5.60%
Paramount, 0.3
0% Spicejet, 13.20
%
Source: TRAI
The Indian travel and tourism industry is large and growing rapidly. According to the
WTTC (World Travel and Tourism Council), the contribution of travel & tourism to GDP is
expected to rise from 8.6% (Rs.5532 billion or US$118 billion) in 2010 to 9.0% (Rs.18544
billion or US$330 billion) by 2020. India is one of the fastest growing countries in the world
in terms of its travel and tourism industry. Real GDP growth for the travel & tourism
economy is expected to be 6.7% in 2010 and to average 8.5% per annum over the coming
ten years. Further, the WTTC expects that, as a result of the strong growth rate in the
Indian travel and tourism industry, over the next ten years India will become one of the
world’s top ten travel and tourism markets in terms of the absolute size of its market.
Exhibit 9: Travel and Tourism GDP in 2020
9 1 7
5 0 1
2 1 61 4 8 14 3 12 4 1 22 1 11 1 04 8 0
0
1 0 0
2 0 0
3 0 0
4 0 0
5 0 0
6 0 0
7 0 0
8 0 0
9 0 0
10 0 0
Source: WTTC
According to PhoCusWright, the Indian online travel market grew 11% to reach $3.4 billion
in 2009. Netscribes has cited sources stating that, in 2009, approximately 34% of air
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tickets and 14% of train tickets booked in India were sold online. Many travelers also
utilize online travel agency websites for travel-related research and information. Per
PhoCusWright, air ticket bookings contributed to approximately 70% of the online travel
market in India in 2009. However, the non-air ticket segments are also growing in the
Indian online travel market. Online rail revenues grew in excess of 25% in 2008-2009.
Indian government has also recognized the importance of the travel and tourism industry,
and over the past several years, has enacted or announced several initiatives to give
further impetus to the industry:
• The “Incredible India” campaign helps showcase India as a leading tourist
destination globally;
• The provision of one-month tourist visas on arrival for citizens of five countries
(Japan, Finland, New Zealand, Singapore and Luxembourg);
• An expenditure budget of Rs. 11.2 billion allocated to the Ministry of Tourism in
the 2010 Indian government budget (a 9.7% increase over the previous year), of
which about Rs. 4.7 billion has been earmarked for building new infrastructure
facilities such as tourist reception centers and refurbishing monuments;
• Support of an “open-skies” policy in India which has led to the rise in LCCs;
• Upgrade of existing or construction of new airports in major cities, including
Mumbai, Delhi, Chennai Hyderabad and Bangalore;
• The construction of international convention centers in cities including Delhi,
Mumbai, Goa, Jodhpur, Udaipur, Cochin, Agra and Jaipur to attract more
business travelers to India; and
• Air transportation policies permitting airlines in India which have been in
operation on domestic routes for over five years to fly on international routes.
We believe the Indian travel market is poised for growth given a strong domestic
economy, growth in the LCC market and a highly fragmented lodging industry.
Government spending is evident in airports and roads, and we believe OTAs can
capitalize on the opportunities presented by this Asian behemoth.
Travel Distribution Channels in India
OTAs in India: PhoCusWright estimates that the total “business-to-customer” online travel
agency market (i.e., businesses serving end consumers with travel products and/or
services through an online channel) in India is valued at $1 billion and is dominated by
four players—MakeMyTrip, Yatra, Cleartrip and Travelguru (which was acquired by
Travelocity in August 2009). Of these, MakeMyTrip commands a market share of 48%,
followed by Yatra at 24% and Cleartrip at 18%, based on gross bookings for 2009 major
Indian OTAs in the market.
Travel Suppliers: Generally, at the top of the travel distribution value chain are suppliers
that seek cost-effective ways to reach end-user travelers. Historically, these suppliers
relied largely on traditional GDS (global distribution system) to connect their inventory of
products and services with travel agencies, which in turn distribute the products and
services to travelers.
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Meta Travel Search Engines: These are online travel search sites such as Ixigo,
Ezeego1, Zoomtra and Kayak.com, and travel research sites that have search
functionality, such as TripAdvisor (Expedia-owned).
Supplier Websites: Recently, travel suppliers have begun to utilize other forms of
distribution, including direct distribution via their own websites. Many travel suppliers such
as airlines and hotel companies have their own branded websites to drive business.
Traditional Travel Agencies: Traditional retail travel agencies, supplier reservation
centers and ticket offices remain the largest distribution channels for travel in India.
GDS in the Travel Ecosystem
Originally started by the airlines, computerized reservation systems book and sell travel
for various airlines and hotels. Also known as GDS (global distribution systems), these
reservation systems are available via internet gateways for distribution vendors such as
OTAs, offline agencies and corporate travelers to book travel online. While the system
serves a variety of travel bookings, its primary services are geared toward airlines. Today,
major GDSs include Amadeus, SABRE, Galileo and Worldspan. Galileo and WorldSpan
generate 90% of revenues from airlines and currently offer 450 airlines and 83,000 hotel
properties on its reservation platform.
Amadeus, headquartered in Madrid, Spain, is the sole GDS provider for MakeMyTrip, and
offers over 700 airlines and 80,185 hotel properties on its network. All in all, GDSs
encompass a large network of airline and hotel partners and are an important part of the
travel ecosystem.
Airline Industry
LCC and network carriers have an equal share of India’s airline market in terms of
passenger volumes. Due to airline deregulation policies adopted by the government, the
Indian air market is characterized by fierce competition that keeps fares in check.
Due to aggressive direct distribution and the OTA impact on LCCs approximately 54% of
LCC airlines tickets were transacted online in 2008. One-third of the domestic air market
($1.54B) was booked online in 2008.
Hotel Industry
The lodging market in India is heavily fragmented and largely untapped. Information on
Indian hotels is not well aggregated and available only on a piecemeal basis from a
myriad of sources. A lot of the hotel inventory is not yet online.
Indian Railways
The Indian government-owned Indian Railways has emerged as the largest online travel
website not just in India but also in the entire Asia-Pacific region when measured by
transaction volume—and this is despite internet penetration levels of just 7% in India. Rail
is the main mode of transportation for a majority of the Indian populace thus representing
a significant opportunity.
Seasonality in Indian Travel
June and December quarters tend to benefit from seasonality in the Indian travel industry,
with June quarter benefiting from the summer holiday season and the December quarter
from the year-end holiday season in India. This results in higher revenue from the hotels
and packages business in the June and December quarters. The air ticketing business
tends to be impacted more by business seasonality and as such sees decreased volume
in the March quarter.
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Religious Tourism
Religious tourism is popular in India, where visitors can take tours and make pilgrimages
to many sites easily accessible by air or railway. According to PhoCusWright, ~20% of
trips in India are religious trips made with family. Pilgrimage destinations (please see
Exhibit 10 below) are some of the most popular destinations in India. However, lack of
online inventory for these destinations deters online booking for hotels and packages for
this segment. We are starting to see large/reputed hotel chains focus on bringing rooms in
the religious zones online and we expect to see availability improve in the religious zones
in the next one-two years.
Exhibit 10: Key Religious Places in India
Religious Places Region Peak Season
Amarnath North India July/Aug
Bodhgaya Central India All Year
Shirdi West India All Year
Varanasi North India All Year
Golden Temple North India Oct/Nov
Tirupathi South India October
Vaishno Devi North India All Year
Durga Puja East India Sep/Oct
Mathura Central India Aug/Sep
Uttaran (Kite Festival) West India Jan
Onam South India Aug/Sep
Jagannath Puri East India June/July
Source: Oppenheimer & Co
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MakeMyTrip Business Model
Exhibit 11: The MakeMyTrip Travel Ecosystem
GDS
Amadeus
Suppliers
Make My Trip Travel NetworkNetwork Airlines
MakeMyTrip.Com
Low Cost Carriers India Domestic and US Inbound Travel CustomersDomestic Travelers
Hotels MakeMyTrip Travel Agent Network
4000 Travel Agents International Travelers
Rail
MakeMyTrip Travel Stores
Bus 19 Travel Stores
Travel Insurance MakeMyTrip.ca
Canadian Indbound Travel
Catering to NRIs in Canada
MakeMyTrip.ae
Middle East Inbound Travel
Catering to NRIs in the Middle East
OkTataByeBye.Com
Review Site similar to Tripadvisor.com
Source: Oppenheimer & Co. Inc.
