Filed
pursuant to Rule 424(b)(1)
Registration Statement No. 333-172572
PROSPECTUS
5,244,000 SHARES
MakeMyTrip Limited
ORDINARY SHARES
MakeMyTrip Limited is offering 1,450,000 ordinary shares and
the selling shareholders identified in this prospectus are
offering 3,794,000 ordinary shares.
MakeMyTrip Limited’s ordinary shares are listed on the
Nasdaq Global Market under the symbol “MMYT.” On
May 26, 2011, the reported last sale price of the ordinary
shares on the Nasdaq Global Market was $24.44 per share.
Investing in our ordinary
shares involves risks. See “Risk Factors”
beginning on page 9.
PRICE $24.00 A SHARE
Underwriting
Proceeds to
Price to
Discounts and
Proceeds to
Selling
Public
Commissions
Company
Shareholders
Per Share
$24.00
$0.78
$23.22
$23.22
Total
$125,856,000
$4,090,320
$33,669,000
$88,096,680
MakeMyTrip Limited and certain selling shareholders have granted
the underwriters the right to purchase up to an additional
786,600 shares to cover over-allotments.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or
determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares to purchasers on
June 2, 2011.
You should rely only on the information contained in this
prospectus. We and the selling shareholders have not authorized
anyone to provide you with information different from that
contained in this prospectus. If anyone provides you with
different or inconsistent information, you should not rely on
it. We and the selling shareholders are not, regardless of the
time of delivery of this prospectus or the time of sale of our
ordinary shares, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. We and
the selling shareholders are offering to sell ordinary shares
and seeking offers to buy ordinary shares, only in jurisdictions
where offers and sales are permitted. The information contained
in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this
prospectus or any sale of the ordinary shares.
We have not taken any action to permit a public offering of the
ordinary shares outside the United States or to permit the
possession or distribution of this prospectus outside the United
States. Persons outside the United States who come into
possession of this prospectus must inform themselves about and
observe any restrictions relating to the offering of the
ordinary shares and the distribution of this prospectus outside
of the United States.
Until June 20, 2011 (the 25th day after the date of
this prospectus), all dealers that buy, sell or trade ordinary
shares, whether or not participating in this offering, may be
required to deliver a prospectus. This is in addition to the
dealers’ obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
In this prospectus, we refer to information regarding the travel
service industry and our competitors from market research
reports, analyst reports and other publicly available sources,
including from PhoCusWright Inc., or PhoCusWright, an
independent travel industry research company founded and
controlled by Mr. Philip C. Wolf, one of our directors. See
“Related Party Transactions — Transactions with
PhoCusWright” for details of our transactions with
PhoCusWright. We also refer to data from The Economic Times, a
daily business newspaper in India, and the United States Central
Intelligence Agency “World Factbook,” or CIA World
Factbook.
We conduct our business principally through our Indian
subsidiary, MakeMyTrip (India) Private Limited, or MMT India. In
this prospectus, unless otherwise stated or unless the context
otherwise requires, references to “we,”“us,”“our,”“our company” or
“our group” are to MakeMyTrip Limited and its
subsidiaries collectively, and references to “our holding
company” are to MakeMyTrip Limited on a standalone basis.
In this prospectus, references to “US,” the
“United States” or “USA” are to the United
States of America, its territories and its possessions.
References to “India” are to the Republic of India,
and references to “Mauritius” are to the Republic of
Mauritius. References to “$,”“dollars” or
“US dollars” are to the legal currency of the United
States and references to “Rs.,”“Rupees” or
“Indian Rupees” are to the legal currency of India.
Solely for the convenience of the reader, this prospectus
contains translations of certain Indian Rupee amounts into US
dollars at specified rates. Except as otherwise stated in this
prospectus, all translations from Indian Rupees to US dollars
are based on the noon buying rate of Rs. 44.24 per $1.00 in
the City of New York for cable transfers of Indian Rupees, as
certified for customs purposes by the Federal Reserve Bank of
New York on April 30, 2011. No representation is made that
the Indian Rupee amounts referred to in this prospectus could
have been or could be converted into US dollars at such rates or
any other rates. Any discrepancies in any table between totals
and sums of the amounts listed are due to rounding.
On July 22, 2010, we effected a
20-for-one
share split with respect to all our ordinary and preferred
shares, as well as a
20-for-one
adjustment with respect to the number of ordinary shares
underlying our share options and a corresponding adjustment to
the exercise prices of such options. At the same time, the par
value of our shares was changed from $0.01 per share to $0.0005
per share. Consequently, all share information and per share
data included in this prospectus has been presented on a
post-share split basis, unless otherwise specifically stated or
the context otherwise requires. In connection with our initial
public offering in August 2010, all of our preferred shares were
converted into ordinary shares upon the completion of our
initial public offering.
Unless otherwise indicated, the consolidated financial
statements and related notes as of and for the fiscal years
ended March 31, 2009, 2010 and 2011 included elsewhere in
this prospectus have been prepared in accordance with
International Financial Reporting Standards, or IFRS, as issued
by the International Accounting Standards Board, or IASB.
References to a particular “fiscal year” are to our
fiscal year ended March 31 of that year. Our fiscal quarters end
on June 30, September 30 and December 31. References
to a year other than a “fiscal” year are to the
calendar year ended December 31.
We also refer in various places within this prospectus to
“revenue less service cost,” which is a non-IFRS
measure that is calculated as revenue less costs for the
acquisition of relevant services and products for sale to
customers and more fully explained in “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.” The presentation of this non-IFRS information
is not meant to be considered in isolation or as a substitute
for our consolidated financial results prepared in accordance
with IFRS as issued by the IASB.
The following summary is qualified in its entirety by the
more detailed information and consolidated financial statements
and notes thereto appearing elsewhere in this prospectus. You
should read the following summary together with the more
detailed information regarding our company and the ordinary
shares being sold in this offering and our consolidated
financial statements and notes thereto appearing elsewhere in
this prospectus. This prospectus includes forward-looking
statements that involve risks and uncertainties. See
“Special Note Regarding Forward-Looking
Statements.”
Our
Business
We are the largest online travel company in India, based on
gross bookings for 2009, according to PhoCusWright. Through our
primary website, www.makemytrip.com, and other
technology-enhanced platforms, travelers can research, plan and
book a wide range of travel services and products in India as
well as overseas. Our services and products include air tickets,
hotels, packages, rail tickets, bus tickets, car hire and
ancillary travel requirements such as facilitating access to
travel insurance.
We commenced operations in 2000 and in the first five years
following our inception, we focused on the non-resident Indian
market in the United States, servicing mainly their need for
United States-India inbound air tickets. We started our Indian
business with the launch of our Indian website in September
2005. During the initial years of our operations, we invested
significant capital in our infrastructure as well as in sales
and marketing efforts to build our brand and gain recognition,
and we recorded net losses for all our completed fiscal years.
In fiscal year 2008, our second full fiscal year since we
commenced our Indian business, we recorded a net loss of
$(18.9) million. We reduced our net loss in fiscal years
2009 and 2010, recording a net loss of $(7.3) million and
$(6.2) million, respectively, and recorded a net profit of
$4.8 million in fiscal year 2011. We also reduced our
operating loss in fiscal years 2009 and 2010, recording an
operating loss of $(10.6) million and $(6.0) million,
respectively, and recorded an operating profit of
$4.1 million in fiscal year 2011. Excluding the effects of
employee share-based compensation costs, we would have recorded
an operating loss of $(10.2) million in fiscal year 2009,
an operating profit of $0.8 million in fiscal year 2010 and
an operating profit of $4.6 million in fiscal year 2011;
and we would have recorded a net loss of $(6.9) million in
fiscal year 2009, a net profit of $0.6 million in fiscal
year 2010 and a net profit of $5.4 million in fiscal year
2011.
We believe the strength of our brand, quality of our services,
user-friendliness of our website experience, focus on our
customers and efficacy of our marketing programs have enabled us
to capture a significant share of the domestic air tickets
market in India, while driving increased bookings of the
international outbound air tickets market. In fiscal year 2010,
1.6 million transactions for domestic air tickets in India
were booked through us, and we generated $31.1 million in
revenue less service cost from our air ticketing business. In
fiscal year 2011, 2.6 million transactions for domestic air
tickets in India were booked through us, and we generated
$47.6 million in revenue less service cost from our air
ticketing business. We leverage our strength in air travel to
grow into non-air travel and other segments of the travel
industry, specifically hotels and packages. Revenue less service
cost from our hotels and packages business totaled
$8.0 million in fiscal year 2010, accounting for 19.8% of
our total revenue less service cost, and $10.9 million in
fiscal year 2011, accounting for 17.9% of our total revenue less
service cost.
We have designed our websites to provide our customers with a
user-friendly experience. We had an average of over
2.7 million unique visitors per month in fiscal year 2011.
In fiscal year 2010, 2.0 million transactions were executed
through our websites, accounting for approximately 94.5% of our
total transactions, and in fiscal year 2011, 3.6 million
transactions were executed through our websites, accounting for
approximately 96.0% of our total transactions. We recently
launched a booking engine on our website that allows our
customers to search and book some of our domestic holiday
packages online. We also added a new “Flight plus
Hotel” tab on our website to describe the potential cost
savings from booking bundled packages compared to booking
flights and hotels separately. Furthermore, we recently launched
our BlackBerry application, which allows customers to book
domestic flights in India though and automatically synchronizes
the flight details with the calendar on their BlackBerry
devices. We have built an advanced and secure technology
platform, which integrated our sales, customer service and
fulfillment operations. Our technology platform is scalable and
can be upgraded to handle increased traffic and complexity of
products with limited additional investment. As reported by The
Economic Times on February 6, 2011, the Indian middle class
is expected to grow over three times from 160 million
people
currently to 547 million people by 2026. In order to meet
the requirements of this growing Indian middle class travel
market where Internet penetration is relatively low, we also
utilize other technology-enhanced distribution channels,
including call centers and travel stores in India, as well as
our travel agents’ network in India.
We provide our customers with access to all major domestic
full-service and low-cost airlines operating in India and all
major airlines operating to and from India, over 4,500 hotels in
India and a wide selection of hotels outside India, Indian
Railways and several major Indian bus operators. On the other
hand, we believe we are a cost-effective distribution channel
for our suppliers, providing reach to a large and expanding
customer base in India as well as non-resident Indians.
In our air ticketing business, we generate revenue through
commissions and incentive payments from airlines, service fees
charged to our customers and fees from our global distribution
system, or GDS, service provider. A GDS service provider
facilitates the reservation and confirmation of airline tickets
on its system. Travel agents typically utilize a GDS to book air
tickets and receive fees for their use of such system. We
currently use Amadeus GDS. In our hotels and packages business,
our revenue represents the total amount paid by our customers
for these travel services and products and the cost of procuring
the relevant services and products are classified as service
cost. We evaluate our financial performance based on revenue
less service cost, which is a non-IFRS measure, as we believe
that revenue less service cost reflects more accurately the
value addition of the travel services that we provide to our
customers. Our total revenue less service cost increased from
$16.5 million in fiscal year 2008 to $61.1 million in
fiscal year 2011.
We believe the overall Indian travel industry will experience
continued growth due to income growth in India and the increased
spending by Indians on travel and recreation. According to
Internet World Stats, in 2010, Internet penetration was only
8.5% in India as compared with 77.3% in the United States. We
therefore believe that the Indian online travel industry is
well-positioned for long-term growth and that our
well-recognized brand, leadership in the online travel market in
India and broad and technology-enhanced distribution channels
position us well to capitalize on these growth opportunities.
Furthermore, MMT India was ranked second overall and first in
the professional services industry in a ranking published on
June 21, 2010 of “India’s Best Companies to Work
For 2010” by the Great Place to Work Institute, an
independent global research and consulting firm, and The
Economic Times, a daily business newspaper in India.
Our
Strengths
We have the following competitive strengths:
•
the largest online travel company in India with a
well-recognized brand;
•
comprehensive selection of service and product offerings;
•
broad distribution network;
•
advanced, secure and scalable technology platform;
•
customer-focused approach; and
•
experienced management team.
Our
Strategy
We believe that the relatively low but fast growing Internet
penetration in India, coupled with income growth in India
provide us with significant growth opportunities. Our objective
is to grow profitably by building on our current leadership
position to become India’s dominant travel company. The key
elements of our strategy include:
•
expand our hotels and packages business;
•
expand our service and product portfolio to enhance
cross-selling opportunities;
•
expand our travel agents’ network;
•
enhance our service platforms by investing in technology;
pursue selective strategic partnerships and acquisitions.
Risk
Factors
Our business is subject to numerous risks and uncertainties that
may materially affect our business, financial condition, results
of operations and prospects, as more fully described in the
section entitled “Risk Factors,” immediately following
this prospectus summary. These include:
•
our ability to maintain our existing arrangements with our
travel suppliers, the lack of formal agreements with many of our
travel suppliers and the ability of many of our suppliers to
terminate their arrangements with us at short notice or without
notice;
•
our history of operating losses;
•
our reliance on third-party systems and service providers,
including outsourcing service providers;
•
our reliance on information technology;
•
changes in the Indian travel industry, including our ability to
effectively compete in this industry;
•
impediments to the execution and success of our growth strategy;
and
•
our susceptibility to adverse changes in the political, economic
and regulatory environment in India that could materially harm
our business.
Corporate
Structure
The following diagram illustrates our corporate structure and
the place of formation and ownership interest of each of our
subsidiaries, as of the date of this prospectus.
Note: (1)
Remaining 0.01% ownership interest
held by Deep Kalra, our Group Chairman and Group Chief Executive
Officer. See “Business — Regulations” for
more information.
(2)
On May 9, 2011 we acquired
approximately 79% of the fully-diluted share capital of Luxury
Tours & Travel Pte Ltd. We have agreed to acquire the
remaining shares in Luxury Tours & Travel Pte Ltd in three
tranches over a three-year earn-out period ending June 2014.
Corporate
Information
We are a public company limited by shares incorporated in
Mauritius. We were incorporated as International Web Travel
Private Limited, a private company limited by shares, on
April 28, 2000 and subsequently changed our name to
MakeMyTrip Limited and converted to a public company on
June 23, 2010. Our registered office is located at the
offices of Multiconsult Limited at Rogers House, 5 President
John Kennedy Street, Port Louis, Mauritius. Our principal
executive offices are located at 103 Udyog Vihar,
Phase 1, Gurgaon, Haryana 122016, India, and our
telephone number at this location is
(91-124)
439-5000.
Our principal website address is www.makemytrip.com. The
information contained on our websites does not form part of this
prospectus. Our agent for service of process in the United
States is MakeMyTrip.com Inc., located at 60 East
42nd Street, Suite 411, New York, NY10165.
Ordinary shares to be outstanding after this offering
36,601,272 ordinary
shares(1)(2)
Offering price
The public offering price is $24.00 per ordinary share.
Over-allotment option
786,600 ordinary shares
Use of proceeds
We will receive net proceeds of approximately $33.5 million
from this offering, after deducting the underwriting discounts
and commissions and estimated offering expenses payable by us.
We intend to use the net proceeds received by us from this
offering to expand our operations by acquiring or investing in
strategic businesses or assets that complement our service and
product offerings, to invest in enhancements to our technology,
as well as for working capital and other general corporate
purposes. At this time, we have not entered into any agreement
or commitment with respect to any material acquisitions or
investments. See “Use of Proceeds.”
We will not receive any of the proceeds from the sale of
ordinary shares by the selling shareholders.
Purchase by affiliates of Tiger Global (as defined in
“Principal and Selling Shareholders”), one of our
shareholders
Certain affiliates of one of our shareholders, Tiger Global,
have subscribed for, and were allocated by the underwriters,
1,650,000 shares in this offering at the public offering price
and on the same terms as the other shares being offered in this
offering. As a result, Tiger Global and its affiliates will
beneficially own 15.79% of our total outstanding shares
immediately upon the completion of this offering, assuming no
exercise of the over-allotment option by the underwriters. Any
such shares purchased in this offering will not be subject to
any lock-up restrictions by the underwriters.
Lock-up
We, the selling shareholders and Tiger Global, have agreed with
the underwriters, with certain exceptions, not to sell or
transfer any ordinary shares or securities convertible into or
exercisable for ordinary shares for a period of 90 days
after the date of this prospectus. See “Underwriting.”
Risk factors
See “Risk Factors” and other information included in
this prospectus for a discussion of factors you should carefully
consider before deciding to invest in our ordinary shares.
Payment and settlement
The ordinary shares are expected to be delivered against payment
on June 2, 2011. The ordinary shares will be deposited with
a custodian for, and registered in the name of a nominee of, The
Depository Trust Company, or DTC, in New York, New York. In
general, beneficial interests in the ordinary shares will be
shown on, and transfers of those beneficial interests will be
effected only through, records maintained by DTC and its direct
and indirect participants.
Unless otherwise specifically
stated, the information throughout this prospectus does not take
into account the possible issuance of additional ordinary shares
to the underwriters pursuant to their option to purchase
additional ordinary shares to cover over-allotments.
(2)
The number of ordinary shares
outstanding immediately after this offering:
•
is based on 35,099,639 ordinary
shares outstanding as of March 31, 2011, assuming the
issuance of 51,633 ordinary shares upon the exercise of share
options held by certain of our selling shareholders for sale in
this offering, effective upon the completion of this offering;
and
•
excludes 1,458,554 ordinary shares
issuable upon the exercise of share options outstanding as of
March 31, 2011 (not taking into account the 51,633 ordinary
shares issuable upon the exercise of share options by certain of
our selling shareholders for sale in this offering, effective
upon the completion of this offering).
The following summary consolidated statement of comprehensive
income and loss data for fiscal years 2009, 2010 and 2011, and
the summary consolidated statement of financial position data as
of March 31, 2010 and March 31, 2011, have been
derived from our audited consolidated financial statements
included elsewhere in this prospectus. The financial data set
forth below should be read in conjunction with, and are
qualified by reference to, “Selected Consolidated Financial
and Other Data,”“Management’s Discussion and
Analysis of Financial Condition and Results of Operations”
and the consolidated financial statements and notes thereto
included elsewhere in this prospectus. Our consolidated
financial statements are prepared and presented in accordance
with IFRS as issued by the IASB. Our historical results do not
necessarily indicate results expected for any future period.
Fiscal Year Ended
March 31
2009
2010
2011
(in thousands, except per share
data and number of shares)
Consolidated Statement of Comprehensive Income (Loss)
Data:
Revenue:
Air ticketing
$
19,225.1
$
32,119.5
$
47,622.7
Hotels and packages
48,622.8
50,287.9
74,558.0
Other revenue
703.8
1,152.8
2,540.7
Total revenue
68,551.7
83,560.2
124,721.4
Service cost:
Procurement cost of hotels and packages services
(43,069.2)
(42,292.2)
(63,650.9)
Purchase of air ticket coupons
(491.8)
(985.5)
—
Personnel expenses
(9,679.8)
(16,562.0)
(14,399.0)
Other operating expenses
(24,369.9)
(28,160.5)
(40,698.9)
Depreciation and amortization
(1,558.7)
(1,569.7)
(1,910.6)
Results from operating activities
(10,617.6)
(6,009.8)
4,061.9
Net finance income (costs)
3,244.1
(188.8)
(1,923.9)
Profit (Loss) before tax
(7,373.5)
(6,198.6)
2,138.0
Income tax benefit (expense)
25.3
(8.4)
2,691.7
Profit (Loss) for the year
$
(7,348.2)
$
(6,207.0)
$
4,829.7
Earnings (Loss) per ordinary share:
Basic
$
(0.42)
$
(0.35)
$
0.17
Diluted
$
(0.55)
$
(0.35)
$
0.15
Weighted average number of ordinary shares outstanding:
Basic
17,437,120
17,521,120
28,320,901
Diluted
20,403,420
17,521,120
34,950,246
Proforma earnings (loss) per ordinary Share (unaudited):
Basic(1)
$
(0.38)
$
(0.18)
$
0.16
Diluted(1)
$
(0.38)
$
(0.18)
$
0.15
Proforma weighted average number of ordinary shares outstanding
(unaudited):
In December 2006, August 2007 and
May 2008, we issued Series A, Series B and Series C
preferred shares, respectively, that were converted into
ordinary shares effective upon the completion of our initial
public offering on August 17, 2010. Our proforma earnings
(loss) per ordinary share (basic and diluted) and proforma
weighted average number of ordinary shares outstanding (basic
and diluted) have been calculated assuming that the conversion
of all our outstanding preferred shares occurred on a
“hypothetical basis” on April 1, 2007 for our
Series A and Series B preferred shares and
April 1, 2008 for our Series C preferred shares. All
our preferred shares were converted into ordinary shares
effective upon the completion of our initial public offering on
August 17, 2010.
The following table sets forth a summary of our consolidated
statement of financial position:
as of March 31, 2011 on an as adjusted basis to reflect
(1) the issuance of 51,633 ordinary shares upon the
exercise of share options held by certain of our selling
shareholders for sale in this offering, effective upon the
completion of this offering; and (2) the issuance and sale
by us of 1,450,000 ordinary shares offered in this offering,
after deducting the underwriting discounts and commissions and
estimated offering expenses payable by us, and further assuming
no exercise by the underwriters of the over-allotment option and
no other change to the number of ordinary shares sold by us as
set forth on the cover page of this prospectus.
As of March 31
2010
2011
2011
Actual
Actual
As Adjusted
(in thousands)
Consolidated Statement of Financial Position Data:
Trade and other receivables
$
12,449.5
$
12,857.2
$
12,857.2
Term deposits
14,471.4
16,941.9
16,941.9
Cash and cash equivalents
9,341.5
51,730.3
85,202.3
Total assets
50,633.5
112,939.6
146,411.7
Total equity (deficit) attributable to equity holders of our
company
(24,955.4)
76,275.9
109,747.9
Loans and borrowings
40,966.9
209.6
209.6
Trade and other payables
26,467.0
29,694.7
29,694.7
Total liabilities
75,584.5
36,663.8
36,663.8
Total equity (deficit) and liabilities
$
50,633.5
112,939.6
146,411.7
Other
Data:
The following table sets forth for the periods indicated,
certain selected consolidated financial and other data:
As certain parts of our revenue are
recognized on a “net” basis and other parts of our
revenue are recognized on a “gross” basis, we evaluate
our financial performance based on revenue less service cost,
which is a non-IFRS measure, as we believe that revenue less
service cost reflects more accurately the value addition of the
travel services that we provide to our customers. The
presentation of this non-IFRS information is not meant to be
considered in isolation or as a substitute for our consolidated
financial results prepared in accordance with IFRS as issued by
the IASB. Our revenue less service cost may not be comparable to
similarly titled measures reported by other companies due to
potential differences in the method of calculation. The
following table reconciles our revenue (an IFRS measure) to
revenue less service cost (a non-IFRS measure):
Air Ticketing
Hotels and Packages
Other Revenue
Total
Fiscal Year Ended
March 31
Fiscal Year Ended
March 31
Fiscal Year Ended
March 31
Fiscal Year Ended
March 31
2009
2010
2011
2009
2010
2011
2009
2010
2011
2009
2010
2011
(in thousands)
Revenue
$
19,225.1
$
32,119.5
$
47,622.7
$
48,622.8
$
50,287.9
$
74,558.0
$
703.8
$
1,152.8
$
2,540.7
$
68,551.7
$
83,560.2
$
124,721.4
Less:
Service cost
491.8
985.5
—
43,069.2
42,292.2
63,650.9
—
—
—
43,561.0
43,277.7
63,650.9
Revenue less service cost
$
18,733.3
$
31,134.0
$
47,622.7
$
5,553.6
$
7,995.7
$
10,907.1
$
703.8
$
1,152.8
$
2,540.7
$
24,990.7
$
40,282.5
$
61,070.5
(2)
Gross bookings represent the total
amount paid by our customers for the travel services and
products booked through us, including taxes, fees and other
charges, and are net of cancellations and refunds.
(3)
Net revenue margins is defined as
revenue less service cost as a percentage of gross bookings.
You should carefully consider the risks described below
before making an investment decision. Additional risks not
presently known to us or that we currently deem immaterial may
also impair our business operations.
Our business, financial condition or results of operations
could be materially and adversely affected by any of these
risks. The trading price and value of our ordinary shares could
decline due to any of these risks, and you may lose all or part
of your investment.
This prospectus also contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking
statements as a result of certain factors, including the risks
faced by us described below and elsewhere in this prospectus.
Risks
Related to Us and Our Industry
If We
Are Unable to Maintain Existing, and Establish New, Arrangements
with Our Travel Suppliers, Our Business May Be Adversely
Affected.
Our business is dependent on our ability to maintain our
relationships and arrangements with existing suppliers, such as
airlines which supply air tickets to us directly, Amadeus (our
GDS service provider) and Indian Railways, as well as our
ability to establish and maintain relationships with new travel
suppliers, including hotels, bus operators and car hire
companies. A substantial portion of our revenue less service
cost is derived from fees and commissions negotiated with travel
suppliers for bookings made through our websites or via our
other distribution channels. Adverse changes in existing
arrangements, including an inability by any travel supplier to
fulfill their payment obligation to us in a timely manner,
increasing industry consolidation or our inability to enter into
new arrangements with these parties on favorable terms, if at
all, could reduce the amount, quality, pricing and breadth of
the travel services and products that we are able to offer,
which could adversely affect our business and financial
performance.
No assurance can be given that our agreements or arrangements
with our travel suppliers or GDS service provider will continue
or that our travel suppliers or GDS service provider will not
reduce or eliminate fees or commissions or attempt to charge us
for content, terminate our contracts and seek to recover signing
bonuses or default on or dispute their payment obligations
towards us, any of which could reduce our revenue and net
revenue margins or may require us to initiate legal or arbitral
proceedings to enforce their contractual payment obligations,
which may adversely affect our business and financial
performance.
We Do
Not Have Formal Agreements with Many of Our Travel
Suppliers.
We rely on various travel suppliers to facilitate the sale of
our travel services. We do not have formal agreements with many
of our travel suppliers, including low-cost airlines and many
hotels whose booking systems or central reservations systems are
relied upon by us for bookings and confirmation as well as
certain payment gateway arrangements, and there can be no
assurance that these third parties will not terminate these
arrangements with us at short notice or without notice. Further,
where we have entered into formal agreements, many of these
agreements are short-term contracts, providing our
counterparties with a right to terminate at short notice or
without notice. Many of our airline suppliers with whom we have
contracts are able to either terminate or alter the terms of
their contracts with us at will or by providing a few days’
notice. For example, our agreement with Indian Railways Catering
and Tourism Corporation Limited, or IRCTC, which allows us to
transact with Indian Railways’ passenger reservation system
through the Internet, can be terminated by IRCTC without prior
notice and at its sole discretion. Termination of any of the
abovementioned agreements
and/or
arrangements could have a material adverse effect on our
business, financial condition and results of operations.
We
Have Sustained Operating Losses in the Past and May Experience
Operating Losses in the Future.
We sustained operating losses in our fiscal years through
March 31, 2010. While we had operating profit in fiscal
year 2011, we cannot assure you that we can avoid operating
losses in the future. We expect that our operating expenses will
increase and the degree of increase in these expenses will be
largely based on anticipated organizational growth and revenue
trends. As a result, any decrease or delay in generating
additional sales volumes and revenue could result in substantial
operating losses.
We
Rely on Third-Party Systems and Service Providers, and Any
Disruption or Adverse Change in Their Businesses Could Have a
Material Adverse Effect on Our Business.
We currently rely on certain third-party computer systems,
service providers and software companies, including the GDS used
by full service airlines, and electronic central reservation
systems used by low-cost airlines, certain hotels which are
directly-connected to us, Indian Railways and bus operators. In
particular, we rely on third parties to:
•
assist in conducting searches for airfares and process air
ticket bookings;
•
process hotel reservations;
•
process credit card payments;
•
provide computer infrastructure critical to our business; and
•
provide customer relationship management, or CRM, software
services.
Any interruption or deterioration in performance of these
third-party systems and services could have a material adverse
effect on our business. Further, the information provided to us
by certain of these third-party systems, such as the central
reservations systems of certain of our hotel suppliers, may not
always be accurate due to either technical glitches or human
error, and we may incur monetary
and/or
reputational loss as a result.
Our success is also dependent on our ability to maintain our
relationships with these third-party systems and service
providers, including our technology partners. In the event our
arrangements with any of these third parties are impaired or
terminated, we may not be able to find an alternative source of
systems support on a timely basis or on commercially reasonable
terms, which could result in significant additional costs or
disruptions to our business.
We
Outsource a Significant Portion of Our Call Center Services and
If Our Outsourcing Service Providers Fail to Meet Our
Requirements or Face Operational or System Disruptions, Our
Business May Be Adversely Affected.
We outsource our call center service for sales for all
international flights and most of our domestic Indian hotel
reservations and packages. We also outsource our call center
service for post-sales customer service support for all flights
(domestic and international), domestic Indian hotel reservations
and packages, and rail and bus ticketing, as well as back office
fulfillment and ticketing services, to various third parties in
India. If our outsourcing service providers experience
difficulty meeting our requirements for quality and customer
service standards, our reputation could suffer and our business
and prospects could be adversely affected. Our operations and
business could also be materially and adversely affected if our
outsourcing service providers face any operational or system
interruptions.
Further, many of our contracts with outsourcing service
providers are short-term or have short notice periods. For
example, our agreement with Intelenet Global Services Private
Limited, or Intelenet Global Services, which provides call
center services for our Indian domestic air ticketing and
international air ticketing business, as well as post-sales
customer service support for air tickets, is for a renewable
term of three years but may be terminated by either party on two
months’ notice. The agreements with iEnergizer IT Services
Private Limited, or iEnergizer IT Services, and Motif India
Infotech Private Limited, or Motif India Infotech, may be
terminated by either party on 90 days’ notice after
the first year in the term of such agreements. In the event one
or more of our contracts with our outsourcing service providers
is terminated on short notice, we may be unable to find
alternative outsourcing service providers on commercially
reasonable terms, or at all. Further, the quality of the service
provided by a new or replacement outsourcing service providers
may not meet our requirements, including during the transition
and training phase. Hence, termination of any of our contracts
with our outsourcing service providers could cause a decline in
the quality of our services and disrupt and adversely affect our
business, results of operations and financial condition.
We
Rely on Information Technology to Operate Our Business and
Maintain Our Competitiveness, and Any Failure to Adapt to
Technological Developments or Industry Trends Could Harm Our
Business.
We depend on the use of sophisticated information technology and
systems, which we have customized in-house, for search and
reservation for flights and hotels, as well as payments,
refunds, customer relationship
management, communications and administration. As our operations
grow in both size and scope, we must continuously improve and
upgrade our systems and infrastructure to offer our customers
enhanced services, features and functionality, while maintaining
the reliability and integrity of our systems and infrastructure
in a cost-effective manner. Our future success also depends on
our ability to upgrade our services and infrastructure ahead of
rapidly evolving consumer demands while continuing to improve
the performance, features and reliability of our service in
response to competitive offerings.
We may not be able to maintain or replace our existing systems
or introduce new technologies and systems as quickly as our
competitors, in a cost-effective manner or at all. We may also
be unable to devote adequate financial resources to develop or
acquire new technologies and systems in the future.
We may not be able to use new technologies effectively, or we
may fail to adapt our websites, transaction processing systems
and network infrastructure to consumer requirements or emerging
industry standards. If we face material delays in introducing
new or enhanced solutions, our customers may forego the use of
our services in favor of those of our competitors. Any of these
events could have a material adverse effect on our operations.
We currently license from third-parties some of the technologies
incorporated into our websites. As we continue to introduce new
services that incorporate new technologies, we may be required
to license additional technology. We cannot be sure that such
technology licenses will be available on commercially reasonable
terms, if at all.
The
Travel Industry for India and India-Related Travel Is Intensely
Competitive, and We May Not Be Able to Effectively Compete in
the Future.
The Indian travel market is intensely competitive. Factors
affecting our competitive success include, among other things,
price, availability and breadth of choice of travel services and
products, brand recognition, customer service, fees charged to
travelers, ease of use, accessibility and reliability. We
currently compete with both established and emerging providers
of travel services and products, including other online travel
agencies, such as cleartrip.com, expedia.co.in,
travelocity.co.in and yatra.com, as well as traditional travel
agencies, tour operators, travel suppliers and operators of
travel industry reservation databases. Certain of our
competitors have also launched websites in other countries to
better cater to Indian and other customers located in those
areas. For example, cleartrip.com recently launched website
operations in the United Arab Emirates. Large, established
Internet search engines have also recently launched applications
offering travel itineraries in destinations around the world,
and meta-search companies who can aggregate travel search
results also compete against us for customers. Some of our
competitors have significantly greater financial, marketing,
personnel and other resources than us and certain of our
competitors have a longer history of established businesses and
reputations in the Indian travel market (particularly in the
hotels and packages business) as compared with us. From time to
time we may be required to reduce service fees and net revenue
margins in order to compete effectively and maintain or gain
market share.
Further, we may also face increased competition from new
entrants in our industry. We cannot assure you that we will be
able to successfully compete against existing or new competitors
in our existing lines of business as well as new lines of
business into which we may venture. If we are not able to
compete effectively, our business and results of operations may
be adversely affected.
Some travel suppliers are seeking to decrease their reliance on
distribution intermediaries such as us by promoting direct
distribution channels. Many airlines, hotels, car rental
companies and tour operators have call centers and have
established their own travel distribution websites. From time to
time, travel suppliers offer advantages, such as bonus loyalty
awards and lower transaction fees or discounted prices, when
their services and products are purchased from supplier-related
channels. We also compete with competitors who may offer less
content, functionality and marketing reach but at a relatively
lower cost to suppliers. If our access to supplier-provided
content or features were to be diminished either relative to our
competitors or in absolute terms or if we are unable to compete
effectively with travel supplier-related channels, our business
could be materially and adversely affected.
Some
of Our Airline Suppliers (Including Our GDS Service Provider)
May Reduce or Eliminate the Commission and Other Fees They Pay
to Us for the Sale of Air Tickets, and This Could Adversely
Affect Our Business and Results of Operations.
In our air ticketing business, we generate revenue through
commissions and incentive payments from airline suppliers,
service fees charged to our customers and fees from our GDS
service provider. Our airline suppliers may reduce or eliminate
the commissions and incentive payments they pay to us. To the
extent any of our airline suppliers reduce or eliminate the
commissions or incentive payments they pay to us, our revenue
may be reduced unless we are able to adequately mitigate such
reduction by increasing the service fee we charge to our
customers in a sustainable manner. However, any increase in
service fees may also result in a loss of potential customers.
Further, our arrangement with the airlines that supply air
tickets to us may limit the amount of service fee that we are
able to charge our customers. Our business would also be
negatively impacted if competition or regulation in the Indian
travel industry causes us to have to reduce or eliminate our
service fees.
We
Rely on the Value of Our Brand, and Any Failure to Maintain or
Enhance Consumer Awareness of Our Brand Could Have a Material
Adverse Effect on Our Business, Financial Condition and Results
of Operations.
We believe continued investment in our brand,
“MakeMyTrip,” is critical to retain and expand our
business. We believe that our brand is well respected and
recognized in the Indian travel market, particularly in the air
ticketing segment. However, we are relatively new in the hotels
and packages segment, and may not enjoy the same brand
recognition in this business. We have invested in developing and
promoting our brand since our inception and expect to continue
to spend on maintaining our brand’s value to enable us to
compete against increased spending by our competitors, as well
as against emerging competitors, including search engines and
meta-search engines, and to allow us to expand into new
geographies and products where our brand is not well known. Our
marketing costs may also increase as a result of inflation in
media pricing (including search engine keywords). There is no
assurance that we will be able to successfully maintain or
enhance consumer awareness of our brand. Even if we are
successful in our branding efforts, such efforts may not be
cost-effective. If we are unable to maintain or enhance consumer
awareness of our brand and generate demand in a cost-effective
manner, it would negatively impact our ability to compete in the
travel industry and would have a material adverse effect on our
business. See also “— We Cannot Be Sure That Our
Intellectual Property Is Protected from Copying or Use by
Others, Including Current or Potential Competitors.”
We May
Not Be Successful in Implementing Our Growth
Strategies.
Our growth strategy involves expanding our hotels and packages
business, travel agents’ network and our service offerings.
Further, one of our strategies is to enhance our service
platforms by investing in technology, and expanding into new
geographic markets. Our success in implementing our growth
strategies are affected by:
•
our ability to increase the number of suppliers, especially our
hotel suppliers, that are directly-connected to us, which is
dependent on the willingness of such suppliers to invest in new
technology;
•
our ability to continue to expand our distribution channels, and
market and cross-sell our travel services and products to
facilitate the expansion of our business;
•
our ability to build or acquire the required technology;
•
the general condition of the global economy (particularly in
India and markets with close proximity to India) and continued
growth in demand for travel services, particularly online;
•
our ability to compete effectively with existing and new
entrants to the Indian travel industry, including both online
travel companies as well as traditional travel agents and tour
providers;
•
the growth of the Internet as a medium for commerce in India; and
•
changes in our regulatory environment.
Many of these factors are beyond our control and there can be no
assurance that we will succeed in implementing our strategy.
Separately, our growth strategy also involves expanding into new
geographic markets
which will involve additional risks. See “— Our
International Operations, Some of Which Are New to Us, Involve
Additional Risks.”
We May
Not Be Successful in Pursuing Strategic Partnerships and
Acquisitions, and Future Partnerships and Acquisitions May Not
Bring Us Anticipated Benefits.
Part of our growth strategy is the pursuit of strategic
partnerships and acquisitions. There can be no assurance that we
will succeed in implementing this strategy as it is subject to
many factors which are beyond our control, including our ability
to identify, attract and successfully execute suitable
acquisition opportunities and partnerships. This strategy may
also subject us to uncertainties and risks, including
acquisition and financing costs, potential ongoing and
unforeseen or hidden liabilities, diversion of management
resources and cost of integrating acquired businesses. We could
face difficulties integrating the technology of acquired
businesses with our existing technology, and employees of the
acquired business into various departments and ranks in our
company, and it could take substantial time and effort to
integrate the business processes being used in the acquired
businesses with our existing business processes. Moreover, there
is no assurance that such partnerships or acquisitions will
achieve our intended objectives or enhance our revenue.
In March 2010, we acquired certain assets of Travis Internet
Private Limited, an online bus ticketing company, including the
websitewww.ticketvala.com, which gives us the ability to
provide our bus suppliers with access to a real time bus
reservations technology platform. We intend to leverage this
platform to enable more bus operators to be directly-connected
to our booking system with such technology, but there is no
assurance that we will be able to successfully leverage this new
platform to further expand our bus offering.
On May 9, 2011, we acquired approximately 79% of Luxury
Tours & Travel Pte Ltd, a Singapore-based travel
agency, engaged in the business of providing hotel reservations,
excursion tours and other related services to inbound and
outbound travelers in Singapore and the rest of Southeast Asia.
We have agreed to acquire the remaining shares in Luxury Tours
& Travel Pte Ltd in three tranches over a three-year
earn-out period. We intend to leverage this acquisition to build
a position of strength in Southeast Asia through relationships
with local hotels and vendors, but there is no assurance that we
will be able to successfully leverage this acquisition to
further grow our business in the region.
Our
Arrangements with Some of Our Suppliers May Subject Us to
Additional Monetary Risks.
We generally do not assume inventory risk in our air ticketing
business as we typically act as an agent. However, on a few
occasions, we pre-purchase air ticket inventory in order to
enjoy special negotiated rates and we assume inventory risk on
such tickets. If we are unable to sell these tickets as
anticipated either at all, or at expected rates, our revenue and
business may be adversely affected. We also generally do not
guarantee a minimum number of room reservations to our hotel
suppliers. However, in a few instances, particularly when we
anticipate high volumes of room reservations, we may enter into
arrangements with one or more of our hotel suppliers where we
guarantee a minimum number of room reservations through us at an
agreed rate, in order to obtain favorable terms or discounts. We
may use this “guaranteed” model increasingly for
future transactions with hotels as our business expands.
Although we have generally been able to obtain extensions from
our hotel suppliers where we have been unable to sell our
minimum guaranteed number of rooms, there can be no assurance
that we will be able to obtain similar extensions in the future.
Such guarantees may result in losses to us if we are unable to
fulfill our commitment to the hotels or if we are unable to
obtain similar extensions.
Certain
of Our Businesses or Services Have Only Recently Been Introduced
and, As a Result, It May Be Difficult to Evaluate Their
Performance and Prospects.
Some of the services and products offered by us were introduced
recently. For example, we started our bus ticketing business in
May 2008 and our rail ticketing business in June 2009. As a
result, these businesses have a limited operating history and it
may be difficult to evaluate their performance and prospects.
Our
International Operations, Some of Which Are New to Us, Involve
Additional Risks.
We have been operating in the United States since 2000,
servicing mainly the air ticketing needs of non-resident Indians
in the United States traveling inbound to India. We also
launched our website in the United Arab Emirates in December
2009 and launched our website in Canada in July 2010, following,
among other things, the
registration of our websites’ domain names
(www.makemytrip.ae and www.makemytrip.ca) with the relevant
registry as well as the procurement of additional servers to
handle the increased traffic from these international websites.
Our website in Canada is currently owned by a company which we
have registered in Canada. We are evaluating the transfer of
legal ownership of this company to us by September 2011. We need
to continue to tailor our services and business model to the
unique circumstances of such markets to succeed, including
building new supplier relationships and customer preferences. We
also intend to expand our business in other markets,
particularly those with a significant non-resident Indian
population as well as those with proximity to India or favored
by Indian travelers. For example, on May 9, 2011, we
acquired approximately 79% of Luxury Tours & Travel
Pte Ltd, a Singapore-based travel agency. Adapting our practices
and models effectively to the supplier and customer preferences
of new markets could be difficult and costly and could divert
management and personnel resources. We could also face
additional regulatory requirements in our new markets which
could be onerous. We cannot assure you that we will be able to
efficiently or effectively manage the growth of our operations
in these new markets.
In addition, we are subject to additional risks in our new
international operations that may not exist in our Indian
operations, including:
•
differences and unexpected changes in regulatory requirements
and exposure to local economic conditions;
•
differences in consumer preferences in such markets;
•
increased risk to and limits on our ability to enforce our
intellectual property rights;
•
competition from providers of travel services in such foreign
countries;
•
restrictions on the repatriation of earnings from such foreign
countries, including withholding taxes imposed by certain
foreign jurisdictions; and
•
currency exchange rate fluctuations.
If we are not able to effectively mitigate or eliminate these
risks, our results of operations could be adversely affected.
Our
Business Could Be Negatively Affected by Changes in Search
Engine Logic.
We utilize Internet search engines such as
Googletm
and
Yahoo!tm
India, including through the purchase of travel-related
keywords, to drive traffic to our websites. These search engines
frequently update and change the logic that determines the
placement and display of results of a user’s search, such
that the purchased or optimal placement of links to our websites
may be negatively affected. In addition, a significant amount of
our business is directed to our websites through
pay-per-click
and display advertising campaigns on the Internet and search
engines whose pricing and operating dynamics can rapidly change,
both technically and competitively. If major search engines such
as
Googletm
or
Yahoo!tm
India, which we utilize for a significant amount of our search
engine traffic, change the logic used on their websites for
search results in a manner that negatively affects the search
engine ranking, paid or unpaid, of our websites or those of our
third-party distribution partners, we may experience a decline
in traffic on our websites and our business may be adversely
affected.
System
Interruption in Our Information Systems and Infrastructure May
Harm Our Business.
We rely significantly on computer systems to facilitate and
process transactions. We may in the future experience system
interruptions that make some or all of these systems unavailable
or prevent us from efficiently fulfilling bookings or providing
services to our customers. Any interruptions, outages or delays
in our systems, or deterioration in their performance, could
impair our ability to process transactions and decrease the
quality of our service to our customers. If we were to
experience frequent or persistent system failures, our
reputation and brand could be harmed.
While we have backup systems and contingency plans for critical
aspects of our operations or business processes, certain other
non-critical systems are not fully redundant and our disaster
recovery or business continuity planning may not be sufficient.
Fires, floods, power outages, telecommunications failures,
earthquakes, acts of war or terrorism, acts of God, computer
viruses, sabotage, break-ins and electronic intrusion attempts
from both external
and internal sources and similar events or disruptions may
damage, impact or interrupt our computer or communications
systems, business processes or infrastructure at any time.
Although we have put measures in place to protect certain
portions of our facilities and assets, any of these events could
cause system interruptions, delays and loss of critical data,
and could prevent us from providing services to our customers
and/or
suppliers for a significant period of time. We do not carry
business interruption insurance for such eventualities.
Remediation may be costly and we may not have adequate insurance
to cover such costs. Moreover, the costs of enhancing
infrastructure to attain improved stability and redundancy may
be time consuming and expensive and may require resources and
expertise that are difficult to obtain.
We Are
Exposed to Risks Associated with Online Security and Credit Card
Fraud.
The secure transmission of confidential information over the
Internet is essential in maintaining customer and supplier
confidence in us. Security breaches, whether instigated
internally or externally on our system or other Internet-based
systems, could significantly harm our business. We currently
require customers to guarantee their transactions with their
credit cards online. We rely on licensed encryption and
authentication technology to effect secure transmission of
confidential customer information, including credit card
numbers, over the Internet. However, advances in technology or
other developments could result in a compromise or breach of the
technology that we use to protect customer and transaction data.
We incur substantial expense to protect against and remedy
security breaches and their consequences. However, our security
measures may not prevent security breaches and we may be
unsuccessful in or incur additional costs by implementing our
remediation plan to address these potential exposures.
We also have agreements with banks and certain companies that
process customer credit card transactions for the facilitation
of customer bookings of travel services from our travel
suppliers. The online payment gateway for certain of our sales
made through our mobile platform or through international credit
cards is not secured by “Verified by VISA” or
“MasterSecure,” and we may be liable for accepting
fraudulent credit cards on our websites. We may also be subject
to other payment disputes with our customers for such sales. If
we are unable to combat the use of fraudulent credit cards, our
revenue from such sales would be susceptible to demands from the
relevant banks and credit card processing companies, and our
results of operations and financial condition could be adversely
affected.
Declines
or Disruptions in the Travel Industry Could Adversely Affect Our
Business and Financial Performance.
Our business and financial performance are affected by the
health of the Indian as well as worldwide travel industry,
including changes in supply and pricing. Events specific to the
travel industry that could negatively affect our business
include continued fare increases, travel-related strikes or
labor unrest, such as the recent strikes and other similar
actions at Air India, fuel price volatility and bankruptcies or
liquidations of our suppliers. For example, recent events in the
Middle East have resulted in an adverse impact on travel to that
region. Such events have also contributed to an increase in
crude oil prices which may have an adverse impact on the travel
industry globally, including our business.
Additionally, our business is sensitive to safety concerns, and
thus our business has in the past declined and may in the future
decline after incidents of actual or threatened terrorism,
during periods of political instability or conflict or during
other periods in which travelers become concerned about safety
issues, including as a result of natural disasters such as
tsunamis or earthquakes or when travel might involve
health-related risks, such as the Influenza, H1N1 virus, avian
flu and Severe Acute Respiratory Syndrome, or other epidemics or
pandemics. For example, a recent earthquake and tsunami in Japan
may adversely impact the travel industry in Asia. Such concerns
are outside our control and could result in a significant
decrease in demand for our travel services. Any such decrease in
demand, depending on its scope and duration, together with any
other issues affecting travel safety, could significantly and
adversely affect our business and financial performance over the
short and long term. The occurrence of such events could result
in disruptions to our customers’ travel plans and we may
incur additional costs and constrained liquidity if we provide
relief to affected customers by not charging cancellation fees
or by refunding the cost of airline tickets, hotel reservations
and other travel services and products. If there is a prolonged
substantial decrease in travel volumes, particularly air travel
and hotel stays, for these or any other reasons, our business,
financial condition and results of operations would be adversely
affected.
Our
Business and Results of Operations Could Be Adversely Affected
by Global Economic Conditions.
Consumer purchases of discretionary items generally decline
during recessionary periods and other periods in which
disposable income is adversely affected. As a substantial
portion of travel expenditure, for both business and leisure, is
discretionary, the travel industry tends to experience weak or
reduced demand during economic downturns.
Unfavorable changes in the above factors or in other business
and economic conditions affecting our customers could result in
fewer reservations made through our websites
and/or lower
our net revenue margins, and have a material adverse effect on
our financial condition and results of operations.
In the second half of calendar year 2008 and the first half of
calendar year 2009, there was a rapid deterioration of global
economic conditions, including economic conditions in India,
which impacted our business. The current economic environment
continues to be uncertain. The weakness and uncertainty in the
economy has negatively impacted both corporate and consumer
spending patterns and demand for travel services in general.
As an intermediary in the travel industry, a significant portion
of our revenue is affected by fares and tariffs charged by our
suppliers as well as volumes of sales made by us. During periods
of poor economic conditions, airlines and hotels tend to reduce
rates or offer discounted sales to stimulate demand, thereby
reducing our commission-based income. A slowdown in economic
conditions may also result in a decrease in transaction volumes
and adversely affect our revenue. It is difficult to predict the
effects of the uncertainty in global economic conditions. If
economic conditions worsen globally or in India, our growth
plans, business, financial condition and results of operations
could be adversely impacted.
Our
Processing, Storage, Use and Disclosure of Customer Data of Our
Customers or Visitors to Our Website Could Give Rise to
Liabilities As a Result of Governmental Regulation, Conflicting
Legal Requirements, Differing Views of Personal Privacy Rights
or Data Security Breaches.
In the processing of our customer transactions, we receive and
store a large volume of customer information. Such information
is increasingly subject to legislation and regulations in
various jurisdictions and governments are increasingly acting to
protect the privacy and security of personal information that is
collected, processed and transmitted in or from the governing
jurisdiction. We could be adversely affected if legislation or
regulations are expanded or amended to require changes in our
business practices or if governing jurisdictions interpret or
implement their legislation or regulations in ways that
negatively affect our business, financial condition and results
of operations. As privacy and data protection become more
sensitive issues in India, we may also become exposed to
potential liabilities. For example, under the Information
Technology Act, 2000, as amended, we are subject to civil
liability for wrongful loss or gain arising from any negligence
by us in implementing and maintaining reasonable security
practices and procedures with respect to sensitive personal data
or information on our computer systems, networks, databases and
software.
We cannot guarantee that our security measures will prevent data
breaches. Companies that handle such information have also been
subject to investigations, lawsuits and adverse publicity due to
allegedly improper disclosure of personally identifiable
information. Security breaches could damage our reputation,
cause interruptions in our operations, expose us to a risk of
loss or litigation and possible liability, and could also cause
customers and potential customers to lose confidence in the
security of our transactions, which would have a negative effect
on the demand for our services and products. Moreover, public
perception concerning security and privacy on the Internet could
adversely affect customers’ willingness to use our
websites. A publicized breach of security in India or in other
countries in which we have operations, even if it only affects
other companies conducting business over the Internet, could
inhibit the growth of the Internet as a means of conducting
commercial transactions, and, therefore, the prospects of our
business.
These and other privacy and security developments that are
difficult to anticipate could adversely affect our business,
financial condition and results of operations.
We
Cannot Be Sure That Our Intellectual Property Is Protected from
Copying or Use by Others, Including Current or Potential
Competitors.
Our websites rely on content and in-house customizations and
enhancements of third-party technology, much of which is not
subject to intellectual property protection. We protect our
logo, brand name, websites’ domain names and, to a more
limited extent, our content by relying on trademarks, trade
secret laws and confidentiality agreements. Even with all of
these precautions, it is possible for someone else to copy or
otherwise obtain and use our content, techniques and technology
without our authorization or to develop similar technology.
Effective trademark, copyright and trade secret protection may
not be available in every country in which we operate, offline
or through the Internet, and policing unauthorized use of our
content and technological customizations is difficult and
expensive. Our logo and brand name, “MakeMyTrip,” are
only registered as trademarks in India and the United States and
are not protected in other countries where we operate or
otherwise, and we are in the process of applying to obtain
copyright protection for our logo and brand name in India. We
cannot be sure that our trademarks or domain names will be
protected to the same extent in India or elsewhere as in the
United States or that the steps we have taken will prevent
misappropriation or infringement of what we consider our
proprietary information. Such misappropriation or infringement
could have a material adverse effect on our business. In the
future, we may need to engage in litigation to enforce our
intellectual property rights, to protect our trade secrets or to
determine the validity and scope of the proprietary rights of
others. Such litigation might result in substantial costs and
diversion of resources and management attention.
Our
Business Experiences Seasonal Fluctuations and
Quarter-to-Quarter
Comparisons of Our Results May Not Be Meaningful.
Our business experiences seasonal fluctuations. We tend to
experience higher revenue from our hotels and packages business
in the second and fourth calendar quarters of each year, which
coincide with the summer holiday travel season and the year-end
holiday travel season in India. In our air ticketing business,
we tend to experience higher revenues in the third and fourth
calendar quarters of each year and lower revenue in the first
calendar quarter, mainly as a result of changes in demand for
business travel. As a result,
quarter-to-quarter
comparisons of our results may not be meaningful.
Changing
Laws, Rules and Regulations and Legal Uncertainties, Including
Adverse Application of Tax Laws and Regulations, May Adversely
Affect Our Business and Financial Performance.
Our business and financial performance could be adversely
affected by unfavorable changes in or interpretations of
existing, or the promulgation of new, laws, rules and
regulations applicable to us and our business, including those
relating to the Internet and
e-commerce,
consumer protection and privacy. Such unfavorable changes could
decrease demand for our services and products, increase costs
and/or
subject us to additional liabilities. For example, there may
continue to be an increasing number of laws and regulations
pertaining to the Internet and
e-commerce,
which may relate to liability for information retrieved from or
transmitted over the Internet or mobile networks, user privacy,
content restrictions, taxation and the quality of services and
products sold or provided through the Internet. Furthermore, the
growth and development of
e-commerce
may result in more stringent consumer protection laws that may
impose additional burdens on online businesses generally.
The application of various Indian and international sales, use,
occupancy, value-added and other tax laws, rules and regulations
to our services and products is subject to interpretation by the
applicable taxing authorities. Many of the statutes and
regulations that impose these taxes were established before the
growth of the Internet, mobile networks and
e-commerce.
If such tax laws, rules and regulations are amended, new adverse
laws, rules or regulations are adopted or current laws are
interpreted adversely to our interests, particularly with
respect to occupancy or value-added or other taxes, the results
could increase our tax payments (prospectively or
retrospectively)
and/or
subject us to penalties and, if we pass on such costs to our
customers, decrease the demand for our services and products. As
a result, any such changes or interpretations could have an
adverse affect on our business and financial performance. We
received a notice in October 2010 from the Indian tax regulatory
authority for a demand of service tax on certain matters, some
of which relate to the travel industry in India and involve
complex interpretation of law. We have also received a notice
and a few assessment orders from the Indian income tax
authorities. See “Business — Legal
Proceedings.”
Infrastructure
in India May Not Be Upgraded in Order to Support Higher Internet
Penetration, Which May Result in Additional Investments and
Expenses for Us.
The majority of our bookings are made through our Indian
website. However, Internet penetration in India was only 8.5% in
2010, according to Internet World Stats. There can be no
assurance that Internet penetration in India will increase in
the future as slowdowns or disruptions in upgrading efforts for
infrastructure in India could reduce the rate of increase in the
use of the Internet. As such we may need to make additional
investments in alternative distribution channels. Further, any
slowdown or negative deviation in the anticipated increase in
Internet penetration in India may adversely affect our business
and prospects.
Our
Significant Shareholders Will Be Able to Exercise Significant
Influence over Our Company After This Offering and May Have
Interests That Are Different from Those of Our Other
Shareholders.
After the completion of this offering, SB Asia Investment
Fund II L.P., or SAIF, will own 32.82% of the issued and
outstanding shares of our company and each of Mr. Deep
Kalra, Tiger Global and Helion Venture Partners, LLC, or Helion
Venture, will beneficially own 9.66%, 15.79% and 7.65%,
respectively; of the issued and outstanding shares of our
company. By virtue of such significant shareholdings, these
shareholders will have the ability to exercise significant
influence over our company and our affairs and business,
including the election of directors, the timing and payment of
dividends, the adoption and amendments to our Constitution, the
approval of a merger or sale of substantially all our assets and
the approval of most other actions requiring the approval of our
shareholders. The interests of these shareholders may be
different from or conflict with the interests of our other
shareholders and their influence may result in the delay or
prevention of a change of management or control of our company,
even if such a transaction may be beneficial to our other
shareholders.
Our
Results of Operations Are Subject to Fluctuations in Currency
Exchange Rates.
As the functional currency of MMT India, our key operating
subsidiary, is the Indian Rupee, our exposure to foreign
currency risk primarily arises in respect of our non-Indian
Rupee-denominated trade and other receivables, trade and other
payables, and cash and cash equivalents. Based on our operations
in fiscal year 2011, a 10.0% appreciation of the US dollar
against the Indian Rupee as of March 31, 2011, assuming all
other variables remained constant, would have decreased our
profit for fiscal year 2011 by $0.6 million. Similarly, a
10.0% depreciation of the US dollar against the Indian Rupee as
of March 31, 2011, assuming all other variables remained
constant, would have increased our profit for fiscal year 2011
by $0.6 million. Based on our operations in fiscal year
2010, a 10.0% appreciation of the US dollar against the Indian
Rupee as of March 31, 2010, assuming all other variables
remained constant, would have decreased our loss for the year by
$0.2 million. Similarly, a 10.0% depreciation of the US
dollar against the Indian Rupee as of March 31, 2010,
assuming all other variables remained constant, would have
increased our loss for the year by $0.2 million.
We are also exposed to movements between the US dollar and the
Indian Rupee in our operations, as approximately 9.1% and 7.2%
of our revenue for fiscal year 2010 and fiscal year 2011,
respectively, was generated by MMT India from its air ticketing
business and received in US dollars although our expenses are
generally incurred in Indian Rupees. Additionally, we receive
revenue from our hotels and packages segment in Indian Rupees,
but a portion of our expenses in this segment (those relating to
outbound packages from India in particular) could be incurred in
a non-Indian currency. We currently do not have any hedging
agreements or similar arrangements with any counter-party to
cover our exposure to any fluctuations in foreign exchange
rates. While, we do incorporate margins in our pricing to cover
any adverse fluctuations in foreign exchange rates, there can be
no assurance that such margins will adequately protect us from
adverse fluctuations in foreign exchange rates and hence our
earnings remain susceptible to foreign exchange rate
fluctuations.
Our
Ability to Attract, Train and Retain Executives and Other
Qualified Employees Is Critical to Our Business, Results of
Operations and Future Growth.
Our business and future success is substantially dependent on
the continued services and performance of our key executives,
senior management and skilled personnel, particularly personnel
with experience in our industry and our information technology
and systems. Any of these individuals may choose to terminate
their employment with us at any time and we cannot assure you
that we will be able to retain these employees or find adequate
replacements, if at all. The specialized skills we require can
be difficult, time-consuming and expensive to acquire
and/or
develop and, as a result, these skills are often in short
supply. A lengthy period of time may be required to hire and
train replacement personnel when skilled personnel depart our
company. Our ability to compete effectively depends on our
ability to attract new employees and to retain and motivate our
existing employees. We may be required to increase our levels of
employee compensation more rapidly than in the past to remain
competitive in attracting the quality of employees that our
business requires. If we do not succeed in attracting
well-qualified employees or retaining or motivating existing
employees, our business and prospects for growth could be
adversely affected.
Risks
Related to Operations in India
A
Substantial Portion of Our Business and Operations Are Located
in India and We Are Subject to Regulatory, Economic, Social and
Political Uncertainties in India.
