Subbu Murugan

It was a great milestone for Indian Internet startups when makemytrip.com, a 10 year old online travel company, made a spectacular NASDAQ debut. With its market valuation almost doubling to USD 800 million, it was one of the best one day gain on NASDAQ since 2007.

Naturally was intrigued by its performance and scanned through their Balance Sheet and P&L and found the following -

• Total revenue for 2010 - USD 83.5 million; They have shown their air ticketing as net revenues and hotel packages as gross which was odd.  If you take the net for hotel packages also the net revenue stands @ USD 40 million.
• They have never shown net or operating profit for any financial year. 
• Their net margins are 7% on airline ticketing and 14% hotel packages and overall at 8.4%. 
• They don’t have any technological advantage and this space has quite a few other operators, both local and international.

However, with all the money raised they could expand business faster both organically and inorganically.  With this they could, in the long run, reduce operating costs and increase net margins.  With the recent BWA and 3G auction success the internet penetration would increase substantially and thereby increase their reach as well.  It all depends on their execution.  

Does this warrant the pop on the opening day?  Probably not; In my opinion, its more to do with lack of investment options on Indian companies and market timing.  I am sure there will a surge in Indian tech offerings in NASDAQ in the coming years based on this.  

In addition to this Indian VC and PE industry who have been very pessimistic on the Indian Internet sector would be more bullish on the same and help the sector and startups.