MMYT currently operates as an OTA through the following websites:
• www.makemytrip.com - Catering to all customers worldwide including ~3 million
Non-Resident Indians in the US;
• www.makemytrip.ae - Catering to Non Resident Indians (~1.5 million) in the
United Arab Emirates;
• www.makemytrip.ca - Catering to Non Resident Indians (~1.2 million) in Canada;
and
• www.ticketvala.com - Booking bus tickets online.
MMYT generates majority of its revenue through its Airlines and Hotel lines of business.
Product Mix in FY10 was predominantly Airline travel with Air accounting for 77% of total
net revenue and Hotel and Packages for 20%. Airline sales are largely online with 94% of
airline transactions online in FY10.
Airlines (77% of FY10 Net Revenue)
Airline revenue sources include: 1) commissions and incentive payments from airline
suppliers; 2) service fees charged to customers; and 3) fees from Amadeus (GDS service
provider). Revenue for the airline business is generally accounted for on a net basis and
recognized at the time of ticket issuance. In some instances MMYT pre-purchases air
ticket inventory (it pre-purchased $0.9 million worth of inventory in FY10). Revenue
generated from the sale of these tickets is recognized on a gross basis and the cost of
tickets is classified as service cost.
MakeMyTrip Limited
17
Revenue from air tickets sold as part of packages is eliminated from air ticketing revenues
and added to the hotels and packages revenue.
Despite downward commission pressures from airlines and lack of GDS fees from
emerging LCCs, air net revenue margins have increased 50bps from FY08 to FY10
largely due to incentive fees paid by Indian airline suppliers to travel agents such as
MMYT. We expect these incentive fees to largely subside, which could put pressure on
airline margins going forward. We estimate airline margins to decline to 7.3% in FY11 and
7% in FY12.
Commission income from Airline carriers accounted for 54% of MMYT’s airline revenue
mix in FY10. MMYT currently charges Rs. 50-100 per transaction as a service fee to end-
users. This accounted for ~27% of net revenues in FY10. The remaining 19% came from
GDS or Segment fees.
Exhibit 12: Revenue Composition—Domestic and Outbound Air
Service
Fees, 27%
Commission
Income, 54%
Segment
Fees, 19%
Source: Company Reports and Oppenheimer & Co. Inc.
In FY10 Airlines constituted 77% of total revenue mix ($31 million), with Domestic Air
accounting for 48%, or $19.3 million of total net revenue. Ticket sales to NRI Indians
coming from the US to India, which are largely driven by Call Centers (85%), accounted
for 15% of total revenue, or $6 million. Inbound Air tends to be higher margin in nature at
about 10% gross margins. By our estimates, 72% of net revenues or $22.4 million from
the Airline Segment was generated from the online channel.
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Exhibit 13: Airline Revenue/Channel Mix
Domestic
Air, 48%
Outbound,
14%
Inbound Air
(US to
India), 15%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
FY10
15%
52%
96%
0
9%
4%
85%
39%
0%
0% 20% 40% 60% 80% 100%
Inbound
Outbound
Domestic
Online Retail Call Centre
Source: Company Reports
Hotels & Packages (20% of FY10 Net Revenue)
Hotels & Packages sales are largely done through call centers, travel stores and travel
agents’ networks.
In the Hotels & Packages business, revenue (including revenue on air tickets sold as part
of packages) is generally accounted for on a “gross” basis, representing the total amount
paid by customers for these travel services and products. The cost of procuring the
relevant services and products for sale to customers in this business is classified as
service cost. Hotels & Packages revenue also includes commissions earned for the sale
of hotel rooms (without packages), and commissions as an agent from other online travel
agents and aggregators from whom the company procures hotel rooms for customers for
hotels outside India, which are accounted for on a “net” basis. The revenue from the sale
of hotels and packages and hotel reservations is recognized on the customer’s departure
and check-in dates, respectively.
In FY10, Hotels & Packages contributed 20% of total net revenue ($8 million), with
Domestic Hotels & Packages accounting for 11% or $4.4 million of total net revenue.
Outbound Hotels & Packages accounted for 9% of total net revenue ($3.6 million). FY10
was negatively impacted by macro and we believe affected the higher priced outbound
travel segment as customers opted for lower priced domestic holidays. We believe
Outbound Hotels & Packages could constitute a higher part of the mix going forward given
a robust and growing Indian economy, easy accessibility to South East Asian Countries
and the Middle-East all within a five-hour flight time from India and a growing number of
cheaper airline options as LCCs launch their near-shore international operations. By our
estimates 41% of net revenues, or $3.2 million, from the Hotel and Packages segment
were generated from the online channel in FY10.
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Exhibit 14: Hotel & Packages Revenue/Channel Mix
Domestic
Holidays &
Hotels, 11%
Outbound
Holidays &
Hotels, 9%
0%
5%
10%
15%
20%
25%
FY10
36%
46%
31%
10%
24%
45%
0% 20% 40% 60% 80% 100%
Domestic
Outbound
Online Retail/B2B Call Centre
Source: Company Reports
Other (3% of FY10 Net Revenue)
Other ancillary services accounted for just 3% of total revenue in FY10. While transaction
volumes are high for rail and bus categories, ticket sizes are small resulting in small
incremental revenue contribution from this segment. Rail transactions in FY10 totaled
185,948 with bus transactions at 57,529.
Rail net revenue contribution was ~$140K in FY11, translating to average revenue per
transaction of $0.75. Similarly the bus segment contributed ~$60K in net revenue in FY10
translating to $1.05 average value per transaction.
Ad revenues and travel insurance contributed a majority of the revenues in this category,
accounting for 2.5% or $1 million of total net revenue.
We estimate the “other” category to more than double in FY11 and a net revenue
contribution of 3.1 million transactions with car rentals added to the mix as well. We also
believe that travel insurance could start to see higher attach rates given a ticket size of
just $2-3 per air ticket.
Exhibit 15: Other - Revenue Trends ($ million) and Revenue Breakdown for FY10
0.1 0.71.2
3.1
6.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2008 2009 2010 2011E 2012E
Ancillary
(Insurance
etc.), 2.50%
Rail, 0.35%
Bus, 0.15%
Source: Company Reports and Oppenheimer & Co. Inc. estimates
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Travel Stores
MMYT operates 19 travel stores in major cities across India, which primarily sell travel
packages. At these travel stores, customers can consult with sales representatives,
receive comprehensive, real time flight, hotel and package information as well as
information for other services and products, and make travel bookings, without prior
appointment. The travel stores are also equipped with MMYT’s ERP application and linked
to their CRM system.
Exhibit 16: Travel Stores in India
Source: Company Reports
Travel Agents’ Network
MMYT also operates a travel agents’ network in India since 2009, where ~4,000 travel
agents across India have the ability to access MMYT’s B2B website, which enables the
travel agents to sell MMYT’s full suite of online travel products to their customers. The
B2B option is attractive to travel agents as it provides access to a range of travel services
and products, which such agents may not be have been able to access cost-effectively or
at all. These travel agents then earn a commission from MMYT based on volume and type
of travel services and products sold. This allows MMYT to expand its footprint in India in a
cost-effective manner.
Call Centers
MMYT has outsourced call center operations to third-party vendors such as IBM Daksh,
and currently the company outsources a portion of its customer service to IBM Daksh and
Intelenet Global Services in India. There are 459 employees who work on behalf of MMYT
at the outsourced vendors. Customers are provided with real time assistance through
these call centers, which are available 24/7.
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Mobile
In 2008, MMYT also launched “makemytrip.mobile,” a mobile service platform. The mobile
channel allows customers to search, book and pay for Indian domestic air tickets on their
mobile phones at no additional cost. Tickets can also be delivered to customers by SMS.
Currently, the mobile service is available only for Indian domestic air tickets. With a mobile
footprint far larger than current internet penetration we view this as a viable distribution
channel as comfort levels.
Supplier Relationships
MMYT has a team of 25 employees dedicated to maintaining and enhancing their existing
relationships, and developing new relationships with travel suppliers. The team negotiates
agreements or arrangements with suppliers for access to travel inventory. MMYT works
with all domestic airlines in India to provide content depth to the consumer. MMYT has
access to real-time inventory for all airlines operating from within India either through the
Amadeus GDS or through direct connects to the airline supplier’s booking system.
Following is a list of top five suppliers to MMYT based on net revenue contribution in
FY10:
Exhibit 17: Top Suppliers to MMYT in FY10
Airlines Airlines Indian Hotels
Domestic International
Jet Airways Emirates Advani Hotels & Resorts
Indigo Jet Airways Indian Hotels
Kingfisher Lufthansa Mahindra Holdings
National Aviation Co. National Aviation Co. Neelam HotelsSpicejet United Airlines Resort Terra Paraiso
Source: Company Reports and Oppenheimer & Co. Inc.