A substantial portion of our business and employees are located
in India, and we intend to continue to develop and expand our
business in India. Consequently, our financial performance and
the market price of our ordinary shares will be affected by
changes in exchange rates and controls, interest rates, changes
in government policies, including taxation policies, social and
civil unrest and other political, social and economic
developments in or affecting India.
The Government of India has exercised and continues to exercise
significant influence over many aspects of the Indian economy.
Since 1991, successive Indian governments have generally pursued
policies of economic liberalization and financial sector
reforms, including by significantly relaxing restrictions on the
private sector. Nevertheless, the role of the Indian central and
state governments in the Indian economy as producers, consumers
and regulators has remained significant and we cannot assure you
that such liberalization policies will continue. The present
government, formed in May 2009, has announced policies and taken
initiatives that support the continued economic liberalization
policies that have been pursued by previous governments.
However, the present government is a multiparty coalition and
therefore there is no assurance that it will be able to generate
sufficient cross-party support to implement such policies or
initiatives. The rate of economic liberalization could change,
and specific laws and policies affecting travel service
companies, foreign investments, currency exchange rates and
other matters affecting investments in India could change as
well. A significant change in India’s policy of economic
liberalization and deregulation or any social or political
uncertainties could adversely affect business and economic
conditions in India generally and our business and prospects.
As the
Domestic Indian Market Constitutes a Significant Source of Our
Revenue, a Slowdown in Economic Growth in India Could Cause Our
Business to Suffer.
In fiscal years 2010 and 2011, 94.7% and 92.8%, respectively, of
our revenue was derived directly from sales by our subsidiary in
India. The performance and growth of our business are
necessarily dependent on economic conditions prevalent in India,
which may be materially and adversely affected by political
instability or regional conflicts, a general rise in interest
rates, inflation, economic slowdown elsewhere in the world or
otherwise. The CIA World Factbook estimates that consumer
inflation in India was 8.3% in 2008, 10.9% in 2009 and 11.7% in
2010. The Indian economy also remains largely driven by the
performance of the agriculture sector which depends on the
quality of the monsoon which is difficult to predict. The Indian
economy has grown significantly over the past few years. In the
past, economic slowdowns in the Indian economy have harmed the
travel industry as customers have less disposable income for
their travels, especially holiday travel. Any future slowdown in
the Indian economy or a further increase in inflation could have
a material adverse effect on the demand for the travel products
we sell and, as a result, on our financial condition and results
of operations.
Trade deficits could also adversely affect our business and the
price of our ordinary shares. India’s trade relationships
with other countries and its trade deficit, driven to a major
extent by global crude oil prices, may adversely affect Indian
economic conditions. If trade deficits increase or are no longer
manageable because of the rise in global crude oil prices or
otherwise, the Indian economy, and therefore our business, our
financial performance and the price of our ordinary shares could
be adversely affected.
India also faces major challenges in sustaining its growth,
which include the need for substantial infrastructure
development and improving access to healthcare and education. If
India’s economic growth cannot be sustained or otherwise
slows down significantly our business and prospects could be
adversely affected.
The
Travel Industry in India is Susceptible to Extraneous Events
Such As Terrorist Attacks and Other Acts of Violence, Which May
Result in a Reduction in Travel Volumes to Affected
Areas.
Terrorist attacks and other acts of violence or war involving
India or other neighboring countries may adversely affect the
Indian markets and the worldwide financial markets. As many
terrorist attacks tend to be focused on tourists or tourist
destinations, such acts may also result in a reduction in
confidence in the Indian travel industry and could adversely
impact our business and prospects. In addition, any
deterioration in international relations between India and other
countries may result in concerns regarding regional stability
which could adversely affect the price of our ordinary shares.
The occurrence of any of these events may result in a loss of
business confidence and have an adverse effect on our business
and financial performance.
South Asia has also experienced instances of civil unrest and
hostilities among neighboring countries from time to time,
including between India and Pakistan. Military confrontations
between India and Pakistan have occurred along the
India/Pakistan border. There have also been incidents in and
near India such as terrorist attacks and troop mobilizations
along the border. Such military activity, terrorist attacks or
other adverse social, economic and political events in India in
the future could adversely affect the Indian economy by
disrupting communications and making travel more difficult.
Resulting political tensions could create a greater perception
that investments in Indian companies involve a high degree of
risk and could have an adverse impact on our business and the
price of our ordinary shares. Furthermore, if India were to
become engaged in armed hostilities, we might not be able to
continue our operations. While we maintain insurance for losses
arising from terrorist activities, our insurance policies do not
cover business interruptions from terrorist attacks or for other
reasons.
Natural
Calamities Could Have a Negative Impact on the Indian Economy
and Cause Our Business to Suffer.
India has experienced natural calamities such as earthquakes,
tsunamis, floods and drought in the past few years. In December
2004, Southeast Asia, including both the eastern and western
coasts of India, experienced a massive tsunami, and in October
2005, the State of Jammu and Kashmir experienced an earthquake,
both of which events caused significant loss of life and
property damage. The extent and severity of these natural
disasters determines their impact on the Indian economy.
Substantially all of our operations and employees are located in
India and there can be no assurance that we will not be affected
by natural disasters in the future. Furthermore, if any of these
natural disasters occur in tourist destinations such as the
tsunami in 2004 which affected the state of Kerala, a popular
vacation destination in India, travel to and within India could
be adversely affected, which could have an adverse impact on our
business and financial performance.
Restrictions
on Foreign Investment in India May Prevent Us from Making Future
Acquisitions or Investments in India, Which May Adversely Affect
Our Results of Operations, Financial Condition and Financial
Performance.
India regulates ownership of Indian companies by foreigners,
although some restrictions on foreign investment have been
relaxed in recent years. These regulations and restrictions may
apply to acquisitions by us or our affiliates, including MMT
India and affiliates which are not resident in India, of shares
in Indian companies or the provision of funding by us or any
other entity to Indian companies within our group. For example,
under its consolidated foreign direct investment policy, the
Government of India has set out additional requirements for
foreign investments in India, including requirements with
respect to downstream investments by Indian companies, owned or
controlled by foreign entities, and the transfer of ownership or
control of Indian companies in sectors with caps on foreign
investment from resident Indian persons or entities to
foreigners. These requirements, which currently include
restrictions on valuations and sources of funding for such
investments and may include prior approval from the Foreign
Investment Promotion Board, may adversely affect our ability to
make investments in India, including through MMT India. There
can be no assurance that we will be able to obtain any required
approvals for future acquisitions or investments in India, or
that we will be able to obtain such approvals on satisfactory
terms.
We May
Become Liable to Penalties or Actions Imposed by the Reserve
Bank of India in Relation to Delays in Compliance with Certain
Reporting Requirements Applicable in Respect of the Acquisition
and Transfer of Our Shares by Certain Indian Resident Employees
of MMT India and of Issuances of Shares of MMT India to
Us.
The Reserve Bank of India has prescribed certain reporting
requirements in connection with the acquisition and transfer of
foreign securities by Indian residents, including periodic
filings to be made by an Indian subsidiary of a foreign company
with respect to employees acquiring shares under an employee
share option scheme, and the issuance of shares of Indian
entities to persons resident outside India. In the past, there
have been instances where certain of such filings required to be
made by our Indian subsidiary, MMT India, in connection with
issuances of shares of our company to employees of MMT India
under our employee share option scheme and of issuances of
shares of MMT India to us, have been inadvertently delayed or
incomplete. While we have now made the necessary filings or
provided clarifications sought by the Reserve Bank of India with
respect to such filings, we may become liable to certain
penalties or actions by the Reserve Bank of India, which we are
unable to quantify at this time. We have not received any other
communication regarding the imposition of any penalty or action
from the Reserve Bank of India with respect to such filings.
Our
Business and Activities Are Regulated by the Competition Act,
2002.
The Competition Act, 2002, as amended, or the Competition Act,
seeks to prevent practices that could have an appreciable
adverse effect on competition. Under the Competition Act, any
arrangement, understanding or action between enterprises,
whether formal or informal, which causes or is likely to cause
an appreciable adverse effect on competition is void and will be
subject to substantial penalties. Any agreement that directly or
indirectly determines purchase or sale prices, limits or
controls production, or creates market sharing by way of
geographical area or number of customers in the market is
presumed to have an appreciable adverse effect on competition.
Provisions relating to the regulation of certain acquisitions,
mergers or amalgamations which have an appreciable adverse
effect on competition and regulations recently issued by the
Competition Commission of India with respect to notification
requirements for such combinations were recently notified to
come into force on June 1, 2011.
The effect of the Competition Act on the business environment in
India is unclear. If we or any member of our group, including
MMT India, are affected, directly or indirectly, by the
application or interpretation of any provision of the
Competition Act or any enforcement proceedings initiated by the
Competition Commission of India or any other relevant authority
under the Competition Act or any claim by any other party under
the Competition Act or any adverse publicity that may be
generated due to scrutiny or prosecution by the Competition
Commission of India or any other relevant authority under the
Competition Act, our business and financial performance may be
materially and adversely affected.
Risks
Related to Investments in Mauritian Companies
As Our
Shareholder, You May Have Greater Difficulties in Protecting
Your Interests Than As a Shareholder of a United States
Corporation.
We are incorporated under the laws of Mauritius. The laws
generally applicable to United States corporations and their
shareholders may provide shareholders of United States
corporations with rights and protection for which there may be
no corresponding or similar provisions under the Companies Act
2001 of Mauritius, as amended, or the Mauritius Companies Act.
As such, if you invest in our ordinary shares, you may or may
not be accorded the same level of shareholder rights and
protection that a shareholder of a United States corporation may
be accorded under the laws generally applicable to United States
corporations and their shareholders. Taken together with the
provisions of our Constitution, some of these differences may
result in your having greater difficulties in protecting your
interests as our shareholder than you would have as a
shareholder of a United States corporation. This affects, among
other things, the circumstances under which transactions
involving an interested director are voidable, whether an
interested director can be held accountable for any benefit
realized in a transaction with us, what rights you may have as a
shareholder to enforce specified provisions of the Mauritius
Companies Act or our Constitution, and the circumstances under
which we may indemnify our directors and officers.
We May
Become Subject to Unanticipated Tax Liabilities That May Have a
Material Adverse Effect on Our Results of
Operations.
We are a Mauritius Category 1 Global Business Company and are
tax resident in Mauritius. The Income Tax Act 1995 of Mauritius
imposes a tax in Mauritius on the chargeable income of our
company at the rate of 15.0%. However, under the Income Tax
(Foreign Tax Credit) Regulations 1996 of Mauritius, subject to
the Income Tax Act 1995 and the regulations under the Income Tax
(Foreign Tax Credit) Regulations 1996, credit is allowed for
foreign tax on the foreign source income of a resident of
Mauritius against Mauritius tax computed by reference to the
same income, and where credit is allowed against Mauritius tax
chargeable in respect of any income, the amount of Mauritius tax
so chargeable shall be reduced by the amount of the credit.
Under the Income Tax (Foreign Tax Credit) Regulations 1996,
“foreign source income” means income which is not
derived from Mauritius and includes in the case of a corporation
holding a Category 1 Global Business Licence under the Financial
Services Act 2007 of Mauritius, income derived in the course of
a global business. Subject to the provisions of the Income Tax
(Foreign Tax Credit) Regulations 1996, no credit is allowed in
respect of foreign tax unless written evidence is presented to
the Mauritius Revenue Authority showing the amount of foreign
tax which has been charged and for this purpose, “written
evidence” includes a receipt of the relevant authorities of
the foreign country for the foreign tax or any other evidence
that the foreign tax has been deducted or paid to the relevant
authorities of that country. However, pursuant to
regulation 8 of the Income Tax (Foreign Tax Credit)
Regulations 1996, if written evidence is not presented to the
Mauritius Revenue Authority showing the amount of foreign tax
charged on our company’s foreign source income, the amount
of foreign tax shall nevertheless be conclusively presumed to be
equal to 80% of the Mauritius tax chargeable with respect to
that income and in such circumstance, the effective tax rate in
Mauritius on our company’s chargeable income would be 3%.
Following amendments to the Financial Services Act 2007 of
Mauritius pursuant to the Finance (Miscellaneous Provisions) Act
2010 in December 2010, Mauritius companies holding a Category 1
Global Business Licence, or GBC1, issued by the Financial
Services Commission in Mauritius are permitted to conduct
business both in and outside Mauritius (instead of outside
Mauritius only). The operations of a GBC1 company in
Mauritius will be subject to tax on chargeable income at the
rate of 15% in Mauritius.
We hold two tax residence certificates issued by the Mauritius
Revenue Authority. We believe that a significant portion of the
income derived from our operations will not be subject to tax in
countries in which we conduct activities or in which our
customers are located, other than Mauritius and India. However,
this belief is based on the anticipated nature and conduct of
our business, which may change. It is also based on our
understanding of our position under the tax laws of the
countries in which we have assets or conduct activities. This
position is subject to review and possible challenge by taxing
authorities and to possible changes in law that may have
retroactive effect. Our results of operations could be
materially and adversely affected if we become subject to a
significant amount of unanticipated tax liabilities.
Risks
Related to Our Ordinary Shares and this Offering
Investors
May Have Difficulty Enforcing Judgments against Us, Our
Directors and Management.
We are incorporated under the laws of Mauritius. Further, we
conduct substantially all of our operations in India through our
key operating subsidiary in India. The majority of our directors
and officers, and some of the experts named in this prospectus,
reside outside the United States, and a majority of our assets
and some or all of the assets of such persons are located
outside the United States. As a result, it may be difficult or
impossible to effect service of process within the United States
upon us or those persons, or to recover against us or them on
judgments of United States courts, including judgments
predicated upon the civil liability provisions of the United
States federal securities laws. An award of punitive damages
under a United States court judgment based upon United States
federal securities laws is likely to be construed by Mauritian
and Indian courts to be penal in nature and therefore
unenforceable in both Mauritius and India. Further, no claim may
be brought in Mauritius or India against us or our directors and
officers in the first instance for violation of United States
federal securities laws because these laws have no
extraterritorial application under Mauritian or Indian law and
do not have force of law in Mauritius or India. However, a
Mauritian or Indian court may impose civil liability, including
the possibility of monetary damages, on us or our directors and
officers if the facts alleged in a complaint constitute or give
rise to a cause of action under Mauritian or Indian law.
Moreover, it is unlikely that a court in Mauritius or India
would award
damages on the same basis as a foreign court if an action were
brought in Mauritius or India or that a Mauritian or Indian
court would enforce foreign judgments if it viewed the amount of
damages as excessive or inconsistent with Mauritius or Indian
practice or public policy.
The courts of Mauritius or India would not automatically enforce
judgments of United States courts obtained in actions against us
or our directors and officers, or some of the experts named
herein, predicated upon the civil liability provisions of the
United States federal securities laws, or entertain actions
brought in Mauritius or India against us or such persons
predicated solely upon United States federal securities laws.
Further, there is no treaty in effect between the United States
and Mauritius providing for the enforcement of judgments of
United States courts in civil and commercial matters and the
United States has not been declared by the Government of India
to be a reciprocating territory for the purposes of enforcement
of foreign judgments, and there are grounds upon which Mauritian
or Indian courts may decline to enforce the judgments of United
States courts. Some remedies available under the laws of United
States jurisdictions, including remedies available under the
United States federal securities laws, may not be allowed in
Mauritian or Indian courts if contrary to public policy in
Mauritius or India. Because judgments of United States courts
are not automatically enforceable in Mauritius or India, it may
be difficult for you to recover against us or our directors and
officers or some experts named in this prospectus based upon
such judgments. In India, prior approval of the Reserve Bank of
India is required in order to repatriate any amount recovered
pursuant to such judgments. See “Enforceability of Civil
Liabilities.”
As a
Foreign Private Issuer, We are Permitted to, and We Will, Follow
Certain Home Country Corporate Governance Practices in Lieu of
Certain Nasdaq Requirements Applicable to US Issuers. This May
Afford Less Protection to Holders of Our Ordinary
Shares.
As a foreign private issuer whose ordinary shares are listed on
the Nasdaq Global Market, we are permitted to follow certain
home country corporate governance practices in lieu of certain
Nasdaq Global Market requirements. A foreign private issuer must
disclose in its annual reports filed with the Securities and
Exchange Commission, or the SEC, each Nasdaq Global Market
requirement with which it does not comply followed by a
description of its applicable home country practice. As a
company incorporated in Mauritius and listed on the Nasdaq
Global Market, we expect to follow our home country practice
with respect to the composition of our board of directors and
nominations committee and executive sessions. Unlike the
requirements of the Nasdaq Global Market, the corporate
governance practice and requirements in Mauritius do not require
us as a Mauritius Category 1 Global Business Company to
have a majority of our board of directors to be independent; do
not require us as a Mauritius Category 1 Global Business Company
to establish a nominations committee; and do not require us to
hold regular executive sessions where only independent directors
shall be present. Such Mauritian home country practices may
afford less protection to holders of our ordinary shares.
An
Active or Liquid Trading Market for Our Ordinary Shares May
Not Be Maintained and the Trading Price for Our Ordinary
Shares May Fluctuate Significantly.
While this offering will increase the number of our ordinary
shares publicly trading in the United States, an active, liquid
trading market for our ordinary shares may not be maintained in
the long term and we cannot be certain that any trading market
for our ordinary shares will be sustained or that the present
price will correspond to the future price at which our ordinary
shares will trade. Loss of liquidity could increase the price
volatility of our ordinary shares.
Any additional issuance of ordinary shares would dilute the
positions of existing investors in the ordinary shares and could
adversely affect the market price of our ordinary shares. We
cannot assure you that our ordinary shares will not decline
below their public offering price. The public offering price of
our shares will be determined by reference to the prevailing
market price and market conditions at the time of pricing. You
may be unable to sell your ordinary shares at a price that is
attractive to you.
Because
the Public Offering Price Is Substantially Higher Than Our Book
Value Per Ordinary Share, You Will Incur Immediate and
Substantial Dilution.
Purchasers of our ordinary shares will experience immediate and
substantial dilution in net tangible book value per ordinary
share from the public offering price per ordinary share. After
giving effect to the issuance of ordinary shares upon the
exercise of share options held by certain of our selling
shareholders for sale in this offering and the
sale of ordinary shares offered by this prospectus, after
deducting the underwriting discounts and commissions and the
estimated offering expenses payable by us in this offering, our
net tangible book value as of March 31, 2011 would have
been approximately $107.0 million, or $2.92 per ordinary
share. This represents an immediate dilution in net tangible
book value of $21.08 per ordinary share to investors in this
offering. For a calculation of the dilution purchasers in this
offering will incur, see “Dilution.”
The
Sale or Availability for Sale of Substantial Amounts of Our
Ordinary Shares Could Adversely Affect Their Market
Price.
Sales of substantial amounts of our ordinary shares in the
public market after the completion of this offering, or the
perception that such sales could occur, could adversely affect
the market price of our ordinary shares and could materially
impair our future ability to raise capital through offerings of
our ordinary shares.
We will have 36,601,272 ordinary shares outstanding immediately
after this offering (assuming the issuance of 51,633 ordinary
shares upon the exercise of share options held by certain of our
selling shareholders for sale in this offering, effective upon
the completion of this offering), or 36,826,517 ordinary shares
if the underwriters exercise their option to purchase additional
ordinary shares in full. Further, although certain of our share
option holders are subject to restrictions on selling shares
acquired upon the exercise of options, the majority of the
options granted under our equity option plan will continue to be
exercisable following the completion of this offering. All of
the ordinary shares sold in this offering will be freely
tradable without restriction or further registration under the
US Securities Act of 1933, or the Securities Act, unless
held by our “affiliates” as that term is defined in
Rule 144 under the Securities Act. Subject to the
90-day
lock-up
restrictions described below and other applicable restrictions
and limitations under Rule 144 of the Securities Act, all
of our shares outstanding prior to this offering will be
eligible for sale in the public market. If these shares are
sold, or if it is perceived that they will be sold, in the
public market, the trading price of our ordinary shares could
decline.
In connection with this offering, we, the selling shareholders
and Tiger Global, one of our shareholders, have agreed, subject
to some exceptions, not to sell any ordinary shares for
90 days after the date of this prospectus without the
written consent of the underwriters. However, the underwriters
may release these ordinary shares from these
lock-up
restrictions at any time. We cannot predict what effect, if any,
market sales of ordinary shares held by our significant
shareholders or any other shareholder or the availability of
these ordinary shares for future sale will have on the market
price of our ordinary shares.
Future
Issuances of Any Equity Securities May Decrease the Trading
Price of Our Ordinary Shares.
Any issuance of equity securities after this offering could
dilute the interests of our shareholders and could substantially
decrease the trading price of our ordinary shares. We may issue
equity or equity-linked securities in the future for a number of
reasons, including to finance our operations and business
strategy (including in connection with acquisitions and other
transactions), to adjust our ratio of debt to equity, to satisfy
our obligations upon the exercise of then-outstanding options or
other equity-linked securities, if any, or for other reasons.
We
Will Have Considerable Discretion As to the Use of the Net
Proceeds to be Received by Us from This Offering.
Our allocation of the net proceeds to be received by us of this
offering is based on current plans and business conditions. The
amounts and timing of any expenditure will vary depending on the
amount of cash generated by our operations, competitive, market
as well as technological developments, and the number and type
of new acquisitions or investments we undertake. Accordingly,
our management will have considerable discretion in the
application of the net proceeds received by us. You will not
have the opportunity, as part of your investment decision, to
assess whether proceeds are being used appropriately. You must
rely on the judgment of our management regarding the application
of the net proceeds of this offering. The net proceeds may be
used for corporate purposes that do not improve our results of
operations or increase our share price. The net proceeds from
this offering, pending investment in operating assets or
businesses, or technological enhancement, may be placed in
investments that do not produce income or that lose value, which
will cause the price of our ordinary shares to decline.
Our
Holding Company Will Have to Rely Principally on Dividends and
Other Distributions on Equity Paid by Our Operating Subsidiaries
and Limitations on Their Ability to Pay Dividends to Our Holding
Company Could Adversely Impact Your Ability to Receive Dividends
on Our Ordinary Shares.
Dividends and other distributions on equity paid by our
operating subsidiaries will be our holding company’s
principal source for cash in order for us to be able to pay any
dividends and other cash distributions to our shareholders. As
of the date of this prospectus, MMT India has not paid any cash
dividends on its equity shares. If our operating subsidiaries
incur debt on their own behalf in the future, the instruments
governing the debt may restrict their ability to pay dividends
or make other distributions to our holding company. As our key
operating subsidiary is established in India, it is also subject
to certain limitations with respect to dividend payments. See
“Dividends and Dividend Policy” for further
information.
Compliance
with Rules and Requirements Applicable to Public Companies May
Cause Us to Incur Additional Costs, and Any Failure by Us to
Comply with Such Rules and Requirements Could Negatively Affect
Investor Confidence in Us and Cause the Market Price of Our
Ordinary Shares to Decline.
As a public company, we incur significant legal, accounting and
other expenses. We have begun the process of bringing our
company into compliance with applicable financial reporting
regulations including the requirements under section 404 of
the
Sarbanes-Oxley
Act. We have a senior manager and three other employees who are
responsible for implementation of requirements under the
Sarbanes-Oxley Act. We are in the process of evaluating and
hiring consultants and new staff. Complying with these rules and
requirements may be particularly difficult and costly for us
because we may have difficulty finding sufficient personnel in
India with experience and expertise relating to IFRS and United
States public-company reporting requirements, and such personnel
may be costly. If we cannot employ sufficient qualified and
experienced personnel to ensure compliance with these rules and
regulations, we may need to rely more on outside legal,
accounting and financial experts, which may be costly. In
addition, we will incur additional costs associated with our
public company reporting requirements. We cannot predict or
estimate the amount of additional costs we may incur or the
timing of such costs.
We May
Be Classified as a Passive Foreign Investment Company, Which
Could Result in Adverse US Federal Income Tax Consequences to US
Holders of Our Ordinary Shares.
Based on, among other things, the current and anticipated
valuation of our assets and composition of our income and
assets, we do not expect to be a passive foreign investment
company, or PFIC, for US federal income tax purposes for our
current taxable year ending March 31, 2012. However, we
must make a separate determination after the close of each
taxable year as to whether we were a PFIC for that year.
Accordingly, we cannot assure you that we will not be a PFIC for
our current taxable year or any future taxable year. A
non-US corporation will be a PFIC for any taxable year if
either (1) at least 75% of its gross income for such year
is passive income or (2) at least 50% of the value of its
assets (based on an average of the quarterly values of the
assets) during such year is attributable to assets that produce
passive income or are held for the production of passive income.
Because the value of our assets for purposes of the PFIC test
will generally be determined by reference to the market price of
our ordinary shares, fluctuations in the market price of the
ordinary shares may cause us to become a PFIC. In addition,
changes in the composition of our income or assets may cause us
to become a PFIC. If we are a PFIC for any taxable year during
which a US Holder (as defined in “Taxation — US
Federal Income Taxation”) holds an ordinary share, certain
adverse US federal income tax consequences could apply to such
US Holder. See “Taxation — US Federal Income
Taxation — Passive Foreign Investment Company.”
This prospectus contains forward-looking statements that relate
to our current expectations and views of future events. These
forward-looking statements are contained principally in the
sections entitled “Prospectus Summary,”“Risk
Factors,”“Use of Proceeds,”“Management’s Discussion and Analysis of Financial
Condition and Results of Operations,”“Industry
Overview” and “Business.” These statements relate
to events that involve known and unknown risks, uncertainties
and other factors, including those listed under “Risk
Factors,” which may cause our actual results, performance
or achievements to be materially different from any future
results, performance or achievements expressed or implied by the
forward-looking statements.
In some cases, these forward-looking statements can be
identified by words or phrases such as “may,”“will,”“expect,”“anticipate,”“aim,”“estimate,”“intend,”“plan,”“believe,”“potential,”“continue,”“is/are likely to” or other
similar expressions.
These forward-looking statements are subject to risks,
uncertainties and assumptions, some of which are beyond our
control. In addition, these forward-looking statements reflect
our current views with respect to future events and are not a
guarantee of future performance. Actual outcomes may differ
materially from the information contained in the forward-looking
statements as a result of a number of factors, including,
without limitation, the risk factors set forth in “Risk
Factors” and the following:
•
our ability to maintain and expand our supplier relationships;
•
our reliance on technology;
•
our ability to expand our business, implement our strategy and
effectively manage our growth;
•
political and economic stability in and around India;
•
our ability to successfully implement our growth strategy;
•
our ability to attract, train and retain executives and other
qualified employees;
•
increasing competition in the Indian travel industry; and
•
risks associated with online commerce security.
The forward-looking statements made in this prospectus relate
only to events or information as of the date on which the
statements are made in this prospectus. Except as required by
law, we undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new
information, future events or otherwise, after the date on which
the statements are made or to reflect the occurrence of
unanticipated events. You should read this prospectus and the
documents that we reference in this prospectus and have filed as
exhibits to the registration statement, of which this prospectus
is a part, completely and with the understanding that our actual
future results or performance may be materially different from
what we expect.
We are incorporated in Mauritius and our primary operating
subsidiary, MMT India, is incorporated in India. The majority of
our directors and executive officers are not residents of the
United States and substantially all of our assets and the assets
of such persons are located outside the United States. As a
result, it may not be possible for you to effect service of
process within the United States upon such persons or us. In
addition, you may be unable to enforce judgments obtained in
courts of the United States against such persons outside the
jurisdiction of their residence, including judgments predicated
solely upon US securities laws.
There is uncertainty as to whether the courts in Mauritius would
enforce judgments obtained in the United States against us or
our directors or executive officers, as well as the experts
named herein, based on the civil liability provisions of the
securities laws of the United States or allow actions in
Mauritius against us or our directors or executive officers
based only upon the securities laws of the United States.
Further, foreign judgments may not be given effect to by a
Mauritius court where it would be contrary to any principle
affecting public policy in Mauritius or to the extent that they
constitute the payment of an amount which is in the nature of a
penalty and not in the nature of liquidated damages.
In addition to and irrespective of jurisdictional issues,
neither Mauritian nor Indian courts will enforce a provision of
the US federal securities laws that is either penal in nature or
contrary to public policy. An action brought pursuant to a
public or penal law, the purpose of which is the enforcement of
a sanction, power or right at the instance of the state in its
sovereign capacity, is unlikely to be entertained by Mauritian
or Indian courts. Specified remedies available under the laws of
US jurisdictions, including specified remedies under US federal
securities laws, would not be available under Mauritian or
Indian law or enforceable in a Mauritian or Indian court, if
they are considered to be contrary to Mauritian or Indian public
policy. An award of punitive damages under a United States court
judgment based upon United States federal securities laws is
likely to be construed by Mauritian and Indian courts to be
penal in nature and therefore unenforceable in both Mauritius
and India. Further, no claim may be brought in Mauritius or
India against us or our directors and officers, as well as the
experts named herein, in the first instance for a violation of
US federal securities laws because these laws have no
extraterritorial application under Mauritian or Indian law and
do not have force of law in Mauritius or India.
Section 44A of the Indian Code of Civil Procedure, 1908, as
amended, or the Civil Procedure Code, provides that where a
foreign judgment has been rendered by a superior court in any
country or territory outside of India which the Government of
India has by notification declared to be a reciprocating
territory, such foreign judgment may be enforced in India by
proceedings in execution as if the judgment had been rendered by
an appropriate court in India. However, the enforceability of
such judgments is subject to the exceptions set forth in
Section 13 of the Civil Procedure Code. This section, which
is the statutory basis for the recognition of foreign judgments,
states that a foreign judgment is conclusive as to any matter
directly adjudicated upon except:
•
where the judgment has not been pronounced by a court of
competent jurisdiction;
•
where the judgment has not been given on the merits of the case;
•
where the judgment appears on the face of the proceedings to be
founded on an incorrect view of international law or a refusal
to recognize the law of India in cases where such law is
applicable;
•
where the proceedings in which the judgment was obtained were
opposed to natural justice;
•
where the judgment has been obtained by fraud; or
•
where the judgment sustains a claim founded on a breach of any
law in force in India.
Section 44A of the Civil Procedure Code is applicable only
to decrees or judgments under which a sum of money is payable
not being in the nature of amounts payable in respect of taxes
or other charges of a similar nature or in respect of fines or
other penalties and does not include arbitration awards. It is
unlikely that a court in India would award damages on the same
basis as a foreign court if an action were brought in India.
Furthermore, it is unlikely that an Indian court would enforce a
foreign judgment if it viewed the amount of damages awarded as
excessive or inconsistent with public policy or practice in
India.
If a judgment of a foreign court is not enforceable under
Section 44A of the Civil Procedure Code as described above,
it may be enforced in India only by a suit filed upon the
judgment, subject to Section 13 of the Civil Procedure
Code, and not by proceedings in execution. The United States has
not been declared by the Government of India to be a
reciprocating territory for the purposes of Section 44A of
the Civil Procedure Code. Accordingly, a judgment of a court in
the United States may be enforced only by filing a fresh suit on
the basis of the judgment and not by proceedings in execution.
The suit must be brought in India within three years from the
date of the judgment in the same manner as any other suit filed
to enforce a civil liability in India. It is difficult to
predict whether a suit brought in an Indian court will be
disposed of in a timely manner or be subject to untimely delay.
A party seeking to enforce a foreign judgment in India is
required to obtain prior approval from the Reserve Bank of India
under the Foreign Exchange Management Act, 1999, as amended, to
repatriate any amount recovered pursuant to such enforcement.
Any judgment in a foreign currency would be converted into
Indian Rupees on the date of judgment and not on the date of
payment.
A final and conclusive judgment in the superior courts of a
foreign jurisdiction, or foreign courts, other than the courts
of the United Kingdom, under which a sum of money is payable
(other than a sum payable in respect of taxes, fines, penalties
or similar charges) may be recognized by, and be enforceable in,
the courts of Mauritius if (1) the judgment is still valid,
final and is capable of execution in the jurisdiction in which
it was delivered; (2) the judgment is not contrary to any
principle affecting public policy in Mauritius; (3) the
foreign courts had jurisdiction to hear the claim; and
(4) our company had been regularly summoned to attend the
proceedings before the foreign courts. Any judgment expressed in
a foreign currency by a foreign court, may, when made executory
in Mauritius, be expressed in that foreign currency. A valid and
final judgment rendered by a court in the United States may not
be enforced in Mauritius except by way of exequatur under the
Mauritius Code on Civil Procedure. The exequatur may be sought
in Mauritius so long as the valid and final judgment is capable
of execution in the United States.
A final and conclusive judgment or order in the superior courts
of the United Kingdom under which a sum of money is made payable
(and including an award in proceedings on an arbitration if the
award has, under the law in force in the place where it was
made, become enforceable in the same manner as a judgment by a
court in that place) would, on registration in accordance with
the provisions of The Reciprocal Enforcement of Judgments Act
1923 be enforceable in the Supreme Court of Mauritius. Any
judgment expressed in pounds sterling or other currency by a
superior court of the United Kingdom, may, when made executory
in Mauritius, be expressed in pounds sterling or any other
currency at the rate of exchange prevailing at the date of
judgment of the original court.
The net proceeds we will receive from the sale of the ordinary
shares offered by us will be approximately $33.5 million,
after deducting the underwriting discounts and commissions and
estimated offering expenses payable by us. The underwriters have
agreed to pay for certain expenses in connection with this
offering. If the underwriters exercise their option to purchase
786,600 additional ordinary shares in full, our net proceeds
from the sale of the ordinary shares offered by us will be
approximately $38.5 million, after deducting the
underwriting discounts and commissions and estimated offering
expenses payable by us. We will not receive any proceeds from
the sale of ordinary shares by the selling shareholders.
We intend to use the net proceeds received by us from this
offering to expand our operations by acquiring or investing in
strategic businesses or assets that complement our service and
product offerings, to invest in enhancements to our technology,
as well as for working capital and other general corporate
purposes. At this time, we have not entered into any agreement
or commitment with respect to any material acquisitions or
investments.
We have not yet determined all of our expected expenditures, and
we cannot estimate the amounts to be used for the purposes set
forth above. The amounts and timing of any expenditures will
depend on the amount of cash generated by our operations,
competitive and market developments and the availability of
acquisition or investment opportunities on terms acceptable to
us. Accordingly, our management will have significant
flexibility in applying the net proceeds of this offering. See
“Risk Factors — Risks Related to Our Ordinary
Shares and this Offering — We Will Have Considerable
Discretion As to the Use of the Net Proceeds to Be Received by
Us from This Offering.”
Pending use of the net proceeds as described above, we intend to
invest the net proceeds of this offering in short-term,
interest-bearing bank deposits or money market funds. These
investments may have a material adverse effect on the US federal
income tax consequences of your investment in our ordinary
shares. See “Risk Factors — Risks Related to Our
Ordinary Shares and this Offering — We May Be
Classified as a Passive Foreign Investment Company, Which Could
Result in Adverse US Federal Income Tax Consequences to US
Holders of Our Ordinary Shares” and “Taxation
— US Federal Income Taxation — Passive
Foreign Investment Company.”
The following table sets forth our indebtedness and
capitalization as of March 31, 2011:
•
on an actual basis; and
•
on an as adjusted basis to reflect (1) the issuance of
51,633 ordinary shares upon the exercise of share options held
by certain of our selling shareholders for sale in this
offering, effective upon the completion of this offering; and
(2) the issuance and sale by us of 1,450,000 ordinary
shares offered in this offering at the public offering price of
$24.00 per share, after deducting the underwriting discounts and
commissions and estimated offering expenses payable by us, and
further assuming no exercise by the underwriters of their
over-allotment option and no other change to the number of
ordinary shares sold by us as set forth on the cover page of
this prospectus.
You should read this table in conjunction with “Use of
Proceeds,”“Selected Consolidated Financial
Information,”“Management’s Discussion and
Analysis of Financial Condition and Results of Operations”
and our consolidated financial statements and related notes
included elsewhere in this prospectus.
Ordinary shares of par value $0.0005 each,
Issued: 35,099,639, actual; 36,601,272, as
adjusted(1)
17.5
18.3
Share premium
111,541.7
145,955.8
Accumulated deficit
(38,024.1
)
(38,728.8
)
Share-based payment reserve
3,914.8
3,676.7
Foreign currency translation reserve
(1,174.1
)
(1,174.1
)
Total equity/(deficit) attributable to equity holders of our
company
76,275.9
109,747.9
Total capitalization
$
80,341.5
$
113,813.4
Note: (1)
The actual ordinary shares stated
in the table above excludes 1,510,187 ordinary shares issuable
upon the exercise of outstanding options granted under our
equity option plan as of March 31, 2011. See
“Management — Share Incentive Plans —
Equity Option Plan.” The as adjusted ordinary shares as of
March 31, 2011 stated in the table above exclude
1,458,554 ordinary shares issuable upon the exercise of
outstanding options granted under our equity option plan (not
taking into account those share options to be exercised by
certain of our selling shareholders for sale in this offering,
effective upon the completion of this offering).
Since our incorporation, no dividends have been declared or paid
on our ordinary shares. We currently intend to retain our
earnings, if any, to finance the development and growth of our
business and operations as well as expand our business and do
not currently anticipate paying dividends on our ordinary shares
in the near future.
Under Mauritius law, we may only pay dividends out of retained
earnings, after having made good any accumulated losses at the
beginning of the relevant accounting period and no distribution
(which term includes dividend) may be made unless our board of
directors is satisfied that upon the distribution being made
(1) our company is able to pay its debts as they become due
in the normal course of business and (2) the value of our
company’s assets is greater than the sum of (a) the
value of its liabilities and (b) our company’s stated
capital (which refers to the total of all amounts received by
our company or due and payable to our company in respect of the
nominal
paid-up
value of our issued shares and share premiums paid to our
company in relation to such shares). Subject to the Mauritius
Companies Act and our Constitution, the declaration and payment
of any dividend has to be authorized by our board of directors
and is subject to the approval of our shareholders. Even if our
board of directors decides to pay dividends, the form, frequency
and amount will depend upon our future operations and earnings,
cash flows, capital requirements, general financial condition,
contractual restrictions and other factors which our directors
may deem relevant. Cash dividends, if any, will be paid in US
dollars. Other distributions, if any, will be made to our
shareholders by any means which our directors deem fair, legal
and practicable.
As we are a holding company, we will have to rely on dividends
paid to us by our subsidiaries (in particular, our key operating
subsidiary in India, MMT India) for our cash requirements,
including funds to pay dividends and other cash distributions to
our shareholders, service any debt we may incur and pay our
operating expenses. Our ability to pay dividends to our
shareholders will depend on, among other things, the
availability of dividends from MMT India.
As of the date of this prospectus, MMT India has not paid any
cash dividends on its equity shares. Dividends other than in
cash are not permitted under Indian law. The declaration and
payment of any dividends in the future will be recommended by
the board of directors of MMT India and approved by the
shareholders of MMT India at their discretion and would depend
on a number of factors, including its financial condition,
results of operations, capital requirements and surplus,
contractual obligations, applicable Indian legal restrictions,
the provisions of its articles of association, the terms of its
credit facilities and other financing arrangements at the time a
dividend is considered and other factors considered relevant by
the board of directors. MMT India may also from time to time pay
interim dividends. MMT India is liable to pay dividend
distribution tax in India at the rate of 15.0%, plus applicable
cess and surcharge, on any dividends paid by it.
Under Indian law, a company declares dividends upon a
recommendation by its board of directors and approval by a
majority of the shareholders at the annual general meeting of
shareholders held within six months of the end of each fiscal
year. However, while final dividends can be paid out by a
company only after such dividends have been recommended by the
board of directors and approved by shareholders, interim
dividends can be paid out with only a recommendation by the
board of directors. The shareholders have the right to decrease
but not to increase any dividend amount recommended by the board
of directors. Under Indian law, shares of a company belonging to
the same class must receive equal dividend treatment.
Under Indian law, a company is permitted to declare or pay
dividends in any year from profits for that year only if it
transfers a specified percentage of profits for that year to the
reserves of the company as prescribed by the Companies Act,
1956, as amended, or the Companies Act, and applicable rules
thereunder. We intend to make such transfers to our general
reserves in anticipation of any dividends we may pay.
If profits for a particular year are insufficient to declare
dividends (including interim dividends), the dividends for that
year may be declared and paid out from accumulated profits if
the following conditions are fulfilled:
•
the rate of dividend to be declared shall not exceed the average
of the rates at which dividends were declared in the five years
immediately preceding that year or 10.0% of our
paid-up
share capital, whichever is less;
the total amount to be drawn from the accumulated profits earned
in previous years and transferred to the reserves shall not
exceed an amount equal to one-tenth of the sum of our
paid-up
share capital and net reserves, and the amount so drawn shall
first be utilized to set off the losses incurred in the
financial year before any dividend in respect of preference or
equity shares is declared; and
•
the balance of the reserves after such withdrawal shall not fall
below 15.0% of our
paid-up
share capital.
If you invest in our ordinary shares, your interest will be
diluted to the extent of the difference between the public
offering price per ordinary share and our net tangible book
value per ordinary share after this offering. Dilution results
from the fact that the public offering price per ordinary share
is substantially in excess of the book value per ordinary share
attributable to the existing shareholders for our presently
outstanding ordinary shares.
As of March 31, 2011, we had net tangible book value of
$73.48 million, or $2.09 per ordinary share outstanding as
of that date. Our net tangible book value is determined by
subtracting the value of our intangible assets and total
liabilities from our total assets.
Dilution is determined by subtracting net tangible book value
per ordinary share from the public offering price per ordinary
share of $24.00, after deducting the underwriting discounts and
commissions and estimated offering expenses payable by us.
Without taking into account any other changes in net tangible
book value after March 31, 2011, other than to give effect
to (1) the issuance of ordinary shares upon the exercise of
share options held by certain of our selling shareholders for
sale in this offering, to be effected upon the completion of
this offering; and (2) our sale of the ordinary shares
offered in this offering, with estimated net proceeds of
$33.5 million after deducting the underwriting discounts
and commissions and estimated offering expenses payable by us,
our proforma net tangible book value as of March 31, 2011
would have been $107.0 million and $2.92 per outstanding
ordinary share. This represents an immediate dilution in
proforma net tangible book value of $21.08 per ordinary share to
new investors in this offering.
The following table illustrates such dilution per ordinary share
Public offering price per ordinary share
$
24.00
Net tangible book value per ordinary share as of March 31,2011
$
2.09
Proforma net tangible book value per ordinary share after giving
effect to the issuance of shares pursuant to the exercise of
options for sale in this offering and this offering
$
2.92
Amount of dilution in net tangible book value per ordinary share
to new investors in the offering
$
21.08
Percentage dilution in net tangible book value per ordinary
share to new investors in the offering
87.8
%
Assuming the underwriters’ over-allotment option is
exercised in full, our net tangible book value as of
March 31, 2011 (after giving effect to the issuance of
shares pursuant to the exercise of options for sale in this
offering, and this offering) would have been $112.0 million
and $3.04 per outstanding ordinary share. This represents an
immediate dilution in proforma net tangible book value of $20.96
per ordinary share to new investors in this offering.
The following table summarizes, on a proforma basis as of
March 31, 2011 (assuming the exercise of share options by
certain of our selling shareholders for sale in this offering
occurred on such date), the differences between the number of
ordinary shares purchased from us, the total consideration paid
to us and the average price per ordinary share that existing
shareholders paid for their shares and new investors paid,
before deducting the underwriting discounts and commissions and
estimated offering expenses payable by us.
The discussion and tables above assume no exercise of any
outstanding share options other than such options to be
exercised by certain of our selling shareholders effective upon
completion of this offering. As of March 31, 2011, there
were 1,458,554 ordinary shares issuable upon exercise of
outstanding share options with exercise prices ranging from
$0.0005 to $5.39 (excluding those outstanding share options to
be exercisable by certain of our selling shareholders effective
upon completion of this offering), and there were ordinary
shares available for future issuance upon the exercise of future
grants under our equity option plan. To the extent that any of
these options is exercised, there will be further dilution to
new investors.
Our consolidated financial statements and other financial data
included in this prospectus are presented in US dollars. Our
business and operations are primarily conducted in India through
our Indian subsidiary, MMT India. The functional currency of MMT
India is Indian Rupees and its revenues and expenses are
denominated in that currency. We report our consolidated
financial results in US dollars. The conversion of Indian Rupees
into US dollars in this prospectus is based on the noon buying
rate in The City of New York for cable transfers of Indian
Rupees as certified for customs purposes by the Federal Reserve
Bank of New York. For your convenience, unless otherwise noted,
all translations from Indian Rupees to US dollars and from US
dollars to Indian Rupees in this prospectus were made at a rate
of Rs. 44.24 to $1.00, the noon buying rate in effect as of
April 30, 2011. We make no representation that any Indian
Rupee or US dollar amounts referred to in this prospectus could
have been or could be converted into US dollars or Indian
Rupees, as the case may be, at any particular rate or at all.
The effects of foreign currency translation adjustments are
included as a component of other comprehensive income in our
shareholders’ equity.
The following table sets forth, for each of the periods
indicated, the low, average, high and period-end noon buying
rates in The City of New York for cable transfers, in Indian
Rupees per US dollar, as certified for customs purposes by the
Federal Reserve Bank of New York. These rates are provided
solely for your convenience and are not necessarily the exchange
rates that we used in this prospectus or will use in the
preparation of our periodic reports or any other information to
be provided to you.
Indian Rupees per US Dollar
Noon Buying Rate
Period
Period
End
Average(1)
Low
High
2006
44.11
45.17
43.89
46.83
2007
39.41
41.00
38.48
44.49
2008
48.58
43.70
39.12
50.12
2009
46.40
48.22
46.00
51.96
2010
44.80
45.58
43.90
47.49
November
45.83
44.93
43.90
45.83
December
44.80
45.10
44.70
45.54
2011:
January
45.92
45.38
44.59
45.92
February
45.18
45.38
45.06
45.66
March
44.54
44.91
44.54
45.24
April
44.24
44.30
44.00
44.51
Note: (1)
Averages for a period other than
one month are calculated by using the average of the noon buying
rate at the end of each month during the period. Monthly
averages are calculated by using the average of the daily noon
buying rates during the relevant month.
Our outstanding ordinary shares are currently listed and traded
on the Nasdaq Global Market under the symbol “MMYT.”
As at March 31, 2011, 35,099,639 ordinary shares were
outstanding.
The following table shows:
•
the reported high and low trading prices quoted in US dollars
for our ordinary shares on the Nasdaq Global Market; and
•
the average of the aggregate trading volume for our ordinary
shares on the Nasdaq Global Market.
Nasdaq Global Market Price
Per Ordinary Share
Period
High
Low
Fiscal Year
2011(1)
$
42.88
$
20.75
Fiscal Quarter 2011
2nd
Quarter(1)
$
42.88
$
20.75
3rd Quarter
$
40.80
$
23.81
4th Quarter
$
32.41
$
24.03
2010
November
$
39.60
$
26.22
December
$
29.10
$
23.81
2011
January
$
32.41
$
27.00
February
$
30.16
$
24.03
March
$
29.50
$
24.47
April
$
34.22
$
28.85
Note: (1)
From August 12, 2010 following
completion of our initial public offering on the Nasdaq Global
Market.
The following selected consolidated statement of comprehensive
income and loss data for fiscal years 2009, 2010 and 2011 and
the selected consolidated statement of financial position data
as of March 31, 2010 and 2011 have been derived from our
audited consolidated financial statements included elsewhere in
this prospectus. The selected consolidated statement of
comprehensive income and loss data for fiscal year 2008 and the
selected consolidated statement of financial position as of
March 31, 2008 and 2009 have been derived from our audited
financial statements not included in this prospectus. The
financial data set forth below should be read in conjunction
with, and are qualified by reference to, “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” and the consolidated financial statements and
notes thereto included elsewhere in this prospectus. Our
consolidated financial statements are prepared and presented in
accordance with IFRS as issued by the IASB. Our historical
results do not necessarily indicate results expected for any
future period.
Prior to initiation of our initial public offering that was
completed in August 2010, we had not prepared consolidated
financial statements. Our India-incorporated and
Delaware-incorporated operating subsidiaries prepare financial
statements in accordance with Indian Generally Accepted
Accounting Principles, or Indian GAAP, and United States
Generally Accepted Accounting Principles, or US GAAP,
respectively. We have adopted IFRS as issued by the IASB with a
transition date of April 1, 2007 and have prepared
consolidated financial statements with effect from that date. We
represent that selected financial data for fiscal year 2007
cannot be prepared and presented below in accordance with IFRS
as issued by the IASB without incurring unreasonable effort or
expense, as, among other things, our subsidiaries would have to
convert their respective financial statements from Indian GAAP
to IFRS and from US GAAP to IFRS, in order for the historical
financial data to be extracted.
Fiscal Year Ended
March 31
2008
2009
2010
2011
(in thousands, except per share
data and number of shares)
Consolidated Statement of Comprehensive Income (Loss)
Data:
Revenue:
Air ticketing
$
14,091.4
$
19,225.1
$
32,119.5
$
47,622.7
Hotels and packages
24,189.4
48,622.8
50,287.9
74,558.0
Other revenue
50.1
703.8
1,152.8
2,540.7
Total revenue
38,330.9
68,551.7
83,560.2
124,721.4
Service cost:
Procurement cost of hotels and packages services
(21,823.8)
(43,069.2)
(42,292.2)
(63,650.9)
Purchase of air ticket coupons
—
(491.8)
(985.5)
—
Personnel expenses
(8,459.2)
(9,679.8)
(16,562.0)
(14,399.0)
Other operating expenses
(23,229.0)
(24,369.9)
(28,160.5)
(40,698.9)
Depreciation and amortization
(1,107.5)
(1,558.7)
(1,569.7)
(1,910.6)
Results from operating activities
(16,288.7)
(10,617.6)
(6,009.8)
4,061.9
Net finance income (costs)
(2,611.2)
3,244.1
(188.8)
(1,923.9)
Profit (Loss) before tax
(18,899.8)
(7,373.5)
(6,198.6)
2,138.0
Income tax benefit (expense)
4.5
25.3
(8.4)
2,691.7
Profit (Loss) for the year
$
(18,895.4)
$
(7,348.2)
$
(6,207.0)
$
4,829.7
Profit (Loss) per ordinary share:
Basic
$
(1.08)
$
(0.42)
$
(0.35)
$
0.17
Diluted
$
(1.08)
$
(0.55)
$
(0.35)
$
0.15
Weighted average number of ordinary shares outstanding:
(in thousands, except per share
data and number of shares)
Proforma earnings (loss) per ordinary Share (unaudited):
Basic(1)
$
(0.59)
$
(0.38)
$
(0.18)
$
0.16
Diluted(1)
$
(0.59)
$
(0.38)
$
(0.18)
$
0.15
Proforma weighted average number of ordinary shares outstanding
(unaudited):
Basic(1)
26,980,680
29,761,580
29,845,580
32,993,361
Diluted(1)
26,980,680
29,761,580
29,845,580
34,929,282
Note: (1)
In December 2006, August 2007 and
May 2008, we issued Series A, Series B and Series C
preferred shares, respectively, that were converted into
ordinary shares effective upon the completion of our initial
public offering on August 17, 2010. Our proforma earnings
(loss) per ordinary share (basic and diluted) and proforma
weighted average number of ordinary shares outstanding (basic
and diluted) have been calculated assuming that the conversion
of all our outstanding preferred shares occurred on a
“hypothetical basis” on April 1, 2007 for our
Series A and Series B preferred shares and
April 1, 2008 for our Series C preferred shares.
The following table sets forth a summary of our consolidated
statement of financial position as of March 31, 2008, 2009,
2010 and 2011:
As of March 31
2008
2009
2010
2011
(in thousands)
Consolidated Statement of Financial Position Data:
Trade and other receivables
$
9,852.8
$
5,428.2
$
12,449.5
$
12,857.2
Term deposits
7,346.3
16,038.9
14,471.4
16,941.9
Cash and cash equivalents
3,775.5
5,471.6
9,341.5
51,730.3
Total assets
33,226.6
37,898.2
50,633.5
112,939.6
Total equity (deficit) attributable to equity holders of our
company
(17,244.6)
(27,237.5)
(24,955.4)
76,275.9
Loans and
borrowings(1)
24,198.1
39,712.5
40,966.9
209.6
Trade and other payables
12,321.1
13,440.1
26,467.0
29,694.7
Total liabilities
50,468.1
65,131.6
75,584.5
36,663.8
Total equity (deficit) and liabilities
$
33,226.6
$
37,898.2
$
50,633.5
$
112,939.6
Note: (1)
The preferred shares issued by us
were compound financial instruments with equity, liability and
embedded derivative components. Accordingly, the liability
portion of our preferred shares amounting to $24.1 million,
$39.6 million, $40.8 million and $0 for fiscal years
2008, 2009, 2010 and 2011, respectively, had been included under
our loans and borrowings. All our preferred shares were
converted into ordinary shares effective upon the completion of
our initial public offering on August 17, 2010.
The following table sets forth for the periods indicated,
certain selected consolidated financial and other data:
Fiscal Year Ended
March 31
2008
2009
2010
2011
(in thousands, except
percentages)
Number of transactions:
Air ticketing
1,029.1
1,250.8
1,766.9
2,824.6
Hotels and packages
36.9
81.4
109.7
175.9
Revenue less service
cost(1):
Air ticketing
$
14,091.4
$
18,733.3
$
31,134.0
$
47,622.7
Hotels and packages
2,365.6
5,553.6
7,995.7
10,907.1
Other revenue
50.1
703.8
1,152.8
2,540.7
$
16,507.1
$
24,990.7
$
40,282.5
$
61,070.5
Gross
bookings(2):
Air ticketing
$
198,799.6
$
260,945.1
$
408,603.1
$
647,846.9
Hotels and packages
26,489.7
52,365.7
57,273.1
94,608.2
Net revenue
margins(3):
Air ticketing
7.1
%
7.2
%
7.6
%
7.4
%
Hotels and packages
8.9
%
10.6
%
14.0
%
11.5
%
Notes: (1)
As certain parts of our revenue are
recognized on a “net” basis and other parts of our
revenue are recognized on a “gross” basis, we evaluate
our financial performance based on revenue less service cost,
which is a non-IFRS measure, as we believe that revenue less
service cost reflects more accurately the value addition of the
travel services that we provide to our customers. The
presentation of this non-IFRS information is not meant to be
considered in isolation or as a substitute for our consolidated
financial results prepared in accordance with IFRS as issued by
the IASB. Our revenue less service cost may not be comparable to
similarly titled measures reported by other companies due to
potential differences in the method of calculation. The
following table reconciles our revenue (an IFRS measure) to
revenue less service cost (a non-IFRS measure):
Air Ticketing
Hotels and Packages
Other Revenue
Total
Fiscal Year Ended
March 31
Fiscal Year Ended
March 31
Fiscal Year Ended
March 31
Fiscal Year Ended
March 31
2008
2009
2010
2011
2008
2009
2010
2011
2008
2009
2010
2011
2008
2009
2010
2011
(In thousands)
Revenue
$
14,091.4
$
19,225.1
$
32,119.5
$
47,622.7
$
24,189.4
$
48,622.8
$
50,287.9
$
74,558.0
$
50.1
$
703.8
$
1,152.8
$
2,540.7
$
38,330.9
$
68,551.7
$
83,560.2
$
124,721.4
Less:
Service cost
—
491.8
985.5
—
21,823.8
43,069.2
42,292.2
63,650.9
—
—
—
—
21,823.8
43,561.0
43,277.7
63,650.9
Revenue less service cost
$
14,091.4
$
18,733.3
$
31,134.0
$
47,622.7
$
2,365.6
$
5,553.6
$
7,995.7
$
10,907.1
$
50.1
$
703.8
$
1,152.8
$
2,540.7
$
16,507.1
$
24,990.7
$
40,282.5
$
61,070.5
(2)
Gross bookings represent the total
amount paid by our customers for the travel services and
products booked through us, including taxes, fees and other
charges, and are net of cancellations and refunds.
(3)
Net revenue margins is defined as
revenue less service cost as a percentage of gross bookings.
You should read the following discussion and analysis of our
financial condition and results of operations in conjunction
with the section entitled “Selected Consolidated Financial
and Other Data,” and our consolidated financial statements
and the related notes included elsewhere in this prospectus.
This discussion contains forward-looking statements and involves
numerous risks and uncertainties, including, but not limited to,
those described in the “Risk Factors” section of this
prospectus. Actual results could differ materially from those
contained in any forward-looking statements.
Overview
We are the largest online travel company in India, based on
gross bookings for 2009, according to PhoCusWright. Through our
primary website, www.makemytrip.com, and other
technology-enhanced platforms, travelers can research, plan and
book a wide range of travel services and products in India as
well as overseas. Our services and products include air tickets,
hotels, packages, rail tickets, bus tickets, car hire and
ancillary travel requirements such as facilitating access to
travel insurance. As reported by The Economic Times on
February 6, 2011, the Indian middle class is expected to
grow over three times from 160 million people currently to
547 million people by 2026. In order to meet the
requirements of this growing Indian middle class travel market
where Internet penetration is relatively low, we also utilize
other technology-enhanced distribution channels, including call
centers, our travel stores in India, as well as our travel
agents’ network in India.
We generate revenue through two main lines of business, air
ticketing, and hotels and packages. Sales in our air ticketing
business are primarily made through our websites whereas sales
in our hotels and packages business are made mainly through our
call centers, travel stores and travel agents’ network. We
also generate revenue through the online sale of rail and bus
tickets and by facilitating access to travel insurance, as well
as advertising revenue from third party advertisements on our
websites.
In our air ticketing business, our three main sources of revenue
are (1) commissions and incentive payments from airline
suppliers for tickets booked by customers through our
distribution channels, (2) service fees we charge our
customers and (3) fees from our GDS service provider.
Revenue from our air ticketing business generally represents the
commissions, incentive payments and fees we earn as an agent on
a “net” basis.
In our hotels and packages business, revenue (including revenue
on air tickets sold as part of packages) is generally accounted
for on a “gross” basis, representing the total amount
paid by our customers for these travel services and products.
The cost of procuring the relevant services and products for
sale to our customers in this business are classified as service
cost. Our hotels and packages revenue also includes commissions
we earn for the sale of hotel rooms (without packages), and
commissions we earn as an agent from other online travel agents
and aggregators from whom we procure hotel rooms for our
customers for hotels outside India, which are accounted for on a
“net” basis.
As certain parts of our revenue are recognized on a
“net” basis and other parts of our revenue are
recognized on a “gross” basis, we evaluate our
financial performance based on revenue less service cost, which
is a non-IFRS measure, as we believe that revenue less service
cost reflects more accurately the value addition of the travel
services that we provide to our customers. The presentation of
this non-IFRS information is not meant to be considered in
isolation or as a substitute for our consolidated financial
results prepared in accordance with IFRS as issued by the IASB.
Our revenue less service cost may not be comparable to similarly
titled measures reported by other companies due to potential
differences in the method of calculation.
The following tables reconcile our revenue (an IFRS measure) to
revenue less service cost (a non-IFRS measure):
Air Ticketing
Hotels and Packages
Other Revenue
Total
Fiscal Year Ended
Fiscal Year Ended
Fiscal Year Ended
Fiscal Year Ended
March 31
March 31
March 31
March 31
2009
2010
2011
2009
2010
2011
2009
2010
2011
2009
2010
2011
(in thousands, except
percentages)
Revenue
$
19,225.1
$
32,119.5
$
47,622.7
$
48,622.8
$
50,287.9
$
74,558.0
$
703.8
$
1,152.8
$
2,540.7
$
68,551.7
$
83,560.2
$
124,721.4
Less:
Service cost
491.8
985.5
—
43,069.2
42,292.2
63,650.9
—
—
—
43,561.0
43,277.7
63,650.9
Revenue less service cost
$
18,733.3
$
31,134.0
$
47,622.7
$
5,553.6
$
7,995.7
$
10,907.1
$
703.8
$
1,152.8
$
2,540.7
$
24,990.7
$
40,282.5
$
61,070.5
% of total revenue less service cost
75.0%
77.3%
78.0%
22.2%
19.8%
17.9%
2.8%
2.9%
4.1%
100.0%
100.0%
100.0%
Key
Operating Metrics
Our operating results are affected by certain key metrics that
represent overall transaction activity and subsequent financial
performance generated by our travel services and products. Three
of the most important metrics, which are critical in determining
the ongoing growth of our business, are revenue less service
cost, gross bookings and net revenue margins.
