MakeMyTrip’s Loss Widens on Mar­ket­ing, Pro­mo­tional Spends

The Economic Times - - Disruption: Startups & Tech - Biswarup.Gooptu @times­group.com

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.

ANIR­BAN BORA

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