MakeMyTrip Isn't Cheap Enough


It's been a long way down for MakeMyTrip (NAS: MMYT) . India's largest online travel site may have been the hottest IPO since 2007 when it went public last year, but the stock has given up nearly 60% of its value since peaking last September.

This morning's quarterly report may help shed some light in explaining how a rapidly growing dot-com valued at $1.6 billion a year ago is worth a mere $655 million today. Revenue climbed 54% to $52 million, but it's an inflated metric. There are $30.7 million in procurement costs related to its hotel and tour package services baked into that figure. The more accurate metric is the $21.1 million that MakeMyTrip generated in revenue less service costs. Earnings slipped to $0.02 a share -- or $0.04 a share on an adjusted basis. MakeMyTrip is targeting just $86 million to $89 million in revenue after service costs for the entire fiscal year. Reality and potential are at an impasse.

It's true that MakeMyTrip remains India's most popular travel portal. Its closest rivals -- Yatra, Cleartrip, and Travelguru -- are far behind. (NAS: CTRP) commands a market cap of $5.5 billion, and it's the top dog in a country that's only marginally more populated than India. Expedia (NAS: EXPE) and (NAS: PCLN) -- stateside companies that are global in scope -- combine for a market cap of $33.5 billion!

We can't blame MakeMyTrip for its lack of material revenue. This is a problem with Indian dot-coms in general. (NAS: REDF) is a speculative play as a popular online portal, yet it continues to generate less than $2 million in profitless revenue a month.

India's government is committed to beefing up the country's broadband connectivity, but this is something that will take both time and money to materialize. Patient investors with a long-term horizon will be rewarded, but the revenue these companies generate in the near term will continue to be minuscule relative to their overseas peers.

Why isn't India generating the same kind of growth-stock darlings as China is? Share your thoughts in the comments box below. If you want to stay on top of new for India's online stocks, add or MakeMyTrip to My Watchlist.

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