Revenue from our air ticketing business is generally accounted
for on a “net” basis (representing the commissions,
incentive payments and fees we earn) and recognized at the time
of issuance of air tickets. We account for our air ticketing
revenue in this manner as we typically act as an agent and as we
do not assume any performance obligation after the confirmation
of the issuance of tickets. However, on a few occasions, we
pre-purchase air ticket inventory in order to enjoy special
negotiated rates and revenue from the sale of such tickets is
accounted for on a “gross” basis (representing the
price of the tickets paid by our customers) as we assume
inventory risk on such pre-purchased tickets. The cost of such
air tickets are classified as service cost.
Revenue from our hotels and packages business (including air
tickets sold as part of packages) is generally accounted for on
a “gross” basis, representing the total amount paid by
our customers for these travel services and products, as we are
the primary obligor and have responsibility for the delivery of
services. The cost of procuring the relevant services and
products for sale to our customers in this business are
classified as service cost. However, our hotels and packages
revenue also includes commissions we earn for the sale of hotel
rooms (without packages), and commissions we earn as an agent
from other online travel agents and aggregators from whom we
procure hotel rooms for our customers for hotels outside India,
which are accounted for on a “net” basis. Our hotels
and packages revenue is recognized on the check-in date for
hotel reservations and the date of departure for packages.
As certain parts of our revenue are recognized on a
“net” basis and other parts of our revenue are
recognized on a “gross” basis, we evaluate our
financial performance based on revenue less service cost, as we
believe this reflects more accurately the value addition of the
travel services that we provide to our customers.
Gross bookings represent the total amount paid by our customers
for the travel services and products booked through us,
including taxes, fees and other charges, and are net of
cancellations and refunds.
Net revenue margins is defined as revenue less service cost as a
percentage of gross bookings and represent the commissions,
fees, incentive payments and other amounts earned in our
business. We follow net revenue margin trends closely across our
various lines of business to gain insight into the profitability
of our various businesses.
The following table sets forth the number of transactions, gross
bookings and net revenue margins for our air ticketing business,
and hotels and packages business for our last three fiscal years.
Fiscal Year Ended
March 31
2009
2010
2011
(in thousands, except
percentages)
Number of transactions:
Air ticketing
1,250.8
1,766.9
2,824.6
Hotels and packages
81.4
109.7
175.9
Gross bookings:
Air ticketing
$
260,945.1
$
408,603.1
$
647,846.9
Hotels and packages
52,365.7
57,273.1
94,608.2
$
313,310.8
$
465,876.2
$
742,455.1
Net revenue margins:
Air ticketing
7.2
%
7.6
%
7.4
%
Hotels and packages
10.6
%
14.0
%
11.5
%
Combined net revenue margin for air ticketing and hotels and
packages
7.8
%
8.4
%
7.9
%
Factors
Affecting Our Results of Operations
Changes in Our Business Mix and Net Revenue
Margins. Changes in the Indian air travel
industry have affected, and will continue to affect, the revenue
per transaction for travel agents, including our company. In
particular, volatility in global economic conditions and jet
fuel prices in recent years have caused our airline partners to
pursue cost reductions in their operations, including reducing
distribution costs. Measures taken by airlines to reduce such
costs have included reductions in travel agent commissions. In
our experience, the commission rate paid by airlines to travel
agents has generally been decreasing and we expect this trend to
continue. Many international airlines which fly to India have
also either significantly reduced or eliminated commissions to
travel agents. Unlike full-service airlines, low-cost airlines
do not generally utilize GDSs for their ticket inventory. As a
result, travel agents selling air tickets for low-cost airlines
generally do not earn fees from GDSs.
In fiscal year 2010, these trends prompted Indian travel agents,
including our company, to increase the amount of service fees
charged to customers and the number of services for which fees
are levied. As a result, although commissions in the air
ticketing business faced downward pressures in the industry, our
air ticketing net revenue margins increased from 7.2% in fiscal
year 2009 to 7.6% in fiscal year 2010. In addition, many of our
Indian airline suppliers also paid incentive fees to travel
agents such as ourselves during the economic slowdown in fiscal
year 2010 and most of fiscal year 2009 in order to improve their
sales.
In fiscal year 2011, our air ticketing net revenue margins
decreased to 7.4% from 7.6% in fiscal year 2010. This decrease
was mainly a result of a reduction in the service fees we charge
in our domestic air ticketing business in order to attract more
customers and gain market share. This reduction in service fees
partially offset the effects of an increase in our gross
bookings and higher volume-related incentives we earned from the
airlines during fiscal year 2011.
The hotels and packages business tends to yield higher margins
than the air ticketing business, reflecting the greater value
added in respect of the travel services that we provide in the
hotels and packages segment as well as the diversity and more
complex nature of hotels and packages services as compared with
air tickets. Our net revenue margins in this business increased
from 10.6% in fiscal year 2009 to 14.0% in fiscal year 2010 as
we were able to negotiate more favorable terms with our
suppliers on account of the growth in our number of transactions
and gross bookings during these years, and also because our
travel suppliers provided more favorable terms due to the
slowdown in India’s economy in fiscal 2010. Our net revenue
margins in the hotels and packages business decreased, however,
from 14.0% in fiscal year 2010 to 11.5% in fiscal year 2011. We
reduced our margin in the third
quarter of fiscal year 2011 in order to increase our market
share and promote new holiday packages as we continued to
develop new travel destinations.
We are focused on expanding our hotels and packages business.
Our hotels and packages transactions have increased over the
last three fiscal years, increasing from 81,357 transactions in
fiscal year 2009 to 175,869 transactions in fiscal year 2011.
Gross bookings for hotels and packages have increased from
$52.4 million in fiscal year 2009 to $94.6 million in
fiscal year 2011. Revenue less service cost from our hotels and
packages business accounted for 22.2%, 19.8% and 17.9% of our
total revenue less service cost in fiscal years 2009, 2010 and
2011, respectively.
Seasonality in the Indian Travel Industry. We
experience seasonal fluctuations in the demand for travel
services and products offered by us. We tend to experience
higher revenues from our hotels and packages business in the
second and fourth calendar quarters of each year, which coincide
with the summer holiday travel season and the year-end holiday
travel season in India. In our air ticketing business, we tend
to experience higher revenues in the third and fourth calendar
quarters of each year and lower revenue in the first calendar
quarter, mainly as a result of changes in demand for business
travel.
Advertising and Business Promotion
Expenses. Competition in the Indian online travel
industry has intensified and the industry is expected to remain
highly competitive for the foreseeable future. Increased
competition may cause us to increase our advertising and
business promotion expenses or lower our service fees in the
future in order to compete effectively with new entrants and
existing players in the market. We may also increase our
advertising and business promotion expenses as well as personnel
expenses as a result of our expansion into new markets and such
expenses may not be offset by increased revenue particularly at
the initial commencement of business in these new markets. We
intend to invest in marketing to further increase our brand
awareness through our “Memories Unlimited” marketing
campaign. We expect to spend approximately $2.0 million on
marketing in fiscal year 2012 in addition to our typical
advertising and business promotion expenses to further
strengthen our brand.
Trends and Changes in the Indian Economy and Travel
Industry. Our financial results have been, and
are expected to continue to be, affected by trends and changes
in the Indian economy and travel industry, particularly the
Indian online travel industry. These trends and changes include:
•
growth in the Indian economy and the middle class population in
India, as well as increased tourism expenditure in India;
•
increased Internet penetration (particularly broadband
penetration) in India;
•
increased use of the Internet for commerce in India; and
•
intensive competition from new and existing market entrants,
particularly in the Indian online travel industry.
See “Industry Overview” for further information.
Our
Revenue, Service Cost and Other Revenue and Expenses
Revenue
We started our business in 2000 with a focus on the sales of air
tickets to non-resident Indians in the United States traveling
inbound to India. In 2005 we started our Indian air ticketing
business. Over time, we have expanded our hotels and packages
business as well as introduced new non-air services and products
such as the sale of rail and bus tickets, and facilitating
access to travel insurance. We also generate advertising revenue
from third party advertisements on our websites.
Air Ticketing. We earn commissions from
airlines for tickets booked by customers through our
distribution channels as well as incentive payments linked to
the number of sales facilitated by us. We either deduct
commissions at the time of payment of the fare to our airline
suppliers or collect our commissions on a regular basis from our
airline suppliers, whereas incentive payments are collected from
our airline suppliers on a periodic basis. Incentives earned
from airlines are recognized on the basis of performance targets
agreed with the
relevant airline and when performance obligations have been
completed. We charge our customers a service fee for booking
airline tickets. We receive fees from our GDS service provider
based on the volume of sales completed by us through the GDS.
Revenue from air tickets sold as part of packages is eliminated
from our air ticketing revenues and added to our hotels and
packages revenue.
Hotels and Packages. Revenue from our hotels
and packages business generally represents the total amount paid
by our customers for these services and products as well as
revenue from air tickets sold as part of packages. Our hotels
and packages revenue also includes commissions we earn for the
sale of hotel rooms (without packages), and commissions we earn
as an agent from other online travel agents and aggregators from
whom we procure hotel rooms for our customers for hotels outside
India, which is recorded on a “net” basis. As revenue
in our hotels and packages business is accounted for on a
“gross” basis, revenue from air tickets sold as part
of packages is grossed up to include the fare paid by customers
as well as all commissions and fees charged by us, and added to
our hotels and packages revenue.
Other Revenue. Our other revenue primarily
comprises revenue from commissions or fees from IRCTC for the
sale of rail tickets, bus operators for the sale of bus tickets,
as well as Apollo Munich Health Insurance Company Limited
(previously known as Apollo DKV Insurance Company Limited) for
our facilitation of the access to travel insurance, and
third-party advertising on our websites. We also receive fees
from aggregators from whom we procure inventory for certain bus
tickets, when we book bus tickets through them. We expect that
revenue from these other businesses will continue to contribute
an insignificant percentage of our revenue in the near future.
Service
Cost
Service cost primarily consists of costs paid to hotel and
package suppliers for the acquisition of relevant services and
products for sale to customers, and includes the procurement
cost of hotel rooms and other local services such as sightseeing
costs for packages and local transport costs; it does not
include any component of personnel cost, depreciation or other
operating costs. As revenue from our air ticketing business is
generally recognized on a “net” basis, there is
typically no service cost associated with our air ticketing
business. However, on a few occasions, we pre-purchase air
ticket inventory in order to enjoy special negotiated rates and
revenue from the sale of such tickets is recognized on a
“gross” basis (representing the retail value of the
tickets paid by our customers). The cost of such air tickets are
classified as service cost.
The following tables sets forth revenue recorded on a
“gross” basis and on a “net” basis as well
as service costs within our air ticketing business, our hotels
and packages business and our other revenue during our last
three fiscal years.
Air Ticketing
Hotels and Packages
Other Revenue
Total
Fiscal Year Ended
Fiscal Year Ended
Fiscal Year Ended
Fiscal Year Ended
March 31
March 31
March 31
March 31
2009
2010
2011
2009
2010
2011
2009
2010
2011
2009
2010
2011
(in thousands)
Revenue on gross basis
$
578.7
$
1,110.2
$
—
$
48,101.0
$
48,724.2
$
71,155.1
$
—
$
—
$
—
$
48,679.7
$
49,834.4
$
71,155.1
Revenue on net basis
18,646.4
31,009.3
47,622.7
521.8
1,563.7
3,402.9
703.8
1,152.8
2,540.7
19,872.0
33,725.8
53,566.3
Revenue
19,225.1
32,119.5
$
47,622.7
48,622.8
50,287.9
$
74,558.0
703.8
1,152.8
$
2,540.7
68,551.7
83,560.2
$
124,721.4
Less:
Service cost
491.8
985.5
—
43,069.2
42,292.2
63,650.9
—
—
—
43,561.0
43,277.7
63,650.9
Revenue less service cost
$
18,733.3
$
31,134.0
$
47,622.7
$
5,553.6
$
7,995.7
$
10,907.1
$
703.8
$
1,152.8
$
2,540.7
$
24,990.7
$
40,282.5
$
61,070.5
Personnel
Expenses
Personnel expenses primarily consist of wages and salaries,
employee welfare expenses, contributions to mandatory retirement
provident funds as well as other expenses related to the payment
of retirement benefits, and employee share-based compensation.
Other operating expenses primarily consist of, among other
things, advertising and business promotion expenses, charges by
payment gateway providers and fees paid to our outsourcing
service providers for our call center service and other
functions.
Depreciation
and Amortization
Depreciation consists primarily of depreciation expense recorded
on property and equipment, such as computers and office
furniture, fixtures and equipment, leasehold improvements, motor
vehicles and power backup generators at certain of our offices,
including our corporate office in Gurgaon, India. Amortization
expense consists primarily of amortization recorded on
intangible assets including website development expenses and
software.
Finance
Income
Finance income consists mainly of net gains
and/or
losses arising from the change in fair value of the derivative
component on our preferred shares (being the option embedded in
our preferred shares which obliges our company to issue
additional preferred shares to preferred shareholders if we
subsequently issue new preferred shares at lower prices than the
original issue prices of the preferred shares of the same class)
as well as interest income on our term deposits.
Finance
Costs
Finance costs consist primarily of interest expense accrued on
our convertible preferred shares which are considered as
interest bearing loans for accounting purposes (except for their
embedded option derivative value), bank charges, impairment loss
on trade and other receivables, which represent provisions for
bad and doubtful debts under certain terminated contracts with
travel suppliers as well as receivables under dispute by our
suppliers, and cost of initial public offering of our ordinary
shares. All of our preferred shares were converted into ordinary
shares upon the completion of our initial public offering in
August 2010.
Foreign
Currency Translation
Our functional currency and that of our subsidiary,
MakeMyTrip.com Inc., is the US dollar. However, MMT India, our
key operating subsidiary, primarily operates its business in
Indian Rupees and its functional currency is the Indian Rupee.
We report our consolidated financial statements in US dollars.
The financial statements of MMT India are translated to our
reporting currency using relevant exchange rates in accordance
with IFRS. In particular, the assets and liabilities of our
foreign operations are translated to US dollars at exchange
rates as of the relevant reporting date, and the income and
expenses of our foreign operations are translated to US dollars
at the average of the exchange rates applicable during the
relevant reporting period. Adjustments resulting from the
translation of MMT India’s financial statements from its
functional currency to our reporting currency are accumulated
and reported as other comprehensive income (loss), which is a
separate component of our shareholders’ equity. See also
“— Quantitative and Qualitative Disclosures about
Market Risk — Foreign Exchange Risk.”
Critical
Accounting Policies
Certain of our accounting policies require the application of
judgment by our management in selecting appropriate assumptions
for calculating financial estimates, which inherently contain
some degree of uncertainty. Our management bases its estimates
on historical experience and various other assumptions that are
believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the reported
carrying values of assets and liabilities and the reported
amounts of revenues and expenses that may not be readily
apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
We believe the following are the critical accounting policies
and related judgments and estimates used in the preparation of
our consolidated financial statements. Our management has
discussed the application of these critical accounting estimates
with our board of directors and audit committee. For more
information on each of these policies, see
“Note 3 — Significant Accounting
Policies” in the notes to our consolidated financial
statements.
We derive our revenue primarily from two sources: air ticketing
and hotels and packages.
Revenue from our air ticketing business is primarily generated
from our websites whereas revenue from our hotels and packages
business is primarily generated through call centers, travel
stores and travel agents’ network. We also generate revenue
through the sale of rail and bus tickets, facilitating access to
travel insurance and advertising revenue from third party
advertisements on our websites.
Air Ticketing. Income from our air ticketing
business comprises commissions and incentive payments from
airline suppliers, service fees charged to customers and fees
from our GDS service provider. We recognize income from our air
ticket bookings at the time of issuance of tickets on the net
commission we earn as an agent as we do not assume any
performance obligation after the confirmation of the issuance of
the air tickets to our customers. Incentives earned from
airlines are recognized on the basis of performance targets
agreed with the relevant airline and when performance
obligations have been completed. In cases where we pre-purchase
air tickets and assume inventory risk, revenue from the sale of
such tickets are accounted for on a “gross” basis. The
costs of such air tickets are classified as service cost.
Hotels and Packages. Income from our hotels
and packages business, including income from air tickets sold as
part of packages, is accounted for on a “gross” basis
as we are the primary obligor in the arrangement and incur risk
and responsibility, including the responsibility for delivery of
services. Our hotels and packages revenue also includes
commissions we earn for the sale of hotel rooms (without
packages), and commissions we earn as an agent from other online
travel agents and aggregators from whom we procure hotel rooms
for our customers for hotels outside India, which are accounted
for on a “net” basis. Our hotels and packages revenue
is recognized on the check-in date for hotel reservations and
the date of departure for packages, respectively.
Other Revenue. We also earn commissions and
fees from railway and bus operators, earn fees by facilitating
access to travel insurance policies to our customers and
generate revenue from third party advertisements on our
websites. Income from these other sources is recognized as the
services are being performed.
We recognize revenue when we have persuasive evidence of an
arrangement in respect of services to be provided, where such
services have been rendered, and the fee is determinable and
collectibility is reasonably assured. We conclude that we have
persuasive evidence of an arrangement when we enter into a
legally enforceable agreement with our customers with terms and
conditions that describe the service and the related payments.
We consider fees to be determinable when the services have been
provided in accordance with the agreement, i.e. upon booking of
the air ticket in the case of airline ticketing revenue and upon
check-in in the case of packages and hotels, respectively. As
the customer is primarily required to pay the amount at the time
of transaction, collectibility is reasonably assured. We do not
believe we have significant uncertainty regarding revenue
recognition, or that the same would not be affected by uncertain
future events. No major estimates or assumptions are made at the
time of revenue recognition.
Revenue is recognized net of cancellations, refunds, discounts
and taxes. In the event of cancellation of airline tickets,
revenue recognized in respect of commissions earned by our
company on such tickets is reversed and is net off from our
revenue earned during the fiscal period at the time of
cancellation. In addition, a liability is recognized in respect
of the refund due to our customers for the gross amount charged
to such customers net of cancellation fees. The revenue from the
sale of hotels and packages and hotel reservations is recognized
on the customer’s departure and check-in dates,
respectively. Cancellations, if any, do not impact revenue
recognition since revenue is recognized upon the availing of
services by the customer.
Service
Cost
Service cost primarily consists of costs paid to hotel and
package suppliers for the acquisition of relevant services and
products for sale to customers, and includes the procurement
cost of hotel rooms and other services. Service costs also
include costs of pre-purchased air tickets in respect of sale of
airline tickets where our company assumes inventory risks.
Service costs are the amount paid or accrued against procurement
of these services and products from the respective suppliers and
do not include any other operating cost to provide these
services or products. Service costs are recognized when
incurred, which coincides with the recognition of the
corresponding revenue.
Other operating costs include costs such as advertising and
business promotion costs, payment gateway charges, web hosting
charges and outsourcing fees, which are recognized on an accrual
basis. Depreciation and amortization costs are amortized over
the estimated useful lives of the assets.
Advertising and business promotion costs are primarily comprised
of Internet, television, radio and print media advertisement
costs, as well as event-driven promotion costs for our
company’s products and services. Such costs are the amounts
paid by us to or accrued by us toward advertising agencies or
direct service providers for advertising on websites,
television, print formats, search engine marketing and any other
media. Advertising and business promotion costs are recognized
when incurred.
Accounting
Estimates
While preparing our financial statements, we make estimates and
assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent liabilities as of the date
of our financial statements and the reported amount of revenues
and expenses for the relevant reporting period.
Our estimate of liability relating to pending litigation is
based on currently available facts and our assessment of the
probability of an unfavorable outcome. Considering the
uncertainties about the ultimate outcome and the amount of
losses, we re-assess our estimates as additional information
becomes available. Such revisions in our estimates could
materially impact our results of operations and our financial
position. We believe that the estimates used in the preparation
of our consolidated financial statements are prudent and
reasonable. Actual results could differ from these estimates.
Any changes in estimates are recognized prospectively. Certain
of our accounting policies require higher degrees of judgment
than others in their application. We consider the policies
discussed below to be critical to an understanding of our
financial statements as their application places the most
significant demands on management’s judgment.
Impairment
Loss on Trade and Other Receivables
We estimate the amount of uncollectible receivables each period
and establish an impairment loss for uncollectible amounts. We
provide impairment loss based on (i) our specific
assessment of the collectability of all significant amounts; and
(ii) any specific knowledge we have acquired that might
indicate that an amount is uncollectible. The assessments
reflect management’s best assumptions and estimates.
Significant management judgment is involved in estimating these
factors, and they include inherent uncertainties. Management
periodically evaluates and updates the estimates based on the
conditions that influence these factors. The variability of
these factors depends on a number of conditions, including
uncertainty about future events, and thus our accounting
estimates may change from period to period.
Share-based
Payment Transactions
Our employees receive remuneration in the form of equity
instruments for rendering services over a defined vesting
period. The value of equity instruments granted to our employees
is measured by reference to the fair value of the instrument at
the relevant date of grant. We record an expense for the value
of such equity instruments granted and record an increase to our
equity.
The equity instruments generally vest in tranches over the
vesting period. The fair value determined at the grant date is
expensed over the vesting period of the respective tranches. We
recognize share-based compensation net of an estimated
forfeiture rate and therefore only recognize compensation cost
for those shares expected to vest over the service period of the
award.
We apply the Black-Scholes valuation model in determining the
fair value of options granted, which requires the input of
highly subjective assumptions, including the expected life of
the share option, share price volatility, and the pre-vesting
option forfeiture rate. Expected life is based on historical
exercise patterns, which we believe are representative of future
behavior. We estimate expected volatility at the date of grant
based on historical volatility of comparable companies for the
period equal to the expected term of the options. Expected
dividends percentage is
taken as zero as we do not anticipate issuing dividends. The
risk-free interest rate is the yield on a treasury bond with a
remaining term equal to the expected option life assumed at the
date of grant. The assumptions used in calculating the fair
value of share options represent our best estimates, but these
estimates involve inherent uncertainties and the application of
management judgment. As a result, if factors change and we use
different assumptions, our share-based compensation expense
could be materially different in the future. In addition, we are
required to estimate share-based compensation expense net of
estimated forfeitures. In determining the estimated forfeiture
rates for share-based awards, we periodically conduct an
assessment of the actual number of equity awards that have been
forfeited to date as well as those expected to be forfeited in
the future. We consider many factors when estimating expected
forfeitures, including the type of award, the employee class and
historical experience. If our actual forfeiture rate is
materially different from our estimate, the share-based
compensation expense could be significantly different from what
we have recorded in the current period.
In the future, if we elect to use different assumptions under
the Black-Scholes valuation model, it could result in a
significantly different impact on our net income or loss.
Estimated
Useful Lives of Property, Plant and Equipment and Website
Development Cost
Property, Plant and Equipment. In accordance
with International Accounting Standards, or IAS, 16,
“Property, Plant and Equipment,” we estimate
the useful lives of plant and equipment in order to determine
the amount of depreciation expense to be recorded during any
reporting period. If technological changes were to occur more
rapidly than anticipated or in a different form than
anticipated, the useful lives assigned to these assets may have
to be shortened, resulting in the recognition of increased
depreciation expense in future periods. Likewise, if anticipated
technological or other changes occur more slowly than expected,
the useful lives could be extended. This could result in a
reduction of depreciation expense in future periods.
Website Development Cost.Website development
costs representing vendor invoices towards costs of design,
configuration, coding, installation and testing of our websites
are capitalized until implementation. Upon implementation, the
asset is amortized to expense over its estimated useful life.
Ongoing website post-implementation costs of operation and
application maintenance is charged to expense as incurred. In
accordance with IAS 38 “Intangible Assets,”website development costs also include costs incurred on
development related to internally generated intangible assets
which have been capitalized on meeting the criteria of technical
feasibility, future economic benefit, marketability and
separately identifiable.
We review the carrying value of long-lived assets or asset
groups to be used in operations whenever events or changes in
circumstances indicate that the carrying amount of the assets
might not be recoverable. Factors that would necessitate an
impairment assessment include a significant adverse change in
the extent or manner in which an asset is used, a significant
adverse change in legal factors or the business climate that
could affect the value of the asset, or a significant decline in
the observable market value of an asset, among others.
Income
Tax
Income tax comprises current and deferred tax. Income tax
expense is recognized in our profit or loss, except to the
extent it relates to items directly recognized in equity, in
which case it is recognized in equity.
Current Income Tax. As part of the process of
preparing our consolidated financial statements, we are required
to estimate our income taxes in each of the jurisdictions in
which we operate. We are subject to tax assessments in each of
these jurisdictions. A tax assessment can involve complex
issues, which may only be resolved over extended time periods.
Although we have considered all these issues in estimating our
income taxes, there could be an unfavorable resolution of such
issues that may affect our results of operations.
Current income tax for our current and prior periods are
measured at the amount expected to be recovered from or paid to
the taxation authorities based on the taxable income for that
period. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted by the
reporting date.
The amount of income tax we pay is subject to evaluation of
assessment proceedings by income tax authorities, which may
result in adjustments to our carried forward tax losses. Our
estimate of the potential outcome for any uncertain tax issue is
highly judgmental. We believe we have adequately provided for
any reasonably foreseeable outcome related to these matters.
However, our future results may include favorable or unfavorable
adjustments to
our estimated tax liabilities in the period the assessments are
made or resolved, tax examinations are closed or when statutes
of limitation on potential assessments expire. As a result, our
effective tax rate may fluctuate significantly.
Deferred Income Tax. We recognize deferred
income tax using the balance sheet approach. Deferred tax is
recognized on temporary differences as of the relevant reporting
date between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes. We recognize
a deferred tax asset only to the extent that it is probable that
future taxable profits will be available against which the
deductible temporary differences and tax loss carry forwards can
be utilized.
We consider many factors when assessing the likelihood of future
realization of our deferred tax assets, including our recent
earnings experience by jurisdiction, expectations of future
taxable income, and the carry forward periods available to us
for tax reporting purposes, as well as other relevant factors.
Due to inherent complexities arising from the nature of our
businesses, future changes in income tax law or variances
between our actual and anticipated operating results, we assess
the likelihood of future realization of our deferred tax assets
based on our judgments and estimates. Therefore, actual income
taxes could materially vary from these judgments and estimates.
The measurement of deferred tax assets involves judgment
regarding the deductibility of costs not yet subject to taxation
and estimates regarding sufficient future taxable income to
enable utilization of unused tax losses in different tax
jurisdictions. All deferred tax assets are subject to review of
probable utilization. If, however, unexpected events occur in
the future that would prevent us from realizing all or a portion
of our net deferred tax assets, an adjustment would result in a
charge to income in the period in which such determination was
made.
Deferred income tax assets and liabilities are measured at the
tax rates that are expected to apply in the period when the
asset is realized or the liability is settled, based on tax
rates and tax laws that have been enacted or substantively
enacted at the reporting date. Deferred tax assets and
liabilities are offset if there is a legally enforceable right
to offset current tax liabilities and assets, and they relate to
income taxes levied by the same tax authority on the same
taxable entity, or on different tax entities which intend to
settle current tax liabilities and assets on a net basis or
their tax assets and liabilities simultaneously.
Compound
Financial Instruments
Compound financial instruments issued by our company comprise
our convertible and redeemable preferred shares with a
discretionary, non-cumulative dividend that may be converted
into our ordinary share capital at the option of the holder. Our
preferred shares comprise equity, liability and embedded
derivative components. One preferred share is convertible into
one ordinary share. As our preferred shares contain adjustment
clauses that represent price protection features which protect
the original preferred shareholders from decline in the fair
market value of their shares, our company may have to issue a
variable number of ordinary shares on conversion and hence this
represents a liability.
Equity instruments are instruments that evidence a residual
interest in the assets of an entity after deducting all of its
liabilities. Therefore, as the initial carrying amount of our
preferred shares (which are compound financial instruments) has
been allocated to their equity and liability components, the
equity component has been assigned the residual amount after
deducting the amount separately determined for their liability
component from the entire fair value of our preferred shares.
The value of derivative features (such as the conversion option)
embedded in our preferred shares is included as a component of
liability. The sum of the carrying amounts assigned to the
liability and equity components on initial recognition was equal
to the fair value that would be ascribed to the instrument as a
whole. No gain or loss was recognized from initially recording
the components of the instrument.
The fair value of the financial liability has been initially
recognized at the amount payable on demand, discounted from the
first date that the amount could be required to be paid. As the
preference shareholders can demand repayment of the purchase
price at any time subsequent to issuance, the fair value of the
liability component has been calculated at not less than the
nominal amount of the preference shares issued.
The equity component has been recognized initially based on the
difference between the fair value of our preferred shares as a
whole and the fair value of their liability component (including
the embedded derivative liability). From the liability component
that included the embedded derivative liability, the fair value
of the
derivative liability has been separated and the balance has been
accounted for as a non-derivative liability. Any directly
attributable transaction costs have been allocated to the
liability and equity components of our preferred shares in
proportion to their initial carrying amounts. Subsequent to
initial recognition, the non-derivative liability component of
our preferred shares has been measured at their amortized cost
using an “effective interest” method. The equity
component of our preferred shares is not re-measured subsequent
to its initial recognition. Separable embedded derivatives in
our preferred shares are recognized as described below in
“— Separable Embedded Derivatives.”
The fair value of the separable embedded derivative is measured
using the binomial lattice model. Measurement inputs include
share price on measurement date, expected term of the
instrument, anti-dilution price of different class of
convertible and redeemable preference shares, risk free rate
(based on government bonds), expected volatility (based on
weighted average historic volatility adjusted for changes
expected due to publicly available information), probability of
funds to be raised from an initial public offering or private
placement, probability of conversion or redemption of the
convertible and redeemable preference shares. The assumptions
used in calculating the fair value of derivative liability
represent our best estimates, but these estimates involve
inherent uncertainties and the application of management
judgment. As a result, if factors change and we use different
assumptions, our fair value of derivative liability could be
materially different in the future.
Interest, dividends, losses and gains relating to the liability
component of our preferred shares have been recognized in our
profit or loss.
Separable
Embedded Derivatives
Our preferred shares, which have all been converted to ordinary
shares upon the completion of our initial public offering in
August 2010, included a variable conversion feature which
represents an embedded derivative feature. Such derivatives have
been recognized initially at their fair value and attributable
transaction costs are recognized in our profit or loss as they
are incurred. Fair value of the derivatives have been determined
on the date of issuance of our preferred shares using an
appropriate valuation method. Subsequent to initial recognition,
such derivatives have been measured at their fair value, and any
changes in such value are accounted for in our profit or loss.
Results
of Operations
The following table sets forth a summary of our consolidated
statement of comprehensive income (loss), both actual amounts
and as a percentage of total revenue, for the periods indicated.
Revenue. We had revenue of $124.7 million
in fiscal year 2011, an increase of 49.3% over revenue of
$83.6 million in fiscal year 2010.
Air Ticketing. Revenue from our air ticketing
business increased by 48.3% to $47.6 million in fiscal year
2011 from $32.1 million in fiscal year 2010. Our gross
bookings increased by 58.6%, primarily due to a 59.9% growth in
the number of transactions both as a result of an improvement in
the overall air travel market as well as the continued increase
in our domestic air ticket market share, partially offset by a
0.8% decrease in the average value per transaction. Our air
ticketing net revenue margins declined to 7.4% in fiscal year
2011 from 7.6% in fiscal year 2010, primarily as a result of a
reduction by us of the service fees we charge in our domestic
air ticketing business in order to attract more customers and
gain market share.
Hotels and Packages. Revenue from our hotels
and packages business increased by 48.3% to reach
$74.6 million in fiscal year 2011 from $50.3 million
in fiscal year 2010. This was due to an increase of 65.2% in
gross bookings, primarily due to a 60.3% increase in the number
of transactions and an increase in the average value per
transaction of 3.0%. Despite strong growth in our gross
bookings, revenue less service cost from our hotels and packages
business increased by only 36.4% to $10.9 million in fiscal
year 2011 from $8.0 million in fiscal year 2010, primarily
as a result of a reduction in our hotels and packages net
revenue margins to 11.5% in fiscal year 2011 from 14.0% in
fiscal year 2010. In fiscal year 2010, our travel suppliers
provided more favorable terms due to the slowdown in
India’s economy. We also reduced our margin in the third
quarter of fiscal year 2011 in order to increase our market
share and promote new holiday packages as we continued to
develop new travel destinations.
Other Revenue. Our other revenue more than
doubled to $2.5 million in fiscal year 2011 from
$1.2 million in fiscal year 2010, primarily due to an
increase in facilitation fees on travel insurance and the sale
of rail tickets and bus tickets. We commenced the sale of rail
tickets in June 2009.
Service Cost. Service cost increased by 47.1%
to $63.7 million in fiscal year 2011 from
$43.3 million in fiscal year 2010, as a result of an
increase in the transaction volume in our hotels and packages
business.
Total Revenue Less Service Cost. Our total
revenue less service cost increased by 51.6% to
$61.1 million in fiscal year 2011 from $40.3 million
in fiscal year 2010, primarily as a result of a 53.0% increase
in our air ticketing revenue less service cost in line with the
increase in the number of transactions, as well as a 36.4%
increase in our hotels and packages revenue less service cost,
mainly reflecting the increase in the number of transactions.
However, the total revenue less service cost was partially
offset by reductions in the net revenue margins in our hotels
and packages business to 11.5% in fiscal year 2011 from 14.0% in
fiscal year 2010 and our air ticketing business to 7.4% in
fiscal year 2011 from 7.6% in fiscal year 2010.
Personnel Expenses. Personnel expenses
decreased by 13.1% to $14.4 million in fiscal year 2011
from $16.6 million in fiscal year 2010, primarily as a
result of a reduction in employee share-based compensation costs
to $0.5 million in fiscal year 2011 from $6.8 million
in fiscal year 2010. The employee share-based compensation costs
for fiscal year 2010 were primarily attributable to grants of
fully-vested employee share options in the first quarter of
fiscal year 2010, as a result of options issued under our 2001
equity option plan and grants intended to replace prior options
granted under MMT India’s share option plan. Excluding
employee share-based compensation costs, personnel expenses
increased by 41.7% in fiscal year 2011 from fiscal year 2010,
primarily as a result of annual wage increases and an increase
in average employee headcount.
Other Operating Expenses. Other operating
expenses increased by 44.5% to $40.7 million in fiscal year
2011 from $28.2 million in fiscal year 2010, primarily as a
result of an increase in payment gateway charges, an increase in
advertising and business promotion expenses, as a result of an
increase in online searches, promotions on outbound tours and an
increase in spending on customer relationship management, and
outsourcing fees.
Depreciation and Amortization. Our
depreciation and amortization expenses increased by 21.7% to
$1.9 million in fiscal year 2011 from $1.6 million in
fiscal year 2010, primarily as a result of costs incurred for
purchases of computers and software.
Results from Operating Activities. As a result
of the foregoing factors, our results from operating activities
improved to an operating profit of $4.1 million in fiscal
year 2011 from a loss of $(6.0) million in fiscal year
2010. Excluding the effects of employee share-based compensation
costs for both fiscal years 2010 and 2011, we would have
recorded an operating profit of $0.8 million in fiscal year
2010 and an operating profit of $4.6 million in fiscal year
2011.
Finance Income. Our finance income decreased
to $1.6 million in fiscal year 2011 from $1.9 million
in fiscal year 2010, primarily as a result of a decrease in
interest income on term deposits due to our withdrawal of
certain term deposits to pay down bank overdrafts, a lower rate
of interest earned on Mauritius based term deposits and a
reduction of the net gain recognized on the change in fair value
of the embedded derivative component of our preferred shares,
partially offset by a foreign exchange gain in fiscal year 2011.
Finance Costs. Our finance costs increased by
70.9% to $3.5 million in fiscal year 2011 from
$2.1 million in fiscal year 2010, primarily due to costs
relating to our initial public offering of $2.1 million,
partially offset by a decrease in foreign exchange loss. In
addition, interest expenses on the liability portion of our
preference shares were $1.1 million in fiscal year 2010 and
$0.4 million in fiscal year 2011.
Income Tax Benefit (Expense). We recognized
income tax benefit of $2.7 million in accordance with our
accounting policy on deferred tax for unutilized tax losses as
on March 31, 2011, as management considered it probable
that future taxable profits would be available. We had an income
tax expense of $8,428 in fiscal year 2010.
Profit (Loss) for the Year. As a result of the
foregoing factors, including the effects of employee share-based
compensation costs, our profit for fiscal year 2011 was
$4.8 million, an improvement against a loss of
$(6.2) million in fiscal year 2010. Excluding the effects
of employee share-based compensation costs for both fiscal years
2010 and 2011, we would have recorded a net profit of
$0.6 million in fiscal year 2010 and a net profit of
$5.4 million in fiscal year 2011.
Fiscal
Year 2010 Compared to Fiscal Year 2009
Revenue. We had revenue of $83.6 million
in fiscal year 2010, an increase of 21.9% over revenue of
$68.6 million in fiscal year 2009.
Air Ticketing. Revenue from our air ticketing
business increased by 67.1% to $32.1 million in fiscal year
2010 from $19.2 million in fiscal year 2009. Our gross
bookings increased by 56.6%, primarily due to a 41.3% growth in
the number of transactions both as a result of an improvement in
the overall air travel market as well as the continued increase
in our domestic air ticket market share, and a 10.8% increase in
the average value per transaction. Contributing to our revenue
increase was also an improvement in our air ticketing net
revenue margins from 7.2% in fiscal year 2009 to 7.6% in fiscal
year 2010. The improvement in our air ticketing net revenue
margins was mainly due to incentive fees paid to us from certain
airlines, better commissions from certain consolidators and
higher per-segment revenue earned from our GDS service provider
in fiscal year 2010.
Hotels and Packages. Revenue from our hotels
and packages business increased by 3.4% to reach
$50.3 million in fiscal year 2010 from $48.6 million
in fiscal year 2009. Revenue increased at a slower rate as our
hotels and packages gross bookings increased by 9.4% due to a
reduction in average value per transaction by 18.9% from $644 in
fiscal year 2009 to $522 in fiscal year 2010, as we sold more
domestic packages in fiscal year 2010, which tend to have lower
values as compared to international packages. Revenue less
service cost from our hotels and packages business increased by
44.0% from $5.6 million in fiscal year 2009 to
$8.0 million in fiscal year 2010, primarily due to a 34.8%
increase in the number of hotels and packages transactions as
well as higher net revenue margins of 14.0% in fiscal year 2010
compared to 10.6% in fiscal year 2009, as we were able to
negotiate better rates with travel suppliers on account of
increased volumes and also due to the slowdown in India’s
economy in fiscal year 2010.
Other Revenue. Our other revenue increased by
63.8% to $1.2 million in fiscal year 2010 from
$0.7 million in fiscal year 2009, primarily as our
advertising revenue more than doubled from sales of third-party
advertisement space on our websites (a sales initiative we
started in fiscal year 2009), and we earned
$0.2 million in revenue from our rail and bus services in
fiscal year 2010, compared to $0.01 million from our bus
services in fiscal year 2009. We commenced the sale of rail
tickets in June 2009.
Service Cost. Service cost decreased slightly
to $43.3 million in fiscal year 2010 from
$43.6 million in fiscal year 2009, primarily as a result of
a decrease in procurement cost for our hotel and packages
services from $43.1 million in fiscal year 2009 to
$42.3 million in fiscal year 2010 as we managed to
negotiate better rates with our suppliers, partially offset by
an increase in costs associated with the pre-purchase of air
ticket inventory from $0.5 million in fiscal year 2009 to
$1.0 million in fiscal year 2010.
Total Revenue Less Service Cost. Our total
revenue less service cost increased by 61.2% to
$40.3 million in fiscal year 2010 from $25.0 million
in fiscal year 2009, primarily as a result of a 66.2% increase
in our air ticketing revenue less service cost in line with the
increase in the number of transactions and the increase in
commissions due to the increase in the value per transaction and
higher net revenue margins, as well as a 44.0% increase in our
hotels and packages revenue less service cost, mainly reflecting
the increase in the number of transactions and our net revenue
margins.
Personnel Expenses. Personnel expenses
increased by 71.1% to $16.6 million in fiscal year 2010
from $9.7 million in fiscal year 2009, mainly as result of
a significant increase in our employee share-based compensation
costs which were $6.8 million in fiscal year 2010, compared
with $0.4 million in fiscal year 2009. This increase arose
from grants of fully-vested employee share options in the first
quarter of fiscal year 2010, both as a result of options issued
under our 2001 equity option plan and grants intended to replace
prior options granted under MMT India’s share option plan.
The total of the remaining personnel expenses (which excludes
our employee share-based compensation costs) increased by 5.7%
in fiscal year 2010 primarily due to an increase in bonus
accruals from $0.9 million in fiscal year 2009 to
$1.6 million in fiscal year 2010, partly offset by a
reduction in the overall average headcount during the fiscal
year.
Other Operating Expenses. Other operating
expenses increased by 15.6% to $28.2 million in fiscal year
2010 from $24.4 million in fiscal year 2009, primarily as a
result of higher outsourcing fees of $4.3 million in fiscal
year 2010 compared with $3.1 million in fiscal year 2009 as
we outsourced most of our call center operations and back office
fulfillment functions in fiscal year 2010. We entered into an
agreement with Intelenet Global Services, our second outsourcing
service provider, in March 2009. In fiscal year 2010, we also
recorded increases in payment gateway charges and advertising
and business promotion expenses in line with the growth in our
business.
Depreciation and Amortization. Our
depreciation and amortization expenses remained almost constant
at $1.6 million in fiscal years 2009 and 2010.
Results from Operating Activities. As a result
of the foregoing factors, our results from operating activities
improved from a loss of $(10.6) million in fiscal year 2009
to a loss of $(6.0) million in fiscal year 2010. Excluding
the effects of employee share-based compensation costs for both
fiscal years 2009 and 2010, we would have recorded an operating
loss of $(10.2) million in fiscal year 2009 and an
operating profit of $0.8 million in fiscal year 2010.
Finance Income. Our finance income decreased
significantly to $1.9 million in fiscal year 2010 from
$6.3 million in fiscal year 2009, primarily as a result of
the reduction of the net gain recognized on the change in fair
value of the embedded derivative component of our preferred
shares to $0.3 million in fiscal year 2010 from
$5.0 million in fiscal year 2009 due to a reduction in the
value of the anti-dilution option embedded in our preferred
shares, partially offset by higher interest rates earned on our
term deposits. The value of the option embedded in our preferred
shares was reduced due to a lower probability of the
anti-dilution option being exercised as we commenced preparation
for our initial public offering.
Finance Costs. Our finance costs decreased by
32.4% to $2.1 million in fiscal year 2010 from
$3.0 million in fiscal year 2009, primarily as our
impairment loss on trade and other receivables was reduced to
$0.04 million in fiscal year 2010 from $1.0 million in
fiscal year 2009. Our impairment loss on trade and other
receivables in fiscal year 2009 included receivables under
dispute with certain airlines as well as outstanding receivables
due from Abacus after we terminated our contract with them.
Income Tax Benefit (Expense).Our company had
an income tax benefit of $25,291 for fiscal year 2009. Our
income tax expense for fiscal year 2010 was $8,428. Our company
had unrecognized deferred tax assets of $13.1 million as of
March 31, 2010. We have not recognized deferred tax
benefits in respect of the cumulative tax losses of our Indian
subsidiary, MMT India, as it has a limited history of taxable
profits. We shall recognize a deferred tax asset in respect of
such cumulative tax losses when it is probable that MMT India
will be able to realize such tax losses. Under Indian tax laws,
tax losses are permitted to be carried forward for a period of
eight years and tax depreciation is permitted to be carried
forward for an indefinite period.
Loss for the Year. As a result of the
foregoing factors, including the effects of our employee
share-based compensation costs, our loss for the year improved
from a loss of $(7.3) million in fiscal year 2009 to a loss
of $(6.2) million in fiscal year 2010. Excluding the
effects of employee share-based compensation costs for both
fiscal years 2009 and 2010, we would have recorded a net loss of
$(6.9) million in fiscal year 2009 and a net profit of
$0.6 million in fiscal year 2010.
Our
Selected Quarterly Results of Operations
The following table presents our selected consolidated quarterly
results of operations for the nine fiscal quarters in the period
ended March 31, 2011. This information should be read
together with our audited consolidated financial statements and
related notes included elsewhere in this prospectus. The
selected consolidated quarterly financial information has been
derived from our quarterly condensed consolidated financial
statements not included in the prospectus. The unaudited
quarterly condensed consolidated financial statements includes
all adjustments, consisting only of normal recurring
adjustments, that we consider necessary for a fair presentation
of our financial position and operating results for the quarters
presented. Operating results for any quarter are not necessarily
indicative of results for any future quarter or for a full year.
There are many factors, including those discussed under
“Risk Factors,” that could have a material adverse
effect on our business and operating results.
The following table presents certain selected consolidated
financial and operating data derived from unaudited consolidated
financial statements for the nine fiscal quarters in the period
ended March 31, 2011.
Combined net revenue margin for air ticketing and hotels and
packages
9.0
%
8.8
%
8.4
%
8.5
%
8.0
%
7.6
%
7.9
%
7.8
%
8.2
%
Revenue from our air ticketing business has experienced
continued growth since the fourth quarter of fiscal year 2009,
except for the second quarter of fiscal year 2010. Our air
ticketing revenue in the second quarter of fiscal year 2010 was
lower than the first quarter because we sold a larger number of
air tickets in the first quarter for which we had pre-purchased
air tickets as we managed to secure air ticket inventory at
attractive rates. Revenue from the sale of these pre-purchased
air tickets was accounted for on a “gross” basis as we
assumed inventory risk on such tickets. Revenue less service
cost from our air ticketing business increased in all nine
fiscal quarters ended March 31, 2011, growing from
$5.0 million in the fourth quarter of fiscal year 2009 to
$13.9 million in the fourth quarter of fiscal year 2011.
We experience seasonal fluctuations in our hotels and packages
segment, with revenues, number of transactions and gross
bookings being higher in the first and third quarters of each
fiscal year, coinciding with the summer holiday travel season
and calendar year-end holiday travel season in India,
respectively. Revenue less service cost from our hotels and
packages business increased from $1.4 million in the fourth
quarter of fiscal year 2009 to $2.5 million in the fourth
quarter of fiscal year 2011. In the third quarter of fiscal year
2011, revenue less service cost was $2.9 million as we
reduced our margin in the third quarter of fiscal year 2011 to
increase our market share and promote new holiday packages as we
continued to develop new travel destinations.
Our air ticketing net revenue margins decreased from 8.2% in the
fourth quarter of fiscal year 2009 to 7.7% in the fourth quarter
of fiscal year 2011, reflecting the reduction in service fees
earned on our domestic air ticketing business in order to
attract more customers and gain market share.
Net revenue margins for our hotels and packages business ranged
from 13.6% to 14.4% from the fourth quarter of fiscal year 2009
to the fourth quarter of fiscal year 2010 due to the
comparatively favorable rates provided by travel suppliers
during the slowdown in India’s economy. In fiscal year
2011, our net revenue margins decreased, reaching 11.6% in the
fourth quarter of fiscal year 2011 as India’s economy
improved in fiscal year 2011 and rates provided by our hotel and
packages travel suppliers increased without a corresponding
increase in the rates we
charged to our customers, in order to increase the volume of our
transactions. Our hotels and packages net revenue margins
improved to 14.4%, in the second quarter of fiscal year 2010
from 13.6% in the first quarter of fiscal year 2010 due to a
reduction in the cost of procurement of services from our
suppliers as this period was the off peak season for travel and
holidays. Our net revenue margins decreased from 14.4% in the
second quarter of fiscal year 2010 to 13.9% in the fourth
quarter of fiscal year 2010, as we reduced margins in our
domestic hotels and packages business to increase our sales of
domestic packages. This was partially offset by increasing our
margin in our outbound hotels and packages business. Our net
revenue margins decreased to 10.8% in the third quarter of
fiscal year 2011 as we reduced margin in that quarter to
increase our market share and promote new holiday packages as we
continued to develop new travel destinations.
Our historical quarterly results of operations have also been
impacted by our employee share-based compensation costs. Our
personnel expenses of $8.8 million in the first quarter of
fiscal year 2010 included $6.6 million in employee
share-based compensation costs relating to grants of
fully-vested employee share options awarded in that quarter,
both on account of options issued under our 2001 equity option
plan and options issued to replace prior options granted under
MMT India’s share option plan. The overall increase in our
personnel expenses was a result of salary increases, increased
contributions to defined contribution plans as well as employee
welfare expenses, and in the fourth quarter of fiscal year 2010
in particular, due to an increase of $0.3 million in the
final accrued bonus payment for fiscal year 2010, compared with
the prior quarters of fiscal year 2010. Our personnel expenses,
including employee share-based compensation for the fourth
quarter of fiscal year 2011 was $3.7 million, up from
$2.9 million in the fourth quarter of fiscal year 2010
mainly as a result of annual wage increases and an increase in
average employee headcount.
Other operating expenses increased from $5.9 million in the
fourth quarter of fiscal year 2009 to $11.8 million in the
fourth quarter of fiscal year 2011, primarily as a result of
increases in payment gateway charges, advertising and business
promotion expenses and outsourcing fees. We spent less on
marketing and advertisements during the second quarter of fiscal
year 2010 as the second quarter does not coincide with the
holiday or vacation season in India and we also reduced our
marketing expenditure during that quarter in respect of our
United States-India inbound air ticketing business. Contributing
to increases in our other operating expenses were increases in
payment gateway charges due to the growth in our number of
transactions. Our advertising and business promotion expenses
were $3.7 million in the fourth quarter of fiscal year 2011
compared with $3.5 million in the fourth quarter of fiscal
year 2010, primarily as a result of increases in advertising
expenses for online search engines, promotions on outbound tours
and increases in spending on customer relationship management in
the period. Since the first quarter of fiscal year 2009, we have
recorded
quarter-on-quarter
increases in our outsourcing fees as we continued to outsource
more of our call center operations and back office fulfillment
functions as our business grew.
Our depreciation and amortization increased from
$0.37 million in the fourth quarter of fiscal year 2009 to
$0.5 million in the fourth quarter of fiscal year 2011,
primarily as a result of our purchases of computers, software
and motor vehicles.
As a result of the foregoing, our results from operating
activities, excluding the effects of employee share-based
compensation costs, improved from a loss of $(1.8) million
in the fourth quarter of fiscal year 2009 to profits of
$1.0 million, $1.4 million, $0.5 million,
$1.6 million and $1.1 million in the first quarter of
fiscal year 2010 and in the first, second, third and fourth
quarters of fiscal year 2011, respectively, but recorded a loss
of $(1.1) million in the fourth quarter of fiscal year 2010.
We had net finance costs of $(0.9) million in the fourth
quarter of fiscal year 2009 and net finance income of
$0.05 million in the first quarter of fiscal year 2010. The
fiscal year 2009 net finance cost was primarily as a result of
an impairment loss on trade and other receivables of
$(1.0) million in the fourth quarter of fiscal year 2009
arising out of receivables under disputes with certain airlines
as well as outstanding receivables due from Abacus after we
terminated our contract with Abacus. We did not record any
impairment loss on trade and other receivables in the first
quarter of fiscal year 2010. The impairment loss on trade and
other receivables in the fourth quarter of fiscal year 2009 was
partially offset by the net gain recognized on the change in
fair value of the embedded derivative component of our preferred
shares of $0.3 million. The net gain recognized on the
change in fair value of the embedded derivative component in our
preferred shares in the fourth quarter of fiscal year 2009 was
due to the reduction in value of such option from the prior
fiscal quarter as a result of a lower probability of the
anti-dilution
option being exercised. The lower probability of such
anti-dilution option being exercised was due to the likelihood
of our recognizing operating cash profits in the near term which
could be used to meet our funding requirements and also due to
higher probability of our funding requirements being met through
an initial public offering. Between the second and third
quarters of fiscal year 2010, the net gain recognized on the
change in fair value of the embedded derivative component of our
preferred shares increased from $0.01 million to
$0.2 million, as a result of a further significant decrease
in the value of such embedded derivative option due to a further
reduction in probability of the anti-dilution option being
exercised as we recognized a profit in both the second and third
quarters of fiscal year 2010. We had net finance costs of
$0.2 million in the second quarter of fiscal year 2010
primarily as a result of lower finance income compared to the
two previous fiscal quarters, as certain of our fixed deposits
matured and we earned lower interest rates on certain of our new
fixed deposits as interest rates declined during that period. In
the second quarter of fiscal year 2011, we had net finance costs
of $2.1 million, primarily due to initial public offering
costs, partially offset by a decrease in foreign exchange loss.
In the third quarter of fiscal year 2011, we earned net finance
income of $0.2 million, primarily as a result of
$0.2 million of interest on fixed deposits and
$0.1 million of foreign exchange gains partially offset by
interest expenses. In the fourth quarter of fiscal year 2011, we
had net finance costs of $0.04 million, primarily as a
result of $0.3 million of impairment loss on receivables
and interest expense partially offset by interest on fixed
deposits.
Our profit (loss) before tax, including the effects of employee
share-based compensation costs, was a loss of
$(2.8) million in the fourth quarter of fiscal year 2009
and a loss of $(5.6) million in the first quarter of fiscal
year 2010, improving to a profit of $0.02 million and
$0.6 million in the second and third quarters of fiscal
year 2010, respectively, and reducing to a loss of
$(1.3) million in the fourth quarter of fiscal year 2010.
In fiscal year 2011, our profit (loss) before tax, including the
effects of employee share-based compensation costs, was a profit
of $1.3 million, a loss of $(1.8) million, a profit of
$1.6 million and a profit of $1.0 million in the
first, second, third and fourth quarters, respectively.
Liquidity
and Capital Resources
Historically, our sources of liquidity have principally been
proceeds from the sale of our convertible preferred shares and
ordinary shares, bank overdrafts and working capital facilities
and cash flows from operations. Our cash requirements have
mainly been for working capital as well as capital expenditures.
As of March 31, 2011, our primary sources of liquidity were
$47.9 million of cash and cash equivalents and
$16.9 million in term deposits with various banks in India,
which are available on demand. Such term deposits are used to
secure bank overdraft facilities with various banks in India,
including HDFC Bank and ICICI Bank, which are used for
working capital purposes. As of March 31, 2011, our total
bank overdrafts were $3.9 million, which were all from HDFC
Bank.
Our trade and other receivables primarily comprise commissions,
incentive or other payments owing to us from airlines,
receivables from our corporate and retail customers to whom we
typically extend credit periods, security deposits paid
primarily for our leased premises as well as interest accrued
but not due on our term deposits. Our trade and other
receivables increased from $12.4 million as of
March 31, 2010 to $12.9 million as of March 31,2011, primarily as a result of the growth of our business.
Our trade and other receivables increased from $5.4 million
as of March 31, 2009 to $12.4 million as of
March 31, 2010, primarily as a result of increased
receivables of $2.1 million from our GDS supplier as a
result of the payment terms under our contract with our current
GDS supplier. We entered into an agreement with Amadeus in
February 2009 under which our service fees are paid on a
semi-annual basis, compared to a quarterly basis under our
contract with our previous GDS supplier. Also contributing to
the increase in our trade and other receivables was an increase
in trade receivables of $1.2 million mainly in
performance-linked incentives due from airlines and an increase
in receivables of $2.3 million due from our corporate and
retail customers in line with the growth of our business. We
also recorded a higher amount of interest accrued but not due on
our term deposits of $1.7 million as of March 31,2010, compared with $0.9 million as of March 31, 2009,
as a result of higher interest due on one of our term deposits.
Our other current assets primarily consist of deposits and
advances to our suppliers to secure better prices and
availability of inventory in future periods. Our other current
assets increased significantly from $7.5 million as of
March 31, 2010 to $17.9 million as of March 31,2011, primarily due to increases in advances to airlines
primarily for fiscal year 2012 by $7.4 million and
increases in advances to hotels by $1.9 million due to the
growth of our business.
Our other current assets increased significantly from
$3.7 million in fiscal year 2009 to $7.5 million in
fiscal year 2010, primarily due to increases in advances made to
our airline and hotel suppliers. The increase in advances to our
suppliers as of March 31, 2010 as compared with
March 31, 2009 was also due to a
four-day
bank holiday and weekend period in India from April 1 to
April 4, 2010, during which we extended advances to our
suppliers to take into account the increase in business during
this holiday period.
We also have a secured working capital facility from HDFC Bank
for cash credit of up to Rs. 100 million
($2.3 million) and an overdraft facility of
Rs. 400 million ($9.0 million) and an overdraft
facility from YES Bank of Rs. 150 million
($3.4 million). The cash credit is secured by an assignment
of certain of our credit card receivables and charges over our
current assets and fixed assets. As of March 31, 2011,
interest is payable monthly on such facilities, at a rate of
12.25%, 8.49% (weighted average fixed deposit rate plus 1.00%)
and 11.75% (base rate plus 3.75%) per annum, respectively. As of
March 31, 2011, we had drawn down $3.9 million against
our HDFC Bank facilities and had not drawn down against our YES
Bank facility.
From time to time, we are also required by certain international
and Indian airlines, hotels and packages suppliers, as well as
certain aggregators from whom we obtain hotel inventory and
other travel suppliers to obtain bank guarantees to secure our
obligations to them. As of March 31, 2011, MMT India had
obtained approximately $18.4 million in bank guarantees
mainly from YES Bank in favor of International Air Transport
Association, or IATA, against any payment default by us to all
airlines participating in IATA’s bill settlement plan, and
MakeMyTrip.com Inc. had obtained certificates of deposit
totaling approximately $0.7 million for purposes of
providing guarantees to various international airlines. Apart
from the foregoing borrowings, we have no outstanding bank loans
or financial guarantees or similar commitments to guarantee our
payment obligations or those of third parties.
We believe that our current cash and cash equivalents, cash flow
from operations and the proceeds from this offering will be
sufficient to meet our anticipated regular working capital
requirements and our needs for capital expenditures, for the
next 12 months. We may, however, require additional cash
resources due to changing business conditions or other future
developments, including any investments or acquisitions we may
decide to pursue.
The following table sets forth the summary of our cash flows for
the periods indicated:
Fiscal Year Ended
March 31
2009
2010
2011
(in millions)
Net cash from/(used in) operating activities
$
(3.1
)
$
5.2
$
(6.3
)
Net cash from/(used in) investing activities
(11.8
)
3.5
(3.0
)
Net cash from/(used in) financing activities
14.3
(0.2
)
52.4
Net increase/(decrease) in cash and cash equivalents
(0.6
)
8.5
43.0
Cash and cash equivalents at beginning of period
(2.4
)
(2.4
)
5.3
Effect of exchange rate fluctuations on cash held
0.6
(0.7
)
(0.5
)
Cash and cash equivalents at end of period
(2.4
)(1)
5.3
(2)
47.9
(3)
* not meaningful
Notes:
(1)
Includes $7.9 million of bank
overdrafts and excludes $16.0 million of term deposits not
classified as “cash and cash equivalents.”
(2)
Includes $4.0 million of bank
overdrafts and excludes $14.5 million of term deposits not
classified as “cash and cash equivalents.”
