MakeMyTrip’s Loss Widens on Marketing, Promotional Spends
New Delhi: Nasdaq-listed MakeMyTrip posted a wider first-quarter loss, as India’s largest online travel operator continued to spend on marketing and promotions in its bid to stay ahead of deep-pocketed global competitors and newer domestic entrants.
The company posted a loss of $68.5 million, or 70 cents a share on a diluted basis, in the quarter to June 2017, compared with $14.3 million, or 34 cents per share, in the year-ago period. On an adjusted basis, the company, that has a market capitalisation of $3.04 billion, posted firstquarter loss of $52.1 million, or 53 cents per diluted share.
Marketing and sales promotion expenses increased by more than 150% to $133 million for the quarter, compared with $52.7 million in the March 2016 quarter. According to the company, this was primarily to accelerate growth in its hotel booking business, along with brand advertisement expenses.
“We will continue to drive new customer acquisition in a significant manner, and therefore, continue to invest in marketing and promotions at least right through this fiscal… We will continue with our high-spend strategy so that the market share gains continue to be there,” Mohit Kabra, group chief financial officer at MakeMyTrip, said during a call with analysts. The increase in spend on promotions strongly indicates that the country’s online travel segment will continue to be characterised by de- ep discounts, particularly in the highly-fragmented hotels space, as companies look to create the largest inventory of rooms and alternate accommodations, while attempting to establish customer stickiness among the notoriously price-conscious Indian consumer. Revenue for the three months ended June came in at $192.1 million, up almost 59% from the comparable year-ago quar-
THE BIG LOSS
ter. MakeMyTrip reported cash and cash equivalents and term deposits of $492.6 million for the period.
The latest results also include the financial and operating results of Ibibo Group, which it acquired last year, and for which it received the necessary clearances from fair-trade regulator Competition Commission of India in January.
The focus on the lucrative, highermargin hotels segment comes at a time when the company continues to face strong competition from deep-pocketed global players such as Priceline Group-backed Booking.com and Expedia. “The (Indian) hotels market is opening up. We are currently at 10% penetration, but there is still 90% to go… A lot of work is happening on the supply and demand side there, and Booking.com is not a company we take lightly,” Deep Kalra, group CEO at MakeMyTrip, said on the call.
Additionally, domestic players, such as Alibaba Group- and SoftBank Group-backed Paytm have also entered the online travel space, and have earmarked a significant amount of capital to establish their footprints. “Their (Paytm) offerings in travel, particularly in air, rail and bus, are definitely finding traction with the price-conscious customer, when there’s a discount or a cashback offer. There’s almost a direct correlation with that,” Kalra said. For the latest quarter, MakeMyTrip posted revenues of $134.6 million from its hotels and packages business, up 40.8% from the year-ago quarter. For its air ticketing business, it earned $41.3 million, up about 73%, from the same period last year.