India’s peripatetic middle powers MakeMyTrip IPO

August 2, 2010

By Tim Mullaney

Woody Allen once said 80 percent of success comes from just showing up. In that regard, MakeMyTrip has shown up in the right place. The company commands half of Web travel-agency bookings in India, where a rising middle class is increasingly on the go. Moreover, MakeMyTrip is growing faster than the market. Though its $70 million U.S. IPO doesn’t come cheap, it should put buyers on the runway to gains.

Concerns about the price — and the fact that some insiders and early backers are selling stock — may have curtailed by $30 million the amount of money MakeMyTrip will harvest next week in its U.S. offering, which would be the first in four years for an Indian company. But the stock offers a unique opportunity for investors to gain exposure to India’s increasingly peripatetic consumer class.

The 10-year old company has its roots in selling travel to expatriate Indians. But it’s refocusing on the domestic market. And well it should: India’s bourgeoisie is set to explode 11-fold by 2025. So far the firm’s off to a good start. Its 65 percent bookings growth in the June quarter is six times the estimated growth of Indian online travel.

The company is also improving margins. Partly this is the natural effect of scale. Revenue reached $83.6 million in the year ending last March, and MakeMyTrip posted positive operating cash flow, though it lost $6.2 million. This also reflects the company’s shift towards selling more services to Indians travelling at home.

Selling more travel to a broader audience lets the group bargain harder for prices on hotel rooms, which are more profitable than airline tickets. MakeMyTrip’s key financial metric is the markup on each lodging bill it keeps. That has risen to 14 percent from 9 percent in the last two years, as MakeMyTrip’s expanding market power lets it extract better terms from hoteliers.

True, insiders — including CEO Deep Kalra — are selling some stock in the offering. So, too, are earlier backers such as Softbank’s Asian Infrastructure Fund. But hedge fund Tiger Global, another insider, is buying. Overall, sellers are recovering only part of their investment and letting their paper profits ride. Only about a quarter of the IPO consists of existing stock.

Moreover, the precedents for online travel agents in emerging markets are good. Consider International, China’s online-travel leader. It’s been a 17-bagger since its 2003 debut. Today it’s worth $5.4 billion, or 17 times trailing 12-month sales.

At the top of its $12 to $14 offering range, MakeMyTrip would be valued at $478 million, or five times recent sales. That’s expensive relative to Expedia, a little higher than recent market darling, but cheap compared to Ctrip. If MakeMyTrip can close even a portion of the gap with its Chinese counterpart, shareholders will be in for a profitable journey.


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GetMyDrift MakeMyTrip: Sid Harth

“Caveat Emptor.”

My Dear Tim Mullaney,

Nice to meet you.

Stop making stupid statements without solid proof. Add some cridible citation from unbiased reports. Fakery does not add value to your otherwise good article. This statement in particular I dislike, and I quote:

“India’s bourgeoisie is set to explode 11-fold by 2025.”

I cite following quote from wikipedia

“Recent developments has expanded its footprint in India by adopting a Hybrid OTA Model, with 20 regional offices across the country, apart from several franchise offices. This is intended to help the company serve those customers who prefer making their travel and holiday plans directly in person with the travel expert, rather than through the telephone, real-time chat, or e-mail channels also offered by the company.

In February 2007, Amadeus IT Group announced that MakeMyTrip had chosen Amadeus as technology provider In August 2007, the company allied with Nokia to let customers book air tickets on their mobile phones.


Some customers complain about Makemytrip not giving the complete terms of ticket (baggage allowed, flexibility to change date of travel or cancel the ticket) before booking the ticket. Some complain about false promises before booking the ticket. They warn potential customers to get the terms of the ticket in writing or email before going ahead with the phone booking. Refunds to credit cards are sometimes delayed. It is believed that calls to customer care in case of booked tickets is low priority in call queues compared to calls to buy tickets. There is undue delay in getting service in case of getting help on already booked ticket. The escalation process in case of complaints is not published on their website. Estimated waiting period or the position in the call queue is not announced. Other customers have warned that the website’s “Believe It Or Not” promotion is indeed too good to be true. While MakeMyTrip promises you free domestic air travel once you’ve arrived in Inda, all such air travel must be booked 21 days in advance of the trip. And even if you attempt to arrange it that far in advance, MakeMyTrip makes this process very difficult, if not impossible. You will be booked on overnight flights, trips that should take three hours will wind up taking two days, and in some cases you will wind up paying “taxes and fees” that exceed the actual cost of the ticket, had you booked it yourself.”

I don’t mind little hoopla, usually associated with a new IPO. You, however lost little shine off of you.

…and I am Sid Harth

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Tim Mullaney with all due respect …

Did you really choose “peripatetic” to title this article?

You are such a pompous ass and its pathetic.

Try a simpler word like travel because Indians are not peripatetic but they do love travelling.

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