Over A Year After Merging With Ibibo, MakeMyTrip Losses Continue, Reaching $45.3 Mn In Q3 FY18

Online travel portal MakeMyTrip has announced its unaudited financial and operating results for the quarter ending on December 31, 2017. As per its earnings report, the company’s overall revenue increased to $172.5 Mn, up by 36% YoY from $123.2 Mn clocked in the corresponding period of the previous fiscal year.

Due to increased expenses following the merger with Ibibo Group, the Gurugram-headquartered online travel aggregator witnessed a jump in losses to $45.3 Mn in Q3 of FY18. Compared to that, it had earlier reported profits of $16.6 Mn in the three months ending on December 31, 2016.

Commenting on the results, MakeMyTrip Group Chairman and Group CEO Deep Kalra said, “Our fiscal third quarter financial results reflect our focus on delivering strong growth with improving operational efficiencies. We continued to leverage our scale and multi-brand strategy to broaden our reach to customers and deliver highly differentiated travel services.”

According to the company’s SEC filings, MakeMyTrip posted a 5.9% jump (2.8% in constant currency) in revenue from its air ticketing business to $40.5 Mn in the last quarter of 2017. Compared to that, the online travel startup generated $38.2 Mn revenue from its air ticketing business in Q3 FY17.

Similarly, revenue from the company’s hotels and packages business surged to $113.7 Mn in the quarter ended December 31, 2017, reporting a 34.1% increase in constant currency from $82.2 Mn clocked in the year-ago period.

MakeMyTrip stated in its earnings report, “Gross bookings increased by 101.5% (96.2% in constant currency) driven by 131.9% increase in the number of hotels room-nights year over year including the impact of consolidation of the Ibibo Group acquired in January 31, 2017. Net revenue margin has improved from 19.4% in the quarter ended December 31, 2016 to 22.8% in the quarter end.”

During Q3 of FY18, the company generated revenue from a number of other sources, which amounted to $18.3 Mn from $2.9 Mn earned in the corresponding period of the previous fiscal year.

MakeMyTrip’s net finance income stood at $3.4 Mn in the three months ending in December 2017, as compared to a net finance income of $20.1 Mn in Q3 of FY17.

Operating Expenses, Losses On The Rise Post Merger With Ibibo

Coming to expenses and other costs, MakeMyTrip recorded a 97% leap in personal expenses to $26.9 Mn in the last quarter of 2017, from $13.7 Mn in the year-ago period. This, according to its SEC filings, was mainly due to the consolidation with the Ibibo Group as well as an annual increase in wages in FY17.

Along the same lines, marketing and sales promotion expenses soared to $109 Mn, undergoing a dramatic 144.6% increase from $44.5 Mn in the quarter ended December 31. 2016.

The report added, “Primary drivers of this year on year increase include significant customer inducement and acquisition programs expenses incurred to accelerate growth in our standalone hotel booking business and increases in brand advertisement expenses that was incurred in the quarter ended December 31, 2017 and the consolidation of marketing and sales promotion expenses of the Ibibo Group.”

“Including the promotion expenses of $24.3 Mn adjusted against revenue as explained above, marketing and sales promotion expenses increased by 199.2% year over year,” the filings further stated.

Other operating expenses increased by 79.3% to $32.6 Mn from $18.2 Mn in the same period last fiscal, primarily as a result of an increase in payment gateway charges, legal and professional and outsourcing expenses and the contribution of other operating expenses of the Ibibo Group.

Consequently, the online travel search engine’s losses touched $45.3 Mn in the specified period, compared to a profit of $16.6 Mn in the quarter ending on December 31, 2016.

Attributing the increasing losses to its merger with Ibibo, MakeMyTrip stated, “Excluding the effects of employee share-based compensation costs, amortisation of acquisition-related intangibles, share of loss of equity-accounted investees, and income tax expense (benefit) for both quarters ended December 31, 2017 and 2016, merger and acquisitions related expenses, we would have recorded a net loss of $30.5 Mn in the quarter ended December 31, 2017 and a net loss of $5.9 Mn in the quarter ended December 31, 2016.”

An Overview Of The MakeMyTrip-Ibibo Merger

Initiated in October 2016, MakeMyTrip-Ibibo merger was completed in February 2017, after the deal received the approval of Competition Commission of India. In the original announcement conference call, MMYT’s founder Deep Kalra had stated, “With this transaction, our focus going forward is to continue accelerating the pace of travel bookings growth from off to online, since online travel penetration remains fairly low at around 15%, for the accommodations industry, and 18% for the organised bus industry in India.”

The Ibibo group, which is owned by Naspers (91% stake) and Tencent (9% stake), was sold against the issuance of 38.91 Mn Class B shares (38,971,539 Class B shares) to MakeMyTrip. As per the terms of the deal, Naspers and Tencent remain the largest shareholders in the resulting company with a combined stake of about 40%.

The merger has resulted in the consolidation of the online travel space. Consequently, MakeMyTrip has emerged as a mega entity that aims to control a fifth of the lucrative airline booking market and also have significant shares in the bus and hotel bookings and ride-sharing spaces.

In February 2017, venture capital firm SAIF Partners made a strategic exit from the travel platform, making a 16x return on its $25 Mn investment. In May 2017, travel portal MMYT raised $330 Mn from a group of investors, including Naspers and Ctrip.

MakeMyTrip’s biggest rival Yatra also recently announced its unaudited financial results for the three months ending on December 31, 2017. As per its SEC filings, the company registered a 40.8% year-on-year (YoY) growth in revenue to $52.7 Mn (INR 336.04 Cr) for the last quarter of 2017.

Overall, in the last quarter of 2017, the online travel aggregator raked in profits upwards of $3.6 Mn (INR 23.2 Cr), with adjusted EBITDA loss expanding from $2.9 Mn (INR 18.7 Cr) in the year-ago period to $6 Mn (INR 38.8 Cr).

Apart from Yatra, MakeMyTrip competes against a host of players in the online travel space. Among these are ixigo, TravelTriangle, YuMiGo, HolidayIQ, ClearTrip, Expedia, Ebix-acquired Via.com, Hotels.com and Booking.com.