(3)
Includes $3.9 million of bank
overdrafts and excludes $16.9 million of term deposits not
classified as “cash and cash equivalents.”
Net Cash From/(Used In) Operating
Activities. In fiscal year 2011, net cash flows
used in operating activities were $6.3 million, primarily
resulting from total collections against revenue of
$120.2 million, offset by total cash payments to suppliers
in relation to service costs incurred of $73.2 million and
total cash outflows in respect of personnel and other operating
expenses of $53.3 million.
Total collections against revenue were $120.2 million,
compared to revenue of $124.7 million recognized in fiscal
year 2011. This was primarily due to an increase in receivables
from airlines of $2.3 million, partially offset by an
increase in advances received from our customers of
$3.6 million. There was also an increase in withholding tax
deductions for commissions or payments received from airlines
and other suppliers by $3.1 million which reduced our
collections. We also recognized deferred income of
$2.6 million as revenue during fiscal year 2011 in relation
to an upfront incentive payment which was received in the
previous fiscal year from our current GDS service provider.
Total cash payments to suppliers in relation to service costs
incurred in fiscal year 2011 were $73.2 million, as
compared with $63.7 million in service costs accrued. This
was primarily due to deposits and advances paid to suppliers for
the promotion of holiday products, including advances to
airlines for fiscal year 2012.
Total cash outflows in respect of personnel and other operating
expenses were $53.3 million, in comparison to
$55.1 million in such expenses accrued in fiscal year 2011.
This was primarily due to an increase in other current
liabilities by $1.1 million and non-cash employee
share-based compensation costs of $0.5 million.
Total collections against revenue were $80.9 million,
compared to revenue of $83.6 million recognized in fiscal
year 2010. This was primarily due to the payment terms under our
contract with our current GDS service provider entered into in
February 2009, which provided for the payment of segment
incentives and service fees on a semi-annual basis. Service fees
for October 2009 to March 2010 were due within a
45-day
period following the end of such period. As a result, as of
March 31, 2010, we had an increase of $1.9 million in
outstanding receivables due from our GDS service provider.
During fiscal year 2010, we also had an arrangement with one of
our airline suppliers, which provided for incentive payments for
the period from November 2009 to March 2010 to be paid by May
2010. Primarily, as a result, our receivables due from airlines
increased by $1.1 million. We also recorded an increase in
receivables due from our corporate and retail customers of
$2.0 million in line with the overall growth of our
business. We also recognized deferred income amounting to
$0.6 million as revenue during fiscal year 2010 in relation
to an upfront incentive payment which was received in the
previous fiscal year from our current GDS service provider. Such
reduction in collections from customers was partially offset by
an increase of $2.7 million in advances received from or
refunds due to customers primarily in line with the growth in
our business.
Total cash payments to suppliers in relation to service costs
incurred in fiscal year 2010 were $40.1 million, as
compared with $43.3 million in service costs accrued. This
was primarily due to an increase in credit of $5.1 million
made available to us from a number of our airline and hotel
suppliers due to the growth in our business. We also recorded
service costs of $0.8 million in respect of air ticket
coupons utilized in fiscal year 2010 but which had already been
paid for in fiscal year 2009, so no cash outflow was required in
fiscal year 2010. The foregoing was partly offset by an increase
of $2.9 million in advances paid to our suppliers, as a
result of an increase in $1.8 million in floating deposits
held with our low cost airline suppliers. Such floating deposits
are provided to the airlines in respect of ticket sales and are
generally utilized within a one week period. The increase in
advances to low cost airlines as of March 31, 2010 as
compared with March 31, 2009 was also due to a
four-day
bank holiday and weekend period in India from April 1, 2010
to April 4, 2010, during which we extended advances to our
low cost airline suppliers to ensure regular sale of tickets
during such period. Further increasing our advances to suppliers
in fiscal year 2010 was a $0.3 million floating advance
provided to IRCTC in respect of our rail ticketing business
which commenced in fiscal year 2010.
Total cash outflows in respect of personnel and other operating
expenses were $35.5 million, in comparison to
$44.7 million in such expenses accrued in fiscal year 2010.
This was primarily due to an expense relating to
non-cash
employee share-based compensation of $6.8 million, an
increase in accrued variable bonus expense of $0.6 million
which were not paid as of March 31, 2010 and also an
increase in marketing and other expenses in the last quarter of
fiscal year 2010 due to the growth of our business and in
respect of the upcoming summer season in 2010, which remained
unpaid as of March 31, 2010. These increases in expenses
were partly offset by an increase in prepaid expenses by
$0.2 million primarily as a result advances made to our CRM
service provider.
In fiscal year 2009, cash flows used in operating activities
exceeded cash flows generated from operating activities by
$3.1 million, primarily resulting from total collections
against revenue of $75.1 million, offset by total cash
payments to suppliers in relation to service costs incurred of
$44.4 million as well as cash outflows in respect of
personnel and other operating expenses of $33.9 million.
Total collections against revenue were $75.1 million,
compared to revenue of $68.6 million recognized in fiscal
year 2009. Our cash collections were higher than revenue
recognized as we achieved an increase in deferred income of
$1.4 million as a result of upfront incentives received
from Amadeus, our current GDS provider, as well as Apollo Munich
Health Insurance Company Limited. We also achieved better
collections and collected receivables from the previous fiscal
year from our GDS service provider and airlines, which resulted
in a reduction in outstanding receivables due from our GDS
service provider by $1.6 million and receivables due from
airlines by $1.8 million. There were also increases in
advance received from customers or refunds due to customers by
$2.7 million due to the growth of our business. This was
partly offset by increases in receivables due from our corporate
and retail customers by $0.7 million in line with the
growth of our business. There was also an increase in
withholding tax deductions for commissions or payments received
from airlines and other suppliers by $0.3 million which
reduced our collections.
Total cash payments to suppliers in relation to service costs
incurred in fiscal year 2009 was $44.4 million, as compared
with $43.6 million in service costs accrued. This was
primarily due to $0.8 million we paid for
pre-purchased
air ticket coupons during fiscal year 2009 which were utilized
and expensed in fiscal year 2010.
Total cash outflows in respect of personnel and other operating
expenses were $33.9 million, in comparison to
$34.0 million in such expenses accrued in fiscal year 2009.
Net Cash From/(Used In) Investing
Activities. In fiscal year 2011, cash used in
investing activities was $3.0 million, primarily as a
result of cash deposited in our term deposits with banks
amounting to $2.5 million (computed using average exchange
rates for the period), and net investment of $1.2 million
in fixed assets, as well as investment of $1.6 million in
software and website development projects, partially offset by
interest received on our term deposits. In fiscal year 2010,
cash from investing activities was $3.5 million, primarily
as a result of withdrawal of certain of our term deposits with
banks amounting to $3.7 million (computed using average
exchange rates for the year), which were used to pay down our
bank overdrafts, and interest received on our term deposits of
$0.9 million, partially offset by our investment of
$0.7 million in fixed assets as well as investment of
$0.5 million in software. In fiscal year 2009, cash used in
investing activities was $11.8 million, primarily as a
result of our term deposits with banks amounting to
$11.5 million (computed using average exchange rates for
the year), our investment of $7.8 million and subsequent
sale of our investment amounting to $7.8 million in certain
short term mutual funds, our investment of $0.6 million in
fixed assets as well as investment of $0.3 million in our
websites, partially offset by interest received on our term
deposits of $0.6 million.
Net Cash From/(Used In) Financing
Activities. In fiscal year 2011, cash from
financing activities was $52.4 million, primarily as a
result of net proceeds from the issuance of ordinary shares in
our initial public offering of $52.0 million. Additionally,
we collected $1.3 million as proceeds from the issuance of
shares on exercise of share options by certain of our employees.
The cash from these issuances was partially offset by
$0.3 million paid for the acquisition of additional
interest in MMT India that we purchased from certain of our
ex-employees and $0.6 million interest paid on our bank
overdrafts and working capital facilities. In fiscal year 2010,
cash used in financing activities was $0.2 million,
primarily as a result of interest paid on bank overdrafts and
our working capital facilities of $0.3 million, partially
offset by the increase in certain motor vehicle loans. In fiscal
year 2009, cash from financing activities was
$14.3 million, primarily as a result of the
$15.0 million proceeds from our issuance of convertible
preferred shares in May 2008. The cash from this issuance was
partially offset by interest paid on bank overdrafts and our
working capital facilities of $0.6 million in fiscal year
2009.
Capital
Expenditures
We have historically financed our capital expenditure
requirements with cash flows from operations, as well as through
the sale of our convertible and redeemable preferred shares and
ordinary shares.
We made capital expenditures of $0.9 million,
$1.1 million and $2.8 million in fiscal years 2009,
2010 and 2011, respectively. As of March 31, 2011, we had
committed capital expenditures of $2.5 million, of which we
expect to spend $2.0 million during fiscal year 2012 and
the remainder over the next five years. In addition, we
expect to spend an additional approximately $5.0 million to
$6.0 million on capital expenditures during fiscal year
2012. The capital expenditures in the past principally consisted
of purchases of servers, workstations, computers,
computer software, leasehold improvements and other items
related to our technology platform and infrastructure, upgrading
of our websites, as well as improvements to our leasehold
premises.
Contractual
Obligations
The following table sets forth our contractual obligations as of
March 31, 2011. Other than the lease obligations specified
below, we do not have any long-term commitments:
Payment Due by Period
More than
Contractual
Obligations
Total
Less than
1 year
1-3 years
3-5 years
5 years
(in thousands)
Operating lease
obligations(1)
$
8,564.0
$
1,561.8
$
3,169.4
$
2,638.2
$
1,194.6
Finance lease
obligations(2)
30.3
11.3
19.0
—
—
Purchase
obligations(3)
2,464.7
1,967.9
331.2
165.6
—
Bank
overdraft(4)
3,856.0
3,856.0
—
—
—
Employee
Benefits(5)
667.1
—
—
—
—
Notes: (1)
Operating lease obligations relate
to our leasing arrangements for our various office premises.
(2)
Finance lease obligations relate to
our leasing arrangements for motor vehicles used in our business.
(3)
We enter into purchase orders from
time to time for various equipment or other requirements for our
business.
(4)
Secured against term deposits.
(5)
Employee benefits in the statement
of financial position include $667,050 in respect of employee
benefit obligation. For this amount, the extent of the amount
and timing of repayment/settlement is not reliably estimable or
determinable at present and accordingly have not been disclosed
in the table above.
Off-Balance
Sheet Arrangements
As of March 31, 2011, MMT India had obtained approximately
$18.4 million in bank guarantees mainly from YES Bank in
favor of IATA, against any payment default by us to all airlines
participating in IATA’s bill settlement plan, and
MakeMyTrip.com Inc. had obtained certificates of deposit
totaling approximately $0.7 million for purposes of
providing guarantees to various international airlines. Apart
from the foregoing, we do not have any outstanding off-balance
sheet derivative financial instruments, guarantees, interest
rate swap transactions or foreign currency forward contracts. We
do not engage in trading activities involving non-exchange
traded contracts.
Inflation
Inflation in India has not had a material impact on our
historical results of operations included in this prospectus.
Quantitative
and Qualitative Disclosures about Market Risk
Our business activities are exposed to a variety of market
risks, including credit risk, foreign currency risk and interest
rate risk.
Credit Risk. Financial instruments that
potentially subject us to concentrations of credit risk consist
principally of term deposits, cash equivalents, and trade and
other receivables. By their nature, all such financial
instruments involve risks, including the credit risk of
non-performance by counterparties. Our cash equivalents, bank
balances and term deposits are placed with banks with high
investment grade credit ratings, and our term deposits may be
withdrawn at any time prior to maturity except that this would
result in a lower interest rate. Trade and other receivables are
typically unsecured and arise mainly from commissions and
incentive payments owing to us from our airline suppliers,
receivables from our hotel suppliers which represent amounts
owing to us from deposits we place with such hotels, and
receivables from our corporate and retail customers to whom we
typically extend credit periods. We review the credit worthiness
of our clients to which we have granted credit terms in the
normal course of the business. We believe there is no
significant risk of loss in the event of
non-performance
of the counterparties to these financial instruments, other than
the amounts already provided for in
our financial statements. See note 30 to our audited
consolidated financial statements for additional information
relating to our exposure to credit risk.
Foreign Exchange Risk. We are exposed to
movements in currency exchange rates, particularly those related
to the US dollar and the Indian Rupee. As the functional
currency of MMT India, our key operating subsidiary, is the
Indian Rupee, our exposure to foreign currency risk primarily
arises in respect of our non-Indian
Rupee-denominated
trade and other receivables, trade and other payables and cash
and cash equivalents, which were $3.6 million,
$11.0 million and $1.0 million, respectively, as of
March 31, 2011, and $6.8 million, $5.6 million
and $1.1 million, respectively, as of March 31, 2010.
Based on our operations in fiscal year 2011, a 10.0%
appreciation of the US dollar against the Indian Rupee as of
March 31, 2011, assuming all other variables remained
constant, would have decreased our profit for the year by
$0.6 million. Similarly, a 10.0% depreciation of the US
dollar against the Indian Rupee as of March 31, 2011,
assuming all other variables remained constant, would have
increased our profit for the year by $0.4 million. Based on
our operations in fiscal year 2010, a 10.0% appreciation of the
US dollar against the Indian Rupee as of March 31, 2010,
assuming all other variables remained constant, would have
decreased our loss for the year by $0.2 million. Similarly,
a 10.0% depreciation of the US dollar against the Indian Rupee
as of March 31, 2010, assuming all other variables remained
constant, would have increased our loss for the year by
$0.2 million.
We are also exposed to movements between the US dollar and the
Indian Rupee in our operations, as approximately 9.1% and 7.2%
of our revenue for fiscal years 2010 and 2011, respectively, was
generated by MMT India from its air ticketing business and
received in US dollars although our expenses are generally
incurred in Indian Rupees. We currently do not have any hedging
agreements or similar arrangements with any counter-party to
cover our exposure to any fluctuations in foreign exchange
rates. While we do incorporate margins in our pricing to cover
any adverse fluctuations in foreign exchange rates, there can be
no assurance that such margins will adequately protect us from
adverse fluctuations in foreign exchange rates and hence our
earnings remain susceptible to foreign exchange rate
fluctuations. However as this risk associated with currency
exchange is largely confined to our non-Indian Rupee revenue, we
believe our exposure is minimal and immaterial.
Interest Rate Risk. Our exposure to interest
rate risk for changes in interest rates relates primarily to our
term deposits and bank overdrafts. As of March 31, 2011, we
had fixed rate financial instruments totaling
$16.9 million, consisting of our term deposits, and
variable rate financial instruments totaling $3.9 million,
consisting of our bank overdrafts. As of March 31, 2010, we
had fixed rate financial instruments totaling $55.4 million
(including term deposits totaling $14.5 million and
$40.8 million of preferred shares which converted into
ordinary shares upon the completion of our initial public
offering), and variable rate financial instruments totaling
$4.0 million, consisting of our bank overdrafts. We have
not used any derivative financial instruments to hedge interest
rate risk. We have not been exposed nor do we anticipate being
exposed to material risks due to changes in interest rates. Our
future interest income and financing cost may fluctuate in line
with changes in interest rates. We do not account for any fixed
rate financial instruments at fair value through profit or loss.
Accordingly, a change in interest rates as of March 31,2011 would not have affected our profit or loss. Based on our
consolidated balance sheet as of March 31, 2011, a
sensitivity analysis shows that an increase of 100 basis
points in interest rates as of March 31, 2011 would have
decreased profit or increased loss by $0.04 million and
would not have had any impact on our equity. Similarly, a
decrease of 100 basis points in interest rates as of
March 31, 2011 would have increased profit or decreased
loss by $0.04 million and would not have had any impact on
our equity.
New
Accounting Standards and Interpretations Not Yet Adopted by Our
Group
IFRS 9 ‘Financial Instruments’, is part of the
IASB’s wider project to replace IAS 39 ‘Financial
Instruments: Recognition and Measurement’. IFRS 9 retains
but simplifies the mixed measurement model and establishes two
primary measurement categories for financial assets, amortized
cost and fair value. The basis of classification depends on the
entity’s business model and the contractual cash flow
characteristics of the financial asset. The effective date for
IFRS 9 is annual periods beginning on or after January 1,2013 with early adoption permitted. The Group is in the process
of evaluating the impact of the new standard.
Improvements to IFRS- In May 2010, the IASB published
“Improvements to IFRSs 2010” — a collection
of eleven amendments to six International Financial Reporting
Standards — as part of its program of annual
improvements to its standards, which is intended to make
necessary, but non-urgent, amendments to standards
that will not be included as part of another major project. The
amendments resulting from this standard mainly have effective
dates for annual periods beginning on or after July 1,2010, although entities are permitted to adopt them earlier. The
Group is evaluating the impact of these amendments on the
Group’s consolidated financial statements.
IAS 24, “Related Party Disclosure (revised
2009)”, requires disclosure of related party
relationships, transactions and outstanding balances, including
commitments, in the consolidated and separate financial
statements of a parent, venturer or investor presented in
accordance with IAS 27 Consolidated and Separate Financial
Statements. This Standard also applies to individual financial
statements. These amendments are effective for accounting
periods beginning on or after January 1, 2011. The Group is
evaluating the impact of these amendments on the Group’s
consolidated financial statements.
The information in this section is derived from market
research reports, analyst reports, news articles and other
publicly available sources, including the United States Central
Intelligence Agency “World Factbook,” or the CIA
factbook; Euromonitor International, “Consumer Finance in
India,” 2010 and Tourism Flows Outbound — India,
June 2010, or Euromonitor; Forrester Research, Inc. “Global
Online Population Forecast, 2009 to 2014,” August 2010, or
Forrester; Internet World Stats (statistics available at
www.internetworldstats.com), or Internet World Stats; Netscribes
Inc. “Competitive Intelligence on leading OTA players in
India,” March 2010 and “Online Travel
Industry — India,” June 2009, or Netscribes;
World Travel & Tourism Council
“Travel & Tourism Economic Impact 2010:
India,” February 2010 and “Top 10 Tables,” March
2010, or the WTTC; and The Economic Times.
We have also relied on reports by PhoCusWright, a company
founded and controlled by Mr. Philip C. Wolf, one of
our directors, including “Indian Online Travel
Overview,” September 2010, “Indian Online Travel
Intermediary Overview,” March 2010, “Asia Pacific
Online Travel Overview,” August 2009, and
“U.S. Online Travel Overview,” November 2009. See
“Related Party Transactions — Transactions with
PhoCusWright” for details of our transactions with
PhoCusWright.
Overview
of the Indian Economy
According to the CIA factbook, India is one of the world’s
most populous countries with an estimated population of over
1.19 billion by July 2011. India’s gross domestic
product, or GDP, on a purchasing power parity basis was
approximately $4,046 billion in 2010, making it the fifth
largest economy in the world after the European Union, the
United States, China and Japan. According to the CIA factbook,
economic liberalization, including reduced controls on foreign
trade and investment, began in the early 1990s and has served to
accelerate the country’s GDP growth, which has averaged
more than 7.0% annually since 1997. In 2010, the Indian economy
rebounded robustly from the global financial crisis, in large
part because of strong domestic demand, and grew at 8.3%
year-on-year,
making it the third fastest growing economy globally in 2010 for
countries with GDP over $150 billion.
Economic liberalization in India, which began in 1991,
transformed Indian demographics through rising income levels and
changing consumption patterns. As reported by The Economic Times
on February 6, 2011, the country’s income pyramid is
expected to change, with India’s middle class (India’s
middle class is defined as households with annual income of
between Rs. 340,000 to Rs. 1,700,000) expected to grow
by over three times from 160 million people currently to
547 million people by 2026. With a growing population, the
creation of a large middle class and rising incomes, the
percentage of spending on discretionary items is expected to
rise. According to Netscribes, travel is one of the major areas
of discretionary spending in India.
Source: The Economic Times
Travel
and Tourism Industry in India
The Indian travel and tourism industry is large and growing
rapidly. According to the WTTC, India’s travel and tourism
industry contributed Rs. 1,741.2 billion to
India’s GDP in 2009 and is expected to contribute
Rs. 1,970.1 billion to India’s GDP in 2010. India
is one of the fastest growing countries in the world in terms of
its travel and tourism industry. The Indian travel and tourism
industry is expected to grow at an annual rate of 10.2% over the
next 10 years. Further, the WTTC expects that, as a result
of the strong growth rate in the Indian travel and tourism
industry, over the next 10 years, India will become one of
the top 10 travel and tourism markets in the world in terms of
the absolute size of its market.
Country
Rankings for Travel and Tourism Direct Industry GDP in
2020
Rank
Country
($ in billions)
1
United States
916.5
2
China
500.7
3
Japan
215.8
4
United Kingdom
148.2
5
France
143.0
6
Spain
123.7
7
Italy
121.8
8
India
110.6
9
Germany
103.7
10
Australia
79.7
Source: WTTC
The Government of India has also recognized the importance of
the travel and tourism industry and has over the past several
years enacted or announced several initiatives to give further
impetus to the industry:
•
the “Incredible India” campaign helps showcase India
as a leading tourist destination globally;
•
the provision of one-month tourist visas on arrival for citizens
of 11 countries (i.e., Japan, Finland, New Zealand,
Singapore, Luxembourg, Laos, Vietnam, Philippines, Cambodia,
Myanmar and Indonesia);
•
support of an “open-skies” policy in India;
•
the modernization or expansion of major metro airports in
Mumbai, Bengaluru, Kolkata, Delhi, Chennai, and Hyderabad;
•
the modernization or development of 35 existing non
metro-airports;
•
the construction of international convention centers in cities
including Delhi, Mumbai, Goa, Jodhpur, Udaipur, Cochi, Agra and
Jaipur to attract more business travelers to India; and
•
air transportation policies permitting airlines in India which
have been in operation on domestic routes for over five years to
fly on international routes.
According to Euromonitor, by 2014, the United Arab Emirates,
Singapore and Malaysia will emerge as the most frequented
destination for Indian travelers.
Top 10
Destinations by Departures from India for 2014
According to PhoCusWright, the Indian online travel market grew
31% to reach $4.4 billion in 2010 as compared to
$3.4 billion in 2009. PhoCusWright further estimates the
market to record a compound annual growth rate of 27% over 2011
and 2012 to reach a total size of $7.0 billion by 2012.
According to PhoCusWright, while India’s online leisure and
unmanaged business is just five years old and still nascent, in
2009, it accounted for 21% of all travel industry bookings.
Robust growth is expected in both online air and online hotel
bookings, according to PhoCusWright. Low-cost airlines will
continue to rely heavily on online travel agencies for
distribution, with online travel agencies accounting for nearly
half of their gross bookings. Online hotel bookings are
estimated to grow at 54% in 2012.
According to PhoCusWright, more than one third of India’s
total online population uses Internet to search, shop and buy
their travel, and online travel continues to drive the
country’s
e-commerce
growth to a large extent. PhoCusWright estimates that by 2012,
31% of the industry’s total gross bookings will be
transacted online.
2008
2009
2010
2011
2012
(in $ millions, except
percentages)
Total Indian Travel Market
16,223
15,808
17,652
19,922
22,813
% Change
4
%
(3)
%
12
%
13
%
15
%
Total Indian Online Travel Market
2,907
3,342
4,362
5,524
7,027
% Change
72
%
15
%
31
%
27
%
27
%
Online as % of Total Indian Travel Revenue
18
%
21
%
25
%
28
%
31
%
Source: PhoCusWright
Key
Drivers of Growth
We believe that the online travel industry in India is
under-penetrated and will continue to grow faster than the
overall Indian travel industry, primarily because of the
following drivers of growth:
Increasing Internet Penetration. According to
Internet World Stats, as of December 2010, Internet penetration
was at 8.5% (or approximately 100 million users) in India,
making India the world’s third largest population of
internet users after China and the United States, as compared to
over 77.3% in the United States. We therefore believe that the
Indian online travel industry is well-positioned for long-term
growth. Increased Internet usage as well as the growing breadth
of travel products offered online are expected to drive this
growth. There is significant potential to serve small and medium
businesses through websites rather than traditional corporate
travel agencies. Forrester expects the Internet penetration in
India and other emerging markets such as China and Indonesia to
grow annually at an average rate of 10% to 20% over the next
five years. PhoCusWright estimates that by 2012, 31% of travel
industry gross bookings will be completed online and that
availability of Third Generation, or 3G, services will enable
mobile travel planning tools to gain popularity and mobile
bookings are expected to gain traction after 2012.
Growth in Low-Cost Airlines. We believe that
increasing competition in the Indian airline industry and the
emergence of more airlines, particularly low-cost airlines, has
spurred more and more travelers to choose air travel over the
traditional rail travel due to affordability and convenience.
With the increase in low-cost airlines, online air travel
bookings have also increased. We believe this is in part due to
the fact that low-cost airlines typically prefer to use
cost-effective distribution channels such as the Internet, using
it as their primary distribution channel, either directly or
through online travel agents.
Source: Netscribes,
“Competitive Intelligence on leading OTA players in
India”
Increasing Credit Card Penetration and Secure Payment
Mechanism. Indian travelers are able to pay
online for travel services and products using a variety of
payment methods, including credit cards, debit cards, cash cards
and Internet banking. According to Euromonitor, the number of
credit cards in India was over 24.3 million in 2009, having
grown at an annualized growth rate of 19% since 2000, while the
number of debit cards in India was over 130 million, having
grown at an annualized growth rate of 84% since 2000.
Euromonitor expects the number of credit cards in India to reach
73.7 million by 2014 (i.e., an annual growth rate of over
25%) and the number of debit cards in India to reach
350 million by 2014 (i.e., an annual growth rate of over
22%).
Number of
Credit Cards and Debit Cards in India
Source: Euromonitor, “Consumer
Finance in India”
We believe that with increasing sophistication of the banking
infrastructure in India and the provision of more secure online
payment interfaces, Internet users in India are overcoming their
apprehensions about security in online transactions and thereby
adding to the online consumer base.
Competition
in the Indian Online Travel Agency Industry
PhoCusWright estimates that the total
“business-to-customer”
online travel agency market (i.e. businesses serving end
consumers with travel products
and/or
services through an online channel) in India is valued at
$1 billion and is dominated by four players —
MakeMyTrip, Yatra, Cleartrip and Travelguru (which was acquired
by Travelocity in August 2009). Of these, MakeMyTrip commands a
market share of 48%, followed by Yatra at 24% and Cleartrip at
18%, based on gross bookings for 2009. These online travel
agencies face competition from traditional travel agents as well
as meta search engines, such as Ixigo and Zoomtra.
Source: The PhoCusWright
“Indian Online” Report
Travel
Products Sold by Online Travel Agents
Online travel agencies in India primarily facilitate travel
arrangements by selling or arranging for air tickets, hotel and
package reservations, rail tickets, bus tickets and car hire.
According to Netscribes, online travel agencies are the most
used online method for the booking of air tickets, hotels and
packages and train tickets. The following chart shows the
services and products offered by the top four online travel
agents in India:
Source: Netscribes,
“Competitive Intelligence on leading OTA players in
India”
According to PhoCusWright, air ticket bookings contributed to
approximately 61% of the online travel market in India in 2010.
However, the non-air ticket segments are also growing in the
Indian online travel market. Online rail revenues grew in excess
of 21% in
2009-2010
according to PhoCusWright. Rail and bus tickets are increasingly
popular new offerings by online travel agencies.
We are the largest online travel company in India, based on
gross bookings for 2009, according to PhoCusWright. Through our
primary website, www.makemytrip.com, and other
technology-enhanced platforms, travelers can research, plan and
book a wide range of travel services and products in India as
well as overseas. Our services and products include air tickets,
hotels, packages, rail tickets, bus tickets, car hire and
ancillary travel requirements such as facilitating access to
travel insurance.
We commenced operations in 2000 and in the first five years
following our inception, we focused on the non-resident Indian
market in the United States, servicing mainly their need for
United States-India inbound air tickets. We started our Indian
business with the launch of our Indian website in September
2005. During the initial years of our operations, we invested
significant capital in our infrastructure as well as in sales
and marketing efforts to build our brand and gain recognition,
and we recorded net losses for all our completed fiscal years.
In fiscal year 2008, our second full fiscal year since we
commenced our Indian business, we recorded a net loss of
$(18.9) million. We reduced our net loss in fiscal years
2009 and 2010, recording a net loss of $(7.3) million and
$(6.2) million, respectively, and recorded a net profit of
$4.8 million in fiscal year 2011. We also reduced our
operating loss in fiscal years 2009 and 2010, recording an
operating loss of $(10.6) million and $(6.0) million,
respectively, and recorded an operating profit of
$4.1 million in fiscal year 2011. Excluding the effects of
employee share-based compensation costs, we would have recorded
an operating loss of $(10.2) million in fiscal year 2009,
an operating profit of $0.8 million in fiscal year 2010 and
an operating profit of $4.6 million in fiscal year 2011;
and we would have recorded a net loss of $(6.9) million in
fiscal year 2009, a net profit of $0.6 million in fiscal
year 2010 and a net profit of $5.4 million in fiscal year
2011.
We believe the strength of our brand, quality of our services,
user-friendliness of our website experience, focus on our
customers and efficacy of our marketing programs have enabled us
to capture a significant share of the domestic air tickets
market in India, while driving increased bookings of the
international outbound air tickets market. In fiscal year 2010,
1.6 million transactions for domestic air tickets in India
were booked through us, and we generated $31.1 million in
revenue less service cost from our air ticketing business. In
fiscal year 2011, 2.6 million transactions for domestic air
tickets in India were booked through us, and we generated
$47.6 million in revenue less service cost from our air
ticketing business. We leverage our strength in air travel to
grow into non-air travel and other segments of the travel
industry, specifically hotels and packages. Revenue less service
cost from our hotels and packages business totaled
$8.0 million in fiscal year 2010, accounting for 19.8% of
our total revenue less service cost, and $10.9 million in
fiscal year 2011, accounting for 17.9% of our total revenue less
service cost.
We have designed our websites to provide our customers with a
user-friendly experience. We had an average of over
2.7 million unique visitors per month in fiscal year 2011.
In fiscal year 2010, 2.0 million transactions were executed
through our websites, accounting for approximately 94.5% of our
total transactions, and in fiscal year 2011, 3.6 million
transactions were executed through our websites, accounting for
approximately 96.0% of our total transactions. We recently
launched a booking engine on our website that allows our
customers to search and book some of our domestic holiday
packages online. We also added a new “Flight plus
Hotel” tab on our website to describe the potential cost
savings from booking bundled packages compared to booking
flights and hotels separately. Furthermore, we recently launched
our BlackBerry application, which allows customers to book
domestic flights in India and automatically synchronizes the
flight details with the calendar on their BlackBerry devices. We
have built an advanced and secure technology platform, which
integrates our sales, customer service and fulfillment
operations. Our technology platform is scalable and can be
upgraded to handle increased traffic and complexity of products
with limited additional investment. As reported by The Economic
Times on February 6, 2011, the Indian middle class is
expected to grow over three times from 160 million people
currently to 547 million people by 2026. In order to meet
the requirements of this growing Indian middle class travel
market where Internet penetration is relatively low, we also
utilize other technology-enhanced distribution channels,
including call centers and travel stores in India, as well as
our travel agents’ network in India.
We provide our customers with access to all major domestic
full-service and low-cost airlines operating in India and all
major airlines operating to and from India, over 4,500 hotels in
India and a wide selection of hotels outside India, Indian
Railways and several major Indian bus operators. On the other
hand, we believe we are a cost-
effective distribution channel for our suppliers, providing
reach to a large and expanding customer base in India as well as
non-resident Indians.
In our air ticketing business, we generate revenue through
commissions and incentive payments from airlines, service fees
charged to our customers and fees from our GDS service provider.
We currently use Amadeus GDS. In our hotels and packages
business, our revenue represents the total amount paid by our
customers for these travel services and products and the cost of
procuring the relevant services and products are classified as
service cost. We evaluate our financial performance based on
revenue less service cost, which is a non-IFRS measure, as we
believe that revenue less service cost reflects more accurately
the value addition of the travel services that we provide to our
customers. Our total revenue less service cost increased from
$16.5 million in fiscal year 2008 to $61.1 million in
fiscal year 2011.
We believe the overall Indian travel industry will experience
continued growth due to income growth in India and the increased
spending by Indians on travel and recreation. According to
Internet World Stats, as of December 2010, Internet
penetration was at 8.5% in India, making India the world’s
third largest population of internet users after China and the
United States, as compared with 77.3% in the United States. We
therefore believe that the Indian online travel industry is
well-positioned for long-term growth and that our
well-recognized brand, leadership in the online travel market in
India and broad and technology-enhanced distribution channels
position us well to capitalize on these growth opportunities.
Furthermore, MMT India was ranked second overall and first in
the professional services industry in a ranking published on
June 21, 2010 of “India’s Best Companies to Work
For 2010” by the Great Place to Work Institute, an
independent global research and consulting firm, and The
Economic Times, a daily business newspaper in India.
Recent
Acquisition
On May 9, 2011, we acquired approximately 79% equity stake
in Luxury Tours & Travel Pte Ltd, a Singapore-based
travel agency that provides hotel reservations, excursion tours
and other related services to inbound and outbound travelers in
Singapore and the region, in accordance with the terms of the
share purchase agreement dated February 9, 2011 entered
into with Luxury Tours & Travel Pte Ltd and its
existing shareholders. We paid cash consideration of
approximately $3.0 million, subject to working capital
adjustment in accordance with the terms of the share purchase
agreement. We plan to invest approximately $0.75 million in
one or more tranches until June 2012 for the subscription of new
equity shares to be issued by Luxury Tours & Travel
Pte Ltd.
We have also agreed to acquire the remaining shares of Luxury
Tours & Travel Pte Ltd from the existing shareholders
in cash, in three tranches, over a three year earn-out period
ending June 2014. The earn-out will be based on valuation linked
to future profitability of Luxury Tours & Travel Pte
Ltd. We intend to leverage this acquisition to build a position
of strength in Southeast Asia through relationships with local
hotels and vendors.
Our
Strengths
We have the following competitive strengths:
The Largest Online Travel Company in India with a
Well-Recognized Brand. Since commencing our
travel business in India in 2005, we have become the largest
company in the Indian online travel market, based on gross
bookings for 2009, according to PhoCusWright. In fiscal year
2010, 1.6 million transactions for domestic air tickets in
India and 109,672 transactions for hotels and packages were
booked through us. In fiscal year 2011, 2.6 million
transactions for domestic air tickets in India and 175,869
transactions for hotels and packages were booked through us. We
had an average of over 2.7 million unique visitors per
month in fiscal year 2011.
We believe that our brand is well-recognized in the Indian
travel industry. We were the first and only online travel agency
brand to be selected as a
Superbrandtm
in India for
2009-2010.
We have invested in developing and promoting our brand since our
inception, using a combination of traditional channels such as
print, radio and television, mass media campaigns, as well as
search engine marketing and other innovative digital marketing
tools, such as viral marketing and online display banners, to
broaden our reach to travelers in India and overseas.
We believe that our reputation and market position have also
provided us with better leverage when contracting with airlines,
hotels and other suppliers.
Comprehensive Selection of Service and Product
Offerings. We offer our customers a comprehensive
selection of travel and travel-related services and products. We
cater to the travel needs of residents in India as well as
non-resident Indians and others traveling to India from the
United States and other countries. Our services and products
include air tickets, hotels, packages, rail tickets, bus
tickets, car hire and ancillary travel requirements such as
travel insurance and visa processing. We provide our customers
with access to all major domestic full-service and low-cost
airlines operating in India and all major airlines operating to
and from India, over 4,500 hotels in India and a wide selection
of hotels outside India, Indian Railways and several major
Indian bus operators. We believe our comprehensive selection of
travel services and products makes us a “one stop
shop” for our customers’ travel needs and allows us to
combine multiple products and provide customized packages that
suit the unique needs of our customers.
Broad Distribution Network. We use a variety
of technology-enhanced distribution channels to target the
growing Indian middle class travel market, where Internet
penetration is still relatively low. Our distribution network is
centered on our India-focused website, www.makemytrip.com (which
includes our US
sub-domain
website), our United Arab Emirates-focused website,
www.makemytrip.ae, and our Canadian website, www.makemytrip.ca,
our call centers, and our various travel stores in
19 cities in India, as of March 31, 2011. As of
March 31, 2011, we had a network of approximately 9,300
agents across more than 700 cities and towns in India who
can access our
business-to-business,
or B2B, website enabling them to sell our full suite of online
travel services to their customers. We have recently launched a
BlackBerry application through which mobile users can access
MakeMyTrip mobile offerings. Our broad distribution network
gives us widespread access to travelers both in India as well as
abroad.
Advanced, Secure and Scalable Technology
Platform. We have built an advanced and secure
technology platform, which integrates our sales, customer
service and fulfillment operations. We have designed our
websites to be user-friendly, providing our customers with
extensive low price options and alternative routings, as well as
offering them combinations of flight and hotel bookings at cost
effective rates. Our websites also enable our customers to find
their right destinations easily by using colloquial names or
major landmarks. We also recently launched a booking engine on
our website that allows our customers to search and book some of
our domestic holiday packages online.
Our web-based booking engine has been designed to link to our
suppliers’ systems either through “direct
connects” or a GDS (we currently use Amadeus GDS), and is
capable of delivering real time availability and pricing
information for multiple options simultaneously.
Our technology platform is able to handle up to 500,000 website
requests per day. This platform is scalable, and can be upgraded
to handle increased traffic and complexity of products with
limited additional investment. We estimate that an additional
investment in hardware costing approximately $360,000 would
increase the capacity of our technology platform to
1.0 million website requests per day. As a result of our
scalable platform, we were able to launch our B2B platform in
2009 in only a few months by leveraging our existing technology.
Customer-Focused Approach. We place
significant emphasis on technology, personnel and training to
improve our services to our customers. Our customers can choose
from our various customer service channels to contact us,
including web-based self service or chat support as well as our
toll-free call centers, our travel stores and
e-mail. Our
mobile service platform also enables customers to receive
e-tickets
and flight alerts via text messages (SMS) on their mobile
phones. We recently launched our BlackBerry application, which
allows customers to book domestic flights in India and
automatically synchronizes the flight details with the calendar
on their BlackBerry devices. We also added a new “Flight
plus Hotel” tab on our website to describe the potential
cost savings from booking bundled packages compared to booking
flights and hotel separately. We provide important travel
information on our websites, such as the on-time performance of
airlines, user-generated travel reviews and destination guides
to help customers conduct research and make travel decisions. We
primarily outsource our call center operations and fulfillment
process to IBM Daksh, iEnergizer IT Services, Intelenet Global
Services and Motif India Infotech in India, as we believe these
experienced and reputable service providers are able to adhere
to our customer service standards and enhance our service
quality. We also have a dedicated in-house escalation service
which operates 24 hours a day, seven days a week, and is
responsible for addressing issues or complaints raised by our
customers.
Experienced Management Team. We operate in an
industry where we believe one of the most important assets is
the quality of our people. Our senior management team is
comprised of industry executives with significant experience in
the travel industry, including online travel agencies, in India,
the United States and the United Kingdom. Our management team
also has in-depth experience in the Internet and information
technology industries, having worked with companies such as GE
Capital, Amazon, Google and IBM, and in the consumer industry,
including Pepsi. We also actively recruit MBA graduates and
engineers from leading institutions in India to fill important
management roles in our company.
Our
Strategy
We believe that the relatively low but fast growing Internet
penetration in India, coupled with income growth in India
provide us with significant growth opportunities. Our objective
is to grow profitably by building on our current leadership
position to become India’s dominant travel company. The key
elements of our strategy include:
Expand Our Hotels and Packages Business. Our
hotels and packages business generally yields higher net revenue
margins than our air ticketing business. We intend to acquire or
build technology platforms to enable more hotel suppliers to be
directly-connected to our websites, as this allows our suppliers
to upload information about available rooms, services and rates
directly from their central reservation systems onto our
websites, as well as automatically confirm hotel reservations
made by our customers on a real time basis. We also recently
launched a booking engine on our website that allows our
customers to search and book some of our domestic holiday
packages online. As of March 31, 2011, only approximately
2.1% of our hotel suppliers in India were directly-connected to
us. We believe that our Indian hotels and packages business will
grow as more of our suppliers become directly-connected to us
and as we expand our travel agents’ network in India.
Increasing the number of “direct connects” with our
hotel suppliers will also allow us to reduce the costs of
fulfillment associated with confirmations and reconfirmations of
reservations made under our direct allocation arrangements. We
also intend to grow our packages business outside India through
strategic partnerships and acquisitions, as well as by
strengthening our relationships with key aggregators from whom
we procure inventory for our overseas packages. See
‘— Pursue Selective Strategic Partnerships and
Acquisitions.”
Expand Our Service and Product Portfolio to Enhance
Cross-Selling Opportunities. We believe that
expanding our service and product offerings is an important
means of customer acquisition as the diversity of our services
and products will improve our offerings to customers, attract
more customers to our websites and allow us to cross sell
higher-margin services and products to them. We actively market
additional travel services to our customers. For example, we
market non-air services directly to customers after they have
booked their air tickets with us.
We seek to continue expanding our travel offerings beyond core
air tickets, hotels and packages to mass market products
including bus, rail and car hire. We introduced the sale of bus
tickets in 2008 and the sale of rail tickets in 2009. We
commenced the provision of chauffeur-driven car hire services
online in May 2010. Currently, such services are available for
flight transfers in five cities in India (Delhi, Mumbai,
Hyderabad, Ahmedabad and Bangalore), and we intend to further
expand our coverage to all major cities in India as well as
expand our services to provide chauffeur-driven car rentals not
linked to flight transfers in the third quarter of calendar year
2011. Previously car hire was only available through our offline
channels and tended to be sold as part of packages.
Expand Our Travel Agents’ Network. We are
focused on expanding our travel agents’ network in India,
to enable more travel agents to gain access to our B2B website
and sell our complete suite of travel services and products. We
have a dedicated call center to service requests and queries
from these agents, and provide training to assist these agents
in the operation of our B2B web-based booking system. As of
March 31, 2011, approximately 9,300 agents had joined our
travel agents’ network, covering more than 700 cities
and towns in India, increasing significantly from
4,000 agents working in more than 450 cities and towns
in India as of June 15, 2010.
Enhance Our Service Platforms by Investing in
Technology. We intend to continue to invest in
technology to enhance the features of our services and our
platforms. For example, we plan to integrate our Indian domestic
air tickets booking system with our international air tickets
booking system and allow cross fare class bookings in one
transaction. We also intend to extend user feedback features to
more products, enable more user-friendly bookings to be saved by
our customers and used across all our services and products,
enhance our mobile service platform to
make mobile transactions more user-friendly and allow real time
fingerprinting to prevent online credit card fraud. We believe
that our continued investments in technology will enable us to
enhance our customer service and to capitalize on the expected
growth opportunities in the online travel market in India. We
recently launched our BlackBerry application, which allows
customers to book domestic flights in India and automatically
synchronizes the flight details with the calendar on their
BlackBerry devices.
Expand into New Geographic Markets. We believe
we are well positioned for growth in other overseas markets,
particularly those with a significant non-resident Indian
population as well as destinations with proximity to India and
favored by Indian travelers. In December 2009, we launched our
website, www.makemytrip.ae, in the United Arab Emirates,
following, among other things, the registration of our
website’s domain name with the relevant registry as well as
the procurement of additional servers to handle the increased
traffic from this new international website. The United Arab
Emirates has a significant non-resident Indian population, and
our website is intended to serve the travel needs of
non-resident Indian travelers traveling from the United Arab
Emirates and neighboring Middle Eastern countries to India as
well as on their travels elsewhere. We also launched our
Canadian website, www.makemytrip.ca, in July 2010 to serve the
travel needs of the Indian residents there.
Pursue Selective Strategic Partnerships and
Acquisitions. In addition to growing our business
organically, we may also pursue strategic partnerships and
targeted acquisitions that complement our service offerings or
strengthen or establish our presence in our targeted overseas
markets. Our purchase of certain assets of Travis Internet
Private Limited, which operated www.ticketvala.com, in March
2010 was a step in this direction for our bus network. We also
recently acquired approximately 79% of Luxury Tours &
Travel Pte Ltd, a Singapore-based travel agency, engaged in the
business of providing hotel reservations, excursion tours and
other related services to inbound and outbound travelers in
Singapore and the rest of Southeast Asia. We believe our
existing technology platform will enable us to successfully and
cost-effectively integrate our partners or new companies we
acquire into our network and allow us to ensure our best
practices are followed. As of the date of this prospectus, we
have not entered into any advanced discussions or negotiations
or any agreements or commitments for material acquisitions of
any businesses.
Our
Services and Products
We offer a comprehensive selection travel and travel-related
services and products catering to the needs of residents in
India and non-resident Indians and others traveling to India
from the United States and other countries. We provide travelers
with the tools and information they need to efficiently
research, plan, book and purchase travel services and products
in India as well as overseas. Our services and products include
air tickets, hotels, packages, rail tickets, bus tickets, car
hire and ancillary travel requirements such as visa processing
and facilitating access to travel insurance. Our key customers
include leisure travelers and small businesses.
Air
Tickets
Our air tickets business is primarily targeted at domestic
travel within India and international travel originating in
India; and inbound travel to India from the United States and
other countries.
Indian Domestic and Outbound Travel. We have
experienced significant growth in our air ticketing business
covering domestic travel within India and international travel
from India since we commenced our Indian operations in 2005. The
following table sets forth the number of transactions for air
travel booked through us in this business in the last three
fiscal years.
Number of Transactions
for Fiscal Year Ended
March 31
2009
2010
2011
Indian domestic air travel
1.2 million
1.6 million
2.6 million
Outbound air travel
45,497
93,757
146,033
We provide our customers with a wide selection of airline
tickets for all major domestic full-service and low-cost
airlines operating in India, including Air India, Air India
Express, Go Air, Indigo Airlines, Jet Airways, Kingfisher
Airlines and SpiceJet; and all major international flights that
originate from cities in India, including Air India, British
Airways, Emirates, Jet Airways, Lufthansa, Malaysia Airlines,
Singapore Airlines, Thai Airways and
Virgin Atlantic. We obtain inventory from these airlines either
through a GDS (we currently use Amadeus GDS) or via “direct
connects” to the airlines’ booking systems.
We believe our websites provide comprehensive information to our
customers in a time-efficient and unbiased manner. Customers are
able to quickly and easily evaluate a broad range of potential
fare and airline combinations through our user-friendly
websites. Customers may search for flights based on their
preferred travel dates, destinations, number of passengers,
number of stops and class of travel, or may use our more
advanced search tool and include additional search parameters.
For example, on our Indian domestic flights, customers may
include searches for night flights, specify a preference for
direct flights, as well as include only certain airlines and
only refundable fares. Our website then displays fare and flight
offerings matching those specifications. Customers can also
easily filter and sort the results of their search according to
their preferences.
Inbound Travel to India. We began selling air
tickets for the United
States-to-India
sector in 2000. Our customers are mainly non-resident Indians
and persons of Indian origin traveling to India. Our customers
may search and book their flights on our US
sub-domain
website, us.makemytrip.com, which is linked to our primary
website, www.makemytrip.com, and uses a similar search and
display interface as our primary website, and may also call our
toll-free US hotline, 1800-INDIA-10. The total number of
transactions for inbound air travel to India booked through us
were 22,441 in fiscal year 2009, 36,135 in fiscal year 2010, and
47,765 in fiscal year 2011.
In December 2009, we launched our website in the United Arab
Emirates, www.makemytrip.ae, catering mainly to non-resident
Indians traveling to India as well as on their travels to other
countries. We intend to expand our business in other markets
outside India, particularly those with a significant
non-resident Indian population as well as those with proximity
to India and favored by Indian travelers. We launched our
Canadian website, www.makemytrip.ca, in July 2010. Our Canadian
website is currently owned by a company which we have registered
in Canada. We are evaluating the transfer of legal ownership of
this company to us by September 2011.
Hotels
and Packages
We introduced our hotels and packages business in 2005 and have
since experienced significant growth in this area. The total
number of transactions in our hotels and packages business were
81,357 in fiscal year 2009, 109,672 in fiscal year 2010, and
175,869 in fiscal year 2011.
Hotels. Through our websites, customers can
search, compare and make reservations at more than 4,500 hotels
in India and a wide selection of hotels outside India. We
procure room inventory from our hotel suppliers through three
methods: “direct connects,”“direct
allocation” and “on request.” As of
March 31, 2011, approximately 2.1% of our hotel suppliers
were directly-connected to our booking system. Through these
“direct connects,” our booking systems are integrated
with the central reservations systems of the hotels and
reservations to be made and confirmed on a real time basis. All
our other hotel suppliers have a “direct allocation”
arrangement with us whereby they allocate rooms directly to us
either by managing their room inventory on an extranet supported
by us or via telephone or through “on request”
booking. In our “on request” booking process,
customers may request a reservation and we will liaise with the
relevant hotel to try and confirm the room reservation. We do
not assume any inventory risk for such “direct
allocation” room inventory as any unsold inventory is
released to the hotels upon an agreed number of days prior to
the relevant date of travel.
Customers may search for hotels based on their destination,
preferred dates for check-in and check-out, and may easily
filter our search results by selecting star ratings, specific
hotel chains and location. Customers can also indicate amenity
preferences such as business services, Internet access, fitness
centers, swimming pools and travel assistance. Our “City
Map View” also offers customers the ability to compare
hotel locations on an interactive neighborhood map. Customers
can also preview the property by viewing hotel pictures and read
hotel reviews from other MakeMyTrip customers on our website and
on our travel community website, www.oktatabyebye.com. We
recently launched a booking engine on our website that allows
our customers to search and book some of our domestic holiday
packages online. We also added a new “Flight plus
Hotel” tab on our website to describe the potential cost
savings from booking bundled packages compared to booking
flights and hotels separately.
Packages. We offer pre-packaged vacations
designed by our in-house product specialists, under arrangements
with various travel suppliers and our GDS service provider to
cater to both individual and group
travelers. Our packages also include various travel services
such as travel insurance, visa processing, airport transfer and
sightseeing.
•
Indian Domestic Packages. We offer a variety
of packages, including escorted tours, honeymoon specials and
weekend breakaways, as well as vacation themes, such as beach,
adventure, family, pilgrimage, romantic, shopping, cruise and
culture. Our demographic target for the “weekend
breakaways” packages are corporate executives.
For our customers travelling within India, our Indian website
offers a flight plus hotel option, using a similar search and
display interface as our separate air ticketing and hotels
web-interface, which enables customers to view multiple
combinations of airlines and hotels to assemble a trip which
satisfies his or her unique requirements. Our website allows
customers to customize their trips by combining two or more
travel products and selecting their desired air and hotel
supplier, often at a discounted price, compared to booking the
individual components separately.
•
International Packages. We offer pre-designed
independent packages, customized independent vacations,
customized group tours and pre-designed escorted tours. The wide
array of holiday options offered is intended to suit varying
budgets and preferences of potential customers.
•
Meetings, Incentives, Conferences, Exhibitions and Events.
Our MICE group offers services to organizations as well as
other groups, including students or families who wish to plan
meetings, conferences or other events or organize group trips.
Our MICE group assists such customers in planning and booking
travel arrangements for large groups of travelers and delivers
tickets and other documentation, and, on request of the
customers, a member of our MICE group will accompany the group
during the travel in order to ensure that all plans and
activities run smoothly. Our MICE group also assists employees
of these organizations with their personal travel needs.
Other
Services and Products
Rail Tickets. We introduced the sale of
railway tickets in India in 2009 after entering into an
agreement with IRCTC, which granted us
“direct-connect” access to Indian Railways’
passenger reservation system online and enabled our customers to
reserve and purchase Indian Railways tickets on a real time
basis through our Indian website. Indian Railways is
India’s state-owned railway which owns and operates most of
India’s rail transport. Since we commenced this business in
June 2009, we have booked 185,948 and 576,585 transactions for
rail tickets in fiscal year 2010 and fiscal year 2011,
respectively.
Using a customized search interface, our customers are able to
quickly search for train tickets based on their preferred travel
dates, destinations and class of travel. Our customized
interface allows a customer to compare travel options across
various trains, classes, dates and prices. The search results
displayed are detailed and have been customized to suit the
needs of local Indian railway users. For example, customers are
able to see the wait list status for relevant train trips and
are able to plan their travel accordingly. Like other products,
customers can also easily filter the results of their search
according to their specific preferences. However, as a result of
Indian Railways’ regulations, although customers may search
for rail tickets 24 hours a day and seven days a week,
reservations may not be made between 11.30 pm and 12.30 am India
time.
Bus Tickets. We have agreements with several
major Indian bus operators, some of which are operators of
multiple routes, as well as with aggregators and other
intermediaries. Our bus tickets inventory is obtained through
four channels: real time inventory from operators who are
directly-connected to our booking system; inventory from
aggregators who are directly-connected to our booking system;
inventory from operators who manage their inventory on an
extranet supported by us; and inventory obtained by agreement
with operators where a certain number of tickets are
pre-allocated to us or sold to us “on request.” Since
we commenced this business in May 2008, we have booked 11,792,
57,529 and 147,640 transactions for bus tickets for the nine
months ended March 31, 2009, fiscal year 2010 and fiscal
year 2011, respectively.
Customers can search for bus tickets based on their preferred
travel dates and routes and our website will typically display
numerous options for customers to choose from. We offer our
customers basic information on the
type of bus used on the relevant route and customers are able to
select seats, choose from the available boarding points in the
relevant city on the routes as well as obtain information on the
location of the chosen boarding point.
With the acquisition of certain assets of Travis Internet
Private Limited (which operated www.ticketvala.com) in March
2010, we have obtained access to a technology platform offering
real time bus booking services, quotations and cost comparison,
allowing last minute bookings as well, which we have integrated
with our booking systems. We intend to leverage this platform to
enable more bus operators to be directly-connected to our
booking system to further expand our bus offering.
Car Hire. We offer customers the ability to
rent a chauffeur driven car within India provided by two
operators mainly in major metropolitan cities through our call
centers and travel stores. Typically, this service is requested
in conjunction with a flight and hotel booking or a package
booking. We introduced these services on our Indian website in
May 2010. Currently, such services are available for flight
transfers in five cities in India (Delhi, Mumbai, Hyderabad,
Ahmedabad and Bangalore), and we intend to further expand our
coverage to all major cities in India as well as expand our
services to provide chauffeur-driven car rentals not linked to
flight transfers in the third quarter of calendar year 2011.
Ancillary
Services and Products
As an ancillary service offered to our customers, we provide our
customers with the option to purchase travel insurance from
Apollo Munich Health Insurance Company Limited, with whom we
entered into a memorandum of understanding in April 2008. We
facilitate access to this travel insurance through our Indian
website, as well as via our call centers and travel stores. On
our Indian website, prior to confirming and proceeding with the
reservation of and payment for a flight or hotel, our customers
are prompted to purchase such travel insurance. We also provide
visa processing services, and sell telephone calling cards to
our customers. In addition, we offer travel-related businesses
and other third parties the opportunity to advertise on our
websites.
Distribution
Channels
We utilize a variety of technology-enhanced distribution
channels to target the growing Indian middle class travel
market, where Internet penetration is still relatively low. Our
broad distribution network gives us access to Indians traveling
domestically or overseas and also reaches non-resident Indians
and others traveling inbound to India. Our distribution network
uses a combination of our websites, call centers and travel
stores as well as our travel agents’ network in India and
mobile service platform, giving us multiple channels to access
these customers.
Our customers’ varied needs are served by different
distribution channels. During fiscal year 2011, over 95.0% of
our sales of air tickets for travel in India and the majority of
sales of air tickets for outbound travel from India were made
through our website. Sales of air tickets for inbound travel to
India tend to be made mainly through our call centers, with our
call centers accounting for approximately 63.8% of such sales.
Our customers can book standard flight plus hotel packages on
our websites but the majority of the sales of packages within or
outside India are concluded through our call centers or travel
stores. All of our rail and bus ticket sales are made through
our Indian website.
In fiscal year 2011, transactions executed through our websites,
call centers and travel stores accounted for approximately
95.9%, 3.3% and 0.8%, respectively, of our total transactions.
We currently operate the websiteswww.makemytrip.com (including
the
sub-domain
us.makemytrip.com), www.makemytrip.ae and www.makemytrip.ca
servicing the Indian domestic and outbound market, the United
States-India inbound market (focusing in particular on
non-resident Indians in the United States), the United Arab
Emirates as well as neighboring Middle East countries and the
Canada-India market, respectively. Our Canadian website,
www.makemytrip.ca, is currently owned by a company which we have
registered in Canada. We are evaluating the transfer of legal
ownership of this company to us by September 2011. Our
websites have been designed to provide a user-friendly
experience to our customers and are reviewed and upgraded from
time to time. We recently updated the look of our websitewww.makemytrip.com based on our customers’ feedback.
In March 2010, we acquired certain assets of Travis Internet
Private Limited, an online bus ticket company in India. As part
of this acquisition, we acquired the websitewww.ticketvala.com,
which enables customers to obtain quotations and book bus
tickets online on a real time basis, which we have integrated
with our booking system and our Indian website.
Using our websites, customers can easily and quickly review the
pricing and availability of nearly all our services and
products, evaluate and compare options, and book and purchase
such service and products online within minutes. Customers can
also purchase ancillary travel-related services and products
such as travel insurance as part of the booking process. Certain
packages for MICE or other customized packages cannot be
purchased online although customers can submit inquiries through
our websites and our sales representatives will contact such
customers to follow up and process the transaction, if required.
We recently introduced self-service customer support modules on
our websites to let our customers check their refund status,
modify or cancel reservations and view their travel itineraries.
Typically, a transaction on our websites involves the following
steps:
Search. A customer conducts a search for a
particular product, or combination of products (for example,
flight plus hotel), on our websites by defining desired
parameters. For example, for domestic Indian flights, apart from
the city of departure and destination, number of travelers and
dates of travel, our customers can also input additional
parameters such as preferred cabin class, preferred airlines,
refundable fares and direct flights. Our websites’ search
capabilities employ scalable search and routing logic that we
believe return comprehensive results without sacrificing search
response times or creating added stress on our suppliers’
infrastructure. Our search results are generated in a
cost-effective and time-efficient manner, since over 90% of our
search results come from cache. Our web-based booking engine,
which has been designed to link to our suppliers’ systems
either through “direct connects” or a GDS (we
currently use Amadeus GDS), allows us to deliver real time
information.
Select. At this stage, our websites display to
the customer various possible selections that are available in a
user-friendly format, and also prompt the customer with
available special offers or provide additional information about
the product. Our websites are enabled with asynchronous
JavaScript and extensible markup language, or AJAX, allowing
customers to sort or refine search results by further defining
certain parameters such as price range, time range, preferred
airlines and availability of refunds for air tickets, and star
rating, preferred hotel chains and hotel amenities.
Review. After a customer has selected a
particular option, our websites will provide the customer with
an opportunity to review the details of the product being
purchased and the terms and conditions of such purchase. At this
stage, our websites connect to the Amadeus GDS or the websites
of our travel suppliers to confirm the availability and pricing
of the product selected, and in the event the customer’s
choice is not available, the customer will be informed of the
next-best alternative to the selected product. Customers booking
air tickets or hotels will also be shown options to purchase
travel insurance and other related ancillary services.
Payment. We offer our customers a variety of
payment methods. On our Indian website, customers may pay with
credit cards, debit cards issued by several major banks in India
(including Citibank, ICICI Bank, HDFC Bank and AXIS Bank), bank
transfers or cash cards, and in Indian Rupees. On our US
website, customers may pay with credit cards or Paypal and in US
dollars. On our United Arab Emirates website, customers may pay
with credit cards in United Arab Emirates Dirham, or AED. The
payment gateway for sales on our Indian website is secured by
“Verified by VISA” and “MasterSecure”.