Growth Opportunities/Drivers
We believe that the online travel industry in India is under-penetrated and will continue to
grow faster than the overall Indian travel industry, primarily because of the following
drivers of growth.
Growth in LCCs
The advent of LCCs and increasing competition in the Indian airline industry has lent
affordability to air travel in India and made it a viable alternative for a larger number of
travelers to choose air travel over the traditional rail travel. With the increase in low-cost
airlines, online air travel bookings have also increased since low-cost airlines typically
prefer to use cost-effective distribution channels such as the internet, using it as their
primary distribution channel, either directly or through online travel agents. In FY10 ~30%
of LCC inventory was sold through OTAs. LCCs don’t use GDS for selling their air tickets.
OTAs also enjoy certain exclusive deals and preferred inventory with certain LCCs.
According to the government mandate, newly established airlines have to operate
domestically within India for a period of five years before they can spread their wings
overseas. A majority of the LCCs will be eligible to add overseas routes within the next 12
months. We expect to see increased offerings from LCCs, especially in terms of near-
shore destinations in South East Asia (Hong Kong, Singapore, Malaysia, and Thailand)
MakeMyTrip Limited
22
and Dubai in the Middle-East driving prices down even further to these destinations while
rendering these overseas destinations more attractive to Indian vacationers.
Exhibit 18: Number of LCCs in India
1
4
56 6
7
0
1
2
3
4
5
6
7
8
2004 2005 2006 2007 2008 2009
Source: TRAI
Growth in Internet Penetration
India lags several Asia Pacific markets and is well behind the developed markets in terms
of internet and broadband penetration with ~7% penetration levels (or 81 million internet
users) currently. Of that 7% we believe less than half are broadband users.
However, we believe that internet penetration levels will continue to rise both in the near
and longer term with increased competition and the resultant pricing pressures in the
internet service provider market. Recent broadband spectrum auction by the Indian
government has produced a multitude of players who are looking to offer broadband
internet services and we should see a spate of broadband service offerings in the near
term. We believe true penetration levels to be higher than 7% given that a majority of
potential travel consumers have broadband access at the workplace.
MakeMyTrip Limited
23
Exhibit 19: Internet Penetration Comparison
74.5%
49.0%
24.0%
7.0%5.6%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
North America Europe China India Africa
Source: Euromonitor
Rise in Credit Card Penetration Levels
Indian travelers are able to pay online for travel services and products using a variety of
payment methods, including credit cards, debit cards, cash cards and internet banking.
According to Euromonitor, the number of credit cards in India was over 24.3 million in
2009, having grown at an annualized growth rate of 19% since 2000, while the number of
debit cards in India was over 130 million, having grown at an annualized growth rate of
84% since 2000. Euromonitor expects the number of credit cards in India to reach 73.7
million by 2014 (i.e., annual growth rate of over 25%) and the number of debit cards in
India to reach 350 million by 2014 (i.e., annual growth rate of over 22%).
MakeMyTrip Limited
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Exhibit 20: India’s Credit and Debit Card Mix
Source: Reserve Bank of India and Euromonitor
There are many banks among the Top Business/Finance sites in India, including both
local and international banks (46.5% reach per comScore). Online banking has gained
significant traction over the past few years, having successfully vaulted over the trust
hurdle. We believe it is only a matter of time before credit cards achieve higher
penetration levels in India.
We believe that with increasing sophistication of the banking infrastructure in India and the
provision of more secure online payment interfaces, internet users in India are overcoming
their apprehensions about security in online transactions and thereby adding to the online
consumer base.
Recently the Reserve Bank of India has asked banks to consider introduction of a general-
purpose credit card (GCC) facility up to Rs.25000 at their rural and semi-urban branches.
The credit facility will be structured as a revolving credit, entitling the holder to withdraw up
to the limit sanctioned. If introduced, we believe this could provide further impetus to credit
card growth in India.
India-based Airlines Share Growing as a % of International Traffic Mix
As Indian Network airlines and LCCs add overseas routes from and to India we are
starting to see a mix shift in international air traffic share, with India-based airline share
rising from 29% of international traffic in 2005 to 33% in 2009. In addition, international air
traffic growth from and to India has witnessed an average growth rate of 14% from 2005-
2009. Even in a bad macro period from 2008-2009 traffic was up 6% YoY. We believe
India-based airlines could continue to gain market share on the international traffic front as
they tend to be more popular than the international fare, largely due to superior service
levels, better knowledge of the Indian consumer and service offerings that are customized
to the Indian taste. We believe this bodes well for OTAs due to their tighter relationships
with both Indian Network airlines and LCCs.
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Exhibit 21: International Traffic Market Share
29% 30% 31% 32% 33%
71% 70% 69% 68% 67%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2005 2006 2007 2008 2009
India Mix Foreign Mix
Source: TRAI
Hotel Bookings Growth - A Positive for Margins
The Hotels & Packages business, generally a higher net revenue margin contributor,
accounted for ~20% of total net revenue mix in FY10, up from 14% in FY08. As of June
2010 just 2.4% of MMYT 4,000 hotels were directly connected to MMYT. There is an
increased push by MMYT to grow the number of hotels that are directly connected to them
and we expect capex spending to continue in this area in order to acquire or build
technology platforms to directly connect to hotel suppliers. The hotel industry is heavily
fragmented in India with just a small percentage of rooms available for online booking and
fulfillment. We believe OTAs such as MMYT can play a vital role in bringing a larger
inventory of rooms online. We estimate that, in FY10, the online channel contributed 41%
of the Hotel & Packages revenue at MMYT.
Exhibit 22: Hotel Transaction and Bookings Growth Trends
25.9
81.4109 .7
1 82.1
3 02.3
0
20
40
60
80
10 0
12 0
14 0
16 0
18 0
20 0
0
5 0
10 0
15 0
20 0
25 0
30 0
35 0
20 08 20 09 2 010 2011 201 2
Transac tions
Boo kin gs
Source: Oppenheimer & Co. Inc.
MakeMyTrip Limited
26
Hotel & Packages transactions totaled 109.7 million in FY10 and we are estimating
transaction volume to grow to 182.1 million in FY11 and 302.3 million in FY12 for a FY08-
FY12 CAGR of 192%. We estimate gross bookings to grow at a CAGR of 81% from FY08-
FY12 to reach $188.5 million in FY12.
Hotel net revenue contribution increased from 14% in FY08 to 20% in FY10. We estimate
hotel revenue mix to rise to 29% in FY12 as it increases its supplier relationships in the
hotel segment and increased penetration levels of direct connects.
Exhibit 23: Revenue Mix Shift – FY08-FY12
85%75% 77%
71%64%
14%22% 20%
24%29%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2008A 2009A 2010A 2011E 2012E
Air Hotel Other
Source: Company reports, Oppenheimer & Co. Inc. estimates
Brand Recognition Leads to Market Share Gains
As of the end of 2009, MakeMyTrip had ~48% share of the OTA market in India measured
in terms of gross bookings and it consistently ranks high (top five) in travel searches on
major search engines. India site traffic has grown 178% YoY, totaling more than one
million visits per month. Clearly benefitting from a first mover advantage, MMYT’s brand
recall scores higher in our local surveys in large metropolitan areas such as Mumbai,
Delhi and Bangalore than its closest competitors’ Yatra and Cleartrip. We expect this
trend to continue in tandem with marketing expenditures. We are estimating marketing
spend to increase from $9.7 million in FY10 to $12.7 million in FY11 and $18.1 million in
FY12.
MakeMyTrip Limited
27
Competition MMYT faces competition from OTAs, suppliers, met search engines and traditional travel
agencies. PhoCusWright estimates that the total “business-to-customer” online travel
agency market (i.e., businesses serving end consumers with travel products and/or
services through an online channel) in India is valued at $1 billion and is dominated by
four players—MakeMyTrip, Yatra, Cleartrip and Travelguru (which was acquired by
Travelocity in August 2009). Of these, MakeMyTrip commands a market share of 48%,
followed by Yatra at 24% and Cleartrip at 18%, based on gross bookings for 2009. These
online travel agencies face competition from traditional travel agents as well as meta
search engines, such as Ixigo, Ezeego1 and Zoomtra.
Exhibit 24: OTA Market Share in India
MakeMyTrip, 48%
Cleartrip, 24%
Yatra, 18%
Others, 10%
Source: PhocusWright & Oppenheimer & Co. Inc.
In addition to its rival Indian OTAs, MMYT also faces competition from supplier direct
websites as suppliers have been steadily focusing on increasing online demand on their
own websites and decreasing or eliminating their dependence on third-party distributors.
