MakeMyTrip slips back into loss in Q2, net revenue down 5.5% to $20.15M; adds RoutePlanner

NASDAQ-listed online travel services firm MakeMyTrip (MMT) saw its shares crash on Tuesday after the firm revised down its revenue guidance for the current financial year and slipped back into losses during the quarter ended September 30, 2012.

The shares last traded at $12.58 on the US exchange, down more than 17 per cent, and closed below the issue price of $14, at which it came with its initial public offer two years ago. The shares hit an all-time low before recovering partly on the Presidential Election Day that saw strong trading in US exchanges.

The firm reported 4.3 per cent rise in revenue for the quarter to $45.7 million from $43.8 million in the year-ago period while revenue (less service cost) declined 5.5 per cent to $20.15 million in the same period. The decline in revenue (less service cost) was largely due to fall in both air ticketing and 'other business', which comprise areas like train tickets, cab booking, travel insurance, etc. This was only partially offset by 30.5 per cent growth in its hotels and packages business.

In constant currency terms, the firm saw revenue and revenue (less service cost) rise 25.8 per cent and 12.6 per cent, respectively.

Net loss for the quarter was $1.2 million, compared to a profit of $0.07 million in the year-ago quarter, while adjusted net income (profit for the period excluding employee share-based compensation costs, merger & acquisition-related expenses, net change in fair value of financial liability in business combination and income tax benefit for the second quarter of both fiscal years 2013 and 2012, and net loss on change in the fair value of derivative financial instruments in the second quarter of fiscal 2013) declined to $1.15 million from $1.57 million in the year-ago quarter.

"MakeMyTrip was faced with increasingly difficult operating conditions as the health of our domestic airline industry remains uncertain. However, we are confident and optimistic of our vision and investments in changing the way Indians book their hotels and holidays in the future, as this segment of the travel market remains largely underpenetrated online today," said Deep Kalra, chairman and CEO of MakeMyTrip.

The firm also announced the acquisition of an international hotel booking site called HotelTravel.com for $25 million (more on that here).

Revenue guidance for FY13

MakeMyTrip, which competes with Yatra.com, Cleartrip.com, Via.com and GoIbibo.com in India, also sharply cut its revenue growth guidance for the current financial year ending March 2013.

The firm has said it expects to see revenue (less service costs) to grow in the range of 13-16 per cent on a constant currency basis. This growth guidance is based on average actual Indian Rupee to US Dollar exchange rate of 48.23 for the full fiscal year 2012. On a US Dollar basis, it expects revenue (less service cost) to be in the range of $89 million-$91 million, reflecting the 3Q13 average exchange rate of Rs 54 to a US Dollar.

According to the previous guidance range, which had assumed an average exchange rate of Rs 55 to a US Dollar, the firm expected revenue (less service costs) growth to be in the range of 30-32 per cent on a constant currency basis. On a US Dollar basis, it had previously said that it was expecting revenue (less service cost) in the range of $99 million-$102 million.

Operational performance

Air ticketing: Revenue from air ticketing business decreased 19.6 per cent to $15.3 million in the quarter ended September 30, 2012, from $19 million in the quarter ended September 30, 2011. The revenue less service costs decreased 12.8 per cent to $14.5 million in the quarter. According to the travel services firm, this was due to transactions declining 9.8 per cent YoY as demand for domestic air travel weakened on much higher airfares due to lowered capacity in the industry.

Gross bookings grew 4.2 per cent YoY due to higher airfares, but growth in revenue less service costs was offset by the decline in the company's net revenue margin to 6.5 per cent, from 7.8 per cent a year ago, as MakeMyTrip strategically utilised part of the margin to sustain its market share.

Hotels & Packages: Revenue from hotels and packages business increased 24.3 per cent to $29.6 million in the quarter. The revenue less service costs increased to $4.9 million in the quarter ended September 30 from $3.8 million in the year-ago quarter. This was due to an increase in gross bookings by 26.1 per cent and an increase in net revenue margin from 12.1 per cent in the year-ago quarter to 12.5 per cent in this quarter.

Other revenue: Other revenue decreased to $0.7 million in Q2 from $0.9 million a year ago, primarily due to decrease in rail ticket sales.

Personnel expenses: Personnel expenses increased to $7.5 million in Q2, mainly as a result of employee share-based compensation costs of $2.9 million as against $1.4 million in the year-ago period. Excluding employee share-based compensation costs, personnel expenses as a percentage of net revenue, decreased by 1.7 percentage points year over year and increased by 2.7 percentage points over the previous quarter.

Buyback & board changes

The company's board of directors authorised share buyback to purchase the outstanding ordinary shares, par value $0.0005 per share, of the company on the open market, in privately negotiated transactions or otherwise, in an aggregate amount of up to $25 million.

The firm has also appointed Rajesh Magow, co-founder and group chief financial & operating officer, and Keyur Joshi, co-founder and group chief commercial officer, as directors of the company, effective from Nov 6, 2012. With these appointments, MakeMyTrip now has a total of 11 directors on its board.

RoutePlanner

The firm, which has been adding a slew of new features on its site to engage with customers and ensure easy booking process, has also added a new feature called RoutePlanner. Launched in beta, the patent-pending product enables a user to trace the distance, time of travel and cost of moving between two destinations via various transportation modes including a mix of flights, trains, buses, as well as cabs/private cars.

We tried out the service for getting the route plan between Mumbai and Ladakh, and got a number of suggestions – ranging from Rs 10,238 for the costliest and the fastest (18 hours and 42 minutes) way of travel that included two flights and a taxi ride, to Rs 3,924 for the cheapest but the slowest (56 hours and 29 minutes) one, which included a train, a flight, a bus and a taxi ride.

However, users can't make bookings from the microsite itself. Instead, they can get the details via e-mail and bookings can be made on Makemytrip.com. While rail and flight bookings can be done from MMT, users will have to figure out the bus and taxi travel on their own. Users can filter routes according to pricing, duration and route rank, and they can also like/dislike a particular route, Facebook style.

Interestingly, iXiGO, a travel search engine in which MakeMyTrip owns 19.9 per cent stake, has a similar feature called Trip Planner, which has been launched earlier this year. And we feel that iXiGO's offering is better in terms of the information offered (read here to know more) and the way it is presented.

(Edited by Sanghamitra Mandal)