In order to simplify the booking process for our customers, our
websites do not require prior customer registration in order for
the purchase to be completed. Customers who do not wish to
register will simply be prompted prior to payment to provide
basic contact details (including their name, telephone number
and e-mail
address) for purposes of the travel product they intend to
purchase. An electronic confirmation is sent to the
customer’s
e-mail
address and customers can also use TripAssist on our websites to
check their flight or train details, print
e-tickets
and cancel flight and rail bookings and track progress of
refunds.
Our in-house call centers, which mainly handle our sales and
post-sales customer service support for our international hotels
and packages business as well as domestic Indian packages with
more complicated itineraries, are run out of Gurgaon in India.
These call centers operate 24 hours a day, seven days a
week and customers can call these centers through various
toll-free numbers in India to consult with our sales
representatives, receive comprehensive, real time hotel and
package information, and make travel bookings. As of
March 31, 2011, we employed approximately 67 sales
representatives in our in-house call centers, as compared with
approximately 94 sales representatives as of March 31,2009. This decline in numbers of sales representatives was
primarily due to outsourcing. All of our sales representatives
participate in a formal four-week training program before
commencing work and have an in-depth knowledge of their relevant
local market. Our representatives are also trained and updated
with our new services and products.
To achieve cost efficiency and scalability, we utilize various
third party vendors in India to manage our call center service
and we outsource our call center service for sales for all
international flights (both inbound to India and outbound from
India), and most of our domestic Indian hotel reservations and
packages to such vendors. Our outsourcing service providers also
handle our post-sales customer service support for all flights
(domestic and international), domestic Indian hotel reservations
and packages, and rail and bus ticketing, as well as back office
fulfillment and ticketing services. Our key outsourcing service
providers are IBM Daksh, iEnergizer IT Services, Intelenet
Global Services and Motif India Infotech in India, where agents
provide both English and Hindi language options to our
customers. We believe these experienced and reputable service
providers are able to adhere to our customer service standards
and enhance our service quality. Our agreements with IBM Daksh
and iEnergizer IT Services provide our customers the options of
using Gujarati and Tamil, respectively, for their transactions.
These external call centers also operate 24 hours a day,
seven days a week. In aggregate, we had 767 external sales
agents from IBM Daksh, iEnergizer IT Services, Intelenet Global
Services and Motif India Infotech constituting our outsourced
call center sales force as of March 31, 2011, compared to
232 as of March 31, 2009. Our external agents must undergo
a formal four-week training program as well as periodic
refresher training courses in order to understand our processes
and systems and be able to effectively service our customers.
All our call centers are equipped with our enterprise resource
planning, or ERP, application, allowing our sales
representatives and agents to make bookings and create packages,
as well as attend to customer requests. These centers are also
linked to our CRM system which enables us to monitor the
performance of our sales representatives and outsourced agents
on a
round-the-clock
basis. We also have software that enables us to log on to
customer calls enabling us to perform random checks on our call
centers on a real time basis. Our system also enables us to
monitor the number of waiting calls and limit customer aborted
calls on our hotlines due to unacceptably long waiting times. We
have an in-house quality team which monitors the quality of our
call center transactions, including the tone and voice of our
customers, in order to ensure high quality service is
consistently offered to our customers.
Travel
Stores
As of March 31, 2011, we had various travel stores in
19 cities including metropolitan areas across India, which
primarily sell packages. Our main office in Gurgaon also serves
customers seeking to purchase outbound packages from India. We
believe that these travel stores and offices are important for
our overall growth as they represent a direct interface between
our customers and us. At our travel stores, customers can
consult with our sales representatives, receive comprehensive,
real time flight, hotel and package information as well as
information for other services and products, and make travel
bookings, without prior appointment. Our travel stores are also
equipped with our ERP application and linked to our CRM system.
We have a travel agents’ network in India which we started
in 2009, where approximately 9,300 travel agents across
more than 700 cities and towns in India can access our B2B
website enabling them to sell our full suite of online travel
products to their customers. Our B2B website uses a similar
interface as our external customer-facing websites and we were
able to launch our B2B platform in a few months by leveraging
technology already being used by us for our customer-facing
websites. We believe our network is attractive to travel agents
as we provide access to a range of travel services and products
which such agents may not be able to access cost-effectively or
at all. These travel agents earn commissions from us depending
on the volume and type of travel services and products sold.
Furthermore, our travel agents’ network allows us to expand
our footprint in India and distribution network in a
cost-effective manner.
Mobile
In 2008, we launched “makemytrip.mobile,” our mobile
service platform. Our mobile services allow customers to search,
book and pay for Indian domestic air tickets on their mobile
phones at no additional cost. The tickets and bookings are
delivered through email and SMS. Apart from flight bookings,
customers can view their booking details, cancel bookings,
request
e-tickets
and track refund status on their mobile devices. Customers can
also check flight status, look for new deals and use
location-based services to find nearby places of interest.
Currently, BlackBerry users can access MakeMyTrip mobile
offerings through our recently-launched BlackBerry application,
which allows customers to book domestic flights in India and
automatically synchronizes the flight details with the calendar
on their BlackBerry devices. As of March 31, 2011, there
were more than 35,000 downloads of this application. Customers
with reserved tickets, whether booked through a desktop computer
or mobile device, have the ability to access flight information
or cancel reservations through this application. We are also in
the process of developing similar mobile applications for both
Android and iPhone. We plan to increase the scope of services
available on smartphones and other mobile devices. We also
intend to increase the penetration and usage of mobile offerings
by targeting more mobile service platforms in the future. We
recently re-launched “makemytrip.mobile” with a better
design and user interface which lets customers search and book
flights using many smartphone browsers.
We benefit from an advanced technology platform which we believe
has a high level of reliability, security and scalability, and
which has been designed to handle high transaction volumes
across all our websites on shared infrastructure. Our system is
capable of handling up to 500,000 website requests a day. We
have the ability to scale up and down to meet our needs without
incurring substantial costs as we use virtual machines and
infrastructure when required. We estimate that an additional
investment in hardware costing approximately $360,000 would
increase the capacity of our technology platform to
1 million website requests per day. Our technology stack is
also modular and can be easily modified for multiple lines of
business. For example, we were able to launch our B2B platform
in a few months by leveraging our existing technology used for
our customer-facing websites.
We believe we have core technology advantages in multiple areas,
including:
•
website logic that simplify and improve a customer’s
ability to book a trip most suited to his or her requirements,
including providing extensive low price options and alternative
routings, and assisting customers in finding their destinations
easily by using colloquial names or major landmarks;
•
scalable search and caching technologies that return
comprehensive results and allow us to provide more flight and
hotel options to customers without sacrificing search response
times or creating added stress on our suppliers’ operating
or cost infrastructure; and
•
capability to combine various flight plus hotel options,
offering our customers the ability to see multiple combinations
of airlines and hotels to assemble a package, resulting in trips
that are frequently less expensive than individually booked
components and more flexible for the customers.
As part of our business continuity plan, our systems
infrastructure and web and database servers are housed in
Gurgaon, Delhi and Mumbai, and have monitoring and engineering
support 24 hours a day, seven days a week. All our servers
installed at all our data centers as well as at all our offices
are also secured with firewalls.
Our applications and infrastructure are configured in a manner
that support our business continuity plan. All data is backed up
on a weekly basis across our two data centers. In addition, all
data is also backed up on tapes on a weekly basis. These tapes
are kept at a safe and secure location outside the data centers.
Fully
Integrated Technology Platform
Our CRM system uses software by
RightNowtm
CRM, which integrates our sales, customer service and
fulfillment operations. Our web-enabled centralized booking
system enables our customers and B2B partners to search and book
travel services and products we sell and provide on a real time
basis. We also have “Verified by VISA” and
“MasterSecure” payment gateways, which provides
additional security for transactions via our Indian website
using credit cards issued by Indian institutions. We also offer
payment options via netbanking and other instruments.
Our system also allows us to provide high quality customer
service by promptly processing customer inquiries and requests
and by monitoring the performance of our sales and customer
service representatives and our outsourced call center sales
force on a
round-the-clock
basis. Our system also enables us to monitor the number of
waiting calls and limit aborted calls on our hotlines due to
long waiting time.
We integrate our ERP application (which uses Microsoft
Dynamicstm)
with our CRM system which enables our agents to create packages,
make and amend bookings as well as attend to customer inquiries.
Our CRM system is designed to analyze customer needs for better
servicing. It generates reports identifying areas of opportunity
or weakness and thereby helps us in improving our service and
product quality. We also use Omniture Web Analytics software to
assist us in analyzing our web-based business, such as the rate
of conversion of visitors to our websites to purchasing
customers.
Our systems include automation for ticketing, monitoring of
schedule changes and providing alerts to customers, as well as
auto-cancelation of reservations made through a GDS or
airlines’ central reservations
systems. We are continually looking for opportunities to
automate our processes in order to further increase our
productivity and improve the scalability of our business.
Security
We are committed to protecting the security of our
customers’ information. We maintain an information security
team that is responsible for implementing and maintaining
controls to prevent unauthorized users to access our systems.
These controls include the implementation of information
security policies and procedures, security monitoring software,
encryption policies, access policies, password policies,
physical access limitations, and detection and monitoring of
fraud from internal staff. We have acquired a fraud detection
system which uses transaction patterns and other data sources
which seek to prevent fraudulent transactions in real time. All
sensitive data transmitted through our systems is encrypted
using SSL 1024 bit encryption technology. Our information
security team also coordinates internal and external audits
every six months. We believe that, as of March 2011, we are
the only travel portal in India which is compliant with the
Payment Card Industry Data Security Standard (a set of
requirements for enhancing payment account security developed by
the Payment Card Industry Security Standards Council, which
include key credit card and financial services companies).
Marketing
and Brand Awareness
We believe our online and offline marketing strategies increase
our brand awareness, drive potential customers to our websites
and improve the rate at which visitors become customers.
Our marketing channels primarily include online advertising such
as paid search engine marketing and optimization with leading
Internet search engines (such as
Googletm),
as well as utilizing display advertising on websites (such as
Yahoo!tm
India), offline advertising using print or broadcast media such
as television or radio,
e-mails and
short messages, and marketing through our call centers and
travel stores. We have consistently invested in building our
brand and expanding our reach to travelers in India as well as
overseas, through mass media campaigns as well as through
innovative digital marketing tools such as viral marketing and
online display banners. We also have a strong presence in social
media, such as Facebook and Twitter. We intend to invest in
marketing to further increase our brand awareness through our
“Memories Unlimited” marketing campaign. We expect to
spend approximately $2 million on marketing in fiscal year
2012 in addition to our typical advertising and business
promotion expenses to further strengthen our brand.
Our marketing programs and initiatives also include targeted
campaigns, promotional or seasonal offers, as well as
partnerships with international tourism boards. From time to
time, we may run promotional schemes offering free air tickets
upon the purchase of certain air tickets. For example, from
March 8, 2010 to May 12, 2010, we ran a promotion
offering unlimited free air tickets for travel within India upon
purchase of inbound air tickets to India from the United States
on our US website. This promotional offer was subject to certain
terms and conditions, including that the offer applied only to
the basic fare of the domestic tickets and all taxes and fees
payable on such tickets were to be borne by the customers, the
free air tickets had to be booked within seven days of purchase
of the eligible US-India air ticket and requests for such free
air tickets had to be made at least 21 days before the date
of travel (with the customer who booked the eligible US-India
air ticket utilizing at least one of the free tickets). The
estimated cost of any such free tickets is recognized at the
time of issuance of the eligible paid air tickets.
Due to the short period of the promotion, the corresponding
impact on revenues was insignificant. We do not at present
expect similar promotions in the future to have a material
impact on our revenues.
We also have alliances and arrangements with several major banks
in India, including Kotak Mahindra Bank, HDFC Bank and HSBC, as
well as with American Express, with whom we run promotional
offers and vouchers. These alliances and arrangements provide us
with access to our partners’ large customer base where
targeted marketing for customer acquisition can be made at
relatively low costs. We also participate in i-mint, a multiple
partner consumer loyalty program in India.
We have won many industry awards, including Best Online Travel
Portal of the Year by Class of Travel & Tourism Awards
in 2010, Best Travel Portal by CNBC Awaaz 2009 and Best Online
Travel Agent for Excellence in the Indian Travel Market by
TravelBiz Monitor 2009, as well as numerous awards from trade
partners.
Our customer focused approach is centered on ensuring a
favorable user experience on our websites as well as excellent
customer service. Our websites are designed to provide a
user-friendly experience and integrate valuable travel
information, such as information on the on-time performance of
airlines, user-generated travel reviews and destination guides,
to help customers research and make travel decisions. We also
monitor feedback from our customers using our CRM system and
review and upgrade the features of our websites from time to
time.
The key channels through which we implement our customer support
and communicate with our customers are as follows:
Web-based Support. We offer two web-based
customer support services. Our self service web-support called
“TripAssist,” which is available on our Indian
website, enables our customers to check the status of their
domestic flight or train booking, cancel tickets and track the
progress of their refund, among other things. Customers who
require assistance or have inquiries about certain products also
have an option to contact our sales representatives via our
websites and we have dedicated personnel available 24 hours
a day, seven days a week, who provide assistance to our
customers on a real time basis.
Call Centers. We provide our customers with
comprehensive and real time assistance through our call centers
which are available 24 hours a day, seven days a week.
Currently, we outsource a portion of our customer service call
center operations to IBM Daksh, iEnergizer IT Services,
Intelenet Global Services and Motif India Infotech in India,
whose employees have been trained by our respective outsourcing
service providers and us.
Travel Stores. Customers may also visit our
various travel stores in 19 cities in India and obtain
assistance from our sales and customer service representatives.
Mobile Service. Our mobile service platform,
“makemytrip.mobile,” enables customers to search, book
and pay for Indian domestic air tickets on their mobile phones
at no additional cost. The tickets and bookings are delivered
through email and SMS. Apart from flight bookings, customers can
view their booking details, cancel bookings, request
e-tickets
and track refund status on their mobile devices. Customers can
also check flight status, look for new deals and use
location-based services to find nearby places of interest.
Currently, BlackBerry users can access MakeMyTrip mobile
offerings through our recently-launched BlackBerry application,
which allows customers to book domestic flights in India and
automatically synchronizes the flight details with the calendar
on their BlackBerry devices.
E-mail. Customers
may also
e-mail any
inquiries or complaints, which we endeavor to address
expeditiously.
Through our CRM system, we are able to maintain a customer
database containing information on the transaction history and
preferences of each customer who has booked a travel product
through us. We document all sales and customers service
processes at our company using business process management
system, or BPMS, methodology, where the entire value chain,
starting from the customer’s requirement until the delivery
of the relevant service or product, or refund, if applicable, is
documented. We also monitor our customer transactions and have a
dedicated in-house escalation service which operates
24 hours a day, seven days a week, which is responsible for
answering any complaints or issued raised by our customers.
We have a fulfillment process that we mainly outsource, which
minimizes any travel disruption for our customers, with a team
of personnel responsible for ensuring that customers’ hotel
bookings are checked and reconfirmed prior to the date of travel.
As part of our customer focused approach, we have also set up an
Indian online travel community website, www.oktatabyebye.com,
which allows our customers and other travelers to exchange views
and travel tips. Our Indian website also offers our customers
the option to make cash donations to plant trees in India to
reduce their carbon footprint, when completing their bookings.
Supplier
Relationships
We believe we have cultivated and maintain good relationships
with our travel suppliers. We have a dedicated team to maintain
and enhance our existing relationships, and develop new
relationships, with travel suppliers. Our supplier relationship
teams negotiate agreements or arrangements with suppliers for
access to travel inventory for
our services and products, and also monitor supplier-sponsored
promotions. They also focus on relationship management with our
suppliers. One of the key services we provide to our suppliers
is the provision of customer feedback and preferences which we
obtain primarily through our CRM system, user-generated content
on our websites as well as through our call centers, and via
www.oktatabyebye.com, our Indian online travel community website.
Based on revenue less service cost earned by us, our top five
airline suppliers for travel in India and overseas as well as
top five Indian hotel suppliers (in each case in alphabetical
order) for fiscal year 2011 were:
Airlines
Airlines
(Travel within India)
(International Travel)
Indian Hotels
Air India
Air India
Fortune Hotels
IndiGo Airlines
Emirates
Grand Habib Hotels
GoAir
Jet Airways
Indian Hotels Company Limited
Kingfisher Airlines
Lufthansa
Sea Shell Hotels
SpiceJet
United Airlines
TSG Emerald View Hotels
Airlines
We have access to real time inventory of all major airlines
operating in, from and to India either through a GDS (we
currently use Amadeus GDS) or through “direct
connects” to our airline suppliers’ booking systems.
Most of these airlines offer us fares that match those offered
by the airlines on their own websites as well as on other online
travel websites. The fares paid by our customers include our
service fee in addition to the fares charged by the airlines. We
currently have commission arrangements with all India-based
airlines, as well as major international airlines that service
India, where part of our commission is linked to the number of
sales facilitated by us or the revenue realized by these
airlines on sales completed through us. Similarly, we earn fees
from our GDS service provider on a per-ticket basis for sales
completed by us through the GDS that are linked to the volumes
of sales completed by us.
Hotels
We provide our customers with access to over 4,500 hotels in
India and a wide selection of hotels outside India. Our hotel
supply team is responsible for negotiating agreements or
arrangements with independent hotels, hotel chains and hotel
management companies in India and securing competitive rates,
promotions and access to inventory for listing on our websites
as well as packaging of holidays. We select our hotel partners
by their reputation and quality and monitor customer feedback on
our websites as well as other channels in order to ensure that
hotels listed on our websites maintain acceptable standards.
In our hotels and packages business, our revenue represents the
total amount paid by our customers for these travel services and
products and the cost of procuring the relevant services and
products are classified as service cost. We also earn
commissions from other hotel suppliers, typically larger hotel
chain operators, depending on the volume of reservations made
through us.
As of March 31, 2011, approximately 2.1% of our hotel
suppliers were directly-connected to our booking system. Through
these “direct connects,” our booking systems are
integrated with the central reservations systems of the hotels
and reservations to be made and confirmed on a real time basis.
We intend to work with our suppliers to increase the number of
“direct connects” as we believe “direct
connects” benefit both us and the hotels. All other hotel
suppliers have a “direct allocation” arrangement with
us whereby they allocate rooms directly to us either by managing
their room inventory on an extranet supported by us or via
telephone or through “on request” booking. In the
“on request” booking process, customers may request a
reservation and we will liaise with the relevant hotel to try
and confirm the room reservation. Other than special
arrangements we may have with our hotel suppliers from time to
time where we may guarantee sales of a certain number of rooms
during peak travel periods, we are not subject to inventory risk
on our direct allocations as unsold rooms are returned to the
hotels within an agreed time period. We obtain inventory for
hotels outside India through contracts with online travel agents
and aggregators
outside India. We earn commissions from such agents and
aggregators depending on the volume of room reservations made
through them.
Competition
The market for travel services and products is highly
competitive. We currently compete with both established and
emerging providers of travel services and products, including
other online travel agencies, such as cleartrip.com,
expedia.com, travelocity.com and yatra.com, as well as
traditional travel agencies, tour operators, travel suppliers
and operators of travel industry reservation databases. Large,
established Internet search engines have also launched
applications offering travel itineraries in destinations around
the world, and meta-search companies who can aggregate travel
search results also compete with us for customers. In our hotels
and packages business, we compete primarily with Cox &
Kings, Kuoni India and Thomas Cook, all of which are established
industry players in the Indian travel market.
Some of our competitors have significantly greater financial,
marketing, personnel and other resources than us, and certain of
our competitors have a longer history of established businesses
and reputations in the Indian travel market (particularly in the
hotels and packages business) as compared with us. Factors
affecting our competitive success include, among other things,
price, availability and breadth of choice of travel services,
brand recognition, customer service and customer care, fees
charged to travelers, ease of use of website interface,
accessibility and reliability.
Certain of our travel suppliers have also been steadily focusing
on increasing online demand on their own websites and decreasing
or eliminating their dependence on third-party distributors like
us. For instance, many low-cost airlines may, subject to
applicable regulations, reduce or eliminate commissions to
agents such as us or restrict the amount of service fees we are
able to charge customers. Suppliers who sell on their own
websites typically do not charge a processing fee, and, in some
instances, offer advantages such as their own bonus miles or
loyalty points, which could make their offerings more attractive
to customers than offerings like ours.
Intellectual
Property
Our intellectual property rights include trademarks and domain
names associated with the name “MakeMyTrip,” and other
rights arising from confidentiality agreements relating to our
website content and technology. We regard our intellectual
property as a factor contributing to our success, although we
are not dependent on any patents, intellectual property-related
contracts or licenses other than some commercial software
licenses available to the general public. We rely on trade mark
law, trade secret protection, non-competition and
confidentiality agreements with our employees and some of our
partners to protect our intellectual property rights. We require
our employees to enter into agreements to keep confidential all
information relating to our customers, methods, business and
trade secrets during and after their employment with us. Our
employees are required to acknowledge and recognize that all
inventions, trade secrets, works of authorship, developments and
other processes made by them during their employment are our
property.
We have registered our domain names,
“www.makemytrip.com” (which includes the
sub-domain
“us.makemytrip.com” for our US website),
“www.makemytrip.ae” and “www.indiaahoy.com,”
and have full legal rights over these domain names for the
period for which such domain names are registered. We conduct
our business under the “MakeMyTrip” brand name and
logo and have registered the trademarks “MakeMyTrip”
in India and the United States. We have also applied for
registration of the trademarks “Happy Holidays, Happy
Prices” (our trademark for our holiday packages),
“Traveltalkies” and “MakeMyTrip Times” in
India, and such applications are currently pending. We are in
the process of applying to obtain copyright protection for our
logo and brand name in India. We are also in the process of
obtaining an assignment over the trademarks
“ticketvala.com” and “eBusxpress” for which
Travis Internet Private Limited had applied for registration and
over the trademark “Luxury Tours & Travel”, which
was registered under the name of the previous controlling
shareholder of Luxury Tours & Travel Pte Ltd.
As of March 31, 2011, we had 1,010 employees. We also
outsource some of our customer service and sales functions,
which has resulted in a decline in the number of our employees,
principally from 2008 to 2009. The following tables show a
breakdown of our employees as of the end of our past three
fiscal years by category of activity and geographic location. We
have begun the process of bringing our company into compliance
with applicable financial reporting regulations. We have a
senior manager and three other employees who are responsible for
implementation of requirements under the Sarbanes-Oxley Act. We
are in the process of evaluating and hiring consultants and new
staff.
Number of Employees as
of
March 31
Division/Function
2009
2010
2011
Management
7
7
6
Product development
22
20
40
Sales and marketing
433
442
575
Technology development and technology support
95
111
151
Others (including operations, business development,
administration, finance and accounting, legal and human
resources)
204
177
238
Total
761
757
1,010
Number of Employees as
of
March 31
Location
2009
2010
2011
India
758
754
1,006
United States
3
3
4
Total
761
757
1,010
None of our employees are represented by a labor union. We
believe that our relations with our employees are good. We also
contract with a third party for the provision of temporary
employees from time to time for various functions, including
administration and staffing at our travel stores. As of
March 31, 2011, we employed 76 temporary employees.
Insurance
We maintain and annually renew insurance for losses (but not
business interruption) arising from fire, burglary as well as
terrorist activities for our corporate office at Gurgaon, India,
as well as for our various travel stores in 19 cities in India.
In connection with our initial public offering in August 2010,
we purchased a liability policy that also covers our directors
and officers with a policy limit of $50 million.
Facilities
Our primary facility is our corporate office located in Gurgaon,
India. We lease this approximate 38,000 square foot
facility under a nine-year lease which commenced on
March 7, 2007.
As of March 31, 2011, we also had travel stores in
19 cities in India, including Mumbai, Kolkata, Ahmedabad,
Chennai, Delhi, Goa, Hyderabad, Jaipur and Pune. Outside of
India, we have offices in New York and San Francisco. All
of these properties are leased, and we are currently in the
process of renewing certain such lease agreements for future
periods.
We are subject to various laws and regulations in India arising
from our operations in India, including travel agent
requirements and the operation of our website, call centers and
travel stores.
MMT India has been recognized as an approved Inbound Tour
Operator under the Guidelines for Recognition/Renewal as an
Approved Inbound Tour Operator issued by the Ministry of
Tourism, Government of India, as amended, which prescribes
minimum requirements for capital, period of operation, office
space and trained personnel, requires that the foreign exchange
earnings from inbound tour operations during the preceding
financial year or calendar year be not less than
Rs. 2.5 million (approximately $57,000), and entitles
recognized travel agents to concessions or incentives prescribed
by the Ministry of Tourism from time to time.
In addition, in order to act as a travel agent or a tour
operator in the National Capital Territory of Delhi, MMT India
is required to obtain a licence from the Licensing Authority,
Tourism Department, Government of National Capital Territory of
Delhi under the Delhi Motor Vehicle Rules, 1993, as amended. MMT
India has recently applied for such a license. MMT India is
also currently in the process of applying to the Directorate
General of Civil Aviation, Government of India, for a
license to operate inclusive tour package tourist charter
flights as part of our holiday packages.
MMT India has obtained a license from the Reserve Bank of India
to act as a Full Fledged Money Changer, which requires that MMT
India maintain a minimum net owned funds of
Rs. 2.5 million (approximately $57,000). However,
other than money changing services provided to certain of our
existing customers, we do not intend to expand our money
changing operations.
In connection with recent transfers from certain former
employees to MakeMyTrip Limited of an aggregate of
37,274 shares of MMT India, representing approximately
0.01% of its issued shares, MMT India inadvertently omitted to
record certain documents in accordance with foreign exchange
regulations prior to approving such transfers. MMT India
intends to apply to the Reserve Bank of India to condone such
omission. The Reserve Bank of India may require the parties to
pay a penalty, record the transfer at a later date or take other
actions as it deems fit.
Under the Information Technology Act, 2000, as amended, we are
subject to civil liability to compensate for wrongful loss or
gain to any person arising from negligence in implementing and
maintaining reasonable security practices and procedures with
respect to sensitive personal data or information that we
possess, deal with or handle in our computer systems, networks,
databases and software.
We obtained approvals to operate our domestic and international
call centers in India as “Other Service Providers”
from the Department of Telecommunications, Ministry of
Communications and Information Technology, Government of India,
which are valid for 20 years from September 27, 2005
and June 6, 2001, respectively.
We obtain and maintain registrations under the Shops and
Establishments Act and Rules of each state where our travel
stores are located.
Our operations in India currently do not benefit from tax
holidays under any applicable laws or regulations.
Legal
Proceedings
From time to time, we may be subject to various legal
proceedings and claims that are incidental to our ordinary
course of business. In particular, we are involved in a number
of consumer complaints which are pending at various district
consumer forums and state commissions. Furthermore, we are from
time to time in receipt of notices and complaints from our
customers, some of which may result in cases being filed against
us if we are unable to resolve such complaints satisfactorily.
In November 2008, we received a show cause notice from the
Indian income tax authorities and a demand for an additional
payment of approximately Rs. 8.1 million
(approximately $183,000) (exclusive of any applicable penalties)
due to a reassessment of our taxable income in India for the
assessment year
2005-2006,
on the grounds of an increase proposed by the transfer pricing
officer to adjust our international transactions to an
arm’s length price and the disallowance of website
development expenses as capital expenditure incurred during the
year. In January 2009, we filed our objections to both the show
cause notice and the demand for the additional payment with the
Commissioner of Income Tax (Appeals). The demand for the
additional payment was quashed by the income tax authorities in
February 2009 after adjustment of brought forward losses. Our
appeal against the show cause notice in connection with the
transfer pricing matter was decided in our favor in February
2011. We also received partial relief from the disallowance of
website development expenses as capital expenditure incurred. In
May 2011, we filed our objections with the Income Tax Appellate
Tribunal authorities.
Further, in December 2009, we received a draft assessment order
from the Indian income tax authorities for the assessment year
2006-2007,
advising us of an upward revision in our declared income for the
year due to an increase of approximately Rs. 8 million
(approximately $181,000) proposed by the transfer pricing
officer to adjust our international transactions to an
arm’s length price, and a further increase of approximately
Rs. 3.7 million (approximately $84,000) on account of
the proposed disallowance of website development expenses as
capital expenditure incurred during the year. In January 2010,
we filed our objections with the Dispute Resolution Panel. These
increases in our declared income were upheld by the Dispute
Resolution Panel in September 2010. Further, in October 2010 we
received an assessment order from the Indian income tax
authorities initiating penalty proceedings against us under the
Income Tax Act, 1961. In December 2010, we filed our further
objections with the Income Tax Appellate Tribunal authorities.
In October 2010, we received a preliminary assessment order from
the transfer pricing officer covering the assessment year
2007-2008.
The assessing officer issued an assessment order in January 2011
relating to this matter. Pursuant to these orders, the Indian
income tax authorities advised us of an upward adjustment of our
income of approximately Rs. 333 million (approximately
$7.5 million) in order to reflect their assessment of the
arm’s length price our international transactions and an
addition of Rs. 26 million (approximately $588,000)
due to the disallowance of website development expenses as
capital expenditure incurred during the year. However, we
received no demand for any additional tax payments because our
carried forward losses exceeded taxable income. We filed our
appeal with the Commissioner of Income Tax (Appeals) in
March 2011. While we believe that we have a strong case in
our favor, there can be no assurance that the Indian tax
authorities will not take a different view.
On June 2, 2009, we received a notification of complaint
filed by Tata Sons Limited, or Tata, from the World Intellectual
Property Organization, or WIPO, Arbitration and Mediation Center
under the Uniform Domain Name Dispute Resolution Policy. Tata
alleged that our use of the word “tata” in the domain
name for our Indian online travel community website,
“www.oktatabyebye.com,” derived benefit from the
goodwill of the “Tata” name. On August 11, 2009,
WIPO ordered that our domain name be transferred to Tata. The
order can be contested in a court of appropriate jurisdiction
and we have accordingly appealed against the order at the High
Court of Delhi and the United States District Court in the
Western District of Washington. In furtherance of our appeal in
India, we and Tata have agreed to stay all proceedings in the
United States until the Indian proceedings are resolved or
terminated, and that in the event of resolution in the Indian
proceedings, the parties will cooperate with one another and
perform any acts reasonably necessary to comply with the Indian
court’s ruling. The next hearing is scheduled for
July 28, 2011.
During the year ended March 31, 2009, a general industry
wide inquiry was initiated by the Mumbai Zonal Unit of
Directorate General of Excise Intelligence & Customs,
an excise and customs tax regulatory authority in India, on
various travel agencies in India with regard to compliance with
service tax rules and regulations by travel companies in India.
Pursuant to an audit conducted by the service tax authorities,
we received a notice in October 2010 with a demand of service
tax on certain matters, some of which relate to the travel
industry in India and involve complex interpretation of law.
Based on legal advice, we believe that we have a strong case in
our favor and we have filed our response to this notice.
In August 2010, we were informed that one of our competitors may
have filed a criminal complaint in India against us likely
alleging the misuse of domain names similar to the name of such
competitor’s website. The police authorities are
investigating the matters in such complaint, which was filed by
our competitor, Ezeegol, and we are cooperating with the
authorities and have responded to questions in respect of such
pending investigation. However, we have not received any notice
of claim or summons either from any Indian court or such
competitor and we believe that such complaint is without merit
or basis.
The following table sets forth information regarding our
directors and executive officers as of May 12, 2011.
Name
Age
Position/Title
Directors:
Deep Kalra
41
Group Chairman and Group Chief Executive Officer
Ravi Adusumalli
35
Director
Sanjeev Aggarwal
51
Director
Aditya Tim Guleri
46
Director
Philip C. Wolf
54
Director(2)
Vivek N. Gour
48
Independent Director
Frederic Lalonde
37
Independent Director
Gyaneshwarnath Gowrea
45
Director
Mohammad Akhtar Janally
28
Director
Executive
Officers(1):
Keyur Joshi
38
Group Chief Operating Officer
Rajesh Magow
42
Group Chief Financial Officer
Mohit Gupta
37
Group Chief Marketing Officer
Amit Somani
39
Group Chief Products Officer
Mukesh
Singh(3)
35
Senior Vice-President, Technology
Department
Notes: (1)
Other than directors who are also
executive officers.
(2)
Mr. Philip C. Wolf satisfies
the independence requirements of Rule 5605 of the Nasdaq
Stock Market, Marketplace Rules but does not satisfy the
independence requirements of
Rule 10A-3
under the Securities Exchange Act of 1934, as amended, or the
Exchange Act.
(3)
Mr. Mukesh Singh has resigned
from our Company with effect from May 12, 2011 and is
currently serving his three-month notice period.
Unless otherwise indicated, the business address of each
director and executive officer is 103 Udyog Vihar, Phase 1,
Gurgaon, Haryana 122016, India.
A description of the business experience and present position of
each director and executive officer is provided below:
Directors
Deep Kalra is our founder, Group Chairman and Group Chief
Executive Officer, and was appointed to our board of directors
on October 9, 2001. Mr. Kalra’s responsibilities
as Group Chief Executive Officer include executing our business
strategy and managing the overall performance and growth of our
company. Mr. Kalra has over 18 years of experience in
e-commerce,
sales, corporate finance and financial analysis. Prior to
founding our company in April 2000, Mr. Kalra worked with
GE Capital, a subsidiary of the General Electric Company, for
just over a year, where he was vice president of business
development. Mr. Kalra had previously also worked with AMF
Bowling Inc. and ABN AMRO Bank. Both General Electric and AMF
Bowling are listed companies in the United States.
Mr. Kalra also serves as an independent director of
IndiaMART InterMESH Limited and One 97 Communications Limited.
Mr. Kalra is also a member of the executive council of the
National Association of Software and Services Companies
(NASSCOM) in India and chairs NASSCOM’s Internet working
group, as well as a charter member of The Indus Entrepreneurs
(TiE) and serves on the board of TiE, Delhi. Mr. Kalra has
a
bachelor’s degree in economics from St. Stephen’s
College, Delhi University, India, and a master’s degree in
business administration from the Indian Institute of Management,
Ahmedabad, India.
Ravi Adusumalli was appointed to our board of directors
on July 20, 2005 as a nominee of SAIF. He is a partner of
SAIF Partners II L.P., or SAIF Partners, and has been
engaged by SAIF Partners since 2002. Prior to that,
Mr. Adusumalli worked with Credit Suisse First Boston as an
associate and also with Wasatch Funds. Mr. Adusumalli has a
bachelor of arts degree from Cornell University, United States.
The business address for Mr. Adusumalli is
PO Box 12430, Zephyr Cove, NV89448, United States.
Sanjeev Aggarwal was appointed to our board of directors
on December 18, 2006 as a nominee of Helion Venture. He was
previously the chief executive officer of IBM Daksh from July
2004 to July 2006. He was also the founder and chief executive
officer of Daksh eServices Private Limited from January 2000
until June 2004. Mr. Aggarwal has a bachelor of science
degree in electrical engineering and a master’s degree in
business administration from Punjab University, India. The
business address for Mr. Aggarwal is Block B,
9th Floor, Vatika Towers, Sector 54, Gurgaon 122 002,
Haryana, India.
Aditya Tim Guleri was appointed to our board of directors
on April 3, 2007 as a nominee of Sierra Ventures VIII-A,
L.P., Sierra Ventures VIII-B, L.P. and Sierra Ventures
Associates VIII, LLC. Mr. Guleri is a managing member of
with Sierra Ventures Associates VIII, LLC, the general partner
of Sierra Ventures VIII-A, L.P. and Sierra Ventures VIII-B,
L.P., and in that capacity, he serves on the boards of directors
of various companies that Sierra Ventures invests in, providing
operational and financial guidance. Prior to joining Sierra
Ventures Associates VIII, LLC in February 2001, Mr. Guleri
was vice chairman and executive vice president with Epiphany,
Inc. from March 2000 until February 2001, and prior to that, he
was chairman, chief executive officer and co-founder of Octane
Software Inc. since September 1997. He started his career in
September 1989 with the information technology team at LSI Logic
Corporation until September 1991 and worked with Scopus
Technology Inc. from 1992 until 1996. Mr. Guleri has a
bachelor of science degree in electrical engineering from Punjab
Engineering College, Chandigarh, India and a master of science
degree in engineering and operating research from Virginia
Polytechnic Institute and State University, United States. The
business address for Mr. Guleri is 2884 Sand Hill Road,
Suite 100, Menlo Park, CA94025, United States.
Philip C. Wolf was appointed to our board of directors on
July 20, 2005. Mr. Wolf is president and chief
executive officer of PhoCusWright, a travel industry research
firm he founded in 1994. Prior to founding PhoCusWright,
Mr. Wolf was president and chief executive officer of a
venture-funded software developer and travel booking engine
pioneer which held two patents for its pricing algorithms. He
also sits on the board of Sparrow Media, LLC. Formerly an
adjunct professor at New York University’s Graduate Center
for Hospitality, Tourism and Sports Management, he is currently
a distinguished lecturer at the Cornell University School of
Hotel Administration. Mr. Wolf has a bachelor of arts
degree in public policy studies from Duke University, United
States and a master’s degree in business administration
from the Owen Graduate School of Management, Vanderbilt
University, United States. The business address for
Mr. Wolf is 1 Route 37 East, Suite 200, Sherman, CT06784, United States.
Vivek N. Gour was appointed to our board of directors on
May 1, 2010. Mr. Gour is also the managing director and
chief executive officer of Air Works India Engineering Private
Limited, a privately held company in which he has a significant
equity stake. Prior to joining our company, Mr. Gour was
the chief financial officer of Genpact Limited from January 2005
to February 2010; Genpact is listed on the New York Stock
Exchange. From October 2003 to December 2004, Mr. Gour
served as chief financial officer for GE Global Business
Processes. From October 2002 to September 2003, he served as
chief financial officer of GE Capital India, and from
August 2001 to September 2002 as senior vice-president
(strategic projects) of GE Capital India. Mr. Gour has
a bachelor of commerce degree from Mumbai University, India, and
a master of business administration (finance) from Delhi
University, India.
Frederic Lalonde was appointed to our board of directors
on December 18, 2006. Mr. Lalonde is the founder,
director and chief executive officer of Hopper Inc. (formerly
known as Openplaces Inc.), a privately held company which runs
www.hopper.travel, a travel search engine. Prior to founding his
own company, Mr. Lalonde worked at Expedia Inc. from 2004
to 2006 where he served as vice president of hotel supplier
strategy and vice president of
hotels and packages product planning. Mr. Lalonde has also
been a director of Sparrow Media LLC since August 2009. The
business address for Mr. Lalonde is 5795, Ave de Gaspe,
Suite 100, Montreal, QC, Canada, H2S 2X3.
Gyaneshwarnath Gowrea was appointed to our board of
directors on February 11, 2009 and is one of our resident
directors in Mauritius. Mr. Gowrea has been a managing
director with Multiconsult Limited since 2009. From 2007 to
2008, he was director of Global Services Ltd. and from 1999 to
2006 he was a manager with Multiconsult. Mr. Gowrea
completed his secondary education at John Kennedy College in
Mauritius and holds various professional qualifications,
including being a fellow of the Chartered
Association & Certified Accountants, United Kingdom
and a fellow of the Mauritius Institute of Directors. The
business address for Mr. Gowrea is Rogers House, 5
President John Kennedy Street, Port Louis, Mauritius.
Mohammad Akhtar Janally was appointed to our board of
directors on February 11, 2009 and is one of our resident
directors in Mauritius. Mr. Janally is a manager at
Multiconsult, having joined Multiconsult Limited in July 2003.
Mr. Janally is a member of the Association of Chartered
Certified Accountants, United Kingdom. The business address for
Mr. Janally is Rogers House, 5 President John Kennedy
Street, Port Louis, Mauritius.
Executive
Officers
Keyur Joshi is our co-founder and group chief operating
officer. Prior to co-founding our company in 2000,
Mr. Joshi worked with Around the World Travel (now renamed
Justfares.com) in Seattle, United States, and he has over
10 years of experience in the online travel industry.
Mr. Joshi also served as senior officer with Tata Motors
from March 1997 to March 1998. Mr. Joshi has a
bachelor’s degree in chemistry from Gujarat University,
India, and a master’s degree in business administration
from the City University of New York, United States.
Rajesh Magow is our co-founder and group chief financial
officer. Mr. Magow has over 18 years of experience in
the information technology and Internet industries. After being
part of our senior management team in 2001 for a few months,
Mr. Magow worked with Tecnovate eSolutions Private Limited,
a wholly-owned subsidiary of eBookers.com (a United
Kingdom-based online travel company that was listed on NASDAQ
until it was acquired by the Cendant group in February
2005) from 2001 to June 2006 as its chief financial officer
and head of financial services, and also served as its acting
chief executive officer for approximately one year.
Mr. Magow was also part of the senior management team that
set up eBookers’ call center and back office operations in
India and was a board member of Tecnovate from January 2001 to
June 2006. Prior to Tecnovate, he also worked with Aptech
Limited and Voltas Limited. Mr. Magow rejoined our company
in 2006. Mr. Magow is a chartered accountant from the
Institute of Chartered Accountants of India.
Mohit Gupta is our group chief marketing officer. Prior
to joining us in May 2008, Mr. Gupta served as vice
president, marketing for Pepsi Foods Private Limited and worked
in numerous other capacities at Pepsi Foods Private Limited.
from July 1998 to April 2008. Mr. Gupta holds a bachelor of
engineering (mechanical) degree from Sardar Patel University,
Vallabh Vidyanagar, India and a master’s degree in business
administration from the Indian Institute of Management, Kolkata,
India.
Amit Somani is our group chief products officer. Prior to
joining us in January 2010, Mr. Somani served as group
product manager for Google Inc. (India) from July 2007 to
December 2009, and prior to that as director of engineering and
product management at IBM in San Jose, California, United
States, from July 1995 to May 2007. Mr. Somani has over
15 years of experience in online businesses.
Mr. Somani holds a bachelor of technology degree in
computer science and engineering from the Institute of
Technology, Banaras Hindu University, Varanasi, India and a
master’s degree in computer science from the University of
Wisconsin, United States. Mr. Somani holds seven patents
and is the recipient of three IBM outstanding technical
achievement awards.
Mukesh Singh is the senior vice president of our
technology department. Prior to joining us in December 2009,
Mr. Singh served as general manager and director of Amazon
Development Center (India) Private Limited where he worked for
five years. Mr. Singh has over 11 years of experience
in information technology and prior to Amazon India, he worked
with eGain Communications, Sumtotal System and Timeline Studios.
Mr. Singh holds a bachelor of technology degree in computer
science and engineering with a minor in mathematics from the
Indian Institute of Technology, Kanpur, India.
Our holding company is managed and controlled by our board of
directors from Mauritius. Our board of directors currently has
nine directors. There are no family relationships between any of
our directors and executive officers. A director is not required
to hold any shares in our company by way of qualification. There
are no severance benefits payable to our directors upon
termination of their directorships, other than to Mr. Deep
Kalra who is also our group chief executive officer.
Terms of
Directors and Executive Officers
In accordance with our Constitution, one-third of our directors
(or, if their number is not a multiple of three, the number
nearest to but not less than one-third) shall retire from office
by rotation at each annual meeting of our company, provided that
neither the chairman of our board nor a director holding office
as managing director shall be subject to retirement by rotation
or be taken into account in determining the number of directors
to retire. A retiring director shall be eligible for
re-election. The directors to retire in each year shall be those
who have been longest in office since their last re-election or
appointment and as between persons who became or were last
re-elected directors on the same day, those to retire shall
(unless they otherwise agree among themselves) be determined by
lot. The office of a director shall be vacated if the director
resigns, dies, becomes mentally unsound or bankrupt, becomes
disqualified from being a director or ceases to hold office
under Mauritius law, or is removed by our shareholders. A
director may be removed by an ordinary resolution of our
shareholders.
Under Mauritius law, the office of a director of our company is
required to become vacant at the conclusion of the annual
meeting of our company commencing next after the director
attains the age of 70 years. However, a person of or over
the age of 70 years may, by ordinary resolution of which no
shorter notice is given than that required to be given for the
holding of a meeting of shareholders, be appointed or
re-appointed or authorized to continue to hold office as a
director until the next annual meeting of our company.
Executive officers are selected by and serve at the discretion
of the board of directors.
Duties of
Directors
Under Mauritius law, our directors have a duty to our company to
exercise their powers honestly in good faith in the best
interests of our company. Our directors also have a duty to our
company to exercise the degree of care, diligence and skill that
a reasonably prudent person would exercise in comparable
circumstances. Where a director of a public company also holds
office as an executive, the director is required under Mauritius
law to exercise that degree of care, diligence and skill which a
reasonably prudent and competent executive in that position
would exercise. In fulfilling their duty of care to our company,
our directors must ensure compliance with the Mauritius
Companies Act and our Constitution, as amended from time to
time. A shareholder has the right to seek damages against our
directors if a duty owed by our directors to him as a
shareholder is breached.
The functions and powers of our board of directors include,
among others:
•
convening shareholders’ annual meetings and reporting its
work to shareholders at such meetings;
•
authorizing dividends and distributions;
•
appointing officers and determining the term of office of
officers;
•
exercising the borrowing powers of our company and mortgaging
the property of our company, provided that shareholders’
approval shall be required if any transaction is a major
transaction for our company under section 130 of the
Mauritius Companies Act; and
•
approving the issuance and transfer of shares of our company,
including the recording of such shares in our share register.
Committees
of the Board of Directors
We have established two committees under our board of directors:
an audit committee and a compensation committee. Each
committee’s members and functions are described below.
Our audit committee consists of Messrs. Vivek N. Gour,
Philip C. Wolf and Frederic Lalonde and is chaired by
Mr. Gour. Messrs. Gour, Wolf and Lalonde satisfy the
independence requirements of Rule 5605 of the Nasdaq Stock
Market, Marketplace Rules. Messrs Gour and Lalonde also satisfy
the independence requirements of
Rule 10A-3
under the Exchange Act. Our audit committee will consist solely
of independent directors that satisfy Nasdaq and the SEC
requirements within one year of the completion of this offering.
Our board of directors also has determined that Mr. Gour
qualifies as an audit committee financial expert within the
meaning of the SEC rules. Our audit committee oversees our
accounting and financial reporting processes and the audits of
the financial statements of our company. Our audit committee is
responsible for, among other things:
•
selecting our independent auditors and pre-approving all
auditing and non-auditing services permitted to be performed by
our independent auditors;
•
regularly reviewing the independence of our independent auditors;
•
reviewing all related party transactions on an ongoing basis;
•
discussing the annual audited financial statements with
management and our independent auditors;
•
annually reviewing and reassessing the adequacy of our audit
committee charter;
•
such other matters that are specifically delegated to our audit
committee by our board of directors from time to time;
•
meeting separately and periodically with management and our
internal and independent auditors; and
•
reporting regularly to our full board of directors.
Compensation
Committee
Our compensation committee consists of Messrs. Vivek N.
Gour, Philip C. Wolf and Frederic Lalonde and is chaired by
Mr. Gour. Messrs. Gour, Wolf and Lalonde satisfy the
independence requirements of Rule 5605 of the Nasdaq Stock
Market, Marketplace Rules. Our compensation committee assists
our board of directors in reviewing and approving the
compensation structure of our directors and executive officers,
including all forms of compensation to be provided to our
directors and executive officers. Members of the compensation
committee are not prohibited from direct involvement in
determining their own compensation. Our chief executive officer
may not be present at any committee meeting during which his
compensation is deliberated. The compensation committee is
responsible for, among other things:
•
reviewing the compensation plans, policies and programs adopted
by the management;
•
reviewing and approving the compensation package for our
executive officers;
•
reviewing and approving corporate goals and objectives relevant
to the compensation of our chief executive officer, evaluating
the performance of our chief executive officer in light of those
goals and objectives, and setting the compensation level of our
chief executive officer based on this evaluation; and
•
reviewing periodically and making recommendations to the board
regarding any long-term incentive compensation or equity plans,
programs or similar arrangements, annual bonuses, employee
pension and welfare benefit plans.
We currently do not have in place a nominations committee, and
the actions ordinarily taken by such committee are resolved by a
majority of the independent directors on our board. As a foreign
private issuer, we are permitted to follow home country
corporate governance practices under Rule 5615(a)(3) of the
Nasdaq Stock Market, Marketplace Rules. Our home country
practice differs from Rule 5605(e) of the Nasdaq Stock
Market, Marketplace Rules regarding implementation of a
nominations committee charter or board resolution, because our
company, as a holder of a GBC1 issued by the Financial Services
Commission of Mauritius, is not required under Mauritian law to
establish a nominations committee.
Our code of business conduct and ethics provides that our
directors and officers are expected to avoid any action,
position or interest that conflicts with the interests of our
company or gives the appearance of a conflict. Directors and
officers have an obligation under our code of business conduct
and ethics to advance our company’s interests when the
opportunity to do so arises.
Indemnification
Agreements
We have entered into indemnification agreements with each of our
directors to indemnify them against certain liabilities and
expenses arising from their being a director.
Employment
Agreements with Executive Officers
Each of our executive officers has entered into an employment
agreement with MMT India. These agreements do not have fixed
terms of employment. We may terminate the employment of our
officers for cause, at any time, without notice or remuneration,
for certain acts of the executive officer, including but not
limited to any criminal offense theft, fraud, embezzlement,
intoxication, violence, sexual harassment or damage to our
reputation. Generally, either party may terminate employment at
any time by giving the other party a written notice of three
months or by paying an amount equal to three month’s salary
in lieu of such notice. The employment agreements of
Messrs. Deep Kalra, Keyur Joshi and Rajesh Magow have been
amended, effective April 1, 2010, to change the notice
period for termination from three months to six months (or 12
months in the event of a change in control). Our company’s
executive employment agreements do not provide for any special
termination benefits, nor do we have any other arrangements with
our executive officers for special termination benefits.
Each executive officer has agreed to respect and not claim any
right over any intellectual property owned by our company.
Additionally, each executive officer has assigned all his or her
right, title and interest to, and in, any property relating to
our business (whether tangible or intangible) which is created
during the term of its employment. In addition, each executive
officer has agreed to be bound by the non-competition
restrictions set forth in his or her employment agreement.
Specifically, each executive officer has agreed, while employed
by us and for a period of six months after termination of his or
her employment, not to:
•
solicit or induce any person to terminate his or her employment
or consulting relationship with our company; or
•
canvass, solicit or endeavor to entice away from our company any
client or customer of our company, or any person who regularly
dealt with our company.
Mr. Kalra’s employment agreement, however, specifies a
noncompetition period of 12 months, with the additional
restriction that, during this period, he will not engage or have
a substantial financial interest in any travel intermediary
business that competes directly with our company.
Compensation
of Directors and Executive Officers
For fiscal year 2011, the aggregate cash compensation (including
director’s fees) that we paid to our directors and
executive officers included in the list under the heading
“— Directors and Executive Officers of our
Group” was $1.43 million, which included
$0.40 million in base salary, $0.20 million in housing
and rent allowance, $0.25 million in special allowances and
$0.58 million in bonuses and others (including the variable
component of such bonuses). Our employment agreements (as
amended from time to time) with each of our group chief
executive officer, group chief operating officer and group chief
financial officer provide for bonus entitlements calculated as a
percentage of gross annual salary and linked to gross sales
targets of our company. Our employment agreements with our other
executive officers provide for a variable performance component
which is payable upon each of the individual officer and our
company attaining certain performance targets. These aggregate
cash compensation amounts for fiscal year 2011 do not include
stock compensation and employee benefits to our directors and
executive officers. Stock compensation to our directors and
executive officers are disclosed separately in the table under
“— Outstanding Options”, and employee
benefits to our directors and executive officers are disclosed
separately under “— Employee Benefit Plans.”
Our board of directors adopted the MakeMyTrip.com 2001 Equity
Option Plan, or our equity option plan, on January 12,2001, retrospectively effective from June 1, 2000, pursuant
to the enabling authority granted under a shareholders’
resolution dated January 12, 2001, in order to attract and
retain appropriate talent in the employment of our company, to
motivate our employees with incentives, to create shareholder
value by aligning the interests of employees with the long term
interests of our company and to create a sense of ownership and
provide wealth creation opportunities for our employees. MMT
India had also adopted an equity option plan in 2006. Employees
who were previously granted options under the MMT India equity
option plan have instead been granted options under our equity
option plan. The MMT India equity option plan and all options
granted to employees under such plan were terminated with effect
from July 14, 2010. The following paragraphs describe the
principal terms of our equity option plan.
Administration
Our equity option plan is administered by the compensation
committee of our board of directors. Among other things, our
compensation committee determines the terms and conditions of
each option grant, including, but not limited to, the number of
options, exercise price, vesting period, exercise period and any
lock-in period, forfeiture provisions, adjustments to be made to
the number of options and exercise price in the event of a
change in capital structure or other corporate action, and
satisfaction of any performance conditions.
Number of
Shares Authorized for Grant
Under the terms of our equity option plan, we may grant options
exercisable into up to 15.0% of our
paid-up
share capital on a fully-diluted basis, which is
5,491,474 shares as of March 31, 2011. As of
March 31, 2011, we had outstanding options exercisable into
a total of 1,510,187 ordinary shares with exercise price ranging
from $0.0005 to $5.39. The total number of shares underlying all
grants made to any particular individual may not exceed 5.0% of
our issued share capital. Options that are terminated, forfeited
or lapsed under the provisions of our equity option plan are
available for future grants under our plan.
Eligibility
We may grant awards to any of our employees or directors. Our
compensation committee determines the employees eligible to
participate in our equity option plan in accordance with
criteria laid down by our board of directors from time to time.
Types of
Grants
Under our equity option plan, we may grant options or warrants
to subscribe for equity securities of our company, including
shares and securities convertible into shares.
Vesting
Schedule
Unless otherwise specified in the grant, all initial grants made
to any individual vest in the following manner:
•
10% on the expiry of 12 months from the date of grant.
•
20% on the expiry of 24 months from the date of grant.
•
30% on the expiry of 36 months from the date of grant.
•
40% on the expiry of 48 months from the date of grant.
Unless otherwise specified in the grant, all subsequent grants
made on the basis of the performance of the individual vest in
four equal installments at the anniversary of the respective
grant date. Our compensation committee has absolute discretion
to vary such vesting dates as it deems fit. Other than as set
forth under “— Outstanding Options,” all
options we have granted to date have vested in full on their
respective grant dates.
Unless otherwise specified in the grant, vested options must be
exercised prior to the earliest of the following dates:
•
48 months from the vesting date.
•
72 months from the date of grant.
•
six months following the recipient’s date of voluntary
resignation or termination of employment, other than due to
death, disablement or retirement.
•
one year following the death of a recipient or termination due
to disablement or retirement.
Cashless
Exercise of Options
Our equity option plan permits holders of options to exercise
their options using a cashless exercise method. In a cashless
exercise, the holder of options exercises the options by
simultaneously selling the shares underlying the options upon
exercise. Our board or compensation committee may also require
the holder of options (especially in the case where such method
of cashless exercise may contravene certain regulatory
requirements) to surrender the options to our company at the
selling price of the shares underlying the options in lieu of
such exercise and simultaneous sale of shares. In each of the
foregoing, the holder of options is only entitled to receive the
difference between the selling price and the exercise price for
the options, after deductions for all applicable taxes and
expenses.
Pursuant to the terms of our equity option plan, any holder of
options who may be restricted or prevented by applicable laws
and regulations from paying in full or in part the exercise
price of his or her options or from exercising such restricted
options and acquiring our ordinary shares, will be required to
exercise such restricted options using the cashless exercise
method, as described above. Our equity option plan further
provides that the exercise period for all such restricted
options shall be extended to a period up to 12 months
following the completion of an initial public offering. Any such
restricted options not exercised within this period will
irrevocably lapse. If, however, our company does not effect an
initial public offering within 72 months of the grant date
of such restricted options, all such restricted options not
exercised shall lapse irrevocably, unless otherwise permitted by
law or by our compensation committee.
Effect of
Change of Control or Restructuring of Capital
Upon any restructuring of capital or the occurrence of a change
of control of our company, the recipient of any option that is
outstanding at the time of such restructuring or change of
control will be entitled to such number and type of securities
that is being offered in lieu of the shares underlying such
option by virtue of such restructuring of capital or change of
control, if any.
Amendment
or Termination
Our board of directors may at any time amend, alter or terminate
our equity option plan or any grant under our equity option
plan. However, amendments to any grant under our equity option
plan are subject to consent from the recipient of such grant, if
such amendment would impair or prejudice the rights of such
recipient. Additionally, the approval of shareholders holding
not less than 75% of our issued share capital will be required
to increase the number of shares available for issuance under
options granted pursuant to our equity option plan, change the
exercise price of any option or to extend the maximum period
during which grants under our equity option plan may be made.
The term of our equity option plan was for an initial seven
years but has been extended to June 1, 2012 pursuant to a
board resolution passed on June 12, 2009 which had
retrospective effect from June 1, 2007 and a
shareholders’ resolution passed on May 25, 2010. Our
equity option plan has been subsequently amended and restated
pursuant to a board resolution passed on May 25, 2010, and
a shareholders’ resolution passed on May 25, 2010.
Share
Incentive Plan
We adopted the MakeMyTrip 2010 Share Incentive Plan on
May 25, 2010, or our share incentive plan, upon which our
share incentive plan became immediately effective. While our
equity option plan will continue to be valid
under its terms and will govern the terms of all options granted
thereunder, we intend to grant all new equity share awards under
our share incentive plan.
The purpose of our share incentive plan is to promote the
success and enhance the value of our company by linking the
personal interests of the members of our board, employees and
consultants of our company, subject to restrictions under
applicable law, to those of our shareholders and by providing
such individuals with an incentive for outstanding performance
to generate superior returns to our shareholders. Our share
incentive plan is further intended to provide us with
flexibility in our ability to motivate, attract and retain the
services of such individuals upon whose judgment, interest and
special effort the successful conduct of our operations are
largely dependent.
The following paragraphs describe the principal terms of our
share incentive plan.
Administration
Our share incentive plan is administered by our board of
directors which, to the extent permitted by applicable laws, may
delegate its authority to one or more members of our board or
one or more officers of the company, subject to certain
restrictions set forth in our share incentive plan.
Shares
Available for Awards
Subject to certain adjustments set forth in our share incentive
plan, the aggregate number of shares that may be issued or
awarded under our share incentive plan is equal to (i) ten
percent (10%) of the shares outstanding on the effective date
(i.e., May 25, 2010) plus (ii) an increase on the
date we consummated our initial public offering, by such amount
such that the number of shares which may be issued or
transferred pursuant to awards under our share incentive plan
will be equal to ten percent (10%) of the shares outstanding on
such date, which were 3,413,400 plus (iii) an annual
increase on the first day of each year beginning January 1,2011 and ending January 1, 2019 by such amount that the
number of shares which may be issued or transferred pursuant to
awards under our share incentive plan will equal ten percent
(10%) of the shares outstanding on the last day of the
immediately preceding fiscal year or (iv) such smaller
number of shares as determined by our board of directors. To the
extent that an award terminates, expires or lapses for any
reason, or is settled in cash and not shares, then any shares
subject to the award will again be available for the grant. Any
shares delivered by the holder or withheld by our company upon
the exercise of any award, in payment of the exercise price or
tax withholding, may again be optioned, granted or awarded,
subject to certain limitations set forth in our share incentive
plan.
Eligibility
Our employees, consultants and non-employee directors are
eligible to be granted awards, except that awards will not be
granted to consultants or non-employee directors who are
residents of any country in the European Union and any other
country, which, pursuant to applicable laws, does not allow
grants to any non-employees or consultants.