For instance, many low-cost airlines may, subject to applicable regulations, reduce
commissions to agents including OTAs or restrict the amount of service fees that OTAs
are able to charge customers. Suppliers who sell on their own websites typically do not
charge a processing fee, and, in some instances, offer advantages such as their own
bonus miles or loyalty points, which could make their offerings more attractive to
customers rather than OTAs.
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Exhibit 25: Supplier Direct Vs. OTAs
Supplier
Direct, 55%
OTAs, 45%
Source: Reserve Bank of India and Euromonitor
Cleartrip.com recently launched website operations in the United Arab Emirates. Large,
established internet search engines have also recently launched applications offering
travel itineraries in destinations around the world, and meta-search companies who can
aggregate travel search results also compete against MMYT for customers.
Many airlines, hotels, car rental companies and tour operators have call centers and have
established their own travel distribution websites. From time to time, travel suppliers offer
advantages, such as bonus loyalty awards and lower transaction fees or discounted
prices, when their services and products are purchased from supplier-related channels.
On the hotel end of the business MMYT competes with large traditional travel agencies in
India such as Cox & Kings, Kuoni India and Thomas Cook, all of which are established
industry players in the Indian travel market.
Travel Suppliers: Generally, at the top of the travel distribution value chain are suppliers
that seek cost-effective ways to reach end-user travelers. Historically, these suppliers
relied largely on traditional GDS to connect their inventory of products and services with
travel agencies, which in turn distribute the products and services to travelers.
Meta Travel Search Engines: These are online travel search sites such as Ixigo,
Ezeego1, Zoomtra and Kayak.com, and travel research sites that have search
functionality, such as TripAdvisor (Expedia-owned).
Supplier Websites: Recently, travel suppliers have begun to utilize other forms of
distribution, including direct distribution via their own websites. Many travel suppliers such
as airlines and hotel companies have their own branded websites to drive business
Traditional Travel Agencies: Traditional retail travel agencies, supplier reservation
centers and ticket offices remain the largest distribution channels for travel in India. While
the emergence of the Internet, has added additional channels for travel fulfillment
penetration however remains low due to the nascent nature of this channel.
MakeMyTrip Limited
29
Management Team
Exhibit 26: Management Team
Name Role
Deep Kalra Founder and CEO
Mr. Deep Kalra founded MakeMyTrip in April, 2000. Past
experience includes stints at GE Capital, AMF Bowling Inc. and ABN AMRO Bank. Mr. Kalra holds a Bachelor's
degree in Economics from St. Stephen's College, Delhi (1990), and a MBA (PGDM) degree from the Indian
Institute of Management, Ahmedabad (1992).
Rajesh Magow Co-Founder and CFO
Mr. Rajesh Magow is the Chief Financial Officer of the company. Along with F&A, Mr. Magow oversees
Outsourced Operations, Automation and Quality FunctionHe has over 18 years of functional expertise in
the IT, ITES and Internet industries. Prior to MakeMyTrip, Mr. Magow worked with ebookers/Cendant (now
Travelport) as CFO and Head of Financial Operations as well as being the Active CEO for a year. Mr. Magow is a
Chartered Accountant from the Institute of Chartered Accountants of India, New Delhi
Keyur Joshi Co-Founder and COO
Along with being responsible for sales and business
development, Mr. Joshi's portfolio includes establishing MakeMyTrip's presence in the US market. Before
founding MakeMyTrip, Mr. Joshi worked with Around the World Travel (now called JustFares.com). He has also
worked with Tata Motors, in Market Research and Product Management. Mr. Joshi holds a Bachelor's
degree in Chemistry from Gujarat University and a MBA degree from the City University of New York, New York.
Mohit Gupta Chief Marketing Officer
Mr. Mohit Gupta oversees all marketing activities for the
company. Mr. Gupta has over 11 years of experience in marketing at Pepsi Foods as VP Marketing and Voltas.
Mr. Gupta holds a B.Tech degree in Mechanical Engineering and an MBA from the Indian Institute of
Management, Calcutta.
Amit Somani Chief Products Officer
Mr. Amit Somani heads the online product portfolio at
MakeMyTrip. Mr. Somani comes with over 15 years of experience at Google as Head of Mobile Products Asia-
Pac and IBM as Director for the Enterprise Search and Discovery business. Mr. Somani holds 7 patents and a
B.Tech in Computer Science and Engineering from IT-
BHU and an M.S. in Computer Science.
Rajnish Kapur Chief Innovation Officer
Mr. Rajnish Kapur is responsible for Automation, UI, Content and Quality Assurance. Mr. Kapur has over 20
years of professional experience at the Travel & Distribution practice and Solution Delivery at Kale
Consultants Limited. Mr. Kapur was also CEO/CTO of Cognosys, a company focused on Travel Technology,
which he founded in 2000. He also co-founded eTravelIndia.com. He holds a Bachelor's degree in
Engineering (CS) and a Bachelors degree in Economics from Delhi University.
Source: Company Reports & Oppenheimer & Co
MakeMyTrip Limited
30
Financial and Outlook
Exhibit 27: Financials at a Glance
16.4 25.040.3
61.6
93.8
0
20
40
60
80
100
2008A
2009A
2010A
2011E
2012E
Net Revenues
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%
2008A
2009A
2010A
2011E
2012E
Net Rev as % of Gross Bookings
225 313466
724
1,048
0
500
1000
1500
2008A 2009A 2010A 2011E 2012E
Gross Bookings
9191332
1877
2550
3328
0
5 0 0
1 0 0 0
1 5 0 0
2 0 0 0
2 5 0 0
3 0 0 0
3 5 0 0
2008A
2009A
2010A
2011E
2012E
Tra nsa c tions
-14.9
-8.6
2.3
7.9
22.3
-20
-10
0
10
20
30
2008A 2009A 2010A 2011E 2012E
EBITDA
Source: Company reports, Oppenheimer & Co. Inc. estimates
FY09 Review
FY09 revenue of $68.6 million was up 79% YoY. Airline segment was up 36% to $19.2
million with the Hotel and Packages segment more than doubling to $48.6 million. Airline
Gross Bookings increased 31% YoY benefiting from transaction growth of 21% and 8%
higher Average value per transaction. Net revenue margins remained flat YoY at 7.2%.
Loss reported for FY09 was $7.3 million a significant improvement over the $18.9 million
loss in 2008. Net revenues of $25 million constituted 75% Airlines, 22% Hotels &
Packages and 3% other. Blended gross margin of 8% was up 70bps YoY.
Balance Sheet & Cash Flow
Cash on the balance sheet inclusive of term deposits held in various banks in India and its
recent IPO proceeds as of FY10 was $78.68 million ($10.2 million in cash, $14.04 million
in term deposits and ~$54.44 million in net IPO proceeds).
MakeMyTrip Limited
31
Capital expenditures of $0.9 million and $1.1 million were made in FY09 and FY10. The
company expects to make ~$2.2 million in Capex in FY11.
Recent Results/News IPO Details
MakeMyTrip went public on August 12, 2010 at $14/share and is listed on the Nasdaq
under the ticker MMYT. Total net proceeds to the company (net of underwriting discount
and expenses) were ~$54.44 million and are expected to be used for expanding
operations through acquisitions of ongoing operations. The percentage of shares under
lock-up for 180 days post listing is 85.4%.
Following the public issue of 5.75 million shares (including a greenshoe of 750K shares),
the total number of pro-forma outstanding shares is 34.4 million, and there are 36.6 million
fully diluted shares.
US Investors Thirsty for India Investment Options
There has been a scarcity of options to invest in the Indian market for US investors with
less than 20 Indian companies listed in the US market and just a handful of mutual funds.
MMYT is the first IPO from India since 2006 to list in the US. Couple that with a float size
of just 5.75 million or 16.7% of shares outstanding and it’s no surprise to see the demand
for MMYT.
FY10 Results
FY10 revenue of $83.6 million was up 22% YoY largely on the 67% YoY growth in airline
revenue of $32.1 million. Airline gross bookings increased 57% YoY benefiting from
transaction growth of 41% and 11% higher average value per transaction. Net revenue
margins improved 40bps YoY to 7.6% largely due to incentives paid by some airlines,
better commissions from certain consolidators. Hotel & Packages growth slowed to 3.4%
large due to an unfavorable macro scenario both in India and overseas. While gross
bookings were up 9.4%, average value per transaction declined 19% in FY10 as
consumers chose to travel domestically (lower price point) in a weak macro. Transaction
growth in Hotel & Packages was healthy at 35%.
