‘In FY20, expect to see break-even and profits’

The MakeMyTrip-Ibibo duo reported a gross booking worth $1 billion in Q1FY18, but losses surged 57 per cent to $52.1 million. Founder and group chief executive DEEP KALRA tells Ajay Modi that its trip will turn profitable by 2020 and it has to keep investing in growing the online travel market. Edited excerpts:

How has MakeMyTrip's merger with Ibibo progressed?

We had a rationale for the merger and that has borne out quite well. It is fair to say that not only from a market cap appreciation but even from the point of quarterly results. We did a combined GMV (gross merchandise value) of over $1 billion in a quarter. We did $141 million in revenue. The hotel segment now makes 57 per cent of revenue. Not so long ago it was mostly air. We identified the areas where we could look at the best of both, even in processes. Mergers are more about people. We have come up with a structure where we are getting the best out of both teams. We had very little attrition and held on to all the key people.

The GMV of $1 billion is big for an online travel business. What is the scope for growth?

It is fair to say that this is just the beginning and I will tell you why. Most markets have been shown to take off when you get an average GDP (gross domestic product) of $8,000 per capita. That number in India is shy of $5,000. So, I believe that the growth to $8,000 will take another couple of years. Today we have 50-60 million people who buy travel products online. It could take two years for that to reach 100 million. But from 100 million to 200 million is going to be a race. We are very bullish. By March 2021, you can expect a GMV of $10 billion and $1 billion in revenue.

But how do you wish to move to profitability? Will these high spends on marketing continue?

It is a part of a conscious strategy. The reason that we raised further capital of $330 million in May was very clear. Not only is this a competitive space but we also want to create market. We can sit back and wait for hotel market to grow at 10 per cent a year. But there is clear opportunity to accelerate that growth. As those people come online, not just from Tier-I cities, you become their preferred brand because you are offering them a product that is vernacular or hyper-personalised. We have been profitable and we are fully aware of that. We made $10 million after IPO (initial public offering). We are fully aware how this works. There is a clear plan. In FY20, you can expect to see breakeven and profits.

It seems that people only buy online due to discounts. Is that a cycle that you will find difficult to get out

of? I believe discount has a role to play. That role is inducement and trial. Once you have induced a trial, people should stay back for the benefits. Sometimes that becomes a long process due to competition but you will see over time that the brands to which people gravitate to and stay with are brands that offer convenience.

What is giving investors the confidence to keep funding even though there is no sight of profitability?

Two things: Leadership and growing market share. These investors are very smart and savvy. They go into a cohort analysis and understand why is the share growing. They are more patient on profitability because they have seen companies like Amazon have 10 years of no profitability but when they came above the surface they take off due to critical mass and you are also ahead of others in customer experience. I think it will be fair to say that this is what people are betting on. They are also betting on the team and the future. The next couple of years will bring healthy growth.