Options
Our board of directors is authorized to grant options on shares.
The per share option exercise price of all options granted
pursuant to our share incentive plan will be determined by our
board of directors, which may be a fixed or variable price
related to the fair market value of the shares; provided that no
option may be granted to an individual subject to taxation in
the United States at less than the fair market value on the date
of the grant, without compliance with Section 409A of the
United States Internal Revenue Code of 1986, as amended (or the
Code), or the holder’s consent. Our board of directors will
determine the methods of payment of the exercise price of an
option, which may include without limitation cash or check,
shares, proceeds or other forms of legal consideration
acceptable to our board of directors. The term of options
granted under our share incentive plan may not exceed
10 years from the date of grant. Except as limited by the
requirements of Section 409A of the Code, our board of
directors may extend the term of any outstanding option and may
extend the time period during which vested options may be
exercised, or may amend any other term or condition of such
option, in connection with any termination of service of the
holder.
Our board of directors is authorized to grant shares subject to
various restrictions, including without limitation restrictions
on transferability.
Share
Appreciation Rights
Our board of directors is authorized to grant share appreciation
rights to eligible individuals, entitling the holder to receive
an amount determined by multiplying the difference obtained by
subtracting the exercise price per share of the share
appreciation right from the share value on the date of exercise
of the share appreciation right by the number of ordinary shares
with respect to which the share appreciation right is exercised,
subject to any limitations our board of directors may impose.
The term of share appreciation rights will be set by our board
of directors. Amounts payable upon exercise of a share
appreciation right will be in cash, shares or a combination of
both, as determined by our board of directors.
Dividend
Equivalents
Our board of directors may grant dividend equivalents based on
dividends declared on the ordinary shares of our company. Such
dividend equivalents will be converted to cash by such formula
and at such time and subject to such limitations as may be
determined by our board of directors.
Share
Payments
Our board of directors is authorized to make share payments,
which may, but are not required to be made, in lieu of base
salary, bonus, fees or other cash compensation. The number or
value of shares of any share payment will be determined by our
board of directors and may be based upon any criteria, including
service to our company, as determined by our board of directors.
Deferred
Shares
Our board of directors is authorized to grant deferred shares
based on any specific criteria, including service to our
company, as our board of directors determines. Shares underlying
a deferred share award will not be issued until the deferred
share award has vested, pursuant to a vesting schedule or other
conditions or criteria set by our board of directors. Unless
otherwise provided by our board of directors, a holder of
deferred shares will have no rights as a shareholder with
respect to such deferred shares until the deferred share awards
have vested and the shares underlying the deferred share awards
have been issued.
Restricted
Share Units
Our board of directors is authorized to grant restricted share
units, subject to various vesting conditions. On the
distribution dates, subject to applicable laws, our company will
issue to the holder one unrestricted, fully transferable share
(or the fair market value of one such share in cash) for each
vested and nonforfeitable restricted share unit. Restricted
share units may be paid in cash, shares or both, as determined
by our board of directors.
The term of a dividend equivalent award, share payment award,
deferred share award
and/or
restricted share unit award will be set by our board of
directors in its sole discretion.
Adjustments
In the event of certain changes in our capitalization, our board
of directors, in its sole discretion, will make such
proportionate and equitable adjustments to reflect such changes
with respect to (i) the aggregate number and type of shares
that may be issued under our share incentive plan, (ii) the
terms and conditions of any outstanding awards and
(iii) the grant or exercise price per share for any
outstanding award under our share incentive plan.
Corporate
Transactions
If a corporate transaction occurs and outstanding awards under
our share incentive plan are not converted, assumed or replaced
by the successor, such awards will generally become fully
exercisable and all forfeiture restrictions on such awards will
lapse. Upon, or in anticipation of, a corporate transaction, our
board of directors may, in its sole discretion, (i) cause
any awards outstanding to terminate at a specific time in the
future and give each
holder the right to exercise such awards during such period of
time as our board of directors will determine, (ii) either
purchase any award for an amount of cash equal to the amount
that could have been attained upon the exercise of such award or
realization of the holder’s rights had such award been
currently exercisable or payable or fully vested or
(iii) replace such award with other rights or property
selected by our board of directors in its sole discretion.
Non-transferability
Awards granted under our share incentive plan are generally not
transferable during the lifetime of the award holder.
Amendment,
Suspension or Termination
Unless terminated earlier, our share incentive plan will expire
on, and no award may be granted pursuant to it after, the tenth
anniversary of its effective date. Any awards that are
outstanding on the tenth anniversary of the effective date of
our share incentive plan will remain in force according to the
terms of our share incentive plan and the applicable award
agreement. Except as otherwise provided in our share incentive
plan, our board of directors may terminate, amend or modify our
share incentive plan at any time and from time to time. However,
shareholder approval will be required for any amendment
(i) to the extent necessary and desirable to comply with
applicable laws and (ii) that results in an increase in
benefits that would not apply equally to all shareholders of
shares or a change in eligible individuals. Except as provided
in our share incentive plan or any award agreement, any
amendment, suspension or termination may not impair any rights
or obligations under any award without the award holder’s
consent.
Outstanding
Options
During fiscal year 2010, options to acquire 1,301,240 ordinary
shares were granted to several of our directors and executive
officers. During fiscal year 2011, no options were granted to
any of our directors and executive officers. As set forth in the
following table, outstanding options as of March 31, 2011
were:
All these options vested upon the
date of grant and must be exercised prior to 48 months from
their vesting date (i.e., the date of grant), subject to the
terms of our share incentive plan.
(2)
In accordance with the terms of our
share incentive plan:
•
up to 25% further of the shares may
be sold on or after August 17, 2011, the date falling one
year after the completion of our initial public offering; and
•
the remaining 25% of the shares may
be sold on or after August 17, 2012, the date falling two
years after the completion of our initial public offering.
These options vest in four equal
installments upon each anniversary of the grant, commencing with
the first anniversary of the grant. Such options must be
exercised prior to the earlier of 48 months from their
vesting date or 72 months from their date of grant, subject
to the terms of our share incentive plan. See
“— Equity Option Plan — Option Exercise
and Expiration” above.
Employee
Benefit Plans
We maintain employee benefit plans in the form of certain
statutory and incentive plans covering substantially all of our
employees. For fiscal year 2010, the aggregate amount set aside
or accrued by us to provide for pension or retirement benefits
for all our employees (including our directors and executive
officers) was $460,417.
Provident
Fund
In accordance with Indian law, all of our employees in India are
entitled to receive benefits under the Employees’ Provident
Fund Scheme, 1952, as amended, a retirement benefit scheme
under which an equal amount of 12% of basic salary of an
employee is contributed both by employer and employee in a fund
with government/trust with company. Our company makes a monthly
deposit to a government fund and we have contributed an
aggregate of an aggregate of $427,332 in fiscal year 2009, an
aggregate of $401,687 in fiscal year 2010 and an aggregate of
$631,670 in fiscal year 2011.
Gratuity
In accordance with Indian law, we pay gratuity up to our
eligible employees in India. Under our gratuity plan, an
employee is entitled to receive a gratuity payment on the
termination of his or her employment if the employee has
rendered continuous service to our company for not less than
five years, or if the termination of employment is due to death
or disability. The amount of gratuity payable to an eligible
employee is equal to 15 days’ salary for every year of
employment (or any portion of a year exceeding six months), and
currently the aggregate amount of gratuity shall not exceed
Rs. 1,000,000 ($22,134). We have provided for an aggregate
of an aggregate of $55,860 in fiscal year 2009, an aggregate of
$58,730 in fiscal year 2010 and an aggregate of $176,957 in
fiscal year 2011 for our gratuity payments.
The following table sets forth information with respect to the
beneficial ownership of our ordinary shares as of March 31,2011 on a fully-diluted basis, as adjusted to reflect the sale
of the ordinary shares in this offering (including ordinary
shares to be issued and sold pursuant to the exercise of options
by certain of our selling shareholders effective upon the
completion of this offering), held by:
•
each of our directors and executive officers having more
than 1.0% beneficial share ownership;
•
each person known to us to own beneficially more than 5.0%
of our ordinary shares; and
•
each other selling shareholder.
Each of our shareholders is entitled to one vote on all matters
that require a vote of shareholders, and none of our
shareholders has any contractual or other special voting rights.
We are not aware of any arrangement that may, at a subsequent
date, result in a change of control of our company.
As of March 31, 2011, 12,771,879 of our outstanding
ordinary shares representing 36.39% of our outstanding shares
immediately prior to this offering were held by 11 registered
holders of record with addresses in the United States. Some of
these ordinary shares may be held by brokers or other nominees.
Accordingly, the number of record holders in the United States
may not be representative of the number of beneficial holders or
where the beneficial holders are resident.
As used in this table, beneficial ownership means the sole or
shared power to vote or direct the voting or to dispose of or
direct the sale of any security. A person is deemed to be the
beneficial owner of securities that can be acquired within
60 days upon the exercise of any option, warrant or right.
Ordinary shares subject to options, warrants or rights that are
currently exercisable or exercisable within 60 days are
deemed outstanding for computing the ownership percentage of the
person holding the options, warrants or rights, but are not
deemed outstanding for computing the ownership percentage of any
other person. The amounts and percentages as of March 31,2011 are based on 35,099,639 ordinary shares outstanding
immediately prior to this offering. The percentage of ordinary
shares beneficially owned after this offering further includes
ordinary shares to be issued in this offering (including
ordinary shares to be issued and sold pursuant to the exercise
of options by certain of our selling shareholders effective upon
the completion of this offering) assuming that the underwriters
do not exercise their over-allotment option. The underwriters
may choose to exercise the over-allotment option in full, in
part or not at all.
Represents beneficial ownership of
less than 1.0% of our issued share capital (assuming the
exercise of share options held by certain of our selling
shareholders for sale in this offering).
Notes: (1)
Assumes the underwriters’
option to purchase additional ordinary shares is not exercised.
(2)
Travogue Electronic Travel Private
Limited, or Travogue, is a company controlled by Mr. Deep
Kalra. Mr. Deep Kalra holds 78.4% of the equity shares of
Travogue. Accordingly, Mr. Kalra’s beneficial
ownership of our ordinary shares includes 965,360 ordinary
shares held by him directly and 3,000,000 ordinary shares held
indirectly through Travogue. Mr. Keyur Joshi has a 12.8%
equity interest in Travogue.
(3)
Consists of ordinary shares held by
Sierra Ventures Associates VIII, LLC as nominee for its members
(including those shares held for the Guleri Family
Trust UTD dated April 7, 1999, or the Guleri Family
trust, of which Mr. Aditya Tim Guleri is a trustee and
beneficiary). Mr. Guleri is one of the managing members of
Sierra Ventures Associates VIII, LLC, the sole general partner
of Sierra Ventures VIII-A, L.P. and Sierra Ventures VIII-B,
L.P., and may be deemed to control these entities. However,
Mr. Guleri disclaims beneficial ownership of all shares
held by these entities, except as stated above and except to the
extent of his respective proportionate pecuniary interest
therein. See also note (8) below.
(4)
Mr. Frederic Lalonde acquired
60,940 ordinary shares of our company in February 2011.
(5)
Mr. Mukesh Singh and
Mr. Amit Somani hold options exercisable into our ordinary
shares. As of the date of this prospectus, 25% of these options
have vested and Mr. Mukesh Singh has exercised all such
options. Mr. Amit Somani has exercised a majority of such
vested options. Assuming the exercise of all such options by
each of Mr. Singh and Mr. Somani, each of them would
beneficially own less than 1.0% of our issued share capital
prior to this offering.
Andrew Y. Yan is the sole
shareholder of SAIF II GP Capital Ltd., the sole general partner
of SAIF Partners II L.P., which is the sole general partner
of SAIF II GP L.P., which is in turn the sole general partner of
SAIF, our shareholder.
(7)
The shareholders are Tiger Global
Private Investment Partners IV, L.P., Tiger Global Private
Investment Partners V, L.P., Tiger Global, L.P., Tiger
Global II, L.P. and Tiger Global Master Fund, L.P., collectively
referred to as Tiger Global. Mr. Charles P.
Coleman III controls the ultimate general partner of Tiger
Global and is deemed to beneficially own all the shares held by
Tiger Global. The number of shares beneficially owned by Tiger
Global and its affiliates after this offering includes 1,650,000
shares expected to be purchased by certain affiliates of Tiger
Global in this offering.
(8)
The shareholders are Sierra
Ventures VIII-A, L.P., Sierra Ventures VIII-B, L.P. and Sierra
Ventures Associates VIII, LLC (as nominee for its members),
collectively referred to as the Sierra Ventures entities.
Consists of 33,170 ordinary shares held by Sierra Ventures
Associates VIII, LLC, as nominee for its members (including for
the Guleri family trust, of which Mr. Aditya Tim Guleri is
a trustee and beneficiary. See note (3) above). The Sierra
Ventures entities do not have voting or investment discretion
with respect to the shares held by Sierra Ventures Associates
VIII, LLC, as nominee for its members (including those held for
the Guleri family trust). Sierra Ventures Associates VIII, LLC
is the sole general partner of Sierra Ventures VIII-A, L.P. and
Sierra Ventures VIII-B, L.P. Messrs. Jeffrey M. Drazan,
David C. Schwab, Peter C. Wendell, Steven P. Williams and Aditya
Tim Guleri are the managing members of Sierra Ventures
Associates VIII, LLC and may be deemed to control the Sierra
Ventures entities. Messrs. Drazan, Schwab, Wendell,
Williams and Guleri disclaim beneficial ownership of all shares
held by the Sierra Ventures entities, except to the extent of
their respective proportionate pecuniary interest therein.
Significant
Changes in Percentage of Ownership
The following table sets forth the significant changes in the
shareholding interests of our company by our principal
shareholders in our ordinary shares and preferred shares in the
last three fiscal years. Except as disclosed below, there were
no significant changes in the percentage of ownership in our
company in the last three fiscal years. Percentages set forth
below are based on the number of ordinary shares outstanding as
of the dates set forth below.
As of March 31
2009
2010
2011
Name and Type of
Shares
Number
Percent
Number
Percent
Number
Percent
SAIF:
Ordinary shares
11,669,720
11,669,720
14,628,050
Series A preferred shares
1,517,820
51.54%
1,517,820
51.35%
—
41.68%
Series B preferred shares
992,720
992,720
—
Series C preferred shares
1,157,500
1,157,500
—
Tiger
Global(1):
Ordinary shares
—
1,032,560
4,129,760
Series B preferred shares
1,502,920
8.66%
1,502,920
12.09%
—
11.77%
Series C preferred shares
1,075,280
1,075,280
—
Helion Venture:
Ordinary shares
—
—
3,411,695
Series A preferred shares
3,035,660
3,035,660
—
Series B preferred shares
234,940
12.02%
234,940
11.98%
—
9.72%
Series C preferred shares
306,620
306,620
—
Travogue:
Ordinary shares
3,000,000
10.08%
3,000,000
10.04%
3,000,000
8.55%
Sierra
Ventures(2):
Ordinary shares
—
—
2,274,469
Series A preferred shares
2,023,780
2,023,780
—
Series B preferred shares
156,620
8.01%
156,620
7.98%
—
6.48%
Series C preferred shares
204,420
204,420
—
Notes: (1)
The shareholders are Tiger Global
Private Investment Partners IV, L.P. and Tiger Global Private
Investment Partners V, L.P., Tiger Global L.P., Tiger
Global II, L.P. and Tiger Global Master Fund, L.P.
(2)
The shareholders are Sierra
Ventures Associates VIII, LLC, Sierra Ventures VIII-A, L.P. and
Sierra Ventures VIII-B, L.P. (as nominee for its members).
Our audit committee charter requires our audit committee to
review all related party transactions on an ongoing basis and
for all such transactions to be approved by our audit committee.
The following is a summary of our related party transactions.
Private
Placements
In August 2007, we issued 148,315 Series B preferred shares
at a price of $101.14 per share to SAIF, Helion Venture, the
Sierra Ventures entities, and Tiger Global Private Investment
Partners IV, L.P. and certain of its affiliates. In connection
with the issuance of Series B preferred shares, we and our
founders, Mr. Deep Kalra, Mr. Keyur Joshi and
Mr. Sachin Bhatia, entered into a Series B preferred
share subscription agreement dated as of August 8, 2007
with the foregoing investors.
In May 2008, we issued 139,045 Series C preferred shares at
a price of $107.88 per share to SAIF, Helion Venture, the Sierra
Ventures entities, and Tiger Global Private Investment
Partners V, L.P. and certain of its affiliates. In
connection with the issuance of Series C preferred shares,
we and our founders, Mr. Deep Kalra, Mr. Keyur Joshi
and Mr. Sachin Bhatia, entered into a Series C
preferred share subscription agreement dated as of May 20,2008 with the foregoing investors.
The Series B and Series C preferred share information
above does not take into account the
20-for-one
share split we effected on July 22, 2010.
Shareholders
Agreements
As of May 20, 2008, Mr. Deep Kalra, Mr. Keyur
Joshi, Mr. Sachin Bhatia, Travogue, SAIF, Helion Venture,
the Sierra Ventures entities, Tiger Global, Mr. Lee Fixel,
Mr. Feroz Dewan, Mr. Scott Shleifer and our company
entered into a shareholders agreement (which superseded earlier
shareholders agreements) that contained various rights such as
registration rights, pre-emption rights, rights of first refusal
and co-sale rights, board nomination rights and information
access rights as well as provided for matters which required
special approval by certain of our shareholders.
As of July 16, 2010, Mr. Deep Kalra, Mr. Keyur
Joshi, Mr. Sachin Bhatia, Travogue, SAIF, Helion Venture,
the Sierra Venture entities, Tiger Global, Mr. Lee Fixel,
Mr. Feroz Dewan, Mr. Scott Shleifer and our company
entered into a shareholders agreement (which superseded earlier
shareholders agreements, including the
May 20, 2008 shareholders agreement). The
July 16, 2010 shareholders agreement terminates all
the various rights contained in the earlier shareholders
agreements described in the preceding paragraph except for the
registration rights, which are described in greater detail in
“Description of Share Capital — Registration
Rights.”
Transactions
with SAIF
In fiscal years 2009, 2010 and 2011, we earned revenue of
$13,794, $16,901 and $17,075, respectively, from SAIF primarily
for the sales of air tickets to it. These transactions were
carried out in the ordinary course of our business and on an
arm’s length basis.
Transactions
with PhoCusWright
From time to time, we purchase independent market reports on the
travel and travel-related industry from PhoCusWright, a company
founded and controlled by Mr. Philip C. Wolf, one of our
directors. The amounts paid by us to PhoCusWright were $18,322,
$19,300 and $25,100 in each of the fiscal years 2009, 2010 and
2011, respectively.
Our US subsidiary, MakeMyTrip.com Inc., entered into a
professional services agreement with PhoCusWright dated
February 3, 2010, for the provision of certain professional
services by PhoCusWright to us, including assisting us to create
a sales and marketing strategy and develop a list of potential
customers in the North American market to which to sell our
services. PhoCusWright’s services are expected to continue
until June 2011 and it will receive a total fixed fee of $16,000
for the engagement, of which 50.0% was paid upon commencement of
the engagement and the remainder is to be paid upon the
satisfaction of certain deliverables. PhoCusWright is also
entitled to receive 3.0% of all revenue generated from bookings
made by new customers from February 2010 to
July 31, 2011 from North America for our United
States-to-India
inbound services, which shall be payable on a quarterly basis,
commencing from March 31, 2010.
Loans to
Executive Officers
During fiscal year 2008, we made an unsecured, non-interest
bearing loan to our Group Chief Operating Officer,
Mr. Keyur Joshi, amounting to Rs. 2.2 million
($55,151.67, based on the exchange rate as of the relevant
balance sheet date), which represented a refundable deposit
placed with Mr. Joshi’s landlord for his residential
lease. This loan was repaid on July 9, 2009 following the
expiry of Mr. Joshi’s lease. On May 13, 2009, we
extended a similar loan to Mr. Joshi of
Rs. 2.0 million ($44,414.74, based on the exchange
rate as of the relevant balance sheet date). The variable bonus
component under Mr. Joshi’s employment agreement with
our company was adjusted in April 2010, and this loan was set
off against a portion of his employment compensation.
On June 11, 2009, we made an unsecured, non-interest
bearing loan to our Group Chief Financial Officer,
Mr. Rajesh Magow, amounting to $68,059. Mr. Magow
repaid this loan fully on July 7, 2009. During fiscal year
2010, we made another unsecured, non-interest bearing loan to
Mr. Magow, amounting to $38,521. Mr. Magow repaid this
loan in full as of March 31, 2010. As of March 31,2011, there was no loan outstanding to any of our executive
officers.
Employment
Agreements
See “Management — Employment Agreements with
Executive Officers.”
Our company (Company No. 24478/5832) is a public company
incorporated under the laws of Mauritius with limited liability
and we hold a Category 1 Global Business Licence issued by the
Financial Services Commission in Mauritius. Our affairs are
governed by our Constitution, the Mauritius Companies Act, the
Securities Act 2005 of Mauritius, or the Mauritius Securities
Act, and other applicable laws of Mauritius and any rules or
regulations made thereunder.
Our Constitution states that the objects of our company are to
carry out any business or activity permitted under our
company’s Category 1 Global Business Licence, and to the
extent permitted by law, our company may effect any transaction
and take any steps which it considers expedient to further the
objects of our company.
As of March 31, 2010, our stated capital was $53,900,376,
comprising 877,106 ordinary shares with a par value of
$0.01 each and 616,223 preferred shares with a par value of
$0.01 each, of which 328,863 preferred shares were designated
Series A preferred shares, 148,315 preferred shares were
designated Series B preferred shares and 139,045 preferred
shares were designated Series C preferred shares.
All of our preferred shares were converted into 12,324,460
ordinary shares upon the completion of our initial public
offering in August 2010. We effected a 20-for-one share split on
July 22, 2010.
As of March 31, 2011, our stated capital was
$113,372,678.25, comprising 35,099,639 ordinary shares with a
par value of $0.0005 each.
The following are summaries of certain provisions of our
Constitution and the Mauritius Companies Act insofar as they
relate to the material terms of our ordinary shares. The term
“shareholders” as used in these summaries in relation
to our company refers to persons whose names are entered into
the share register of our company as the current holder of one
or more shares of our company. These summaries do not purport to
be complete and are subject to, and are qualified in their
entirety by reference to, the provisions of our Constitution and
the Mauritius Companies Act. Prospective investors are urged to
read the complete form of our Constitution which has been filed
as an exhibit to our registration statement of which this
prospectus is a part.
Ordinary
Shares
General
All of our ordinary shares issued prior to the completion of the
offering are fully paid, and all of our ordinary shares to be
issued in the offering will be issued as fully paid.
Certificates representing our ordinary shares are issued in
registered form. Our shareholders who are non-residents of
Mauritius may freely hold and vote their ordinary shares.
Dividends
Under the Mauritius Companies Act and our Constitution, we may
only pay dividends out of retained earnings, after having made
good any accumulated losses at the beginning of the accounting
period, and no distribution (which term includes dividend) may
be made unless our board of directors is satisfied that, upon
the distribution being made (1) our company is able to pay
its debts as they become due in the normal course of business
and (2) the value of our company’s assets is greater
than the sum of (a) the value of its liabilities and
(b) our company’s stated capital. Subject to the
Mauritius Companies Act and our Constitution, the declaration
and payment of any dividend has to be authorized by our board of
directors, subject to the approval of our shareholders.
Our board of directors may from time to time pay to our
shareholders such interim dividends as appear to the directors
to be justified by our profits, and in particular (but without
prejudice to the generality of the foregoing) if at any time the
share capital of our company is divided into different classes,
our board of directors may also pay any fixed dividend which is
payable on any shares of our company half-yearly or on any other
dates, whenever our profits, in the opinion of our board of
directors, justifies such payment.
Our board of directors may retain any dividends or other monies
payable on or in respect of a share upon which our company has a
lien, and may apply the same in or towards satisfaction of the
debts, liabilities or engagements in respect of which the lien
exists.
Any dividend or other moneys payable in cash on or in respect of
a share may be paid by check or warrant sent through the post
addressed to the registered address of the shareholder entitled,
or in the case of joint holders, to the registered address of
the person whose name stands first in our register of members in
respect of the joint holding, or to such person at such address
as such shareholder may in writing direct or may be sent by
remittance or telegraphic transfer to the bank account of the
holder at his bank account as may be notified in writing to us.
Every check or warrant or remittance or telegraphic transfer so
sent shall be made payable to the order of the person to whom it
is sent or, in the case of joint holders, to the order of the
holder whose name stands first on our register of members in
respect of such shares, and shall be sent at his or their risk
and the payment of any such check or warrant by the bank on
which it is drawn shall operate as a good discharge to us in
respect of the dividend or moneys represented thereby.
Any dividend unclaimed after a period of six years from the date
of declaration of such dividend may be forfeited by our board of
directors and if so, shall revert to us.
Voting
Rights
Subject to any rights or restrictions as to voting for the time
being attached to any class of shares and our Constitution, each
holder of our ordinary shares who is present in person or by
proxy at a meeting of shareholders shall have one vote on a show
of hands and on a poll, each holder of our ordinary shares who
is present in person or by proxy shall have one vote for every
ordinary share which he holds or represents. Voting at any
meeting of shareholders is by show of hands unless a poll is
demanded. A poll may be demanded by: (1) the chairman of
such meeting, (2) not less than 5 shareholders having
the right to vote at the meeting, (3) a shareholder or
shareholders representing not less than 10% of the total voting
rights of all shareholders having the right to vote at the
meeting, or (4) by a shareholder or shareholders holding
shares in the company that confer a right to vote at the meeting
and on which the aggregate amount paid up is not less than 10%
of the total amount paid up on all shares that confer that right.
An ordinary resolution to be passed by the shareholders requires
the affirmative vote of a simple majority of votes of those
shareholders entitled to vote and voting on the matter which is
the subject matter of the resolution, while a special resolution
is a resolution approved by a majority of 75% or, if a higher
majority is required by the Constitution, that higher majority,
of the votes of those shareholders entitled to vote and voting
on the question. A special resolution will be required for
matters such as amending our Constitution.
Transfer
of Ordinary Shares
Subject to the restrictions contained in our Constitution, as
applicable, any of our shareholders may transfer all or any of
his or her ordinary shares by an instrument of transfer in the
usual or common form or in a form prescribed by the Designated
Stock Exchange (as defined in our Constitution) or in any other
form approved by our board of directors.
Our board of directors may, in its absolute discretion, decline
to register any transfer of any ordinary share (not being a
fully paid up share) to a person of whom it does not approve, or
any transfer of any share issued under any share incentive
scheme for employees upon which a restriction on transfer
imposed thereby still subsists, or any transfer of shares upon
which our company has a lien. Our board of directors may also
decline to register any transfer of any ordinary share unless:
•
a fee of such maximum sum as the Designated Stock Exchange may
determine to be payable or such lesser sum as our board of
directors may from time to time require is paid to our company
in respect thereof;
•
the instrument of transfer is lodged at the registered office of
our company for the time being or at such other place (if any)
as our board of directors may appoint, accompanied by the
relevant share certificate(s) and such other evidence as our
board of directors may reasonably require to show the right of
the transferor to make the transfer (and, if the instrument of
transfer is executed by some other person on his behalf, the
authority of the person so to do); and
•
the instrument of transfer is in respect of only one class of
shares.
If our board of directors refuses to register a transfer of any
shares, they shall within 28 days after the date on which
the transfer was lodged with our company send to the transferor
and the transferee notice of the refusal as required by the
Mauritius Companies Act and the reasons for the refusal will be
given in the notice.
Liquidation
On a return of capital on winding up or otherwise (other than on
conversion, redemption or purchase of ordinary shares), assets
available for distribution among the holders of ordinary shares
shall be distributed among the holders of the ordinary shares on
a pro rata basis. If our assets available for distribution are
insufficient to repay all of the
paid-up
capital, the assets will be distributed so that the losses are
borne by our shareholders proportionately.
Redemption
of Shares
Subject to the provisions of the Mauritius Companies Act and
other applicable law, we may issue shares on terms that are
subject to redemption, at our option or at the option of the
holders, on such terms and in such manner, including out of
capital, as may be determined by our board of directors or by
ordinary resolution of the shareholders of our company.
Variations
of Rights of Shares
If at any time our share capital is divided into different
classes of shares, all or any of the special rights attached to
any class of shares may, subject to the provisions of the
Mauritius Companies Act, be varied with the sanction of a
special resolution passed at a meeting of the holders of the
shares of that class. Consequently, the rights of any class of
shares cannot be detrimentally altered without a majority of 75%
of the vote of all of the shares in that class. The rights
conferred upon the holders of the shares of any class issued
with preferred or other rights shall not, unless otherwise
expressly provided by the terms of issue of the shares of that
class, be deemed to be varied by the creation or issue of
further shares ranking pari passu with such existing
class of shares.
Meetings
of Shareholders
An annual shareholders’ meeting shall be convened by our
board of directors not more than once in each year and not later
than 6 months after our balance sheet date. Special
meetings of shareholders may be convened by our board of
directors or on the written request of shareholders holding
shares carrying together not less than 5% of the voting rights
entitled to be exercised on the issue. Subject to our
Constitution, advance notice of at least fourteen days is
required for the convening of our annual shareholders’
meeting and any special meeting of our shareholders. A quorum
for a shareholders meeting shall be present where the
shareholders or their proxies are present or have cast postal
votes, who are between them able to exercise not less than 33.3%
of the votes to be cast on the business to be transacted by the
meeting.
A shareholder may exercise the right to vote either by being
present in person, by proxy or postal vote. A proxy for a
shareholder may attend and be heard at a meeting of shareholders
as if the proxy were the shareholder. A proxy shall be appointed
by notice in writing signed by the shareholder, and the notice
shall state whether the appointment is for a particular meeting
or a specified term.
Inspection
of Books and Records
Under the Mauritius Companies Act, we are required to keep
available our certificate of incorporation, our Constitution,
our share register, the full names and residential addresses of
our directors, the registered office and address for service of
our company, copies of the instruments creating or evidencing
charges which are required to be registered under
section 127 of the Mauritius Companies Act, minutes of all
meetings and resolutions of shareholders, copies of written
communications to all shareholders or to all holders of a class
of shares during the preceding seven years (including financial
statements, and group financial statements), certificates given
by directors under the Mauritius Companies Act and the interests
register (if any) of our company for inspection by any
shareholder of our company or by a person authorized in writing
by a shareholder for the purpose, between the hours of
9.00 a.m. and 5.00 p.m. on each working day during the
inspection period at the place at which our records are kept in
Mauritius. A shareholder who wishes to inspect such records must
serve written notice on us of his intention to inspect the
records.
The term “inspection period” is defined in the
Mauritius Companies Act to mean the period commencing on the
third working day after the day on which notice of intention to
inspect is served on us by the person or shareholder concerned
and ending with the eighth working day after the day of service.
Changes
in Capital
We may from time to time by ordinary resolution:
•
increase the share capital by such sum, to be divided into
shares of such classes and amount, as the resolution shall
prescribe;
•
consolidate and divide all or any of our share capital into
shares of a larger amount than our existing shares;
•
sub-divide
our existing shares, or any of them, into shares of a smaller
amount; or
•
cancel any shares which, at the date of the passing of the
resolution, have not been taken or agreed to be taken by any
person, and diminish the amount of our share capital by the
amount of the shares so cancelled in accordance with the
Mauritius Companies Act.
We may by special resolution reduce our share capital or any
capital redemption reserve in any manner permitted by law.
Our company may, subject to and in accordance with the Mauritius
Companies Act, purchase or otherwise acquire its own shares, on
such terms and in such manner as our board of directors may from
time to time think fit. Any share that is so purchased or
acquired by our company shall, unless held as treasury shares in
accordance with the Mauritius Companies Act, be deemed to be
cancelled immediately on purchase or acquisition. On such
cancellation of a share, the rights and privileges attached to
that share shall expire, and the number of issued shares of our
company shall be diminished by the number of such shares so
cancelled, and where any such cancelled shares was purchased or
acquired out of the capital of our company, the amount of the
share capital of our company shall be reduced accordingly. In
any other instance, our company may hold or deal with any such
share which is so purchased or acquired by it in such manner as
may be permitted by or in accordance with the Mauritius
Companies Act.
Directors’
Borrowing Powers
Our Constitution provides that our board of directors may
exercise all the powers of our company to borrow money and to
mortgage or charge all or any part of the undertaking, property
and assets (present and future) and uncalled capital of our
company and, subject to the Mauritius Companies Act, to issue
debentures, bonds and other securities, whether outright or as
collateral security for any debt, liability or obligation of our
company or of any third party.
Interested
Directors
The Mauritius Companies Act and our Constitution provide that a
director of our company shall, forthwith after becoming aware of
the fact that he is interested in a transaction or a proposed
transaction with our company, cause to be entered in the
interests register of our company and disclose to our board of
directors the nature and monetary value of that interest, or
where the monetary value of the director’s interest cannot
be quantified, the nature and extent of that interest. A general
notice entered in the interests register or disclosed to our
board of directors to the effect that a director is a
shareholder, director, officer or trustee of another named
company or other person and is to be regarded as interested in
any transaction which may, after the date of the entry or
disclosure, be entered into with that company or person, is a
sufficient disclosure of interest in relation to that
transaction. To the extent that our company is a reporting
issuer (as defined in section 86 of the Mauritius
Securities Act) the relevant disclosure requirements under the
Mauritius Securities Act may also be applicable. We have
obtained an exemption from the Mauritius Financial Services
Commission from the disclosure requirements applicable to
reporting issuers under the Mauritius Securities Act.
Under our Constitution, a director of our company may not vote
in respect of any contract or arrangement or any proposed
contract or arrangement in which he has any interest, directly
or indirectly.
Section 149 of the Mauritius Companies Act provides that a
transaction entered into by a company in which a director of the
company is interested may be avoided by the company at any time
before the expiration of 6 months after the transaction is
disclosed to all the shareholders (whether by means of the
company’s annual report or otherwise). However, a
transaction shall not be avoided where the company receives fair
value under it, and where a transaction is entered into by the
company in the ordinary course of its business and on usual
terms and conditions, the company shall be presumed to have
received a fair value under the transaction. Under the Mauritius
Companies Act, the avoidance of a transaction under
Section 149 of the Mauritius Companies Act will not affect
the title or interest of a person in or to property which that
person has acquired where the property was acquired
(a) from a person other than the company, (b) for
valuable consideration, and (c) without knowledge of the
circumstances of the transaction under which the person referred
to in paragraph (a) acquired the property from the company.
Notification
of Shareholdings by Directors and Substantial
Shareholders
Our Constitution provides that (a) each of our directors
shall, upon his appointment to our board of directors, give an
undertaking to our company that, for so long as he remains a
director of our company, he shall forthwith notify our company
secretary of the particulars of our shares beneficially owned by
him at the time of his appointment and of any change in such
particulars (including the circumstances of any such change),
and (b) each member of our company shall, upon becoming a
substantial shareholder of our company, give an undertaking to
our company that, for so long as he remains as a substantial
shareholder of our company, he shall notify our company
secretary of the particulars of our shares in which he has an
interest at the time of his becoming a substantial shareholder
or of any change in such particulars (including the
circumstances of any such change) within 48 hours of such
time or change (as the case may be), provided that he shall only
be required to give notice of a change in the percentage level
of his interests in the shares where there is a change of 1% or
more in the percentage level of his shareholding interest in the
relevant class of shares in our company. For this purpose, a
“substantial shareholder” means a person who holds by
himself or his nominee a share or an interest in a share in the
capital of our company which entitles him to exercise not less
than 5% of the aggregate voting power exercisable at a meeting
of our shareholders.
Category
1 Global Business Company
We are a public company incorporated under the laws of Mauritius
with limited liability and we hold a Category 1 Global Business
Licence issued by the Financial Services Commission in
Mauritius. “Limited liability” means that the
liability of each shareholder is limited to the amount unpaid by
the shareholder on the shares of the company. Mauritius law
distinguishes between domestic companies and global business
companies. Any company that is formed or registered in Mauritius
and which conducts business outside of Mauritius may apply for a
Category 1 Global Business Licence. The requirements for a
Category 1 Global Business Company are essentially the same
as for a domestic company except for some of the exemptions and
privileges listed below (which are not exhaustive):
•
a Category 1 Global Business Company does not have to file an
annual return of its shareholders with the Registrar of
Companies;
•
a Category 1 Global Business Company may issue no par value
shares; and
•
a Category 1 Global Business Company may register as a protected
cell company.
Following amendments to the Financial Services Act 2007 of
Mauritius pursuant to the Finance (Miscellaneous Provisions) Act
2010 in December 2010, Mauritius companies holding a Category 1
Global Business Licence, or GBC1, issued by the Financial
Services Commission in Mauritius are permitted to conduct
business both in and outside Mauritius (instead of outside
Mauritius only).
We are subject to reporting and other information and disclosure
requirements of the Mauritius Securities Act and any rules or
regulations made thereunder. However, we have obtained an
exemption from the Mauritius Financial Services Commission from
the disclosure requirements applicable to reporting issuers
under the Mauritius Securities Act.
The following is a summary of our share issuances during the
past three years. The following share numbers and prices do not
take into account the
20-for-one
share split we effected on July 22, 2010.
Initial Public Offering. In August 2010, we
issued 4,153,846 ordinary shares in connection with our initial
public offering.
Ordinary Shares. In June 2009, we issued 4,600
ordinary shares to Mr. Rajesh Magow pursuant to vested
options exercised by him at an exercise price of $14.84 per
share, and 480 ordinary shares to Mr. Amit Saberwal and 170
ordinary shares to Mr. Venkatesh Bhardwaj, pursuant to
vested options exercised by them at exercise prices of $9.75 per
share. In April 2010, we issued 1,000 ordinary shares to a
former employee pursuant to vested options exercised by him at
an exercise price of $39.53 per share. In May 2010, we issued 75
ordinary shares to another former employee pursuant to vested
options exercised by him at an exercise price of $107.88 per
share. In July 2010, we issued 2,899 ordinary shares to a former
non-executive director pursuant to vested options exercised by
him at an exercise price $0.01 per share. From August 2010,
various option holders of our company have exercised their
options and till March 31, 2011, we had issued 657,945
ordinary shares pursuant to such exercise of options.
Preferred Shares. In August 2007, we issued a
total of 148,315 Series B preferred shares to SAIF, Tiger
Global Private Investment Partners IV, L.P., Helion Venture, the
Sierra Ventures entities, Messrs Feroz Dewan, Lee J. Fixel and
Scott L. Shleifer at $101.14 per share.
In May 2008, we issued an aggregate of 139,045 Series C
preferred shares to SAIF, Tiger Global Private Investment
Partners V, L.P., Helion Venture, the Sierra Ventures
entities, Messrs Feroz Dewan and Lee J. Fixel at $107.88 per
share.
All of our preferred shares were converted into 12,324,460
ordinary shares upon the completion of our initial public
offering in August 2010. We effected a 20-for-one share split on
July 22, 2010.
Option Grants. We have granted options to
certain of our directors, officers and employees. As of
March 31, 2011, options in respect of an aggregate of
1,510,187 ordinary shares of our company were outstanding. See
the section “Management — Share Incentive
Plans — Equity Option Plan.”
Differences
in Corporate Law
The Mauritius Companies Act differs from laws applicable to
United States corporations and their shareholders. Set forth
below is a summary of the significant differences between the
provisions of the Mauritius Companies Act applicable to us and
the laws applicable to companies incorporated in the United
States and their shareholders.
Pursuant to the Mauritius Companies Act, subject to certain
exceptions prescribed in the Mauritius Companies Act, a
Mauritius company shall not enter into the following
transactions unless the transaction is approved by special
resolution or contingent on approval by special resolution of
the shareholders of the company:
(a)
the acquisition of, or an agreement to acquire, whether
contingent or not, assets the value of which is more than 75% of
the value of the company’s assets before the acquisition;
(b)
the disposition of, or an agreement to dispose of, whether
contingent or not, assets of the company the value of which is
more than 75% of the value of the company’s assets before
the disposition; or
(c)
a transaction that has or is likely to have the effect of the
company acquiring rights or interests or incurring obligations
or liabilities the value of which is more than 75% of the value
of the company’s assets before the transaction (provided
that this will not apply by reason only of the company giving,
or entering into an agreement to give, a charge secured over
assets of the company, the value of which is more than 75% of
the value of the company’s assets for the purpose of
securing the repayment of money or the performance of an
obligation).
Under the Mauritius Companies Act, a special resolution is a
resolution that is approved by a majority of 75% or, if a higher
majority is required by the constitution of a Mauritius company,
that higher majority, of the votes of those shareholders
entitled to vote and voting on the question.
Where a transaction involves the acquisition or disposition or
the acquiring of rights, interests or incurring obligations of,
in any case, more than half the value of the Mauritius
company’s assets, subject to certain exceptions prescribed
in the Mauritius Companies Act, the transaction has to be
approved by ordinary resolution or contingent on approval by
ordinary resolution, and a Mauritius company shall not enter
into the following transactions unless the transaction is
approved by ordinary resolution or contingent on approval by
ordinary resolution of the shareholders of the company:
(a)
the acquisition of, or an agreement to acquire, whether
contingent or not, assets the value of which is more than 50% of
the value of the company’s assets before the acquisition;
(b)
the disposition of, or an agreement to dispose of, whether
contingent or not, assets of the company the value of which is
more than 50% of the value of the company’s assets before
the disposition; or
(c)
a transaction that has or is likely to have the effect of the
company acquiring rights or interests or incurring obligations
or liabilities the value of which is more than 50% of the value
of the company’s assets before the transaction (provided
that this will not apply by reason only of the company giving,
or entering into an agreement to give, a charge secured over
assets of the company, the value of which is more than 50% of
the value of the company’s assets for the purpose of
securing the repayment of money or the performance of an
obligation).
Under the Mauritius Companies Act, an ordinary resolution is a
resolution that is approved by a simple majority of the votes of
those shareholders entitled to vote and voting on the matter
which is the subject of the resolution.
Mergers
and Similar Arrangements
A merger of two or more constituent companies under Mauritius
law requires an amalgamation proposal to be approved by the
directors of each constituent company and by special resolution
of the shareholders of each constituent company.
A merger between a Mauritius parent company and its Mauritius
subsidiary or subsidiaries does not require approval by a
resolution of shareholders. For this purpose a
“subsidiary” has the meaning assigned to it by the
Mauritius Companies Act.
Save in certain circumstances, a dissentient shareholder of a
Mauritius constituent company is entitled to payment of the fair
and reasonable price for his shares upon dissenting to a merger
or consolidation. The exercise of appraisal rights will normally
preclude the exercise of any other rights save for the right to
seek relief on the grounds that the merger or consolidation is
void or unlawful.
In addition, there are statutory provisions that facilitate the
reconstruction and amalgamation of companies where the Supreme
Court of Mauritius, on the application of the company or, with
leave of the court, any shareholder or creditor of the company,
may order that an arrangement or amalgamation or compromise
shall be binding on the company and on such other persons or
classes of persons as the court may specify and any such order
may be made on such terms and conditions as the court thinks fit.
Shareholders’
Suits
In principle, we will normally be the proper plaintiff, but
under the Mauritius Companies Act, the Mauritius courts may
grant leave to a shareholder (including a minority shareholder)
to bring a derivative action.
Indemnification
of Directors and Executive Officers and Limitation of
Liability
Under the Mauritius Companies Act, a company may indemnify a
director or employee of the company or a related company for any
costs incurred by him or the company in respect of any
proceedings (a) that relates to liability for any act or
omission in his capacity as a director or employee and
(b) in which judgment is given in his favor, in which he is
acquitted, which is discontinued, in which he is granted relief
under section 350 of the Mauritius Companies Act or where
proceedings are threatened and such threatened action is
abandoned or not pursued. The Mauritius Companies Act further
provides that a company may indemnify a director or employee of
the company or a related company in respect of
(a) liability to any person, other than the company or a
related
company, for any act or omission in his capacity as a director
or employee or (b) costs incurred by that director or
employee in defending or settling any claim or proceedings
relating to any such liability, save in respect of any criminal
liability or liability in respect of a breach (in the case of a
director) of the duty to exercise his powers honestly in good
faith in the best interests of the company. Our post-offering
Constitution will provide for indemnification, to the extent
permitted by Mauritius law, of our directors and officers for
costs, charges, losses, expenses and liabilities incurred or
sustained by them in the execution and discharge of their duties
in their respective offices or in relation thereto, except in
respect of their own fraud or dishonesty.
Directors’
Fiduciary Duties
Under Delaware corporate law, a director of a Delaware
corporation has a fiduciary duty to the corporation and its
shareholders. This duty has two components: the duty of care and
the duty of loyalty. The duty of care requires that a director
act in good faith, with the care that an ordinarily prudent
person would exercise under similar circumstances. Under this
duty, a director must inform himself of, and disclose to
shareholders, all material information reasonably available
regarding a significant transaction. The duty of loyalty
requires that a director act in a manner he or she reasonably
believes to be in the best interests of the corporation. He or
she must not use his or her corporate position for personal gain
or advantage. This duty prohibits self-dealing by a director and
mandates that the best interest of the corporation and its
shareholders take precedence over any interest possessed by a
director, officer or controlling shareholder and not shared by
the shareholders generally. In general, actions of a director
are presumed to have been made on an informed basis, in good
faith and in the honest belief that the action taken was in the
best interests of the corporation. However, this presumption may
be rebutted by evidence of a breach of one of the fiduciary
duties. Should such evidence be presented concerning a
transaction by a director, a director must prove the procedural
fairness of the transaction, and that the transaction was of
fair value to the corporation.
As a matter of Mauritius law, a director of a Mauritius company
is in the position of a fiduciary with respect to the company
and therefore it is considered that he owes duties to the
company that include a duty to act bona fide in the best
interests of the company, a duty not to make a profit based on
his or her position as director (unless the company permits him
to do so) and a duty not to put himself in a position where the
interests of the company conflict with his or her personal
interest or his or her duty to a third party. Under the
Mauritius Companies Act, our directors have a duty to our
company to exercise their powers honestly, in good faith and in
the best interests of our company. Our directors also have a
duty to our company to exercise the degree of care, diligence
and skill that a reasonably prudent person would exercise in
comparable circumstances. Where a director of a public company
also holds office as an executive, the director is required
under Mauritius law to exercise that degree of care, diligence
and skill which a reasonably prudent and competent executive in
that position would exercise. In fulfilling their duty of care
to our company, our directors must ensure compliance with the
Mauritius Companies Act and our Constitution, as amended from
time to time.
Neither Mauritian law nor our Constitution requires the majority
of our directors to be independent.
Shareholder
Action by Written Consent
Under the Delaware General Corporation Law, a corporation may
eliminate the right of shareholders to act by written consent by
amendment to its certificate of incorporation. Mauritius law
provides that, save for the annual meeting of a company,
shareholders may approve corporate matters by way of a unanimous
written resolution signed by or on behalf of each shareholder
who would have been entitled to vote on such matter at a general
meeting without a meeting being held or by resolution in writing
signed by not less than 75% or such other percentage as the
constitution of the company may require for passing a special
resolution, whichever is the greater, of the shareholders who
would be entitled to vote on that resolution at a meeting of
shareholders who together hold not less than 75% (or, if a
higher percentage is required by the constitution, that higher
percentage) of the votes entitled to be cast on that resolution.
Shareholder
Meetings
Shareholders of a Delaware corporation generally do not have the
right to call meetings of shareholders unless that right is
granted in the certificate of incorporation or bylaws. However,
if a corporation fails to hold its annual general meeting within
a period of 30 days after the date designated for the
annual meeting, or if no date has been
designated for a period of 13 months after its last annual
general meeting, the Delaware Court of Chancery may order a
meeting to be held upon the application of a shareholder.
Mauritius law and our Constitution allow our shareholders to
requisition a shareholders’ meeting. We are obliged by law
to call a shareholders’ annual meeting once every year.
Cumulative
Voting
Under the Delaware General Corporation Law, cumulative voting
for elections of directors is not permitted unless the
corporation’s certificate of incorporation specifically
provides for it. Cumulative voting potentially facilitates the
representation of minority shareholders on a board of directors
since it permits the minority shareholder to cast all the votes
to which the shareholder is entitled on a single director, which
increases the shareholder’s voting power with respect to
electing such director. As permitted under Mauritius law, our
Constitution does not provide for cumulative voting. As a
result, our shareholders are not afforded any less protections
or rights on this issue than shareholders of a Delaware
corporation.
Removal
of Directors
Under the Delaware General Corporation Law, a director of a
corporation with a classified board may be removed only for
cause with the approval of a majority of the outstanding shares
entitled to vote, unless the certificate of incorporation
provides otherwise. Under our Constitution, directors may be
removed by ordinary resolution of our shareholders.
Transactions
with Interested Shareholders
The Delaware General Corporation Law contains business
combination provision applicable to Delaware corporations
whereby, unless the corporation has specifically elected not to
be governed by such statute by amendment to its certificate of
incorporation, it is prohibited from engaging in certain
business combinations with an “interested shareholder”
for three years following the date that such person becomes an
interested shareholder. Subject to specified exceptions, an
interested shareholder is a person or a group that owns 15% or
more of the corporation’s outstanding voting stock
(including any rights to acquire stock pursuant to an option,
warrant, agreement, arrangement or understanding, or upon the
exercise of conversion or exchange rights, and stock with
respect to which the person has voting rights only), or is an
affiliate or associate of the corporation and was the owner of
15% of more of the corporation’s outstanding voting stock
at any time within the previous three years. This has the effect
of limiting the ability of a potential acquirer to make a
two-tiered bid for the target in which all shareholders would
not be treated equally. The statute does not apply if, among
other things, prior to the date on which such shareholder
becomes an interested shareholder, the board of directors
approves either the business combination or the transaction
which resulted in the person becoming an interested shareholder.
This encourages any potential acquirer of a Delaware corporation
to negotiate the terms of any acquisition transaction with the
target’s board of directors.
There is no such statutory provision under Mauritius law
restricting transactions between a company and its significant
shareholders.
Dissolution;
Winding Up
Under the Delaware General Corporation Law, unless the board of
directors approves the proposal to dissolve, dissolution must be
approved by all shareholders entitled to vote thereon. Only if
the dissolution is initiated by the board of directors may it be
approved by a simple majority of the corporation’s
outstanding shares. Delaware law allows a Delaware corporation
to include in its certificate of incorporation a supermajority
voting requirement in connection with dissolutions initiated by
the board.
Under Mauritius law, a company may be wound up by either an
order of the courts of Mauritius or by a special resolution of
its members or, if the company is unable to pay its debts, by a
special resolution of its members with leave of the court. The
court has authority to order winding up in a number of specified
circumstances including where it is, in the opinion of the
court, just and equitable to do so.
Under the Insolvency Act 2009 of Mauritius, our company may be
dissolved, liquidated or wound up by special resolution of our
shareholders.
Under the Delaware General Corporation Law, a corporation may
vary the rights of a class of shares with the approval of a
majority of the outstanding shares of such class, unless the
certificate of incorporation provides otherwise. Under Mauritius
law and our Constitution, if our share capital is divided into
more than one class of shares, we may vary the rights attached
to any class only with the sanction of a special resolution
passed at a general meeting of the holders of the shares of that
class.
Amendment
of Governing Documents
Under the Delaware General Corporation Law, a corporation’s
governing documents may be amended with the approval of a
majority of the outstanding shares entitled to vote, unless the
certificate of incorporation provides otherwise. As permitted by
Mauritius law, our Constitution may only be amended by special
resolution of our shareholders.
Rights
of Non-Resident or Foreign Shareholders
There are no limitations imposed by our Constitution on the
rights of non-resident or foreign shareholders to hold or
exercise voting rights on our shares.
Issuance
of preferred shares
Our Constitution allows for our company to issue preferred
shares. Our Constitution provides that the directors of our
company may offer, issue, grant options over or otherwise
dispose of shares of our company to such persons, at such times
and for such consideration and upon such terms and conditions as
the board of directors of our company may in its absolute
discretion determine (save that no shares shall be issued below
the par value of the share) and that any share in our company
may be issued with or have attached thereto such rights or
restrictions whether in regard to dividend, voting, return of
capital or otherwise as our company may determine or, if there
has not been any such determination or so far as the same does
not make specific provision, as the board of directors of our
company may determine.
Compulsory
Acquisition
The Financial Services Commission in Mauritius has recently
issued the Securities (Takeover) Rules 2010, or the Rules,
under the Financial Services Act 2007 of Mauritius and the
Mauritius Securities Act which may apply to takeover offers
where the offeree is a reporting issuer in Mauritius and to a
corporation holding a global business licence which is listed on
a relevant securities exchange. The Rules include provisions,
inter alia, for the making of a mandatory offer and compulsory
acquisition of shares. The Rules came into operation on
May 1, 2011.
Anti-takeover
provisions
Mauritius law does not prevent Mauritius companies from adopting
a wide range of defensive measures, such as staggered boards,
issue of preferred shares, adoption of poison pill shareholder
rights plans and provisions that restrict the rights of
shareholders to call meetings. Our Constitution includes the
following provisions which may be regarded as defensive
measures: (i) a staggered board of directors, (ii) the
ability to issue preferred shares, (iii) granting directors
the absolute discretion to decline to register a transfer of any
shares (other than a fully paid share), and (iv) requiring
that amendments to the Constitution be approved by a special
resolution of the shareholders of our company.
Registration
Rights
Pursuant to a shareholders agreement dated as of July 16,2010, by and among our company, Mr. Deep Kalra,
Mr. Keyur Joshi and Mr. Sachin Bhatia, SAIF, Travogue,
Helion Venture, the Sierra Ventures entities, Tiger Global,
Mr. Lee Fixel, Mr. Feroz Dewan, and Mr. Scott
Shleifer (collectively referred to as the
“Shareholders”), we have granted certain registration
rights to certain holders of our Registrable Shares, as
described below. The term “Registrable Shares,” as
defined in the abovementioned shareholders agreement, means:
(i)
any ordinary shares held by any of the Shareholders or the
employees/management of our company or its subsidiaries; and
any other ordinary shares of our company issued in respect of
the ordinary shares described in paragraph (i) above
pursuant to stock splits, stock dividends, reclassifications,
recapitalizations or similar events;
provided that ordinary shares that are Registrable Shares shall
cease to be Registrable Shares (a) upon any sale pursuant
to a registration statement or Rule 144 under the
Securities Act, (b) with respect to a Shareholder, when
such Shareholder is eligible to sell, transfer or otherwise
convey all of such Shareholder’s Registrable Shares without
restriction pursuant to applicable law or (c) upon any sale
in any manner to a person or entity which is not entitled to the
rights provided by the shareholders agreement.
Subject to the terms of the shareholders agreement and
lock-up
agreements described in this prospectus, at any time or from
time to time after February 14, 2011, one or more of the
Shareholders may request that our company effect a registration
under the Securities Act of all or any part of the Registrable
Shares owned by the Shareholders, provided that (i) the
Registrable Shares to be so registered have a proposed aggregate
offering price net of underwriting commissions, if any, of at
least $5,000,000 in the aggregate, and (ii) our company
shall not be required to effect more than two registrations
requested in this manner in any 12 month period.
At any time after our company becomes eligible to file a
registration statement on
Form F-3
(or any similar or successor form for which our company then
qualifies relating to secondary offerings), one or more of the
Shareholders will have the right to require our company to
effect the registration on
Form F-3
(or any similar or successor form for which our Company then
qualifies) of all or any portion of the Registrable Shares held
by the Shareholders, provided that (i) our company shall
not be required to effect any registration of Registrable Shares
unless such Registrable Shares have a proposed aggregate
offering price net of underwriting commissions (if any) of at
least $5,000,000 in the aggregate, and (ii) our company
shall not be required to effect more than two registrations
requested in this manner in any 12 month period.
In each case, no Shareholder may make more than one request for
registration in any six month period.
Whenever our company proposes to file a registration statement
including, but not limited to, registration statements relating
to secondary offerings of securities of our company (but
excluding registration statements relating to the paragraphs
above and relating to employee benefit plans or with respect to
corporate reorganizations) at any time and from time to time,
our company will, at least 30 days prior to such filing,
give written notice to all Shareholders of its intention to do
so and, upon the written request of any Shareholder(s) given
within 20 days after our company provides such notice, our
company will use its reasonable efforts to cause all Registrable
Shares that our company has been requested by such
Shareholder(s) to register or to be registered under the
Securities Act to the extent necessary to permit their sale or
other disposition in accordance with the intended methods of
distribution specified in the request of such Shareholder(s),
provided that our company shall have the right to postpone or
withdraw any such registration effected without obligation to
any Shareholder.
We will pay all Registration Expenses (as defined below) of all
registrations under the shareholders agreement, subject to
certain provisos set out in the shareholders agreement. For this
purpose, the term “Registration Expenses” means all
expenses incurred by our company in complying with the
shareholders agreement, including (without limitation) all
registration and filing fees, exchange listing fees, printing
expenses, road show expenses, fees and disbursements of counsel
for our company, the reasonable fees and expenses of one
(1) special counsel selected by the selling Shareholders to
represent the selling Shareholders, state Blue Sky fees and
expenses (if any), fees and expenses of our company’s
independent auditors and the expense of any special audits
incidental to or required by any such registration, but
excluding underwriting discounts, selling commissions and the
fees and expenses of selling Shareholders’ own counsel
(other than the counsel selected to represent all the selling
Shareholders).
We cannot assure you that a significant public market for the
ordinary shares will be sustained after this offering. Future
sales of substantial amounts of our ordinary shares in the
public markets after this offering, or the perception that such
sales may occur, could adversely affect market prices prevailing
from time to time. As described below, only a limited number of
our ordinary shares currently outstanding will be available for
sale immediately after this offering due to contractual and
legal restrictions on resale. Nevertheless, after these
restrictions lapse, future sales of substantial amounts of our
ordinary shares in the public market in the United States,
including ordinary shares issued upon exercise of outstanding
options or warranty, or the possibility of such sales, could
negatively affect the market price in the United States of our
ordinary shares and our ability to raise equity capital in the
future.
Upon the completion of this offering, we will have 36,601,272
outstanding ordinary shares, assuming no exercise of the
underwriters’ option to purchase additional ordinary
shares. Of that amount, 26,584,407 ordinary shares will be held
by our directors, executive officers and principal shareholders,
some of whom may be our “affiliates” as that term is
defined in Rule 144 under the Securities Act. As defined in
Rule 144, an “affiliate” of an issuer is a person
that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with,
the issuer.
All of the ordinary shares sold in the offering will be freely
transferable in the United States by persons other than our
“affiliates” without restriction or further
registration under the Securities Act. Ordinary shares purchased
by one of our “affiliates” may not be resold, except
pursuant to an effective registration statement or an exemption
from registration, including an exemption under Rule 144
under the Securities Act described below.
The above mentioned 26,584,407 ordinary shares which will be
held by directors, executive officers and principal shareholders
are, and those ordinary shares issuable upon exercise of options
and outstanding following the completion of this offering will
be, “restricted securities” as that term is defined in
Rule 144 under the Securities Act. These restricted
securities may be sold in the United States only if they are
registered or if they qualify for an exemption from registration
under Rule 144 or Rule 701 under the Securities Act.
These rules are described below.