On a non-GAAP basis FY10 marked the first profitable year for MakeMYTrip posting a net
profit of $1.5 million, or $0.05 in EPS.
F2Q11 Outlook
For the Sep-quarter (F2Q), due to seasonality, we estimate transaction volume for Air-
ticketing to decline 8% QoQ, and gross bookings to decline 4% QoQ to $140.1 million
yielding net revenues of $10.1 million. We believe seasonality will have a greater impact
on the Hotel and Packages business and are estimating Hotel transaction volume to
decline 15% QoQ with gross bookings down 28% QoQ due to a 15% decline in ASPs as
well. We estimate Hotel and Packages net revenue of $2.8 million for total net revenue of
$13.6 million for the Sep-quarter. We estimate $0.01 in non-GAAP EPS for the Sep-
quarter.
FY11 Outlook
For FY11 we estimate net revenues of $61.6 million with Air representing 71% of the mix,
Hotels 24% and Other 5%. We estimate transaction volumes (Air and Hotel) to grow 36%
MakeMyTrip Limited
32
YoY to yield bookings growth of 55% with blended average value per transaction up 11%.
We estimate $0.18 in non-GAAP EPS for FY11.
FY12 Outlook
For FY12, we estimate net revenues of $93.8 million (up 52% YoY) with Air representing
64% of mix, Hotels 30% and Other 6%. We estimate transaction volumes (Air and Hotel)
to grow 31% YoY to yield bookings growth of 45% with blended average value per
transaction up 14%. We estimate $0.46 in Non-GAAP EPS for FY12.
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Exhibit 28: MMYT Revenue/Margin Trends
85%75% 77%
71%64%
14%22% 20%
24%29%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2008A 2009A 2010A 2011E 2012E
Air Hotel Other Gross Margin
Source: Company Reports and Oppenheimer & Co. Inc. estimates
Valuation Exhibit 29: MMYT Valuation (share price a/o 9/21/10)
Share Price $34.07
Shares Outstanding (M) 36.6
Market Cap ($M) $1,247.62
CY10 EPS $0.11
CY11 EPS $0.40
CY10 EBITDA ($M) $4.9
CY11 EBITDA ($M) $19.2
CY10 Growth 52%
CY11 Growth 56%
CY10 Revenue $54.8
CY11 Revenue $85.7
CY10 PE 309.7x
CY11 PE 85.2x
CY10 EBITDA Multiple 253.3x
CY11 EBITDA multiple 65.0x
CY10 Rev multiple 22.7x
CY11 Rev Multiple 14.6x
CY10 PEG 5.9x
CY11 PEG 1.5x
Source: Oppenheimer & Co. Inc. estimates
Our rating on MMYT shares is Perform. MMYT currently trades at a multiple of 85x our
CY11E EPS of $0.40 vs. the peer average of 33x and a PEG of 1.5x CY11 estimated
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revenue growth of 56% vs. its closest peer CTRP at 1.2x and a peer median PEG multiple
of 1.3x. Our DCF analysis yields a share price of $35, rendering the shares fairly valued at
current levels. We arrive at our DCF using an 11% WACC and a terminal value of $2.8
billion in FY20. Since its IPO (August 12, 2010), MMYT has catapulted nearly 150% from
its offer price of $14, and we believe the upside from current levels is limited. In addition,
we believe volatility due to a small float size remains a near-term risk.
FX Impact
MMYT’s exposure to FX risk primarily arises with respect to its non-India rupee
denominated trade and other receivables and other payables. In FY10 a 10.0%
appreciation of the USD against the INR assuming all other variables remained constant,
would have decreased MMYT’s loss for the year by $0.2 million. Similarly, a 10.0%
depreciation of the USD against the INR in FY10, assuming all other variables remained
constant, would have increased MMYT’s loss for the year by $0.2 million. On the
operations side 9.1% of revenue was in USD reflecting inbound air-ticket revenue booked
through the offline channel. MMYT does not have any hedging agreements in place.
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Investment Risks
Areas of Consideration Supplier Relationships: Inability to maintain existing and establish new relationships with
travel suppliers could adversely affect the business.
Technology Risk: Being an online technology-driven business any disruption in the
technology infrastructure could adversely impact the business.
Competition Risk: The travel industry in India is intensely competitive. MMYT may not
have the financial resources to maintain its competitiveness in the marketplace against
deeper pocketed competitors.
Increasing Competition from Supplier Direct Channels: MMYT faces competition not
only from other OTAs but also from its own travel suppliers such as airline, hotels, rental
cars who may have their own websites.
Continued Competition from Traditional Travel Agencies: MMYT competes with all
traditional travel companies who may also have online initiatives given all travel agents
are targeting the same customer.
Air Commission Pressures: Air suppliers (including Amadeus its GDS provider) may
reduce or eliminate commissions in the future, which could adversely affect the profitability
of the business.
International Operations, recently launched in the UAE and Canada, constitute an
additional risk.
Online Security Risk: Being an online business, MakeMyTrip is susceptible to online
security breaches and Credit card fraud.
Significant Shareholder Risk: SAIF owning over 43% of shares outstanding constitutes
a risk.
Extraneous Event Risk: The travel industry in India is susceptible to extraneous events
such as terrorist attacks and other acts of violence, which may result in a reduction in
travel volumes.
Driving the Hotel Business Growth Online Could Be Challenging: MMYT sells hotels
and packages largely through its offline channel. Given a highly fragmented and immature
hotel industry in India, we believe driving the hotel business online could be challenging.
Internet Penetration Risk: India lags several Asia Pacific markets and is well behind the
developed markets in terms of internet and broadband penetration with ~7% penetration
levels (81 million internet users) currently. Internet penetration may not grow as expected
given various challenges in the marketplace.
Credit Card Penetration Risk: According to Euromonitor and the Reserve Bank of India,
the number of credit cards in India in 2009 was over 25.5 million, having risen at an
annualized growth rate of 19% since 2000, while the number of debit cards in India was
over 130 million, having expanded at an annualized growth rate of 84% since 2000.
Euromonitor expects the number of credit cards in India to reach 73.7 million by 2014 (i.e.,
an annual growth rate of over 25%) and the number of debit cards in India to reach 350
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million by 2014 (i.e., an annual growth rate of over 22%). Credit card growth may not pan
out as estimated due to the highly risk-averse nature of the Indian consumer.