Lock-Up
Agreements
We, the selling shareholders and Tiger Global, one of our
shareholders, have agreed that, without the prior written
consent of the representatives on behalf of the underwriters, we
and they will not, during the period ending 90 days after
the date of this prospectus:
•
offer, pledge, announce the intention to sell, contract to sell,
sell any option or contract to purchase, purchase any option or
contract to sell, grant or exercise any option, right or warrant
to purchase, lend or otherwise transfer or dispose of directly
or indirectly, any shares or any securities convertible into or
exercisable or exchangeable for shares; or
•
enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences
of ownership of the shares,
whether any such transaction described above is to be settled by
delivery of shares or such other securities, in cash or
otherwise, or file or cause to be filed any registration
statement relating to the offering of, or, in the case of each
shareholder, make any demand for or exercise any registration
right in respect of, any shares or any securities convertible
into or exercisable or exchangeable for shares.
The restrictions described in the preceding paragraph do not
apply to:
•
the sale of shares to the underwriters;
•
the issuance by us of shares, effective upon the completion of
this offering, upon the exercise of options or the conversion of
securities outstanding on the date of this prospectus;
•
the grant by us of share options under our share option plan,
provided that each such grant shall be subject to, and each such
grantee shall be bound by, the restrictions described above and
the aggregate number of shares
underlying such options shall not exceed 1.5% of our shares
outstanding immediately after the completion of this
offering; or
•
issuances by us of up to 2.5% of our shares outstanding
immediately after the completion of this offering (whether in
the form of our ordinary shares or securities convertible or
exchangeable into our ordinary shares) from time to time in
connection with any acquisition or merger with another company
or an acquisition of assets related to a business from another
person or entity.
In addition, in the case of each provider of a
lock-up
agreement other than our company, the restrictions described
above do not apply to:
•
transactions relating to shares acquired in open market
transactions after the completion of this offering;
•
the exercise of share options outstanding on the date of this
prospectus, provided that shares issued upon such exercise shall
be subject to the restrictions described above; or
•
distributions by such person of shares to limited partners or
general partners of such person, provided that such distributee
agrees to be bound by the restrictions described above.
In addition, in the case of Tiger Global, the restrictions
described above do not apply to the transactions relating to
shares acquired in this offering.
The 90-day
lock-up
period is subject to adjustment under certain circumstances. If
(1) during the last 17 days of the
90-day
lock-up
period, we issue an earnings release or announce material news
or a material event; or (2) prior to the expiration of the
90-day
lock-up
period, we announce that we will release earnings results during
the 16-day
period beginning on the last day of the
90-day
lock-up, the
lock-up will
continue to apply until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
announcement of the material news or material event, as
applicable; provided that in the case of clause (2) above,
if no earnings results are released during the
16-day
period, the
lock-up will
terminate on the last day of the
16-day
period.
The underwriters do not have any agreements or understandings,
tacit or explicit, or any present intent to release the
lock-ups
early.
Immediately following the completion of this offering,
22,571,158 ordinary shares representing approximately 61.7% of
our then outstanding ordinary shares, or 22,009,803 ordinary
shares representing approximately 59.8% if the underwriters
exercise their option to purchase additional ordinary shares in
full, will be subject to lock-up restrictions as described above.
Rule 144
In general, under Rule 144 under the Securities Act as
currently in effect, beginning 90 days after the date of
this prospectus, a person who is not deemed to have been our
affiliate at any time during the three months preceding a sale
and who has beneficially owned “restricted securities”
within the meaning of Rule 144 for more than six months
would be entitled to sell an unlimited number of those shares,
subject only to the availability of current public information
about us. A non-affiliate who has beneficially owned
“restricted securities” for at least one year from the
later of the date these shares were acquired from us or from our
affiliate would be entitled to freely sell those shares.
A person who is deemed to be an affiliate of ours and who has
beneficially owned “restricted securities” for at
least six months would be entitled to sell, within any
three-month period, a number of shares that is not more than the
greater of:
•
1.0% of the number of our ordinary shares then outstanding,
which will equal approximately 366,013 ordinary shares
immediately after this offering; or
•
the average weekly reported trading volume of our ordinary
shares on the Nasdaq Global Market during the four calendar
weeks proceeding the date on which a notice of the sale on
Form 144 is filed with the SEC by such person.
Sales under Rule 144 by persons who are deemed to be our
affiliates are also subject to
manner-of-sale
provisions, notice requirements and the availability of current
public information about us.
In addition, in each case, these shares would remain subject to
lock-up
arrangements and would only become eligible for sale when the
lock-up
period expires.
Rule 701
Beginning 90 days after the date of this prospectus,
persons who acquired ordinary shares under a written
compensatory plan or contract may be entitled to sell such
shares in reliance on Rule 701 under the Securities Act.
Rule 701 permits affiliates to sell their
Rule 701 shares under Rule 144 without complying
with the holding period requirements of Rule 144.
Rule 701 further provides that non-affiliates may sell
these shares in reliance on Rule 144 without complying with
the current information or six-month holding period
requirements. However, the Rule 701 shares would
remain subject to
lock-up
arrangements and would only become eligible for sale when the
lock-up
period expires.
Registration
Rights
Certain holders of our ordinary shares are entitled to request
that we register their shares under the Securities Act,
following the expiration of the
lock-up
agreements described above. See “Description of Share
Capital — Registration Rights.”
The following discussion of the material Mauritius and US
federal income tax consequences of an investment in our ordinary
shares is based upon laws and relevant interpretations thereof
in effect as of the date of this prospectus, all of which are
subject to change. This discussion does not deal with all
possible tax consequences relating to an investment in our
ordinary shares, such as the tax consequences under state,
local, non-US and non- Mauritian tax laws. To the extent that
the discussion relates to matters of Mauritius tax law, it
represents the opinion of Conyers Dill & Pearman
(Mauritius) Limited, our special Mauritian counsel. To the
extent that the discussion relates to matters of US federal
income tax law (not including any of our expectations), and
subject to the qualifications herein, it represents the opinion
of Latham & Watkins LLP, our special US counsel.
Mauritius
Taxation
Our company holds a valid Category 1 Global Business Licence
issued by the Financial Services Commission in Mauritius, a
valid Tax Residence Certificate issued by the Mauritius Revenue
Authority in connection with the Agreement for the Avoidance of
Double Taxation signed between Mauritius and India, and a valid
Tax Residence Certificate issued by the Mauritius Revenue
Authority in connection with the Agreement for the Avoidance of
Double Taxation signed between Mauritius and Singapore. Our
company is tax resident in Mauritius.
The Income Tax Act 1995 of Mauritius imposes a tax in Mauritius
on the chargeable income of our company at the rate of 15%.
However, under the Income Tax (Foreign Tax Credit) Regulations
1996 of Mauritius, subject to the Income Tax Act 1995 and the
regulations of the Income Tax (Foreign Tax Credit) Regulations
1996, credit is allowed for foreign tax on the foreign source
income of a resident of Mauritius against Mauritius tax computed
by reference to the same income, and where credit is allowed
against Mauritius tax chargeable in respect of any income, the
amount of Mauritius tax so chargeable shall be reduced by the
amount of the credit. Under the Income Tax (Foreign Tax Credit)
Regulations 1996, “foreign source income” means income
which is not derived from Mauritius and includes in the case of
a corporation holding a Category 1 Global Business Licence under
the Financial Services Act 2007 of Mauritius, income derived in
the course of a global business. Subject to the provisions of
the Income Tax (Foreign Tax Credit) Regulations 1996, no credit
is allowed in respect of foreign tax unless written evidence is
presented to the Mauritius Revenue Authority showing the amount
of foreign tax which has been charged and for this purpose,
“written evidence” includes a receipt of the relevant
authorities of the foreign country for the foreign tax or any
other evidence that the foreign tax has been deducted or paid to
the relevant authorities of that country. However, pursuant to
regulation 8 of the Income Tax (Foreign Tax Credit)
Regulations 1996, if written evidence is not presented to the
Mauritius Revenue Authority showing the amount of foreign tax
charged on our foreign source income, the amount of foreign tax
shall nevertheless be conclusively presumed to be equal to 80%
of the Mauritius tax chargeable with respect to that income and
in such circumstance, the effective tax rate in Mauritius on our
chargeable income would be 3%.
Following amendments to the Financial Services Act 2007 of
Mauritius pursuant to the Finance (Miscellaneous Provisions) Act
2010 in December 2010, Mauritius companies holding a Category 1
Global Business Licence, or GBC1, issued by the Financial
Services Commission in Mauritius are permitted to conduct
business both in and outside Mauritius (instead of outside
Mauritius only). The operations of a GBC1 company in
Mauritius will be subject to tax on chargeable income at the
rate of 15% in Mauritius.
Mauritius currently has no capital gains tax (other than on
sales of immovable property) and has no taxation in the nature
of a withholding tax on the payment of dividends, interest or
royalties applicable to us as a holder of a Category 1 Global
Business Licence issued by the Financial Services Commission in
Mauritius and where such dividends or interest are paid to a
non-resident of Mauritius not carrying on any business in
Mauritius and such royalties are paid to non-residents of
Mauritius. There is no estate duty, inheritance tax or gift tax
in Mauritius.
Under existing Mauritius laws:
•
no capital, transfer or registration duties are levied in
Mauritius on the issue, purchase or sale of our ordinary shares;
dividend payments or other distributions to holders of our
ordinary shares are exempt from Mauritius tax, and no
withholding will be required of our company on dividend payments
or other distributions; and
•
gains derived from the sale or disposition of our ordinary
shares will not be subject to Mauritius tax.
There are currently no exchange controls or currency exchange
restrictions in Mauritius.
Prospective investors are advised to consult their tax advisors
with respect to their particular tax situations and the tax
effects of an investment in our shares.
US
Federal Income Taxation
The following discussion describes certain material US federal
income tax consequences to US Holders (as defined below) under
current law of an investment in our ordinary shares. This
discussion applies only to US Holders that hold the ordinary
shares as capital assets (generally, property held for
investment) and that have the US dollar as their functional
currency. This discussion is based on the tax laws of the United
States in effect as of the date of this prospectus and on US
Treasury regulations in effect or, in some cases, proposed as of
the date of this prospectus, as well as judicial and
administrative interpretations thereof available on or before
such date. All of the foregoing authorities are subject to
change, which change could apply retroactively and could affect
the tax consequences described below.
The following discussion does not deal with the tax consequences
to any particular investor or to persons in special tax
situations such as:
•
banks and other financial institutions;
•
insurance companies;
•
regulated investment companies;
•
real estate investment trusts;
•
broker-dealers;
•
traders that elect to use a
mark-to-market
method of accounting;
•
US expatriates;
•
tax-exempt entities;
•
persons liable for alternative minimum tax;
•
persons holding ordinary shares as part of a straddle, hedging,
conversion or integrated transaction;
•
persons that actually or constructively own 10% or more of the
total combined voting power of all classes of our voting stock;
•
persons who acquired ordinary shares pursuant to the exercise of
any employee share option or otherwise as compensation; or
•
partnerships or other pass-through entities, or persons holding
ordinary shares through such entities.
The discussion also does not deal with the consequences of the
recently enacted Medicare tax on “net investment
income.”
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS
REGARDING THE APPLICATION OF THE US FEDERAL TAX RULES TO
THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE, LOCAL,
NON-US AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF OUR ORDINARY SHARES.
The discussion below of the US federal income tax consequences
to “US Holders” will apply to you if you are a
beneficial owner of our ordinary shares and you are, for US
federal income tax purposes:
•
an individual who is a citizen or resident of the United States;
•
a corporation (or other entity taxable as a corporation for US
federal income tax purposes) created or organized in the United
States or under the laws of the United States, any state thereof
or the District of Columbia;
•
an estate, the income of which is subject to US federal income
taxation regardless of its source; or
•
a trust that (1) is subject to the primary supervision of a
court within the United States and the control of one or more
United States persons for all substantial decisions or
(2) has a valid election in effect under applicable US
Treasury regulations to be treated as a United States person.
The tax treatment of a partner in a partnership (or other entity
taxable as a partnership for US federal income tax purposes)
that holds our ordinary shares will depend on the status of such
partner and the activities of such partnership. If you are a
partner in such partnership, you should consult your tax
advisors.
Dividends
and Other Distributions
Subject to the PFIC rules discussed below, the gross amount (in
US dollars) of any distribution we make to you with respect to
our ordinary shares (including the amount of any taxes withheld
therefrom) will generally be includible in your gross income as
dividend income on the date of receipt, but only to the extent
that such distribution is paid out of our current or accumulated
earnings and profits (as determined under US federal income tax
principles). Amounts not treated as dividend income for US
federal income tax purposes will constitute a return of capital
and will first be applied against and reduce your tax basis in
your ordinary shares, but not below zero. Distributions in
excess of our current and accumulated earnings and profits and
your tax basis in your ordinary shares will be treated as
capital gain realized on the sale or other disposition of the
ordinary shares. However, we do not intend to calculate our
earnings and profits under US federal income tax principles.
Therefore, you should expect that any distribution we make to
you will be reported as a dividend even if such distribution
would otherwise be treated as a non-taxable return of capital or
as capital gain under the rules described above. Any dividends
we pay will not be eligible for the dividends-received deduction
allowed to corporations in respect of dividends received from
other US corporations.
With respect to certain non-corporate US Holders, including
individual US Holders, for taxable years beginning before
January 1, 2013, dividends will be taxed at the lower
capital gains rate applicable to “qualified dividend
income,” provided that (1) either our ordinary shares
are readily tradable on an established securities market in the
United States, (2) we are neither a PFIC nor treated as
such with respect to you for the taxable year in which the
dividend is paid and the preceding taxable year and
(3) certain holding period requirements are met. Under US
Internal Revenue Service authority, common or ordinary shares
are considered for purposes of clause (1) above to be
readily tradable on an established securities market in the
United States if they are listed on the Nasdaq Global Market, as
our ordinary shares are. You should consult your tax advisors
regarding the availability of the lower tax rate applicable to
qualified dividend income for any dividends we pay with respect
to our ordinary shares, as well as the effect of any change in
applicable law after the date of this prospectus.
For foreign tax credit purposes, the limitation on foreign taxes
eligible for credit is calculated separately with respect to
specific classes of income. For this purpose, any dividends we
pay with respect to our ordinary shares will generally be
treated as foreign source income and constitute “passive
category income” but could, in the case of certain US
Holders, constitute “general category income.” If the
dividends are taxed as qualified dividend income (as discussed
above), the amount of the dividends taken into account for
purposes of calculating the foreign tax credit limitation will
be limited to the gross amount of the dividends, multiplied by
the reduced tax rate applicable to qualified dividend income and
divided by the highest tax rate normally applicable to
dividends. The rules relating to the determination of the
foreign tax credit are complex, and you should consult your tax
advisors regarding the availability of a foreign tax credit in
your particular circumstances.
Subject to the PFIC rules discussed below, you will recognize
taxable capital gain or loss on any sale, exchange or other
taxable disposition of an ordinary share equal to the difference
between the amount realized (in US dollars) for the ordinary
share and your adjusted tax basis (in US dollars) in the
ordinary share. If you are a non-corporate US Holder, including
an individual US Holder, that has held the ordinary share for
more than one year, you may be eligible for reduced tax rates.
The deductibility of capital losses is subject to limitations.
Any gain or loss that you recognize on a disposition of our
ordinary shares will generally be treated as US source income or
loss for foreign tax credit limitation purposes.
Passive
Foreign Investment Company
Based on, among other things, the current and anticipated
valuation of our assets and composition of our income and
assets, we do not expect to be a PFIC for US federal income tax
purposes for our current taxable year ending March 31,2012. However, the application of the PFIC rules is subject to
uncertainty in several respects. In addition, we must make a
separate determination after the close of each taxable year as
to whether we were a PFIC for that year. Accordingly, we cannot
assure you that we will not be a PFIC for our current taxable
year or any future taxable year. Because PFIC status is a
factual determination for each taxable year that cannot be made
until after the close of each such year, Latham &
Watkins LLP, our US counsel, expresses no opinion with respect
to our PFIC status or our expectations set forth in this
paragraph.
A non-US corporation will be a PFIC for any taxable year if
either:
•
at least 75% of its gross income for such year is passive
income; or
•
at least 50% of the value of its assets (based on an average of
the quarterly values of the assets) during such year is
attributable to assets that produce passive income or are held
for the production of passive income (the “asset
test”).
For this purpose, we will be treated as owning our proportionate
share of the assets and earning our proportionate share of the
income of any other corporation in which we own, directly or
indirectly, at least 25% (by value) of the stock.
Because the value of our assets for purposes of the asset test
will generally be determined in part by reference to the market
price of our ordinary shares, fluctuations in the market price
of the ordinary shares may cause us to become a PFIC. In
addition, changes in the composition of our income or assets may
cause us to become a PFIC. For this purpose, the composition of
our income and assets will depend in part on how, and how
quickly, we spend the cash raised in this offering. If we are a
PFIC for any taxable year during which you hold ordinary shares,
we will continue to be treated as a PFIC with respect to you for
all succeeding years during which you hold the ordinary shares,
unless we cease to be a PFIC and you make a “deemed
sale” election with respect to the ordinary shares. If such
election is made, you will be deemed to have sold the ordinary
shares you hold at their fair market value and any gain from
such deemed sale would be subject to the rules described in the
following two paragraphs. After the deemed sale election, so
long as we do not become a PFIC in a subsequent taxable year,
your ordinary shares with respect to which such election was
made will not be treated as shares in a PFIC.
For each taxable year that we are treated as a PFIC with respect
to you, you will be subject to special tax rules with respect to
any “excess distribution” you receive and any gain you
recognize from a sale or other disposition (including a pledge)
of the ordinary shares, unless you make a
“mark-to-market”
election as discussed below. Distributions you receive in a
taxable year that are greater than 125% of the average annual
distributions you received during the shorter of the three
preceding years or your holding period for the ordinary shares
will be treated as an excess distribution. Under these special
tax rules:
•
the excess distribution or recognized gain will be allocated
ratably over your holding period for the ordinary shares;
•
the amount allocated to the current taxable year and any taxable
years in your holding period prior to the first taxable year in
which we were a PFIC will be treated as ordinary income; and
the amount allocated to each other taxable year will be subject
to the highest tax rate in effect for individuals or
corporations, as applicable, for each such year and the interest
charge applicable to underpayments of tax will be imposed on the
resulting tax attributable to each such year.
The tax liability for amounts allocated to taxable years prior
to the year of disposition or excess distribution cannot be
offset by any net operating losses for such years, and gains
(but not losses) from a sale or other disposition of our
ordinary shares cannot be treated as capital, even if you hold
the ordinary shares as capital assets.
If we are treated as a PFIC with respect to you for any taxable
year, to the extent any of our subsidiaries are also PFICs or we
make direct or indirect equity investments in other entities
that are PFICs, you will be deemed to own shares in such
lower-tier PFICs that are directly or indirectly owned by
us in that proportion that the value of the ordinary shares you
own bears to the value of all of our ordinary shares, and you
may be subject to the rules described in the preceding two
paragraphs with respect to the shares of such
lower-tier PFICs that you would be deemed to own. You
should consult your tax advisors regarding the application of
the PFIC rules to any of our subsidiaries.
A US Holder of “marketable stock” (as defined below)
of a PFIC may make a
mark-to-market
election for such stock to elect out of the PFIC rules described
above regarding excess distributions and recognized gains. If
you make a
mark-to-market
election for our ordinary shares, you will include in gross
income for each year that we are a PFIC an amount equal to the
excess, if any, of the fair market value of the ordinary shares
you hold as of the close of your taxable year over your adjusted
tax basis in such ordinary shares. You will be allowed a
deduction for the excess, if any, of the adjusted tax basis of
the ordinary shares over their fair market value as of the close
of the taxable year. However, deductions will be allowable only
to the extent of any net
mark-to-market
gains on the ordinary shares included in your income for prior
taxable years. Amounts included in your gross income under a
mark-to-market
election, as well as any gain from the actual sale or other
disposition of the ordinary shares, will be treated as ordinary
income. Ordinary loss treatment will apply to the deductible
portion of any
mark-to-market
loss on the ordinary shares, as well as to any loss from the
actual sale or other disposition of the ordinary shares, to the
extent that the amount of such loss does not exceed the net
mark-to-market
gains previously included for such ordinary shares. Your tax
basis in the ordinary shares will be adjusted to reflect any
such income or loss amounts. If you make a
mark-to-market
election, the tax rules that apply to distributions by
corporations that are not PFICs would apply to any distributions
that we make, except that the lower tax rate applicable to
qualified dividend income (discussed above under
“— Dividends and Other Distributions”)
generally would not apply.
The
mark-to-market
election is available only for “marketable stock,”
which is stock that is traded in greater than de minimis
quantities on at least 15 days during each calendar quarter
(“regularly traded”) on a qualified exchange or other
market, as defined in applicable US Treasury regulations. Our
ordinary shares are listed on the Nasdaq Global Market, which is
a qualified exchange or other market for these purposes.
Consequently, if the ordinary shares are regularly traded and
you are a holder of the ordinary shares, we expect that the
mark-to-market
election would be available to you if we were to become a PFIC.
Because a
mark-to-market
election cannot be made for equity interests in any
lower-tier PFICs that we own, a US Holder may continue to
be subject to the PFIC rules described above regarding excess
distributions and recognized gains with respect to its indirect
interest in any investments held by us that are treated as an
equity interest in a PFIC for US federal income tax purposes.
You should consult your tax advisors as to the availability and
desirability of a
mark-to-market
election, as well as the impact of such election on interests in
any lower-tier PFICs.
Alternatively, a US person that owns stock of a PFIC generally
may make a “qualified electing fund” election with
respect to such corporation to elect out of the PFIC rules
described above regarding excess distributions and recognized
gains. A US person that makes a qualified electing fund election
with respect to a PFIC will generally include in gross income
for a taxable year such US person’s pro rata share of the
corporation’s earnings and profits for the taxable year.
However, the qualified electing fund election is available only
if the PFIC provides such US person with certain information
regarding its earnings and profits as required under applicable
US Treasury regulations. We currently do not intend to prepare
or provide the information that would enable you to make a
qualified electing fund election.
Under newly enacted legislation, unless otherwise provided by
the US Treasury, each US shareholder of a PFIC is required to
file an annual report containing such information as the US
Treasury may require. If we are or become a PFIC, you should
consult your tax advisor regarding any reporting requirements
that may apply to you.
You should consult your tax advisors regarding the application
of the PFIC rules to your investment in our ordinary shares and
the elections discussed above.
Information
Reporting and Backup Withholding
Dividend payments with respect to ordinary shares and proceeds
from the sale, exchange or other disposition of ordinary shares
will generally be subject to information reporting to the US
Internal Revenue Service and possible US backup withholding at a
current rate of 28%. Backup withholding will not apply, however,
to a US Holder that furnishes a correct taxpayer
identification number and makes any other required certification
on US Internal Revenue Service
Form W-9
or that is otherwise exempt from backup withholding. US Holders
that are exempt from backup withholding should still complete US
Internal Revenue Service
Form W-9
to avoid possible erroneous backup withholding. You should
consult your tax advisors regarding the application of the US
information reporting and backup withholding rules.
Backup withholding is not an additional tax. Amounts withheld as
backup withholding may be credited against your US federal
income tax liability, and you may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing an
appropriate claim for refund with the US Internal Revenue
Service and furnishing any required information in a timely
manner.
Additional
Reporting Requirements
For taxable years beginning after March 18, 2010, certain
US Holders who are individuals may be required to report
information relating to an interest in our ordinary shares,
subject to certain exceptions (including an exception for
ordinary shares held in accounts maintained by certain financial
institutions). US Holders should consult their tax advisors
regarding the effect, if any, of this legislation on their
ownership and disposition of the ordinary shares.
Under the terms and subject to the conditions contained in an
underwriting agreement dated the date of this prospectus, the
underwriters named below, for whom Morgan Stanley &
Co. International plc and Deutsche Bank Securities Inc. are
acting as the representatives, have severally agreed to
purchase, and we and the selling shareholders have agreed to
sell to them, severally, the number of ordinary shares indicated
below:
Number of
Name
Shares
Morgan Stanley & Co. International plc
3,146,400
Deutsche Bank Securities Inc.
1,311,000
Pacific Crest Securities LLC
681,720
Oppenheimer & Co. Inc.
104,880
Total
5,244,000
The underwriters are offering the ordinary shares subject to
their acceptance of the shares from us and the selling
shareholders and subject to prior sale. The underwriting
agreement provides that the obligation of the underwriters to
pay for and accept delivery of the ordinary shares offered by
this prospectus is subject to the approval of certain legal
matters by their counsel and to certain other conditions. The
underwriters are obligated to take and pay for all the ordinary
shares offered by this prospectus if any are taken. However, the
underwriters are not required to take or pay for the ordinary
shares covered by the underwriters’ over-allotment option
described below.
The underwriters initially propose to offer part of the ordinary
shares directly to the public at the public offering price set
forth on the cover page of this prospectus and part to certain
dealers at a price that represents a concession not in excess of
$0.468 per ordinary share. After the initial offering of the
ordinary shares, the offering price and other selling terms may
from time to time be varied by the representatives.
We and certain selling shareholders have granted to the
underwriters an option, exercisable for 30 days from the
date of this prospectus, to purchase up to an additional 217,500
ordinary shares from us and 569,100 ordinary shares from such
selling shareholders at the public offering price set forth on
the cover page of this prospectus, less the underwriting
discounts and commissions set forth on the same. The
underwriters may exercise such option solely for the purpose of
covering over-allotments, if any, made in connection with the
offering of the ordinary shares offered by this prospectus. To
the extent the option is exercised, each underwriter will become
obligated, subject to certain conditions, to purchase about the
same percentage of the additional ordinary shares as the number
listed next to the underwriter’s name in the preceding
table bears to the total number of ordinary shares listed next
to the names of all underwriters in the preceding table.
The following table sets forth the underwriting discounts and
commissions:
Per Share
Total
Without
With
Without
With
Over-allotment
Over-allotment
Over-allotment
Over-allotment
Underwriting discounts and commissions
$
0.78
$
0.78
$
4,090,320
$
4,703,868
Any offers and sales in the United States will be conducted by
broker-dealers registered with the SEC.
Morgan Stanley & Co. International plc will offer
ordinary shares in the United States through its registered
broker-dealer affiliate in the United States, Morgan
Stanley & Co. Incorporated.
Our ordinary shares are listed on the Nasdaq Global Market under
the symbol “MMYT.”
The ordinary shares being offered pursuant to this prospectus
include shares initially offered and sold outside the United
States pursuant to Regulation S that may be resold from
time to time in the United States in transactions that require
registration under the Securities Act.
The estimated expenses of this offering that are payable by us,
exclusive of the underwriting discounts and commissions, are
approximately $1.0 million, including registration fees of
approximately $24,200, estimated printing fees of approximately
$150,000, estimated legal fees and expenses of approximately
$650,000 and estimated accounting fees and expenses of
approximately $90,000. The underwriters have agreed to pay for
certain expenses in connection with this offering.
The underwriters have informed us that they do not intend sales
to discretionary accounts to exceed 5% of the total number of
securities offered by it.
Certain affiliates of one of our shareholders, Tiger Global,
have subscribed for, and were allocated by the underwriters,
1,650,000 shares in this offering at the public offering
price and on the same terms as the other shares being offered in
this offering. As a result, Tiger Global and its affiliates will
beneficially own 15.79% of our total outstanding shares
immediately upon the completion of this offering, assuming no
exercise of the over-allotment option by the underwriters. Any
such shares purchased in this offering will not be subject to
any lock-up
restrictions by the underwriters.
We, the selling shareholders and Tiger Global, one of our
shareholders, have agreed that, without the prior written
consent of the representatives on behalf of the underwriters, we
and they will not, during the period ending 90 days after
the date of this prospectus:
•
offer, pledge, announce the intention to sell, contract to sell,
sell any option or contract to purchase, purchase any option or
contract to sell, grant or exercise any option, right or warrant
to purchase, lend or otherwise transfer or dispose of directly
or indirectly, any shares or any securities convertible into or
exercisable or exchangeable for shares; or
•
enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences
of ownership of the shares,
whether any such transaction described above is to be settled by
delivery of shares or such other securities, in cash or
otherwise, or file or cause to be filed any registration
statement relating to the offering of, or, in the case of each
shareholder, make any demand for or exercise any registration
right in respect of, any shares or any securities convertible
into or exercisable or exchangeable for shares.
The restrictions described in the preceding paragraph do not
apply to:
•
the sale of shares to the underwriters;
•
the issuance by us of shares, effective upon the completion of
this offering, upon the exercise of options or the conversion of
securities outstanding on the date of this prospectus;
•
the grant by us of share options under our share option plan,
provided that each such grant shall be subject to, and each such
grantee shall be bound by, the restrictions described above and
the aggregate number of shares underlying such options shall not
exceed 1.5% of our shares outstanding immediately after the
completion of this offering; or
•
issuances by us of up to 2.5% of our shares outstanding
immediately after the completion of this offering (whether in
the form of our ordinary shares or securities convertible or
exchangeable into our ordinary shares) from time to time in
connection with any acquisition or merger with another company
or an acquisition of assets related to a business from another
person or entity.
In addition, in the case of each provider of a
lock-up
agreement other than our company, the restrictions described
above do not apply to:
•
transactions relating to shares acquired in open market
transactions after the completion of this offering;
•
the exercise of share options outstanding on the date of this
prospectus, provided that shares issued upon such exercise shall
be subject to the restrictions described above; or
•
distributions by such person of shares to limited partners or
general partners of such person, provided that such distributee
agrees to be bound by the restrictions described above.
In addition, in the case of Tiger Global, the restrictions
described above do not apply to the transactions relating to
shares acquired in this offering.
The 90-day
lock-up
period is subject to adjustment under certain circumstances. If
(1) during the last 17 days of the
90-day
lock-up
period, we issue an earnings release or announce material news
or a material event; or (2) prior to the expiration of the
90-day
lock-up
period, we announce that we will release earnings results during
the 16-day
period beginning on the last day of the
90-day
lock-up, the
lock-up will
continue to apply until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
announcement of the material news or material event, as
applicable; provided that in the case of clause (2) above,
if no earnings results are released during the
16-day
period, the
lock-up will
terminate on the last day of the
16-day
period.
A prospectus in electronic format may be made available on the
websites maintained by the underwriters or securities dealers.
The underwriters may allocate a number of the ordinary shares
for sale to their online brokerage account holders. Shares to be
sold pursuant to an Internet distribution will be allocated by
the underwriters on the same basis as other allocations. In
addition, the ordinary shares may be sold by the underwriters to
securities dealers who resell shares to online brokerage account
holders.
The underwriters reserve the right to withdraw, cancel or modify
the offering and to completely or partially reject any orders.
In order to facilitate the offering of ordinary shares, the
underwriters may engage in transactions that stabilize, maintain
or otherwise affect the price of the ordinary shares.
Specifically, the underwriters may sell more shares than they
are obligated to purchase under the underwriting agreement,
creating a short position. A short sale is covered if the short
position is no greater than the number of shares available for
purchase by the underwriters under the over-allotment option.
The underwriters can close out a covered short sale by
exercising the over-allotment option or purchasing shares in the
open market. In determining the source of shares to close out a
covered short sale, the underwriters will consider, among other
things, the open market price of shares compared to the price
available under the over-allotment option. The underwriters may
also sell shares in excess of the over-allotment option,
creating a naked short position. The underwriters must close out
any naked short position by purchasing shares in the open
market. A naked short position is more likely to be created if
the underwriters are concerned that there may be downward
pressure on the price of the shares in the open market after
pricing that could adversely affect investors who purchase in
this offering. As an additional means of facilitating this
offering, the underwriters may bid for, and purchase, shares in
the open market to stabilize the price of the shares. These
activities may raise or maintain the market price of the shares
above independent market levels or prevent or retard a decline
in the market price of the shares. The underwriters are not
required to engage in these activities and may end any of these
activities at any time.
From time to time, the underwriters and certain of their
affiliates have provided, and continue to provide, commercial
and investment banking services to us for which they have
received, and may in the future receive, customary compensation.
We and the selling shareholders have agreed to indemnify the
underwriters against certain liabilities, including liabilities
under the Securities Act.
The underwriters may be contacted at the following addresses:
Morgan Stanley & Co. International plc, 25 Cabot
Square, Canary Wharf, London E14 4QA, United Kingdom; Deutsche
Bank Securities Inc., 60 Wall Street, 4th Floor, New York,
NY10005, USA; Pacific Crest Securities LLC, SW Fifth Avenue,
42nd Floor, Portland, OR97204, USA; and Oppenheimer &
Co. Inc., 300 Madison Avenue, 4th Floor, New York,
NY10017, USA.
Selling
Restrictions for the Ordinary Shares
No action has been taken in any jurisdiction (except in the
United States) that would permit a public offering of the
ordinary shares, or the possession, circulation or distribution
of this prospectus or any other material relating to us or the
shares in any jurisdiction where action for that purpose is
required. Accordingly, the ordinary shares may not be offered or
sold, directly or indirectly, and neither this prospectus nor
any other offering material or advertisements in connection with
the ordinary shares may be distributed or published, in or from
any country or jurisdiction except in compliance with any
applicable rules and regulations of any such country or
jurisdiction.
Australia. This prospectus is not a formal
disclosure document and has not been lodged with the Australian
Securities and Investments Commission. It does not purport to
contain all information that an investor or their professional
advisors would expect to find in a product disclosure statement
for the purposes of Part 7.9 of the Corporations Act 2001
(Australia) in relation to the ordinary shares.
The ordinary shares are not being offered in Australia to
“retail clients” as defined in section 761G of
the Corporations Act 2001 (Australia). This offering is being
made in Australia solely to “wholesale clients” as
defined in section 761G of the Corporations Act 2001
(Australia) and as such no product disclosure statement in
relation to the ordinary shares has been prepared.
This prospectus does not constitute an offer in Australia other
than to wholesale clients. By submitting an application for our
ordinary shares, you represent and warrant to us that you are a
wholesale client. If any recipient is not a wholesale client, no
applications for our ordinary shares will be accepted from such
recipient. Any offer to a recipient in Australia, and any
agreement arising from acceptance of such offer, is personal and
may only be accepted by the recipient. In addition, by applying
for our ordinary shares you undertake to us that, for a period
of 12 months from the date of issue of the ordinary shares,
you will not transfer any interest in the ordinary shares to any
person in Australia other than a wholesale client.
European Economic Area. In relation to each
member state of the European Economic Area which has implemented
the Prospectus Directive (each, a “Relevant Member
State”), each underwriter represents and agrees that with
effect from and including the date on which the Prospectus
Directive is implemented in that Relevant Member State (the
“Relevant Implementation Date”) no offer may be made
to the public of any ordinary shares which are the subject of
the offering contemplated by this prospectus in that Relevant
Member State except that, with effect from and including the
Relevant Implementation Date, an offer to the public in that
Relevant Member State of such ordinary shares may be made at any
time under the following exemptions under the Prospectus
Directive, if they have been implemented in that Relevant Member
State:
(a)
to any legal entity which is a qualified investor as defined in
the Prospectus Directive;
(b)
by the underwriters to fewer than 100, or, if the Relevant
Member State has implemented the relevant provisions of the 2010
PD Amending Directive, 150, natural or legal persons (other than
qualified investors as defined in the Prospectus Directive), as
permitted under the Prospectus Directive, subject to obtaining
the prior consent of the underwriters for any such offer; or
(c)
in any other circumstances falling within Article 3(2) of
the Prospectus Directive,
provided that no such offer of ordinary shares shall require our
company or the underwriters to publish a prospectus pursuant to
Article 3 of the Prospectus Directive or supplement a
prospectus pursuant to Article 16 of the Prospectus
Directive.
For the purposes of this section, the expression an “offer
to the public” in relation to any ordinary shares in any
Relevant Member State means the communication in any form and by
any means of sufficient information on the terms of the offer
and any ordinary shares to be offered so as to enable an
investor to decide to purchase any ordinary shares, as the same
may be varied in that Relevant Member State by any measure
implementing the Prospectus Directive in that Relevant Member
State. The expression “Prospectus Directive” means
Directive 2003/71/EC (and amendments thereto, including the 2010
PD Amending Directive, to the extent implemented in the Relevant
Member State), and includes any relevant implementing measure in
each Relevant Member State, and the expression “2010 PD
Amending Directive” means Directive 2010/73/EU.
Hong Kong. Our ordinary shares may not be
offered or sold in Hong Kong, or offered or directed for sale
from outside Hong Kong to any person in Hong Kong, by means of
this prospectus or any document other than to “professional
investors” as defined in the Securities and Futures
Ordinance (Cap. 571, Laws of Hong Kong), or the SFO, and any
rules made thereunder, or in circumstances which do not
constitute an offer to the public within the meaning of the
Companies Ordinance (Cap. 32, Laws of Hong Kong). No
advertisement, invitation or document relating to our ordinary
shares may be issued or may be in the possession of any person
other than with respect to the securities which are or are
intended to be disposed of only to persons outside Hong Kong or
only to “professional investors” within the meaning of
the SFO.
India. This document has not been and will not
be registered as a prospectus or a statement in lieu of
prospectus with any registrar of companies in India. This
document has not been and will not be reviewed or approved by
any regulatory authority in India, including the Securities and
Exchange Board of India, any registrar of companies in India or
any stock exchange in India. This document and this offering of
ordinary shares are not and should not be construed as an
invitation, offer or sale of any securities to the public in
India. Other than in compliance with the private placement
exemptions under applicable laws and regulations in India,
including the Companies Act, 1956, as amended, our ordinary
shares have not been, and will not be, offered or sold to the
public or any member of the public in India. This document is
strictly personal to the recipient and neither this document nor
the offering of our ordinary shares is calculated to result,
directly or indirectly, in our ordinary shares becoming
available for subscription or purchase by persons other than
those receiving the invitation or offer. Each investor is deemed
to have acknowledged, represented and agreed that it is eligible
to invest in our company and our ordinary shares under
applicable laws, rules and regulations in India, without the
requirement to obtain any prior approval, and that it is not
prohibited or prevented under any law, rule or regulation in
India from acquiring, owning or selling our ordinary shares.
Ireland. The offering is being effected in the
Republic of Ireland by way of a private placement. Each
addressee of the offering in the Republic of Ireland shall be
deemed to have acknowledged, represented and agreed that the
offering is open for acceptance by the offeree only and that the
offeree will not pass a copy of the prospectus and related
documents on to any person other than the offeree’s
professional advisors and that any ordinary shares acquired by
the offeree will not have been acquired with a view to offer or
resale to persons in circumstances which may give rise to an
offer to the public. Our company is not authorised or supervised
by the Irish Financial Regulator.
Japan. Our ordinary shares have not been and
will not be registered under the Financial Instruments and
Exchange Law of Japan and our ordinary shares will not be
offered or sold, directly or indirectly, in Japan, or to, or for
the benefit of, any resident of Japan (which term as used herein
means any person resident in Japan, including any corporation or
other entity organized under the laws of Japan), or to others
for re-offering or resale, directly or indirectly, in Japan, or
to a resident of Japan, except pursuant to an exemption from the
registration requirements of, and otherwise in compliance with,
the Financial Instruments and Exchange Law and any other
applicable laws, regulations and ministerial guidelines of Japan.
Mauritius. Our ordinary shares may not be
offered, distributed or sold, directly or indirectly, in
Mauritius or to any resident of Mauritius, except as permitted
by applicable Mauritius law, including but not limited to the
Mauritius Securities Act. No offer or distribution of securities
will be made to the public in Mauritius.
Singapore. This prospectus has not been
registered as a prospectus with the Monetary Authority of
Singapore. Accordingly, this prospectus and any other document
or material in connection with the offer or sale, or invitation
for subscription or purchase, of our ordinary shares may not be
circulated or distributed, nor may our shares be offered or
sold, or be made the subject of an invitation for subscription
or purchase, whether directly or indirectly, to persons in
Singapore other than (1) to an institutional investor under
Section 274 of the Securities and Futures Act,
Chapter 289 of Singapore, or the SFA, (2) to a
relevant person or any person pursuant to Section 275(1A),
and in accordance with the conditions specified in
Section 275 of the SFA, or (3) otherwise pursuant to,
and in accordance with the conditions of, any other applicable
provision of the SFA, in each case subject to compliance with
conditions set forth in the SFA.
Where our ordinary shares are subscribed or purchased under
Section 275 by a relevant person which is: (a) a
corporation (which is not an accredited investor as defined in
Section 4A of the SFA) the sole business of which is to
hold investments and the entire share capital of which is owned
by one or more individuals, each of whom is an accredited
investor; or (b) a trust (where the trustee is not an
accredited investor) whose sole purpose is to hold investments
and each beneficiary of the trust is an individual who is an
accredited investor; shares, debentures and units of shares and
debentures of that corporation or the beneficiaries’ rights
and interest (howsoever described) in that trust shall not
transferred within six months after that corporation or that
trust has acquired the shares under Section 275 of the SFA,
except: (1) to an institutional investor (for corporations
under Section 274 of the SFA) or to a relevant person
defined in Section 275(2) of the SFA, or to any person
pursuant to an offer that is made on terms that such shares,
debentures and units of shares and debentures of that
corporation or such rights and interest in that trust are
acquired at a consideration of not less than S$200,000 (or its
equivalent in a foreign currency) for each
transaction, whether such amount is to be paid for in cash or by
exchange of securities or other assets, and further for
corporations, in accordance with the conditions, specified in
Section 275 of the SFA; (2) where no consideration is
or will be given for the transfer; or (3) where the
transfer is by operation of law.
Switzerland. This prospectus does not
constitute a public offering prospectus as that term is
understood pursuant to Article 652a of the Swiss Code of
Obligations. We have not applied for a listing of our ordinary
shares on the SWX Swiss Exchange and consequently the
information presented in this prospectus does not necessarily
comply with the information standards set out in the relevant
listing rules. Our ordinary shares may not be publicly offered
or sold in Switzerland. The shares may be offered or sold only
to a selected number of individual investors in Switzerland,
under circumstances which will not result in our ordinary shares
being a public offering within the meaning of Article 652a
of the Swiss Code of Obligations. Each copy of this prospectus
is addressed to a specifically named recipient and shall not be
passed to a third party.
United Arab Emirates. This prospectus is not
intended to constitute an offer, sale or delivery of the
ordinary shares or other securities under the laws of the United
Arab Emirates, or UAE. The shares have not been and will not be
registered under Federal Law No. 4 of 2000 Concerning the
Emirates Securities and Commodities Authority and the Emirates
Security and Commodity Exchange, or with the UAE Central Bank,
the Dubai Financial Market, the Abu Dhabi Securities Market or
with any other UAE exchange.
This offering, the ordinary shares and interests therein have
not been approved or licensed by the UAE Central Bank or any
other relevant licensing authorities in the UAE, and do not
constitute a public offer of securities in the UAE in accordance
with the Commercial Companies Law, Federal Law No. 8 of
1984 (as amended) or otherwise.
In relation to its use in the UAE, this prospectus is strictly
private and confidential and is being distributed to a limited
number of investors and must not be provided to any person other
than the original recipient, and may not be reproduced or used
for any other purpose. The interests in our ordinary shares may
not be offered or sold directly or indirectly to the public in
the UAE.
United Kingdom. This prospectus is for
distribution only to persons who (1) have professional
experience in matters relating to investments falling within
Article 19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005 (as amended, or the
Financial Promotion Order), (2) are persons falling within
Article 49(2)(a) to (d) (“high net worth companies,
unincorporated associations etc”) of the Financial
Promotion Order, (3) are outside the United Kingdom, or
(4) are persons to whom an invitation or inducement to
engage in investment activity (within the meaning of
section 21 of the Financial Services and Markets Act
2000) in connection with the issue or sale of any shares
may otherwise lawfully be communicated or caused to be
communicated (all such persons together being referred to as
“relevant persons”). This prospectus is directed only
at relevant persons and must not be acted on or relied on by
persons who are not relevant persons. Any investment or
investment activity to which this prospectus relates is
available only to relevant persons and will be engaged in only
with relevant persons.
We are being represented by Latham & Watkins LLP with
respect to legal matters of United States federal securities and
New York State laws. Certain legal matters of United States
federal securities and New York State laws in connection with
this offering will be passed upon for the underwriters by
Shearman & Sterling LLP. The validity of the ordinary
shares offered in this offering and legal matters as to
Mauritian law will be passed upon for us by Conyers
Dill & Pearman (Mauritius) Limited. Certain legal
matters as to Indian law will be passed upon for us by S&R
Associates and for the underwriters by Amarchand &
Mangaldas & Suresh A. Shroff & Co.
Latham & Watkins LLP may rely upon S&R Associates
with respect to certain matters governed by Indian law and upon
Conyers Dill & Pearman (Mauritius) Limited with
respect to matters governed by Mauritian law.
Shearman & Sterling LLP may rely upon
Amarchand & Mangaldas & Suresh A.
Shroff & Co. with respect to matters governed by
Indian law and upon Conyers Dill & Pearman (Mauritius)
Limited with respect to matters governed by Mauritian law.
The consolidated statement of financial position of MakeMyTrip
Limited as of March 31, 2010 and 2011, and the related
consolidated statements of comprehensive income (loss), changes
in equity (deficit) and cash flows for each of the years in the
three-year period ended March 31, 2011, have been included
herein in reliance upon the report of KPMG, independent
registered public accounting firm, appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and
auditing. The office of KPMG is located at Building 10,
8th Floor, Tower B DLF Cyber City, Phase II, Gurgaon
122002, Haryana, India.
We have filed with the SEC a registration statement on
Form F-1,
including relevant exhibits and schedules, under the Securities
Act with respect to the ordinary shares to be sold in this
offering. This prospectus, which constitutes a part of the
registration statement, does not contain all of the information
contained in the registration statement and the exhibits and
schedules in the registration statement. You should read the
registration statement and its exhibits and schedules for
further information with respect to us and our ordinary shares.
Statements contained in this prospectus regarding the contents
of any agreement, contract or other document referred to are not
necessarily complete and reference is made in each instance to
the copy of the contract or document filed as an exhibit to the
registration statement.
We are subject to the information requirements of the Exchange
Act applicable to foreign private issuers, which are different
from the requirements applicable to domestic US issuers. As a
foreign private issuer, we are required to file reports,
including annual reports on
Form 20-F,
reports on
Form 6-K
and other information with the SEC. We submit to the SEC
quarterly reports on
Form 6-K,
which include unaudited quarterly financial information, for the
first three quarters of each fiscal year, in addition to our
annual report on
Form 20-F,
which includes audited annual financial information. As we are a
foreign private issuer, our annual report on
Form 20-F
for fiscal year ended March 31, 2011 will be due six months
following the end of that year. However, for fiscal years ending
on or after December 15, 2011, we will be required to file
our annual report on
Form 20-F
within 120 days after the end of each fiscal year.
All information filed with the SEC can be inspected and copied
at the public reference facilities maintained by the SEC at
100 F Street, N.E., Washington, D.C. 20549. You
can request copies of these documents upon payment of a
duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
rooms. The SEC maintains a website at www.sec.govthat
contains reports, proxy and information statements and other
information regarding registrants that make electronic filings
through its Electronic Data Gathering, Analysis, and Retrieval,
or EDGAR, system. All our Exchange Act reports and other SEC
filings will be available through the EDGAR system.
As a foreign private issuer, we are exempt under the Exchange
Act from, among other things, the rules prescribing the
furnishing and content of proxy statements, and our executive
officers, directors and principal shareholders are exempt from
the reporting and “short-swing profit” recovery
provisions contained in Section 16 of the Exchange Act.
We have audited the accompanying consolidated statements of
financial position of MakeMyTrip Limited and its subsidiaries as
of March 31, 2010 and 2011, and the related consolidated
statements of comprehensive income (loss), changes in equity
(deficit), and cash flows for each of the years in the
three-year period ended March 31, 2011. These consolidated
financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of the Company and its subsidiaries as of
March 31, 2010 and 2011, and the results of their
operations and their cash flows for each of the years in the
three-year period ended March 31, 2011, in conformity with
International Financial Reporting Standards as issued by the
International Accounting Standards Board.
MakeMyTrip Limited (the “Company”) is a Company
domiciled in Mauritius. The address of the Company’s
registered office is Multiconsult Limited, Rogers House, 5
President John Kennedy Street, Port Louis, Mauritius. The
consolidated financial statements of the Company comprise the
Company and its subsidiaries (together referred to as the
“Group” and individually as “Group
entities”). The Company has two subsidiaries: MakeMyTrip
(India) Private Limited and MakeMyTrip.com Inc, incorporated in
India and the United States of America (U.S.) on April 13,2000 and June 30, 2000, respectively.
The Group is primarily engaged in the business of selling travel
products and solutions in India and the U.S. The Group
offers its customers the entire range of travel services
including ticketing, tours and packages and hotels.
On July 19, 2010, the shareholders approved resolutions
effecting certain amendments to the authorized and issued share
capital to:
•
effect a
20-for-one
split of the Company’s share capital on July 22, 2010
pursuant to which each ordinary share, Series A convertible
and redeemable preference share, Series B convertible and
redeemable preference share and Series C convertible and
redeemable preference share of the Company was subdivided into
20 shares at a par value of USD 0.0005 per share.
•
adjust on July 22, 2010, ordinary shares of a par value of
USD 0.01 each reserved under the MakeMyTrip.com Equity
Option Plan for delivery in connection with the grant or vesting
to ordinary shares of a par value of USD 0.0005 each, to
reflect the subdivision of the Company’s ordinary shares
approved by the shareholders of the Company.
All share and per share amounts presented in the consolidated
financial statements have been adjusted on a retroactive basis
to reflect the effect of share split and issuances.
On August 17, 2010, the Company completed the initial
public offering of its ordinary shares on National Association
of Securities Dealers Automated Quotation System (NASDAQ),
pursuant to which the Company issued and sold 3,846,154 ordinary
shares and certain of its existing shareholders (referred to as
the “Selling Shareholders”) sold 1,153,846 ordinary
shares at a price of USD 14 per share. The offering
resulted in gross proceeds of USD 53,846,156 and net
proceeds of USD 50,076,925 to the Company and gross
proceeds of USD 16,153,844 and net proceeds of
USD 15,023,075 to the Selling Shareholders, after deducting
underwriting discounts and commissions. The underwriters
exercised their option to purchase 307,692 additional ordinary
shares from the Company and 442,308 additional ordinary shares
from the Selling Shareholders at the initial offering price of
USD 14 per share to cover over-allotments, resulting in
additional gross proceeds of USD 4,307,688 and net proceeds
of USD 4,006,150 to the Company and additional gross
proceeds of USD 6,192,312 and net proceeds of
USD 5,758,850 to the Selling Shareholders, after deducting
underwriting discounts and commissions.
On August 17, 2010, 6,577,260 Series A convertible and
redeemable preference share of a par value USD 0.0005 each,
2,966,300 Series B convertible and redeemable preference
share of a par value USD 0.0005 each, and 2,780,900
Series C convertible and redeemable preference share of a
par value USD 0.0005 each were converted into 12,324,460
ordinary shares of a par value USD 0.0005 each by the
holders of such preference shares.
2)
BASIS OF
PREPARATION
(a) Statement
of Compliance
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board
(IASB). Accounting policies have been applied consistently to
all periods presented in these financial statements.
The consolidated financial statements were authorized for issue
by the Group’s Board of Directors in its meeting held on
May 11, 2011.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(b) Basis
of Measurement
The consolidated financial statements have been prepared on the
historical cost basis except for the following material items in
the statement of financial position:
•
derivative financial instruments are measured at fair value;
•
share-based payments are valued using the Black Scholes
valuation model at the date the options are granted;
•
long term interest free security deposits are measured at fair
value; and
•
the defined benefit asset is recognised as the net total of the
plan assets, plus unrecognised past service cost and
unrecognised actuarial losses, less unrecognised actuarial gains
and the present value of the defined benefit obligation.
(c) Functional
and Presentation Currency
These consolidated financial statements are presented in
U.S. dollar (USD).
A Company’s functional currency is the currency of the
primary economic environment in which an entity operates and is
normally the currency in which the entity primarily generates
and expends cash. USD is the functional currency of the Company
and its subsidiary, MakeMyTrip.com Inc as it is the currency of
the primary economic environment in which those entities
operate. MakeMyTrip (India) Private Limited primarily operates
its business in Indian Rupee (INR) and thus, INR has been
determined to be the functional currency of MakeMyTrip (India)
Private Limited.
(d) Use
of Estimates and Judgements
The preparation of consolidated financial statements in
conformity with IFRS require management to make judgments,
estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from
these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future
periods affected.
Information about significant areas of estimation/uncertainty in
applying accounting policies that have the most significant
effect on the amounts recognised in the consolidated financial
statements are as follows:
• Note 3(d) and 13
Property, plant and equipment
• Note 3(e) and 14
Useful life of intangible assets
• Note 3(h) and 27
Employee benefit plans
• Note 3(n) and 12
Income taxes
• Note 3(i) and 33
Provisions and contingent liabilities
• Note 3(c)(iv) and (v)
Valuation of derivatives
• Note 3(h)(v) and 28
Share based payment
Information about assumptions and estimation uncertainties that
have a significant risk of resulting in a material adjustment
within the next financial year are included in the following
notes:
Subsidiaries are entities controlled by the Group. Control
exists when the Group has the power to govern the financial and
operating policies of an entity so as to obtain benefits from
its activities. In assessing control, potential voting rights
that currently are exercisable are taken into account. The
financial statements of subsidiaries are included in the
consolidated financial statements from the date that control
commences until the dates that control ceases.
ii) Transactions
Eliminated on Consolidation
Intra-group balances and transactions, and any unrealized income
and expenses arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements.
(b) Foreign
Currency
i) Foreign
Currency Transactions
Transactions in foreign currencies are translated to the
respective functional currencies of Group entities at exchange
rates at the dates of the transactions. Monetary assets and
liabilities denominated in foreign currencies at the reporting
date are translated to the functional currency at the exchange
rate at that date. The foreign currency gain or loss on monetary
items is the difference between amortized cost in the functional
currency at the beginning of the period, adjusted for effective
interest and payments during the period, and the amortized cost
in foreign currency translated at the exchange rate at the end
of the reporting period. Foreign currency differences arising on
translation are recognized in profit or loss.
ii) Foreign
Operations
The assets and liabilities of foreign operations are translated
to USD at exchange rates at the reporting date. The income and
expenses of foreign operations are translated to USD at an
average exchange rate applicable during the period.
Foreign currency differences are recognized in other
comprehensive income as foreign currency translation reserve
(FCTR). However, if the operation is a non-wholly owned
subsidiary, than the relevant proportionate share of the
translation difference is allocated to non-controlling interest.
When a foreign operation is disposed of, in part or in full, the
relevant amount in the FCTR is transferred to profit or loss as
part of the profit or loss on disposal.
(c) Financial
Instruments
i) Non-Derivative
Financial assets
The Group initially recognizes loans and receivables and
deposits on the date that they are originated. All other
financial assets are recognized initially on the trade date at
which the Group becomes a party to the contractual provisions of
the instrument. The financial assets are initially measured at
fair value, net of transaction costs except for those financial
assets classified as at fair value through profit or loss which
are initially measured at fair value.
The Group derecognizes a financial asset when the contractual
rights to the cash flows from the asset expire, or it transfers
the rights to receive the contractual cash flows on the
financial asset in a transaction in which substantially all the
risks and rewards of ownership of the financial asset are
transferred. Any interest in transferred financial assets that
is created or retained by the Group is recognized as a separate
asset or liability.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Financial assets and liabilities are offset and the net amount
presented in the consolidated statement of financial position
when, and only when, the Group has a legal right to offset the
amounts and intends either to settle on a net basis or to
realize the asset and settle the liability simultaneously.
The Group has the following non-derivative financial assets
which are classified into the following specified categories:
‘trade and other receivables’, ‘available for
sale’ and ‘term deposits’. The classification
depends on the nature and purpose of the financial assets and is
determined at the time of initial recognition.
Trade and
other Receivables
Trade and other receivables are financial assets with fixed or
determinable payments that are not quoted in an active market.
Such assets are recognized initially at fair value plus any
directly attributable transaction costs. Subsequent to initial
recognition trade and other receivables are measured at
amortized cost using the effective interest method, less any
impairment losses.
Trade receivables are initially recognized at fair value which
primarily represents original invoice amount less any impairment
loss or an allowance for any uncollectible amounts. Provision is
made when there is objective evidence that the Group may not be
able to collect the trade receivable. Balances are written off
when recoverability is assessed as being remote.
Cash and cash equivalents comprise cash at bank and on hand and
short-term deposits with original maturities of three months or
less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
Available-for-sale
Financial Assets
Available-for-sale
financial assets are non-derivative financial assets that are
either designated as
available-for-sale
or are not classified in any of the other categories. Subsequent
to initial recognition, they are measured at fair value and
changes therein, other than impairment losses are recognized in
other comprehensive income and presented within equity in the
fair value reserve. When an investment is derecognized, the
cumulative gain or loss in other comprehensive income is
transferred to profit or loss.
Term
Deposits
Term deposits comprise deposits with banks, which have original
maturities of more than three months. Such assets are recognized
initially at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition term
deposits are measured at amortized cost using the effective
interest method, less any impairment losses.
ii) Non
Derivative Financial Liabilities
The Group recognizes financial liabilities initially on the
trade date at which the Group becomes a party to the contractual
provisions of the instrument.
The Group derecognizes a financial liability when its
contractual obligations are discharged or cancelled or expire.
Financial assets and liabilities are offset and the net amount
presented in the consolidated statement of financial position
when, and only when, the Group has a legal right to offset the
amounts and intends either to settle on a net basis or to
realize the asset and settle the liability simultaneously.
The Group has the following non-derivative financial
liabilities: loans and borrowings, bank overdraft, other current
liabilities and trade and other payables. Such financial
liabilities are recognized initially at fair value plus any
directly attributable transaction costs. Subsequent to initial
recognition these financial liabilities are measured at
amortized cost using the effective interest method.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Bank overdrafts that are repayable on demand and form an
integral part of the Group’s cash management are included
as a component of cash and cash equivalents for the purpose of
the consolidated statement of cash flows.
iii) Share
Capital
Ordinary
shares
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of ordinary shares are
recognized as a deduction from equity.
iv) Compound
Financial Instruments
Compound financial instruments issued by the Group comprise
convertible and redeemable preference shares with discretionary,
non cumulative dividend that can be converted to ordinary share
capital at the option of the holder. One preference share can be
converted into one ordinary share. This compound instrument also
has an adjustment clause that represents a price protection
feature that protects the original preference shareholders from
decline in the market value of the Group’s securities. This
clause may result in the entity issuing variable number of
preference shares on conversion hence, represents a liability.
Equity instruments are instruments that evidence a residual
interest in the assets of an entity after deducting all of its
liabilities. Therefore, when the initial carrying amount of a
compound financial instrument is allocated to its equity and
liability components, the equity component is assigned the
residual amount after deducting from the fair value of the
instrument as a whole the amount separately determined for the
liability component. The value of any derivative features (such
as conversion option) embedded in the compound financial
instrument other than the equity component is included in the
liability component. The sum of the carrying amounts assigned to
the liability and equity components on initial recognition is
always equal to the fair value that would be ascribed to the
instrument as a whole. No gain or loss arises from initially
recognizing the components of the instrument separately.
The fair value of the financial liability has been initially
recognized at the amount payable on demand, discounted from the
first date that the amount could be required to be paid.
The equity component is recognized initially at the difference
between the fair value of the compound financial instrument as a
whole and the fair value of the liability component (including
the embedded derivative liability). From the liability component
that includes the embedded derivative liability, the fair value
of the derivative liability is separated and the balance host
contract is accounted as a non-derivative liability. Any
directly attributable transaction costs are allocated to the
liability and equity components in proportion to their initial
carrying amounts. Subsequent to initial recognition, the
non-derivative liability component of a compound financial
instrument is measured at amortized cost using the effective
interest method. The equity component of a compound financial
instrument is not re-measured subsequent to initial recognition.