Companies Mentioned in This Report Not Covered by Opco (prices are a/o 9/21/10)
Jet Airways (BOM: 532617, Rs. 792.30)
Kingfisher Airlines (BOM: 532747, Rs. 63.30)
United Airlines (UAUA, NASDAQ, $23.50)
Spicejet (BOM:500285, Rs. 75.50)
IBM (IBM, NYSE, $131.98)
India Hotels (BOM: 500850, Rs. 104)
Advani Hotels & Resorts India Ltd. (BOM: 523269, Rs. 58.20)
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MMYT Comps ($ in million, except per share data)
Comparable Values
9/21/2010 52-Week Share Market Net Enterprise
Company Ticker Price High Low O/S (dil) Cap Debt Cash Debt Value
US Travel
Expedia EXPE $28.65 $28.96 $18.30 284.0 8,138 $895 $1,130 ($235) $7,903
Orbitz OWW $6.18 $8.11 $3.56 102.3 632 511 $162 349 $981
Priceline PCLN $341.02 $349.97 $154.12 48.4 16,501 558 $1,240 (682) $15,819
Asia Travel
Ctrip.com CTRP $43.99 $47.01 $26.52 147.9 6,504 0 $477 (477) $6,028
eLong Inc LONG $19.58 $19.87 $9.10 23.7 464 0 $140 (140) $323
MakeMyTrip MMYT $34.07 $41.47 $20.75 36.6 1,247 3 $79 (76) $1,171
Operating and Valuation Statistics
FY Enterprise CY Rev EV/Revenue CY EPS P/E PEG Revenue
Company End Value 2010E 2011E 2010E 2011E 2010E 2011E 2010E 2011E GrowthUS Travel
Expedia Dec $7,903 $3,258.3 $3,645.5 2.43x 2.17x $1.67 $1.95 17.2x 14.7x 1.2 11.9%
Orbitz Dec $981 $759.6 $834.0 1.29x 1.18x $0.11 $0.26 56.2x 23.8x 2.4 9.8%
Priceline Dec $15,819 $2,992.8 $3,633.1 5.29x 4.35x $12.26 $15.01 27.8x 22.7x 1.1 21.4%
Average 5.6x 4.5x Average 50.3x 34.5x 1.9x
Median 4.5x 3.7x Median 47.3x 23.8x 1.2x
Asia Travel
Ctrip.com Dec $6,028 $422.5 $550.8 14.27x 10.94x $0.93 $1.22 47.3x 36.1x 1.2 30.4%
eLong Inc Dec $323 $72.0 $87.3 4.49x 3.71x $0.19 $0.26 103.1x 75.3x 3.5 21.2%eLong Inc Dec $323 $72.0 $87.3 4.49x 3.71x $0.19 $0.26 103.1x 75.3x 3.5 21.2%
MakeMyTrip Mar $1,171 $54.8 $85.7 21.37x 13.67x $0.11 $0.40 309.7x 85.2x 1.5 56.4%
Source: Oppenheimer & Co. estimates
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DCF Valuation($ in Millions, except per share amounts)
COST OF EQUITY ANALYSIS
SUBJECT COMPANY ASSUMPTIONS:
Industry Unlevered Beta 1.50 Market Return Assumptions
MVD% 0.2% Risk Free Rate 2.00%MVE% 99.8% Market Risk Premium 6.00%Subject Company Marginal Corporate Tax Rate 20.0% Small Capitalization Premium (if applicable) 0.00%Subject Company Levered Beta 1.50
Cost of Equity 11.0%
Terminal Growth Rate 4.00%
COST OF DEBT ANALYSIS
SUBJECT COMPANY DEBT:
Cost Amount
Bank Debt 2.8% $12
Total Debt
WEIGHTED AVERAGE COST OF CAPITAL ANALYSIS
AssumedCapitalization Capital Tax After Tax Contribution
% of Total Cost Shield Capital Cost to WACC
MVD% 0.2% 2.8% 20.0% 2.2% 0.0%MVE% 99.8% 11.0% 0.0% 11.0% 11.0%
Total Capitalization 100.0% 11.0%
Source: Oppenheimer & Co
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DISCOUNTED CASH FLOW ANALYSIS
WACC Based on CAPM Model 11.0%WACC Used to Discount Cash Flow 11.0%
NOMINAL CASH FLOW TO THE UNLEVERED FIRM:
Projected FYE Mar 31
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Revenue $40 $62 $94 $136 $190 $257 $339 $431 $517 $610 $702% Growth 61.2% 52.8% 52.3% 45.0% 40.0% 35.0% 32.0% 27.0% 20.0% 18.0% 15.0%
EBITDA $2 $8 $22 $45 $63 $85 $112 $142 $171 $201 $232
Operating Income $1 $6 $20 $45 $63 $85 $112 $142 $171 $201 $232Less: Income Taxes (0) (1) (4) (9) (13) (17) (22) (28) (34) (40) (46)
Unlevered Cash Net Income $1 $5 $16 $36 $50 $68 $90 $114 $136 $161 $185
Plus: Depreciation and Amortization 0 0 0 0 0 0 0 0 0 0 0Plus: (Increase) Decrease in Operating Working Capital 3 4 5 6 6 7 7 8 9 10 11Less: Cash Flow from Investing 0 0 0 0 0 0 0 0 0 0 0
Unlevered Free Cash Flow $4 $9 $21 $41 $56 $75 $97 $122 $145 $171 $196
Terminal Value $2,801
Nominal Period Cash Flow to the Unlevered Firm $4 $9 $21 $41 $56 $75 $97 $122 $145 $171 $196
Number of Periods to Discount Back Unlevered Free Cash Flow 0.00 0.75 1.75 2.75 3.75 4.75 5.75 6.75 7.75 8.75 9.75
Imputed Present Value of Period Cash Flow to the Unlevered Firm $4 $8 $17 $31 $38 $45 $53 $60 $65 $69 $71
Imputed Present Value Of Terminal Value $1,013
IMPUTED PRESENT VALUE OF ENTERPRISE $1,210
Plus: Cash and cash equivalents 76Less: Debt 12Plus: Non Cash Generating Assets 0
IMPUTED PRESENT VALUE OF EQUITY $1,273
Diluted Shares Outstanding 37
EQUITY VALUE PER SHARE $34.78
Source: Oppenheimer & Co
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MMYT - Income StatementFY FY 1Q10 2Q10 3Q10 4Q10 FY 1Q11A 2Q11E 3Q11E 4Q11E FY FY
(In millions except per shr or as indicated)2008A 2009A Jun-09 Sep-09 Dec-09 Mar-10 2010A Jun-10 Sep-10 Dec-10 Mar-11 2011E 2012E
Revenues:
Air-ticketing
Revenues 14.0 19.2 7.8 7.3 8.4 8.6 32.1 10.3 10.4 11.6 12.9 45.2 62.0
Service Cost - 0.5 0.8 0.0 0.2 0.0 1.0 0.3 0.3 0.3 0.5 1.4 1.9
Net Revenues 14.0 18.7 7.1 7.3 8.2 8.6 31.1 10.0 10.1 11.3 12.4 43.8 60.1
Hotels & Packages
Revenues 24.2 48.6 14.6 9.4 14.1 12.2 50.3 15.4 14.8 16.4 16.1 62.7 78.6
Service Cost 21.8 43.1 12.4 7.9 11.8 10.3 42.3 12.0 12.0 12.0 12.0 48.0 51.0
Net Revenues 2.4 5.6 2.2 1.5 2.3 2.0 8.0 3.4 2.8 4.4 4.1 14.7 27.6
Others 0.1 0.7 0.3 0.2 0.4 0.3 1.2 0.5 0.7 0.9 1.0 3.1 6.0
Total revenues 38.3 68.6 22.6 17.0 22.8 21.1 83.6 26.2 25.9 28.9 30.0 110.9 146.7
Less: Service Cost 21.8 43.6 13.1 7.9 12.0 10.3 43.3 12.3 12.3 12.3 12.5 49.4 52.9
Net revenues 16.4 25.0 9.5 9.1 10.9 10.8 40.3 13.9 13.6 16.6 17.5 61.6 93.8
Total Gross Bookings 225.0 313.3 109.8 107.3 123.9 124.9 465.8 174.6 160.4 188.3 201.2 724.5 1,047.7
Total Transactions 919.5 1,332.1 453.1 440.3 492.3 490.9 1,876.6 633.0 576.7 643.3 696.7 2,549.8 3,328.2
Blended ASP (Air, H&P) 244.7 235.2 242.2 243.7 251.6 254.4 248.2 275.8 278.1 292.6 288.8 284.1 314.8
Operating expenses:
Payment Gateway 5.0 1.4 1.4 1.6 1.7 6.1 2.2 2.4 2.8 2.8 10.3 16.1
Personnel Expenses 8.1 9.3 2.2 2.4 2.4 2.8 9.8 3.3 3.8 4.3 4.2 15.6 18.7
SG&A 11.9 2.9 2.7 3.3 3.5 12.3 3.9 3.5 3.8 3.9 15.1 18.5
Marketing Expenses 23.2 7.5 2.3 2.2 2.6 2.6 9.7 2.6 3.1 3.5 3.5 12.7 18.2
Depreciation 1.1 1.6 0.4 0.4 0.4 0.4 1.6 0.4 0.4 0.4 0.4 1.8 2.4
Total operating expenses 32.5 35.2 9.1 9.1 10.3 11.0 39.5 12.4 13.4 14.9 14.8 55.5 73.8
Non-GAAP Operating Income (16.0) (10.2) 0.4 0.0 0.5 (0.2) 0.8 1.4 0.2 1.7 2.7 6.1 19.9
Miscellaneous 0.2 (0.7) 0.2 0.1 0.1 0.2 0.7 0.3 0.4 0.3 0.3 1.4 1.8
Pre-tax Income (15.8) (10.9) 0.7 0.1 0.6 0.0 1.5 1.7 0.6 2.0 3.0 7.4 21.7
Income tax benefit (expense) 0.0 0.0 - - - (0.0) (0.0) (0.0) (0.1) (0.4) (0.6) (1.1) (4.3)
Non-GAAP Net Income (15.8) (10.9) 0.7 0.1 0.6 0.0 1.5 1.7 0.5 1.6 2.4 6.3 17.4
GAAP Net Income (19.0) (7.3) (6.1) (0.1) 0.5 (0.4) (6.2) 1.3 0.1 1.2 2.1 4.7 15.8
Non GAAP EPS (diluted) (0.59)$ (0.37)$ 0.02$ 0.00$ 0.02$ 0.00$ 0.05$ 0.05$ 0.01$ 0.04$ 0.07$ 0.18$ 0.46$
GAAP EPS (0.70)$ (0.25)$ (0.21)$ (0.00)$ 0.02$ (0.01)$ (0.21)$ 0.04$ 0.00$ 0.03$ 0.06$ 0.13$ 0.42$
Basic 12.0 12.2 12.5 12.6 12.7 12.9 12.7 29.9 34.1 34.1 34.1 33.1 35.0
Shares outstanding (diluted) 27.0 29.8 29.8 29.8 29.8 29.8 29.8 32.5 36.6 36.6 36.6 35.6 37.5
EBIT (16.0) (10.2) 0.4 0.0 0.5 (0.2) 0.8 1.4 0.2 1.7 2.7 6.1 19.9
EBITDA (14.9) (8.6) 0.8 0.4 0.9 0.2 2.3 1.9 0.7 2.2 3.2 7.9 22.3
Exchange Rate (INR/USD) 48.58 46.40 46.30 45.72
Source: Company reports, Oppenheimer & Co. estimates
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MMYT - Margin AnalysisFY FY 1Q10 2Q10 3Q10 4Q10 FY 1Q11A 2Q11E 3Q11E 4Q11E FY FY
2008A 2009A Jun-09 Sep-09 Dec-09 Mar-10 2010A Jun-10 Sep-10 Dec-10 Mar-11 2011E 2012E
Margin Analysis
Revenue Mix
Air-ticketing 85.3% 75.0% 74.2% 80.6% 75.5% 79.0% 77.3% 72.1% 74.2% 68.1% 70.9% 71.1% 64.1%
Hotels & Packages 14.4% 22.2% 23.1% 16.8% 21.3% 18.1% 19.8% 24.2% 20.8% 26.5% 23.4% 23.8% 29.5%
Others 0.3% 2.8% 2.7% 2.7% 3.2% 2.8% 2.9% 3.7% 5.0% 5.4% 5.7% 5.0% 6.4%
Air
Gross Margin 7.1% 7.4% 7.6% 7.6% 7.6% 7.7% 7.9% 6.8% 7.2% 7.2% 7.2% 7.3% 7.0%
Service Cost Margin 0% 2.6% 9.7% 0.2% 2.2% 0.3% 3.1% 0.8% 0.8% 0.8% 0.8% 3.1% 3.1%
H&P
Gross Margin 9.1% 10.6% 13.0% 14.0% 14.4% 14.6% 14.0% 11.9% 14.0% 13.9% 14.4% 14.5% 15.7%
Service Cost Margin 90.2% 88.6% 84.9% 83.7% 83.7% 83.9% 84.1% 83.7% 83.6% 83.5% 83.4% 76.6% 64.9%
Blended
Gross margin 7.3% 8.0% 8.7% 8.5% 8.8% 8.7% 8.6% 8.7% 8.7% 8.7% 8.7% 8.5% 9.0%
Service Cost Margin 57.0% 63.5% 58.0% 46.4% 52.5% 48.7% 51.8% 47.0% 47.5% 42.6% 41.6% 44.5% 36.1%
Payment Gateway 20.0% 15.0% 15.0% 15.0% 15.9% 15.3% 18.0% 18.0% 17.0% 16.0% 17.0% 17.0%
Personnel Expenses 49.5% 22.0% 24.0% 24.0% 24.0% 25.7% 24.3% 26.0% 28.0% 26.0% 24.0% 26.0% 20.0%
SG&A 141.3% 35.0% 30.0% 30.0% 30.0% 24.3% 30.5% 25.0% 26.0% 23.0% 22.0% 25.0% 20.0%
Marketing Expenses 30.0% 24.0% 24.0% 24.0% 24.0% 24.1% 21.0% 23.0% 21.0% 20.0% 21.0% 19.5%
Depreciation 6.7% 6.2% 3.8% 4.2% 3.7% 3.9% 3.9% 3.2% 3.3% 2.7% 2.6% 2.9% 2.6%
Operating margin (%) -97% -41% 4% 0% 5% -2% 2% 10% 2% 10% 15% 10% 21%
Effective tax rate (%) 0% 0% 0% 0% 0% 0% 0% 20% 20% 20% 20% 20% 20%
Net margin (%) -96% -44% 7% 1% 6% 0% 4% 12% 4% 10% 14% 10% 19%
Source: Company reports, Oppenheimer & Co. estimates
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MMYT - Growth AnalysisFY FY 1Q10 2Q10 3Q10 4Q10 FY 3.3 2Q11E 3Q11E 4Q11E FY FY
2008A 2009A Jun-09 Sep-09 Dec-09 Mar-10 2010A Jun-10 Sep-10 Dec-10 Mar-11 2011E 2012E
Sequential Growth Rates
Air
Revenues 43.0% -6.1% 14.2% 2.4% 19.9% 1.0% 11.5% 11.6%
Service Cost 54.4% -98.4% 1429.9% -83.7% 898.7% 0.0% 0.0% 62.1%
Net Revenues 41.9% 3.8% 11.9% 4.4% 16.8% 1.0% 11.8% 10.3%-
Hotels & Packages
Revenues 65.1% -35.5% 50.4% -13.3% 25.6% -3.4% 10.4% -1.7%
Service Cost 65.9% -36.4% 50.3% -13.1% 16.9% 0.0% 0.0% 0.0%
Net Revenues 60.4% -30.5% 51.1% -14.8% 71.0% -15.6% 54.6% -6.5%-
Others -7% -4% 45% -12% 66% 33% 31% 12%
Total revenues 55% -25% 35% -8% 24% -1% 11% 4%
Service Cost 65% -40% 52% -14% 19% 0% 0% 2%
Net revenues 44% -4% 19% 0% 28% -2% 22% 6%
Total Gross Bookings 30% -2% 15% 1% 40% -8% 17% 7%
Payment Gateway
Non-GAAP Operating Income
Pre-tax Income
Non-GAAP Net Income
GAAP Net Income
YoY Growth Rates
Air
Revenues 37.0% 88.3% 53.0% 74.1% 57.1% 67.1% 31.6% 41.6% 38.2% 50.6% 40.7% 37.3%
Service Cost -93.9% 100.4% 1519.3% 40.7% 37.3%
Net Revenues 33.5% 70.0% 52.7% 70.3% 72.0% 66.2% 41.6% 37.7% 37.7% 45.4% 40.7% 37.3%
Hotels & Packages
Revenues 101.0% -7.7% -9.2% 3.0% 38.7% 3.4% 5.5% 58.1% 16.1% 31.6% 24.6% 25.5%
Service Cost 97.3% -14.7% -15.6% -0.1% 37.8% -1.8% -2.9% 52.7% 1.6% 16.9% 13.5% 6.3%
Net Revenues 134.8% 71.3% 49.4% 22.8% 43.4% 44.0% 52.9% 85.7% 90.1% 108.7% 83.6% 88.2%
Others 1308% 118% 42% 140% 13% 64% 90% 95% 100% 120% 167% 95%
Total revenues 79% 13% 13% 13% 13% 22% 16% 16% 16% 16% 33% 32%
Service Cost 100% -9% -9% -9% -9% -1% -6% -6% -6% -6% 14% 7%
Net revenues 52% 71% 71% 71% 71% 61% 46% 46% 46% 46% 53% 52%
Total Gross Bookings 39% 55% 55% 55% 55% 49% 59% 59% 59% 59% 56% 45%
Total Transactions 45% 41% 36% 31%
Payment Gateway
Non-GAAP Operating Income
Pre-tax Income
Non-GAAP Net Income
GAAP Net Income
Diluted EPS -37.4% -106.7% -102.0% -124.9% -100.6% -113.3% 138.2% 232.2% 110.2% 5650.1% 262.9% 162.1%
Source: Company reports, Oppenheimer & Co. estimates
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MMYT Consolidated Balance SheetFY FY FY FY
In $Millions 2009A 2010A 2011E 2012E
Cash & Cash Eq 5.5 9.3 64.0 75.0
Term Deposits 8.3 13.2 14.0 15.1
Inventories 0.8 0.0 0.0 0.0
Current Tax Assets 0.9 0.9 0.9 1.0
Trade and Other Rec 5.1 12.0 18.0 23.4
Other Current Assets 3.7 7.5 7.5 9.0
Total Current Assets $24.2 $43.0 $104.5 $123.6
PPE 3.5 3.7 5.9 8.1
Intangible Assets 2.0 2.0 2.0 2.0
Trade Rec 0.3 0.4 0.4 0.4
Term Deposits 7.8 1.3 1.4 1.5
Other Assets 0.2 0.1 0.1 0.1
Total Assets $37.9 $50.6 $114.4 $135.8
Liabilities and Equity
Bank Overdraft 7.9 4.0 3.0 4.0
Loans 39.7 40.8 0.0 0.0
Trade Payables 13.4 26.5 34.4 44.7
Deferred Income 0.6 0.8 1.0 1.2
Other current liabilities 0.3 0.6 0.6 0.6
Total Current Liabilities $62 $73 $39 $50
Loans and Borrowings 0.0 0.1 0.0 0.0
Employee Benefits 0.3 0.4 0.4 0.4
Deferred Income 2.3 1.9 2.2 2.5
Derivatives 0.3 0.0 0.0 0.0
Other non-current liab 0.3 0.4 2.2 3.3
Total liabilities 65.1 75.6 43.8 56.8
Owners Equity (SE) ($27.2) ($25.0) $70.5 $79.1
Total Liabilities and Equity $37.9 $50.6 $114.4 $135.8
Source: Company reports, Oppenheimer & Co. estimates
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Investment Thesis
We are bullish on the growth prospects of India's largest OTA (48% share of gross bookings) on both revenues and margins. We
forecast top line growth of 52% in FY11 and FY12 and expect margins to expand 40bps from FY10 to FY12. Growth levers such as LCC
growth, especially at the domestic level, rise in credit/debit card penetration levels and increasing internet penetration are positive for the
name, in our view. However, we believe at current levels near-term valuation is stretched. Since its IPO (Aug 12), MMYT has catapulted
~150% from its offer price of $14, and we believe the upside from current levels is limited.
Important Disclosures and CertificationsAnalyst Certification - The author certifies that this research report accurately states his/her personal views about the
subject securities, which are reflected in the ratings as well as in the substance of this report.The author certifies that no
part of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views
contained in this research report.
Potential Conflicts of Interest:
Equity research analysts employed by Oppenheimer & Co. Inc. are compensated from revenues generated by the firm
including the Oppenheimer & Co. Inc. Investment Banking Department. Research analysts do not receive compensation
based upon revenues from specific investment banking transactions. Oppenheimer & Co. Inc. generally prohibits any
research analyst and any member of his or her household from executing trades in the securities of a company that such
research analyst covers. Additionally, Oppenheimer & Co. Inc. generally prohibits any research analyst from serving as an
officer, director or advisory board member of a company that such analyst covers. In addition to 1% ownership positions in
covered companies that are required to be specifically disclosed in this report, Oppenheimer & Co. Inc. may have a long
position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in
options, futures or other derivative instruments based thereon. Recipients of this report are advised that any or all of the
foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of
interest.
Important Disclosure Footnotes for Companies Mentioned in this Report that Are Covered byOppenheimer & Co. Inc:
Stock Prices as of September 23, 2010
Ctrip.com International Ltd. (CTRP - Nasdaq, 44.38, OUTPERFORM)
0
10
20
30
40
50
2008 2009 2010
05/06/09I:O:$37
05/12/09O:$40
07/24/09O:$51
11/12/09O:$71
02/22/10O:$41
03/03/10O:$40
08/09/10O:$45
Rating and Price Target History for: Ctrip.com International Ltd. (CTRP) as of 09-22-2010
Created by BlueMatrix
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20
25
30
35
40
45
2008 2009 2010
09/22/10I:P:NA
Rating and Price Target History for: MakeMyTrip Limited (MMYT) as of 09-22-2010
Created by BlueMatrix
All price targets displayed in the chart above are for a 12- to- 18-month period. Prior to March 30, 2004, Oppenheimer &
Co. Inc. used 6-, 12-, 12- to 18-, and 12- to 24-month price targets and ranges. For more information about target price
histories, please write to Oppenheimer & Co. Inc., 300 Madison Avenue, New York, NY 10017, Attention: Equity Research
Department, Business Manager.
Oppenheimer & Co. Inc. Rating System as of January 14th, 2008:
Outperform(O) - Stock expected to outperform the S&P 500 within the next 12-18 months.
Perform (P) - Stock expected to perform in line with the S&P 500 within the next 12-18 months.
Underperform (U) - Stock expected to underperform the S&P 500 within the next 12-18 months.
Not Rated (NR) - Oppenheimer & Co. Inc. does not maintain coverage of the stock or is restricted from doing so due to a potential
conflict of interest.
Oppenheimer & Co. Inc. Rating System prior to January 14th, 2008:
Buy - anticipates appreciation of 10% or more within the next 12 months, and/or a total return of 10% including dividend payments,
and/or the ability of the shares to perform better than the leading stock market averages or stocks within its particular industry sector.
Neutral - anticipates that the shares will trade at or near their current price and generally in line with the leading market averages due to
a perceived absence of strong dynamics that would cause volatility either to the upside or downside, and/or will perform less well than
higher rated companies within its peer group. Our readers should be aware that when a rating change occurs to Neutral from Buy,
aggressive trading accounts might decide to liquidate their positions to employ the funds elsewhere.
Sell - anticipates that the shares will depreciate 10% or more in price within the next 12 months, due to fundamental weakness
perceived in the company or for valuation reasons, or are expected to perform significantly worse than equities within the peer group.
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Distribution of Ratings/IB Services Firmwide
IB Serv/Past 12 Mos.
Rating Count Percent Count Percent
OUTPERFORM [O] 336 51.60 142 42.26
PERFORM [P] 295 45.30 79 26.78
UNDERPERFORM [U] 20 3.10 4 20.00
Although the investment recommendations within the three-tiered, relative stock rating system utilized by Oppenheimer & Co. Inc. do not
correlate to buy, hold and sell recommendations, for the purposes of complying with FINRA rules, Oppenheimer & Co. Inc. has assigned
buy ratings to securities rated Outperform, hold ratings to securities rated Perform, and sell ratings to securities rated Underperform.
Company Specific DisclosuresIn the past 12 months Oppenheimer & Co. Inc. has provided investment banking services for MMYT.
Oppenheimer & Co. Inc. expects to receive or intends to seek compensation for investment banking services in the next 3
months from MMYT.
In the past 12 months Oppenheimer & Co. Inc. has managed or co-managed a public offering of securities for MMYT.
In the past 12 months Oppenheimer & Co. Inc. has received compensation for investment banking services from MMYT.
Oppenheimer & Co. Inc. makes a market in the securities of MMYT, CTRP, EXPE, and PCLN.
Additional Information Available
Please log on to http://www.opco.com or write to Oppenheimer & Co. Inc., 300 Madison Avenue, New York, NY 10017,
Attention: Equity Research Department, Business Manager.
Other DisclosuresThis report is issued and approved for distribution by Oppenheimer & Co. Inc., a member of all Principal Exchanges and SIPC. This
report is provided, for informational purposes only, to institutional and retail investor clients of Oppenheimer & Co. Inc. and does not
constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such offer or solicitation would be
prohibited. The securities mentioned in this report may not be suitable for all types of investors. This report does not take into account
the investment objectives, financial situation or specific needs of any particular client of Oppenheimer & Co. Inc. Recipients should
consider this report as only a single factor in making an investment decision and should not rely solely on investment recommendations
contained herein, if any, as a substitution for the exercise of independent judgment of the merits and risks of investments. The analyst
writing the report is not a person or company with actual, implied or apparent authority to act on behalf of any issuer mentioned in the
report. Before making an investment decision with respect to any security recommended in this report, the recipient should consider
whether such recommendation is appropriate given the recipient's particular investment needs, objectives and financial circumstances.
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We recommend that investors independently evaluate particular investments and strategies, and encourage investors to seek the advice
of a financial advisor.Oppenheimer & Co. Inc. will not treat non-client recipients as its clients solely by virtue of their receiving this
report.Past performance is not a guarantee of future results, and no representation or warranty, express or implied, is made regarding
future performance of any security mentioned in this report. The price of the securities mentioned in this report and the income they
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sources believed to be reliable, but Oppenheimer & Co. Inc. does not represent that any such information, opinion or statistical data is
accurate or complete (with the exception of information contained in the Important Disclosures section of this report provided by
Oppenheimer & Co. Inc. or individual research analysts), and they should not be relied upon as such. All estimates, opinions and
recommendations expressed herein constitute judgments as of the date of this report and are subject to change without notice.Nothing
in this report constitutes legal, accounting or tax advice. Since the levels and bases of taxation can change, any reference in this report
to the impact of taxation should not be construed as offering tax advice on the tax consequences of investments. As with any investment
having potential tax implications, clients should consult with their own independent tax adviser.This report may provide addresses of, or
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This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Oppenheimer & Co. Inc.
Copyright © Oppenheimer & Co. Inc. 2010.
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