Separable embedded derivatives are recognized in accordance with
accounting policy as per note 3(c)(v).
Interest, dividends, losses and gains relating to the financial
liability are recognized in profit or loss. Distributions to the
equity holders are recognized in equity, net of any tax benefit.
v) Separable
Embedded Derivatives
The Group has an embedded derivative feature in its preference
share capital. Derivatives are recognized initially at fair
value; attributable transaction costs are recognized in profit
or loss as incurred. Fair value of the derivative is determined
on the inception using an appropriate valuation method.
Subsequent to initial recognition, derivatives are measured at
fair value, and changes therein are accounted in profit or loss.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(d) Property,
Plant and Equipment
i) Recognition
and Measurement
Items of property, plant and equipment are measured at cost less
accumulated depreciation and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the
acquisition of the asset. Purchased software that is integral to
the functionality of the related equipment is capitalized as
part of that equipment.
When parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items
(major components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and
equipment are determined by comparing the proceeds from disposal
with the carrying amount of property, plant and equipment, and
are recognized net within “other revenue/other operating
expenses” in profit or loss.
Advances paid towards the acquisition of property, plant and
equipment outstanding at each reporting date and the cost of
property, plant and equipment not ready to use before such date
are disclosed under property, plant and equipment.
ii) Subsequent
Costs
Subsequent expenditure is recognized as an increase in the
carrying amount of the asset when it is probable that future
economic benefits deriving from the cost incurred will flow to
the enterprise and the cost of the item can be reliably
determined. The carrying amount of the replaced part is
derecognized. The costs of the
day-to-day
servicing of property, plant and equipment are recognized in
profit or loss as incurred.
iii) Depreciation
Depreciation is calculated over the depreciable amount, which is
the cost of an asset or other amount substituted for cost, less
its residual value.
Depreciation is recognized in profit or loss on a straight-line
basis over the estimated useful lives for each component of
property, plant and equipment since this most closely reflects
the expected pattern of consumption of the future economic
benefits embodied in the asset. Leased assets where the group is
reasonably certain that it will obtain ownership by end of the
lease term are depreciated over the useful lives.
The estimated useful lives for the current and comparative
periods are as follows:
• Computers
5 years
• Furniture and fixtures
6 years
• Office equipments
7 years
• Motor vehicles
7 years
• Diesel generator sets
7 years
Leasehold improvements are depreciated over the lease term or
useful lives, whichever is shorter.
Depreciation methods, useful lives and residual values are
reviewed at each financial year end and adjusted as appropriate.
Website development costs incurred by the Group, having finite
useful lives, are measured at cost less accumulated amortization
and accumulated impairment losses. Cost includes expenses
incurred during the
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
application development stage. The costs related to planning and
post implementation phases of development are expensed as
incurred.
Expenditure on research activities are recognized in profit or
loss as incurred.
Development activities involve a plan or design for the
production of new or substantially improved products and
processes. Development expenditure is capitalized only if
development costs can be measured reliably, the product or
process is technically and commercially feasible, future
economic benefits are probable, and the Group intends to and has
sufficient resources to complete development and to use or sell
the asset.
Incidental operations are not necessary to bring an asset to the
condition necessary for it to be capable of operating in the
manner intended by management, the income and related expenses
of incidental operations are recognized immediately in profit or
loss, and included in their respective classifications of income
and expense.
ii) Other
Intangible Assets
Other intangible assets comprise software that are acquired by
the Group, which have finite useful lives, are measured at cost
less accumulated amortization and accumulated impairment losses.
Cost includes any directly attributable incidental expenses
necessary to make the assets ready for use.
iii) Subsequent
Expenditure
Subsequent expenditure is capitalized only when it increases the
future economic benefits embodied in the specific asset to which
it relates. All other expenditure, including expenditure on
internally generated goodwill and brands, is recognized in
profit or loss as incurred.
iv) Amortization
Amortization is calculated over the cost of the asset, or other
amount substituted for cost, less its residual value.
Amortization is recognized in profit or loss on a straight-line
basis over the estimated useful lives of intangible assets from
the date that they are available for use, since this most
closely reflects the expected pattern of consumption of the
future economic benefits embodied in the asset.
The estimated useful lives for the current and comparative
periods are as follows:
Amortization methods, useful lives and residual values are
reviewed at each financial year-end and adjusted as appropriate.
(f) Inventories
Inventories are measured at the lower of cost and net realizable
value. Net realizable value is the estimated selling price in
the ordinary course of business, less the estimated selling
expenses.
(g) Impairment
i) Financial
assets (Including Receivables)
A financial asset not carried at fair value through profit or
loss is assessed at each reporting date to determine whether
there is objective evidence that it is impaired. A financial
asset is impaired if objective evidence indicates that a loss
event has occurred after the initial recognition of the asset,
and that the loss event had a negative effect on the estimated
future cash flows of that asset that can be estimated reliably.
Objective evidence that financial assets are impaired can
include default or delinquency by a debtor, restructuring of an
amount due to the Group on terms that the Group would not
otherwise consider, indications that a debtor or issuer will
enter bankruptcy, the disappearance of an active market for a
security.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The Group considers evidence of impairment for receivables for
each specific asset. All individually significant receivables
are assessed for specific impairment.
An impairment loss in respect of a financial asset measured at
amortized cost is calculated as the difference between its
carrying amount and the present value of the estimated future
cash flows discounted at the asset’s original effective
interest rate. Losses are recognized in profit or loss and
reflected in an allowance account against receivables. Interest
on the impaired asset continues to be recognized through the
unwinding of the discount. When a subsequent event causes the
amount of impairment loss to decrease, the decrease in
impairment loss is reversed through profit or loss.
Impairment losses on
available-for-sale
investment securities are recognized by transferring the
cumulative loss that has been recognized in other comprehensive
income, and presented in the fair value reserve in equity, to
profit or loss. The cumulative loss that is removed from other
comprehensive income and recognized in profit or loss is the
difference between the acquisition cost, net of any principal
repayment and amortization, and the current fair value, less any
impairment loss previously recognized in profit or loss. Changes
in impairment provisions attributable to time value are
reflected as a component of interest income.
ii) Non-Financial
Assets
The carrying amounts of the Group’s non-financial assets,
primarily property, plant and equipment, website development
cost and software are reviewed at each reporting date to
determine whether there is any indication of impairment. If any
such indication exists, then the asset’s recoverable amount
is estimated.
The recoverable amount of an asset or cash-generating unit is
the greater of its value in use and its fair value less costs to
sell. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount
rate that reflects current market assumptions of the time value
of money and the risks specific to the asset. For the purpose of
impairment testing, assets that cannot be tested individually
are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of
assets (the “cash-generating unit”, or
“CGU”).
The Group’s corporate assets do not generate separate cash
inflows. If there is an indication that a corporate asset may be
impaired, then the recoverable amount is determined for the CGU
to which the corporate asset belongs.
An impairment loss is recognized if the carrying amount of an
asset or its CGU exceeds its estimated recoverable amount.
Impairment losses are recognized in profit or loss. Impairment
losses recognized in respect of CGUs will reduce the carrying
amounts of the other assets in the unit (group of units) on a
pro rata basis.
An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the
asset’s carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation or
amortization, if no impairment loss had been recognized.
(h) Employee
Benefit Plans
i) Defined
Contribution Plans
A defined contribution plan is a post-employment benefit plan
under which an entity pays fixed contributions into separate
entity and will have no legal or constructive obligation to pay
further amounts. Obligations for contributions to defined
contribution plans are recognized as a personnel expense in
profit or loss in the periods during which services are rendered
by employees. Prepaid contributions are recognized as an asset
to the extent that a cash refund or a reduction in future
payments is available.
ii) Defined
Benefit Plans
A defined benefit plan is a post-employment benefit plan other
than a defined contribution plan. The Group’s gratuity
scheme is a defined benefit plan.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The Group’s liability with regard to gratuity is based on
an actuarial valuation carried out as at September 30 and March
31 each year. Actuarial gains and losses are recognized in
statement of changes in equity. Gains or losses on the
curtailment or settlement of any defined benefit plan are
recognized when the curtailment or settlement occurs. All
expenses related to defined benefit plan are recognized in
personnel expenses in profit and loss.
The Group’s net obligation in respect of defined benefit
plan is calculated by estimating the amount of future benefit
that employees have earned in return for their service in the
current and prior periods; that benefit is discounted to
determine its present value. Any unrecognized past service costs
are deducted. The discount rate is based on the prevailing
market yields of Indian government securities as at the
reporting date that have maturity dates approximating the terms
of the Group’s obligations and that are denominated in the
same currency in which the benefits are expected to be paid. The
calculation is performed half yearly by a qualified actuary
using the projected unit credit method.
iii) Other
Long-term Employee Benefits
Benefits under the Group’s compensated absences constitute
other long term employee benefits.
The Group’s net obligation in respect of long-term employee
benefits is the amount of future benefit that employees have
earned in return for their service in the current and prior
periods; that benefit is discounted to determine its present
value, and the fair value of any related assets is deducted. The
discount rate is based on the prevailing market yields of Indian
government securities as at the reporting date that have
maturity dates approximating the terms of the Group’s
obligations. The calculation is performed using the projected
unit credit method. Any actuarial gains or losses are recognized
in profit or loss in the period in which they arise.
iv) Short-term
Employee Benefits
Short-term employee benefit obligations are measured on an
undiscounted basis and are expensed as the related service is
provided. A liability is recognized for the amount expected to
be paid under short-term cash bonus or profit-sharing plans if
the Group has a present legal or constructive obligation to pay
this amount as a result of past service provided by the
employee, and the obligation can be estimated reliably.
v) Share
Based Payment
The grant date fair value of share-based payment awards granted
to employees is recognized as a personnel expense, with a
corresponding increase in equity, over the period that the
employees unconditionally become entitled to the awards. The
amount recognized as an expense is adjusted to reflect the
number of awards for which the related service and non-market
vesting conditions are expected to be met, such that the amount
ultimately recognized as an expense is based on the number of
awards that do meet the related service and non-market
performance conditions at the vesting date. The increase in
equity recognized in connection with a share based payment
transaction is presented in the share based payment reserve, a
separate component in equity.
In respect of options modified, the Group includes the
incremental fair value of the options in the measurement of the
amounts recognized for services received from the employees. The
incremental fair value is the difference between the fair value
of the modified option and that of the original option both
estimated as at the date of the modification. If the
modification occurs during the vesting period or a modified
vesting period, the incremental fair value is recognized over
the period from the modification date until the date when the
modified equity instruments vest. This is in addition to the
amount based on the grant date fair value of the original equity
instruments. If the modification relates to options which are
fully vested, the incremental fair value of the modified options
is recognized immediately.
(i) Provisions
and Contingent Liabilities
A provision is recognized if, as a result of a past event, the
Group has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
current market assumptions of the time value of money and the
risks specific to the liability. The unwinding of discount is
recognized as finance cost.
The amount recognized as a provision is the best estimate of the
consideration required to settle the present obligation at
reporting date, taking into account the risks and uncertainties
surrounding the obligation.
When some or all of the economic benefits required to settle a
provision are expected to be recovered from a third party, the
receivable is recognized as an asset if it is virtually certain
that reimbursement will be received and the amount of the
receivable can be measured reliably.
Contingent liabilities are possible obligations that arise from
past events and whose existence will only be confirmed by the
occurrence or non-occurrence of one or more future events not
wholly within the control of the Group. Where it is not probable
that an outflow of economic benefits will be required, or the
amount cannot be estimated reliably, the obligation is disclosed
as a contingent liability, unless the probability of outflow of
economic benefits is remote.
(j) Revenue
The Group provides travel products and services to leisure and
corporate travelers in India and abroad. The revenue from
rendering these services is recognized in the income statement
at the time when significant risk and rewards are transferred to
the customer. This is generally the case: 1) on the date of
departure for tours and packages 2) date of check in to
hotel booking business and 3) on the issuance of the ticket
in the case of sale of airline tickets.
Income from the sale of airline tickets is recognized as an
agent on a net commission earned basis as the Group does not
assume any performance obligation post the confirmation of the
issuance of an airline ticket to the customer. Similarly, any
commission earned on hotel reservations booked is being
recognized on a net basis as an agent on the date of check in.
Incentives from airlines are recognized when the performance
obligations under the incentive schemes are achieved.
Income from tours and packages, including income on airline
tickets sold to customers as a part of tours and packages is
accounted on gross basis as the Group is determined to be the
primary obligor in the arrangement i.e., the risks and
responsibilities are taken by the Group including the
responsibility for delivery of services.
Income from other sources, primarily comprising advertising
revenue, income from sale of rail and bus tickets and fees for
facilitating website access to a travel insurance company are
being recognized as the services are being performed. Income
from the sale of rail and bus tickets is recognized as an agent
on a net commission earned basis as the Group does not assume
any performance obligation post the confirmation of the issuance
of the ticket to the customer.
Revenue is recognized net of cancellations, refunds, discounts
and taxes. In the event of cancellation of airline tickets,
revenue recognized in respect of commissions earned by our
company on such tickets is reversed and is net off from our
revenue earned during the fiscal period at the time the
cancellation is made by our customers. In addition, a liability
is recognized in respect of the refund due to our customers for
the gross amount charged to such customers net of cancellation
fees. The revenue from the sale of hotels and packages and hotel
reservations is recognized on the customer’s departure and
check-in dates, respectively. Cancellations, if any, do not
impact revenue recognition since revenue is recognized upon the
availing of services by the customer.
(k) Advertisement
and Business Promotion costs
Advertising and business promotion costs primarily comprise of
internet, television, radio and print media advertisement costs
as well as event driven promotion cost for Group’s products
and services. Such costs are the amount paid to or accrued
towards advertising agencies or direct service providers for
advertising on websites,
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
television, print formats, search engine marketing and any other
media. Advertising and business promotion costs are recognized
when incurred.
(l) Leasing
Arrangements as a Lessee
Accounting
for Finance Leases
On initial recognition, assets held under finance leases are
recorded as property, plant and equipment and the related
liability is recognized under borrowings. At inception of the
lease, finance leases are recorded at amounts equal to the fair
value of the leased asset or, if lower, the present value of the
minimum lease payments. Minimum lease payments under finance
leases are apportioned between the finance expense and the
reduction of the outstanding liability. Contingent lease
payments are accounted for by revising the minimum lease
payments over the remaining term of the lease when the lease
adjustment is confirmed.
The finance expense is allocated to each period during the lease
term so as to produce a constant periodic rate of interest on
the remaining balance of the liability.
Accounting
for Operating Leases
Payments made under operating leases are recognized as an
expense on a straight-line basis over the lease term. Lease
incentives received are recognized as a reduction of the lease
expense, over the term of the lease.
(m) Finance
Income and Expenses
Finance income comprises interest income on funds invested
(including
available-for-sale
financial assets), net gain on change in fair value of embedded
derivatives and gains on the disposal of
available-for-sale
financial assets. Interest income is recognized as it accrues in
profit or loss, using the effective interest method.
Finance expenses comprise interest expense on borrowings,
unwinding of the discount on provisions, net loss on change in
fair value of embedded derivatives, initial public offering
costs related to listing of existing shares and impairment
losses recognized on financial assets, including trade and other
receivables. Borrowing costs that are not directly attributable
to the acquisition, construction or production of a qualifying
asset are recognized in profit or loss using the effective
interest method.
Foreign currency gains and losses are reported on a net basis.
(n)
Income
Taxes
Income tax expense comprises current and deferred taxes. Current
and deferred tax expense is recognized in profit or loss except
to the extent that it relates to items recognized directly in
equity, in which case it is recognized in equity or in other
comprehensive income.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted
at the reporting date, and any adjustment to tax payable in
respect of previous years.
Deferred tax is recognized in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognized for the following
temporary differences: the initial recognition of assets or
liabilities in a transaction that is not a business combination
and that affects neither accounting nor taxable profit or loss,
and differences relating to investments in subsidiaries to the
extent that it is probable that they will not reverse in the
foreseeable future. Deferred tax is measured at the tax rates
that are expected to be applied to temporary differences when
they reverse, based on the laws that have been enacted or
substantively enacted by the reporting date. Deferred tax assets
and liabilities are offset if there is a legally enforceable
right to offset current tax liabilities and assets, and they
relate to income taxes levied by the same tax authority on the
same taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets on a net
basis or their tax assets and liabilities will be realized
simultaneously.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
A deferred tax asset is recognized for unused tax losses and
deductible temporary differences, to the extent that it is
probable that future taxable profits will be available against
which they can be utilized. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realized.
(o)
Earning
(Loss) Per Share
The Group presents basic and diluted earnings (loss) per share
(EPS) data for its ordinary shares. Basic EPS is calculated by
dividing the profit or loss attributable to ordinary
shareholders of the Company by the weighted average number of
ordinary shares outstanding during the period. Diluted EPS is
determined by adjusting the profit or loss attributable to
ordinary shareholders and the weighted average number of
ordinary shares outstanding adjusted for the effects of all
potential dilutive ordinary shares which comprise convertible
and redeemable preference shares and share options granted to
employees.
(p)
Operating
Segment
In accordance with IFRS 8 — Operating Segment, the
operating segments used to present segment information are
identified on the basis of internal reports used by the
Group’s management to allocate resources to the segments
and assess their performance. An operating segment is a
component of the Group that engages in business activities from
which it earns revenues and incurs expenses, including revenues
and expenses that relate to transactions with any of the
Group’s other components. Results of the operating segments
are reviewed regularly by the leadership team, which has been
identified as the CODM, to make decisions about resources to be
allocated to the segment and assess its performance and for
which discrete financial information is available.
The Group has two reportable segments: air ticketing and hotels
and packages. Accordingly, the Group has made relevant
entity-wide disclosures (Refer to Note 6).
Segment results that are reported to the CODM include items
directly attributable to a segment.
Revenue directly attributable to the segments is considered
segment revenue. Segment revenue of the hotels and packages
segment is measured on a gross basis except for only hotel
reservation, which is recorded on a net basis. Segment revenue
of air ticketing segment is measured on a net basis except for
the sale of airline tickets where the Group assumes inventory
risks in which case it is measured on a gross basis.
Service cost includes cost of airline tickets, amounts paid to
hotels and other service providers. Operating expenses other
than service cost have not been allocated to the operating
segments and are treated as unallocated/ common expenses. For
the purposes of the CODM review, the measure of segment revenue
as reduced by service cost is a key operating metric, which is
sufficient to assess performance and make resource allocation
decisions.
Segment capital expenditure does not include cost incurred
during the period to acquire property, plant and equipment and
intangible assets as they cannot be allocated to segments and is
not reviewed by the CODM.
Segment assets do not include property, plant and equipment,
intangible assets, trade and other receivables, term deposits,
current tax assets, corporate assets, other current assets and
other non-current assets as they cannot be allocated to segments
and are not reviewed by the CODM.
Segment liabilities do not include trade and other payables,
employee benefits, accrued expenses, deferred income, embedded
derivatives, loans and borrowings and other liabilities as they
cannot be allocated to segments and are not reviewed by the CODM.
(q)
New
Accounting Standards and Interpretations not yet
Adopted
IFRS 9 ‘Financial Instruments’, is part of the
IASB’s wider project to replace IAS 39 ‘Financial
Instruments: Recognition and Measurement’. IFRS 9
retains but simplifies the mixed measurement model and
establishes two primary measurement categories for financial
assets, amortized cost and fair value. The basis of
classification
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
depends on the entity’s business model and the contractual
cash flow characteristics of the financial asset. The effective
date for IFRS 9 is annual periods beginning on or after
January 1, 2013 with early adoption permitted. The Group is
in the process of evaluating the impact of the new standard.
Improvements to IFRS- In May 2010, the IASB published
“Improvements to IFRSs 2010” — a
collection of eleven amendments to six International Financial
Reporting Standards — as part of its program of annual
improvements to its standards, which is intended to make
necessary, but non-urgent, amendments to standards that will not
be included as part of another major project. The amendments
resulting from this standard mainly have effective dates for
annual periods beginning on or after July 1, 2010, although
entities are permitted to adopt them earlier. The Group is
evaluating the impact of these amendments on the Group’s
consolidated financial statements.
IAS 24, “Related Party Disclosure (revised 2009)”,
requires disclosure of related party relationships,
transactions and outstanding balances, including commitments, in
the consolidated and separate financial statements of a parent,
venturer or investor presented in accordance with IAS 27
Consolidated and Separate Financial Statements. This Standard
also applies to individual financial statements. These
amendments are effective for accounting periods beginning on or
after January 1, 2011. The Group is evaluating the impact
of these amendments on the Group’s consolidated financial
statements.
4)
DETERMINATION
OF FAIR VALUES
A number of the Group’s accounting policies and disclosures
require the determination of fair value, for both financial and
non-financial assets and liabilities. Fair values have been
determined for measurement and / or disclosure
purposes based on the following methods. When applicable,
further information about the assumptions made in determining
fair values is disclosed in the notes specific to that asset or
liability.
(a)
Non
Derivative Financial Liabilities
Fair value, which is determined for disclosure purposes, is
calculated based on the present value of future principal and
interest cash flows, discounted at the market rate of interest
at the reporting date. The market rate of interest is determined
on the basis of internal rate of returns on the financial
liabilities. In respect of the liability component of
convertible and redeemable preference shares, the market rate of
interest is determined on the basis of internal rate of returns
on the convertible and redeemable preference shares. For finance
leases, the market rate of interest is equivalent to interest
rate mentioned in the lease agreement.
(b)
Share
Based Payment Transactions
The fair value of the employee share options is measured using
the Black-Scholes formula. Measurement inputs include share
price on grant date, exercise price of the instrument, expected
volatility (based on weighted average historic volatility
adjusted for changes expected due to publicly available
information), weighted average expected life of the instruments
(based on historical experience and general behavior of the
option holder), expected dividends and the risk-free interest
rate (based on government bonds). Service and non-market
performance conditions attached to the transactions are not
taken into account in determining fair value.
(c)
Trade
and other Receivables
The fair value of trade and other receivables is estimated as
the present value of future cash flows, discounted at the market
rate of interest at the reporting date. The fair value is
determined for disclosure purposes only.
(d)
Separable
Embedded Derivative
The fair value of the separable embedded derivative is measured
using the binomial lattice model. Measurement inputs include
share price on measurement date, expected term of the
instrument, anti dilution price of different class of
convertible and redeemable preference shares, risk free rate
(based on government bond), expected volatility (based on
weighted average historic volatility adjusted for changes
expected due to publicly
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
available information), probability of raising funds,
probability of raising funds from IPO or private placement,
probability of conversion or redemption of the convertible and
redeemable preference shares.
5)
FINANCIAL
RISK MANAGEMENT
Overview
In the normal course of its business, the Group is exposed to
liquidity, credit and market risk (interest rate and foreign
currency risk).
Liquidity
Risk
The Group’s objective is to ensure that it is able to meet
its requirements for funds on a timely basis. The Group
regularly monitors its liquidity to keep it at adequate levels,
with periodic reports to the chief operating decision maker.
Historically, the Group has been financed by a combination of
equity and preference shares. Such investments were
substantially made by strategic investors who have invested
based on long term potential of the Group. Any requirement for
funds for working capital needs and current losses has been met
by such investors from time to time.
To ensure smooth operations, the Group has invested surplus
funds in term deposits with banks and has taken overdraft
facility against them.
Credit
Risk
The Group’s exposure to credit risk is limited, as its
customer base consists of a large number of customers and the
majority of its collections from customers are made on an
upfront basis at the time of consummation of the transaction.
There is limited credit risk on sales made to corporate
customers, incentives due from the airlines and its Global
Distribution System (GDS) provider. The Group has not
experienced any significant default in recovery from such
customers.
Additionally, the Group places its cash and cash equivalents and
term deposits with banks with high investment grade ratings,
limits the amount of credit exposure with any one bank and
conducts ongoing evaluation of the credit worthiness of the
banks with which it does business. Given the high credit ratings
of these financial institutions, the Group does not expect these
financial institutions to fail in meeting their obligations. The
maximum exposure to credit risk is represented by the carrying
amount of each financial asset.
Foreign
Currency Risk
The Group incurs foreign currency risk primarily in respect of
revenue denominated in a currency other than the functional
currency of MakeMyTrip (India) Private Limited (Indian
subsidiary) in which the transaction takes place. On a
consolidated basis, the Group is primarily exposed to foreign
currency fluctuations between the USD and INR. INR being the
functional currency of its Indian subsidiary.
Approximately 7.19% of the Group’s revenues generated by
its Indian subsidiary for the fiscal year ended March 31,2011 (March 31, 2010: 9.13% and March 31, 2009: 3.44%)
were generated outside India and were received in USD.
The Group currently does not have hedging or similar
arrangements with any counter-party to cover its foreign
currency exposure fluctuations in foreign exchange rates.
Interest
Rate Risk
A majority of the financing of the Group has come from a mix of
ordinary or convertible and redeemable preference shares with
nominal dividends and an overdraft facility with banks. The
interest rates on the overdraft facility availed by the Group
are marginally higher than the interest rates on term deposits
with the banks. Accordingly, there is limited interest rate risk.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Market
and Operational Risk
The Group is dependent on its ability to maintain existing and
new arrangements with its suppliers. Adverse changes in existing
relationships, increasing industry consolidation or Group’s
inability to enter into new arrangements with these parties on
favorable terms, if at all, could reduce the amount, quality,
pricing and breadth of travel products and services that Group
is able to offer, which in turn could adversely affect the
Group’s business and financial performance.
The Indian travel market is intensely competitive. Factors
affecting the Group’s competitive success include, among
others: price, availability and breadth of travel products,
ability to package and customize travel products, brand
recognition, customer service and customer care, service fees,
ease of use, accessibility and reliability. If the Group is not
able to compete effectively on any of these factors, the
Group’s business and results of operations may be adversely
affected.
The Group’s business and financial performance are affected
by the health of the Indian as well as worldwide travel
industry, including changes in supply and pricing. Events
specific to the air travel industry that could negatively affect
the Group’s business include continued fare increases,
travel-related strikes or labor unrest, fuel price volatility.
The Group is also affected by economic conditions worldwide and
in India, as poor economic conditions generally result in a
reduction in travel volumes.
6)
OPERATING
SEGMENTS
The Group has two reportable segments, as described below, which
are the Group’s Lines of Business (LoBs). The LoBs offer
different products and services, and are managed separately
because the nature of products and method used to distribute the
services are different. For each of these LoBs, the Group’s
Leadership team comprising of Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer, Chief Marketing
Officer, Chief Innovation Officer, Chief Products Officer,
Senior Vice President — Technology, Senior Vice
President — Out Bound Tours, Senior Vice
President — Domestic Packages and Vice
President — Human Resources, reviews internal
management reports. Accordingly, the Leadership team is
construed to be the Chief Operating Decision Maker (CODM). LoBs
assets, liabilities and expenses (other than service cost) are
reviewed on an entity-wide basis by the CODM, and hence not
being allocated to these LoBs. Segment revenue less service cost
from each LoB are reported and reviewed by the CODM on a monthly
basis.
The following summary describes the operations in each of the
Group’s reportable segments:
1.
Air ticketing: Primarily through an internet based platform,
provides the facility to book international and domestic air
tickets.
2.
Hotels and packages: Through an internet based platform,
call-centers and branch offices, provides holiday packages and
hotel reservations.
Other operations primarily include the advertisement income from
hosting advertisements on its internet web-sites, income from
sale of rail and bus tickets and pay for facilitating website
access to a travel insurance company. This segment does not meet
any of the quantitative thresholds to be a reportable segment
for any of the years presented in these consolidated financial
statements.
Until June 30, 2010, for internal reporting purposes, the
revenue related to airline tickets issued as a component of a
Company developed tour and package is assigned to the air
ticketing segment. Revenue in this segment is recorded on a net
basis for internal reporting purposes. For the external
reporting, such revenue is recorded on a gross basis. Effective
July 1, 2010, the Company has changed the composition of
its reportable segments. For internal reporting purposes, the
revenue related to airline tickets issued as a component of a
Company developed tour and package has been assigned to the
hotels and packages segment and is recorded on a gross basis.
Following a change in the composition of its reportable
segments, the Company has restated the corresponding items of
segment information for earlier periods.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Information
About Reportable Segments Reclassification:
For the Year Ended
March 31
Air Ticketing
Hotels and Packages
Others
Total
Particulars
2009
2010
2011
2009
2010
2011
2009
2010
2011
2009
2010
2011
(in USD)
External revenues
19,225,095
32,119,488
47,622,719
48,622,765
50,287,896
74,557,976
703,841
1,152,822
2,540,692
68,551,701
83,560,206
124,721,387
Total segment revenue
19,225,095
32,119,488
47,622,719
48,622,765
50,287,896
74,557,976
703,841
1,152,822
2,540,692
68,551,701
83,560,206
124,721,387
Service cost
491,780
985,482
—
43,069,188
42,292,226
63,650,910
—
—
—
43,560,968
43,277,708
63,650,910
Segment revenue less service cost
18,733,315
31,134,006
47,622,719
5,553,577
7,995,670
10,907,066
703,841
1,152,822
2,540,692
24,990,733
40,282,498
61,070,477
Personnel expenses
(9,679,770
)
(16,562,034
)
(14,399,040
)
Other operating expenses
(24,369,906
)
(28,160,506
)
(40,698,895
)
Depreciation and amortization
(1,558,687
)
(1,569,747
)
(1,910,637
)
Finance income
6,293,731
1,874,177
1,601,750
Finance costs
(3,049,608
)
(2,062,947
)
(3,525,685
)
Profit (Loss) before tax
(7,373,507
)
(6,198,559
)
2,137,970
Assets and liabilities are used interchangeably between segments
and these have not been allocated to the reportable segments.
Geographical
Information:
The air ticketing and hotel and packages segments are managed on
a worldwide basis from India and the U.S. In presenting
information on the basis of geographical segments, segment
revenue is based on the geographical location of customers.
Segment assets are based on the geographical location of the
assets.
Revenue
Non-Current Assets
For the Year Ended 31
March
As at March 31
Particulars
2009
2010
2011
2010
2011
(in USD)
India
64,106,701
79,173,117
115,753,388
6,916,378
10,319,570
United States
4,445,000
4,387,089
8,967,999
688,964
690,137
Total
68,551,701
83,560,206
124,721,387
7,605,342
11,009,707
Major
Customers:
Considering the nature of business, customers normally include
individuals. Further, none of the corporate customers would
account for more than 10% or more of the Group’s revenues.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
15)
TAX
ASSETS AND LIABILITIES
Unrecognized
Deferred Tax Assets
Deferred tax assets have not been recognized in respect of the
following items:
As at March 31
Particulars
2010
2011
(in USD)
Deductible temporary differences
2,095,516
1,597,623
Tax loss carry forwards
11,049,305
6,621,611
Total
13,144,821
8,219,234
The deferred tax assets with respect to carry forward tax losses
as at March 31, 2011 expire as follows:
Indian Subsidiary
US Subsidiary
Loss for the
Period
Tax
Losses
Expire
on
Tax
Losses
Expire
on
(in USD)
Loss for the year
2004-2005
—
—
31,032
2025
Loss for the year
2007-2008
2,819,707
2016
355,457
2028
Loss for the year
2008-2009
2,376,061
2017
193,615
2029
Unabsorbed depreciation
845,739
No expiry
—
—
Total
6,041,507
580,104
In the year ended March 31, 2011, a deferred tax asset of
USD 2,735,545 was recognized for unused tax losses as
management considered it probable that future taxable profits
would be available. Management has determined that the
recoverability of the balance of deferred tax assets of
USD 6,621,611 in respect of the remaining unused tax losses
cannot be reasonably ascertained because a trend of profitable
growth in the subsidiaries is not yet fully established. If
profitable growth continues then the management will reassess
the probability of future taxable profits and the utilization of
the remaining unused tax losses.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
17)
CASH AND
CASH EQUIVALENTS
As at March 31
Particulars
2010
2011
(in USD)
Cash in hand
116,799
155,643
Credit card collection in hand
3,503,630
3,706,738
Bank balances
5,721,097
3,363,637
Term deposits
—
44,504,303
Cash and cash equivalents
9,341,526
51,730,321
Bank overdrafts used for cash management purposes
(3,996,066
)
(3,855,977
)
Cash and cash equivalents in the statement of cash flows
5,345,460
47,874,344
Credit card collection in hand represents the amount of
collection from credit card swiped by the customers which is
outstanding as at the year end and credited to Group’s bank
accounts subsequent to the year end.
The Group’s exposure to interest rate risk and a
sensitivity analysis for financial assets and financial
liabilities is disclosed in note 5 and 31.
18)
TERM
DEPOSITS
As at March 31
Particulars
2010
2011
(in USD)
Term deposits
14,471,404
16,941,920
Total
14,471,404
16,941,920
Non-current
1,295,489
706,873
Current
13,175,915
16,235,047
Total
14,471,404
16,941,920
As of March 31, 2011, term deposits with banks includes
USD 661,960 (March 31, 2010: USD 661,960) against
which letter of credit has been issued to various airlines.
As of March 31, 2011, term deposits includes
USD 13,112,941 (March 31, 2010: USD 4,294,929)
pledged with banks against bank guarantees and bank overdraft
facility.
On July 22, 2010, the Group effected a
20-for-one
share split which was approved by the shareholders, with respect
to all ordinary and convertible and redeemable preference
shares, as well as a
20-for-one
adjustment with respect to the number of ordinary shares
underlying share options. All share and per share data provided
herein gives effect to this stock split, applied retroactively.
On August 17, 2010, the Company completed the initial
public offering of its ordinary shares, pursuant to which the
Company issued and sold 3,846,154 ordinary shares and certain of
its existing shareholders (referred to as the “Selling
Shareholders”) sold 1,153,846 ordinary shares at a price of
USD 14 per share. The offering resulted in gross proceeds
of USD 53,846,156 and net proceeds of USD 50,076,925
to the Company and gross proceeds of USD 16,153,844 and net
proceeds of USD 15,023,075 to the Selling Shareholders,
after deducting underwriting discounts and commissions.
Additionally, the Company incurred offering related expenses of
approximately USD 2,128,176. The underwriters exercised
their option to purchase 307,692 additional ordinary shares from
the Company and 442,308 additional ordinary shares from the
Selling Shareholders at the initial offering price of
USD 14 per share to cover over-allotments, resulting in
additional gross proceeds of USD 4,307,688 and net proceeds
of USD 4,006,150 to the Company and additional gross
proceeds of USD 6,192,312 and net proceeds of
USD 5,758,850 to the Selling Shareholders, after deducting
underwriting discounts and commissions.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
On August 17, 2010, 6,577,260 Series A convertible and
redeemable preference share of a par value USD 0.0005 each,
2,966,300 Series B convertible and redeemable preference
share of a par value USD 0.0005 each, and 2,780,900
Series C convertible and redeemable preference share of a
par value USD 0.0005 each were converted into 12,324,460
ordinary shares of a par value USD 0.0005 each.
Accordingly, the carrying value of non-derivative liability
component of convertible and redeemable preference shares as at
the date of conversion of USD 41,185,945 has been
reclassified to equity.
The Company presently has only one class of ordinary shares. For
all matters submitted to vote in a shareholders meeting of the
Company, every holder of an ordinary share as reflected in the
records of the Company on the date of the shareholders meeting
shall have one vote in respect of each share held.
Mauritius law mandates that any dividends shall be declared out
of the distributable profits, after having set off accumulated
losses at the beginning of the accounting period and no
distribution may be made unless the Group’s board of
directors is satisfied that upon the distribution being made
(1) the Company is able to pay its debts as they become due
in the normal course of business and (2) the value of the
Company’s assets is greater than the sum of (a) the
value of its liabilities and (b) Company’s stated
capital. Should the Company declare and pay any dividends on
ordinary shares, such dividends will be paid in USD to each
holder of ordinary shares in proportion to the number of shares
held to the total ordinary shares outstanding as on that date.
In the event of liquidation of the Company, all preferential
amounts, if any, shall be discharged by the Company. The
remaining assets of the Company shall be distributed to the
holders of equity shares in proportion to the number of shares
held to the total equity shares outstanding as on that date.
Foreign
currency translation reserve
The translation reserve comprises foreign currency differences
arising from the translation of the financial statements of the
Indian subsidiary.
22)
ACQUISITION
OF NON-CONTROLLING INTERESTS
In December 2010, the Group acquired an additional 0.01%
interest in its Indian subsidiary (MakeMyTrip (India) private
Limited) for USD 325,140 in cash, increasing its ownership
from 99.98% to 99.99%. The Group recognised a decrease in
non-controlling interest of USD 6,545 and an increase in
accumulated deficit of USD 318,595.
23)
EARNINGS
(LOSS) PER SHARE
The following is the reconciliation of the income (loss)
attributable to ordinary shareholders and weighted average
number of ordinary shares used in the computation of basic and
diluted earnings (loss) per share for the years ended
March 31, 2009, 2010 and 2011:
For the Year Ended
March 31
Particulars
2009
2010
2011
Earnings (Loss) attributable to ordinary shareholders (USD)
(7,346,033
)
(6,206,239
)
4,827,471
Accretion of liability component of Series A convertible
and redeemable preference share (USD)
—
—
253,058
Accretion of liability component of Series B convertible
and redeemable preference share (USD)
331,775
—
130,261
Accretion of liability component of Series C convertible
and redeemable preference share (USD)
—
—
42,972
Net change in fair value of derivative on Series B
convertible and redeemable preference share (USD)
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
For the Year Ended
March 31
Particulars
2009
2010
2011
Net change in fair value of derivative on Series C
convertible and redeemable preference share (USD)
—
—
(26,077
)
Earnings (Loss) attributable to ordinary
shareholders — dilutive (USD)
(11,243,410
)
(6,206,239
)
5,205,380
Weighted average number of ordinary shares outstanding used in
computing basic earnings (loss) per share
17,437,120
17,521,120
28,320,901
Dilutive effect of share options (Nos.)
—
—
1,935,921
Dilutive effect of convertible securities (Nos.)
- Series A convertible and redeemable preference share
—
—
2,504,765
- Series B convertible and redeemable preference share
2,966,300
—
1,129,632
- Series C convertible and redeemable preference share
—
—
1,059,028
Weighted average number of ordinary shares outstanding used in
computing dilutive earnings (loss) per share
20,403,420
17,521,120
34,950,246
Earnings (loss) per share (USD)
Basic
(0.42
)
(0.35
)
0.17
Diluted
(0.55
)
(0.35
)
0.15
At March 31, 2011, Nil employee share options
(March 31, 2010: 2,598,800 and March 31, 2009:
7,865,241) and Nil Series A convertible and redeemable
preference shares (March 31, 2010: 6,577,260 and
March 31, 2009: 6,577,260), Nil Series B convertible
and redeemable preference shares (March 31, 2010: 2,966,300
and March 31, 2009: Nil) and Nil Series C convertible
and redeemable preference shares (March 31, 2010: 2,780,900
and March 31, 2009: 2,780,900) were excluded from the
diluted weighted average number of ordinary shares calculation
as their effect would have been anti-dilutive.
In December 2006, August 2007 and May 2008, the Company issued
convertible and redeemable preference shares (refer
note 24) that were converted into ordinary shares upon
the completion of the IPO. Assuming the conversion had occurred
“on a hypothetical basis” on April 1, 2007
(convertible and redeemable preference shares issued on December
2006 and August 2007) and on April 1, 2008
(convertible and redeemable preference shares
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
issued on May 2008) the pro forma basic and diluted net
loss per share for the years ended March 31, 2009, 2010 and
2011 is calculated as follows:
For the Year Ended
March 31
Particulars
2009
2010
2011
(unaudited)
(unaudited)
(unaudited)
Earnings (Loss) attributable to ordinary shareholders (USD)
(7,346,033
)
(6,206,239
)
4,827,471
Pro forma effects of convertible and redeemable preference shares
— Accretion of liability component of convertible and
redeemable preference share (USD)
1,008,802
1,125,677
426,291
— Net change in fair value of derivative on
convertible and redeemable preference share (USD)
(4,984,590
)
(253,212
)
(48,382
)
Numerator for pro forma basic and diluted earnings (loss) per
share (USD)
(11,321,821
)
(5,333,774
)
5,205,380
Weighted average number of shares outstanding
17,437,120
17,521,120
20,668,901
Conversion of convertible and redeemable preference share to
ordinary shares (Nos.)
12,324,460
12,324,460
12,324,460
Denominator for pro forma basic earnings (loss) per share
29,761,580
29,845,580
32,993,361
Dilutive effect of share options (Nos.)
—
—
1,935,921
Denominator for pro forma diluted earnings (loss) per share
29,761,580
29,845,580
34,929,282
Pro forma earnings (loss) per share (USD) — unaudited
Basic
(0.38
)
(0.18
)
0.16
Diluted
(0.38
)
(0.18
)
0.15
On July 22, 2010, the Group effected a
20-for-one
share split which was approved by the shareholders, with respect
to all ordinary and convertible and redeemable preference
shares, as well as a
20-for-one
adjustment with respect to the number of ordinary shares
underlying share options. All share and per share data provided
herein gives effect to this share split applied retroactively.
24)
LOANS AND
BORROWINGS
This note provides information about the contractual terms of
Group’s interest bearing loans and borrowings, which are
measured at amortized cost. For more information about the
Group’s exposure to interest rate, foreign currency and
liquidity risk, see note 5 and 31.
The Group has taken certain vehicles on lease and which have an
option for the Group to purchase the vehicles as per terms of
the lease agreements.
Credit
Facility
The group has fund based limits with HDFC bank and Yes bank
amounting to USD 11,041,086 and USD 9,936,977
respectively. The group has drawn down from its outstanding
limit amounting to USD 3,855,977 as at March 31, 2011
from HDFC Bank (refer note 17).
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Convertible
and redeemable preference shares
The compound financial instrument issued by the Group comprises
convertible and redeemable preference shares (series A, B
and C) with a discretionary, non-cumulative 8% dividend
that can be converted into ordinary share capital at the option
of the holder. One preference share will be converted into one
ordinary share. The details of convertible and redeemable
preference share are as follows:
Convertible and
Convertible and
Convertible and
Redeemable
Redeemable
Redeemable
Preference Share —
Preference Share —
Preference Share —
Particulars
Series
A
Series
B
Series
C
(in USD)
Number of shares
6,577,260
2,966,300
2,780,900
Subscription amount
13,000,000
15,000,579
15,000,175
This compound instrument also has following adjustment clauses:
•
if subsequent to the issuance of the preference shares, the
Group issues securities to parties (except for issue of
securities discussed
below*)
at a price lower than the issue price of the original preference
shares but higher than USD 1.08, then the Group is
obligated to issue additional preference shares to the original
preference shareholders, such that the average price of all
preference shares held by the original Series A, B and C
preference shareholders is equal to the purchase price of the
new Series A, B and C preference shares issued.
•
if subsequent to the issuance of the preference shares, the
Group issues securities to parties (except for issue of
securities discussed below*) with a conversion price lower than
the issue price of the original preference shares but higher
than USD 1.08, then the Group is obligated to issue
additional preference shares to the original preference
shareholders such that the average price of all preference
shares held by the original Series A, B and C shareholders
is equal to the conversion price of the new Series A, B and
C preference shares issued.
•
if subsequent to the issuance of the preference shares, except
for any (a) ordinary shares issued to the employees of the
Group under any employee share option plan approved by the
Board; and (b) ordinary shares issued to one of the
ordinary shareholder, the Group issues additional securities to
any person at a price per security that is lower than
USD 1.08 or the price at which such security is convertible
into ordinary or preference shares is less than USD 1.08,
then the Group is obligated to issue additional ordinary shares
or preferred shares to the original preference shareholders such
that the average price of all ordinary or preference shares held
by the original preference shareholders is equal to the
purchase/conversion price of the new ordinary or preference
share issuance price.
The preference shares do not have a mandatory maturity period,
however within the four years from the subscription date the
preference shares may be redeemed if such redemption has been
approved by the majority shareholders of the respective series.
If the IPO does not happen within four years from the
subscription date then the Group may also redeem such shares at
any time after four years at a price equal to the purchase price
of the preference shares.
* Except for any Securities issued (a) to employees,
consultants, officers or directors of the Group pursuant to
preferred share option plans or preferred stock purchase plans
(in each case, approved by the Board); (b) to financial
institutions in connection with commercial credit arrangements,
equipment financing or other similar financing arrangements,
(c) pursuant to an Initial Public Offering
(“IPO”); (d) pursuant to any stock splits, stock
dividends or like transactions; or (e) to a non-financial
corporation in connection with a license, distribution, business
development, or for other similar arrangements.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The adjustment clauses as stated above represents a price
protection feature that protects the original preference
shareholders from declines in the market value of the
Group’s securities. This clause may result in the entity
issuing variable number of shares on conversion hence,
represents a liability. Equity instruments are instruments that
evidence a residual interest in the assets of an entity after
deducting all of its liabilities. Therefore, when the initial
carrying amount of a compound financial instrument is allocated
to its equity and liability components, the equity component is
assigned the residual amount after deducting from the fair value
of the instrument as a whole the amount separately determined
for the liability component. The value of any derivative
features (such as conversion option) embedded in the compound
financial instrument other than the equity component is included
in the liability component. The sum of the carrying amounts
assigned to the liability and equity components on initial
recognition is always equal to the fair value that would be
ascribed to the instrument as a whole. No gain or loss arises
from initially recognizing the components of the instrument
separately.
The equity component is recognized initially at the difference
between the fair value of the compound financial instrument as a
whole and the fair value of the liability component (including
the embedded derivative liability). The fair value of the
financial liability has been initially recognized at the amount
payable on demand, discounted from the first date that the
amount could be required to be paid. As the preference
shareholders can demand repayment of the purchase price at any
time subsequent to issuance, the fair value of the liability
component has been calculated at not less than the nominal
amount of the preference shares issued. From the liability
component that includes the embedded derivative liability the
fair value of the derivative liability is separated and the
balance host contract is the liability. Any directly
attributable transaction costs are allocated to the liability
and equity components in proportion to their initial carrying
amounts. Subsequent to initial recognition, the liability
component of a compound financial instrument is measured at
amortized cost using the effective interest method. The equity
component of a compound financial instrument is not re-measured
subsequent to initial recognition. Separable Embedded
Derivatives are recognized initially at fair value; attributable
transaction costs are recognized in profit or loss as incurred.
Fair value of the derivative is determined on the inception
using binomial lattice method. Subsequent to initial
recognition, derivatives are measured at fair value, and changes
therein are accounted through income statement.
The carrying amount of the liability component of convertible
and redeemable preference share is summarized below:
As at March 31
Particulars
2010
2011
Carrying amount of liability at beginning of the year
39,633,977
40,759,654
Accretion of interest
1,125,677
426,291
Converted to ordinary shares on IPO
—
(41,185,945
)
Carrying amount of liability at end of the year
40,759,654
—
On July 22, 2010, the Group effected a
20-for-one
share split which was approved by the shareholders, with respect
to all ordinary and convertible and redeemable preference
shares, as well as a
20-for-one
adjustment with respect to the number of ordinary shares
underlying share options. The number of convertible and
redeemable preference shares and minimum issue price of
USD 1.08 gives effect to this stock split, applied
retroactively.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Defined
Benefit Plan
The Group’s gratuity scheme is a defined benefit plan.
Gratuity is paid as a lump sum amount to employees at retirement
or termination of employment at an amount based on the
respective employee’s eligible salaries and the years of
employment with the Group. The following table sets out the
disclosure in respect of the defined benefit plan:
As at March 31
Particulars
2010
2011
(in USD)
Present value of unfunded obligations
226,909
478,026
Total
226,909
478,026
Movement
in the Present Value of the Defined Benefit
Obligation
For the Year Ended
March 31
Particulars
2009
2010
2011
(in USD)
Defined benefit obligations at the beginning of the year
246,268
131,626
226,909
Current service costs
42,598
49,368
84,381
Interest on obligation
13,262
9,362
20,508
Actuarial (gain) losses in other comprehensive income
(89,624
)
14,431
73,356
Benefits paid
(31,467
)
(1,843
)
(764
)
Past service cost
—
—
72,068
Effects of movement in exchange rate
(49,411
)
23,965
1,568
Defined benefit obligations at the end of the year
131,626
226,909
478,026
Expense
Recognised in Profit or Loss
For the Year Ended
March 31
Particulars
2009
2010
2011
(in USD)
Current service costs
42,598
49,368
84,381
Past service cost
—
—
72,068
Interest on obligation
13,262
9,362
20,508
Total
55,860
58,730
176,957
The expense is recognised in personnel expenses in the
consolidated statements of comprehensive income (loss).
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Actuarial
Gains and (Losses) Recognised in Other Comprehensive
Income
For the Year Ended
March 31
Particulars
2009
2010
2011
(in USD)
Cumulative amount at April 1
19,486
109,110
94,679
Recognised during the year
89,624
(14,431
)
(73,356
)
Cumulative amount at March 31
109,110
94,679
21,323
Actuarial
Assumptions
Principal actuarial assumptions are given below:
As at March 31
2010
2011
Discount rate (per annum)
6.50
%
7.70
%
Future salary increases (per annum)
12.00
%
12.00
%
Retirement age
58
58
Withdrawal rates
30.00
%
30.00
%
Assumptions regarding future mortality rates are based on Life
Insurance Corporation of India (LIC) published mortality
rates
(1994-96)
tables.
The actuarial valuation is carried out half yearly by an
independent actuary. The discount rate used for determining the
present value of obligation under the defined benefit plan is
determined by reference to market yields at the end of the
reporting period on Indian Government Bonds. The currency and
the term of the government bonds is consistent with the currency
and term of the defined benefit obligation.
The salary growth rate takes into account inflation, seniority,
promotion and other relevant factors on long-term basis.
Historical
Information:
As at March 31
Particulars
2010
2011
(in USD)
Present value of defined benefit obligations
226,909
478,026
Experience gain/(loss) adjustments arising on plan liabilities
1,780
(47,856
)
28)
SHARE
BASED PAYMENT
Description
of the Share-Based Payment Arrangements
Share
Option Program (Equity-Settled)
a.
2006
MakeMyTrip.com Equity Option Plan
In 2006, the Group established a share option program in India,
named the ‘2006 MakeMyTrip.com Equity Option Plan’ (or
‘2006 ESOP’), which was approved by the shareholders
of the Company at an extra-ordinary meeting held on
December 21, 2005. The ESOP entitles the eligible employees
to purchase ordinary shares of the Group’s Indian
Subsidiary. The Group granted employee stock options to eligible
employees on various dates.
Vesting conditions: Graded vesting
over 4 years. 10% on the expiry of 12 months from the
grant date. 20% on the expiry of 24 months from the grant
date. 30% on the expiry of 36 months from the grant date.
40% on the expiry of 48 months from the grant date.
2.
The stock options can be exercised
within a period of 48 months from the date of vesting.
3.
Options are to be settled by
physical delivery of ordinary shares.
The number and weighted average exercise price of share options
under 2006 ESOP plan are as follows:
Weighted
Average
Exercise Price
Number of
(USD)
Options
Particulars
2010
2010
Outstanding at April 1
0.39
7,865,241
Forfeited and expired during the period
0.21
(24,224
)
Exercised during the period
0.21
(3,826
)
Granted during the period
—
—
Replaced with options under MMT ESOP plan
0.38
(7,837,191
)
Outstanding at March 31
—
—
Exercisable at March 31
—
—
There are nil options outstanding at March 31, 2010 as all
options outstanding under this plan have been replaced with
options granted under MMT ESOP plan. There have been no further
issues of stock options under this plan.
b)
MakeMyTrip.com
Equity Option Plan
In 2000, the Group approved a share option program in Mauritius,
named the MakeMyTrip.com Equity Option Plan (“MMT ESOP
Plan”). In June 2009, this plan was expanded in order to
issue share options to employees of subsidiaries and directors
of the group. The Group replaced certain share options to
acquire shares in its Indian subsidiary held by employees at its
subsidiaries with options granted under the MMT ESOP Plan.
Of the options granted during the
year
2009-10,
2,423,810 options were immediately vested on the grant date and
280,000 options have 25% graded vesting each year over
4 year period.
2.
1,747,810 options have no sale
restrictions after vesting and 956,000 options have post vesting
sales restrictions.
3.
The stock options can be exercised
prior to the earliest of the following dates:
a. 48 months from the
vesting date.
b. 72 months from the
date of grant.
c. 6 months following the
grantee’s date of voluntary resignation or termination of
employment other than due to death, disablement or retirement.
d. 1 year following the
death of a grantee or termination due to disability or
retirement.
4.
Post vesting sales restrictions are
as below:
a. up to 50% of the shares are
eligible to be sold since August 17, 2010 the completion
date of our initial public offering;
b. up to 25% further of the
shares may be sold on or after August 17, 2011, the date
falling one year after the completion of our initial public
offering; and
c. the remaining 25% of the
shares may be sold on or after August 17, 2012, the date
falling two years after the completion of our initial public
offering.
The number and weighted average exercise price of share
options under MMT ESOP plan are as follows:
Weighted
Weighted
Average
Average
Exercise Price
Number of
Exercise Price
Number of
(USD)
Options
(USD)
Options
Particulars
2010
2010
2011
2011
Outstanding at April 1
—
—
1.44
2,598,810
Forfeited and expired during the period
—
—
1.29
9,410
Granted during the period
1.41
2,703,810
—
—
Exercised during the period
0.71
105,000
1.22
1,079,213
Outstanding at March 31
1.44
2,598,810
1.59
1,510,187
Exercisable at March 31
1.55
2,318,800
1.76
1,300,187
The options outstanding at March 31, 2011 have an exercise
price in the range of USD 0.4875 to USD 5.3940
(March 31, 2010: USD 0.0005 to USD 5.3940) and a
weighted average contractual life of 2 years and
8 months (March 31, 2010: 3 years and
6 months).
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Inputs
for Measurement of Grant Date Fair Values of MMT ESOP
Plan
The grant date fair value of the options granted to employees
was measured based on the Black-Scholes formula. Expected
volatility is estimated by considering historical average share
price volatility of the comparable companies. The inputs used in
the measurement of the fair values of the option at the date of
grant are summarized below:
Fair Value of
Share Options and Assumptions
Weighted average share price (USD)
4.70
Weighted average exercise price (USD)
1.41
Expected volatility
51.19% - 61.0%
Expected term
2 - 5 years
Expected dividends
—
Risk-free interest rate
1.12% - 2.64%
7,837,191 options outstanding under 2006 ESOP plan were
replaced with 1,367,800 options under MMT ESOP plan which
resulted in modification of the 2006 ESOP plan as defined under
IFRS 2, Share based Payment. On account of this
modification, the Group has recognized USD 1,505,868 during
the year ended March 31, 2010, as the incremental fair
value as the difference between the fair value of MMT ESOP plan
and that of the 2006 ESOP plan both estimated as at the date of
the modification.
Further, the Group has recognized the unamortized cost of
USD 539,259 during the year ended March 31, 2010,
under the 2006 ESOP plan as the options were immediately vested.
Also, the Group has recognized USD 4,726,249 during the
year ended March 31, 2010, as ESOP cost for 1,336,000 fresh
options granted under the MMT ESOP plan.
During the year ended March 31, 2011, share based payment
expense recognized under personnel expenses (refer
note 8) is USD 527,285 (March 31, 2010:
USD 6,771,376).
On July 22, 2010, the Group effected a
20-for-one
share split which was approved by the shareholders, with respect
to all ordinary and convertible and redeemable preference
shares, as well as a
20-for-one
adjustment with respect to the number of ordinary shares
underlying share options. All share and per share data provided
herein gives effect to this stock split, applied retroactively.
29)
TRADE AND
OTHER PAYABLES
As at March 31
Particulars
2010
2011
(in USD)
Other trade payables
13,987,959
13,159,344
Accrued expenses
6,420,798
6,892,467
Advance from customers
6,058,290
9,642,891
Total
26,467,047
29,694,702
Trade payables primarily include amount payable to airlines for
cost of airline tickets.
The Group’s exposure to currency and liquidity risk related
to trade and other payables is disclosed in note 5 and 31.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
30)
DEFERRED
INCOME
As at March 31
Particulars
2010
2011
(in USD)
Global distribution system provider
2,255,435
—
Facilitation fee
411,760
—
Others
—
26,533
Total
2,667,195
26,533
Current
814,516
26,533
Non-current
1,852,679
—
Total
2,667,195
26,533
The Group requires the services of a Global Distribution system
(“GDS”) provider for facilitating the booking of
airline tickets on its website or other distribution channels.
There are various GDS companies like Abacus, Amadeus, World
span, Galileo etc. These companies usually pay upfront fee to
travel agents for using their system as they get paid by
airlines on the basis of airline tickets booked through their
GDS, which are recognized on the proportion of actual airline
tickets sold over the total estimated airline tickets to be sold
over the term of the agreement and the balance amount has been
recognized as deferred income.
31)
FINANCIAL
INSTRUMENTS
Credit
Risk
Exposure
to Credit Risk
The carrying amount of financial assets represents the maximum
credit exposure. The maximum exposure to credit risk at the
reporting date was:
As at March 31
Particulars
2010
2011
(in USD)
Trade and other receivables
12,449,527
12,857,169
Term deposits
14,471,404
16,941,920
Cash and cash equivalents (except cash in hand)
9,224,727
51,574,678
Total
36,145,658
81,373,767
The maximum exposure to credit risk for trade and other
receivables at the reporting date by geographic region was:
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The maximum exposure to credit risk for trade and other
receivables and term deposits at the reporting date by type of
counterparty was:
As at March 31
Particulars
2010
2011
(in USD)
Airlines
4,489,110
7,058,313
Retail customers
1,687,234
1,428,997
Corporate customers
2,532,935
1,961,528
Deposit with hotels
459,009
643,491
Term deposits with bank
14,471,404
16,941,920
Others
3,281,239
1,764,839
Total
26,920,931
29,799,089
Impairment
Losses
The age of trade and other receivables and term deposits at the
reporting date was:
As at March 31
2010
2011
Particulars
Gross
Impairment
Gross
Impairment
(in USD)
Not past due
22,831,282
—
27,662,679
—
Past due 0-30 days
1,493,968
—
737,496
—
Past due
30-120 days
2,552,160
1,622
1,614,040
257,292
More than one year
1,192,413
1,147,270
917,724
875,558
Total
28,069,823
1,148,892
30,931,939
1,132,850
The movement in the allowance for doubtful debts in respect of
trade and other receivables during the year was as follows:
For the Year Ended
March 31
Particulars
2010
2011
(in USD)
Balance at the beginning of the year
929,384
1,148,892
Provision for doubtful debts
37,943
424,512
Amounts written off against the allowance
—
(351,202
)
Effects of movement in exchange rate
181,565
(89,352
)
Balance at the end of the year
1,148,892
1,132,850
Allowance for doubtful debts mainly represents amount due from
airlines, global distribution system provider and retail
customers. Based on historical experience, the Group believes
that no impairment allowance is necessary, apart from above, in
respect of trade receivables.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Liquidity
risk
The following are the contractual maturities of financial
liabilities, including estimated interest payments and excluding
the impact of netting agreements:
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Currency
Risk
Exposure
to Currency Risk
The Group incurs foreign currency risk primarily in respect of
revenue denominated in a currency other than the functional
currency of the MakeMyTrip (India) Private Limited (Indian
subsidiary), in which the transaction takes place. On a
consolidated basis, the Group is primarily exposed to foreign
currency fluctuations between the USD (presentation currency)
and INR, being the functional currency of its Indian subsidiary.
The Group’s exposure to foreign currency risk was based on
the following amounts as at the reporting dates (in equivalent
USD):
As at March 31
Particulars
2010
2011
(in USD)
Trade and other receivables
6,782,945
3,567,671
Trade and other payables
(5,570,473
)
(10,999,725
)
Cash and cash equivalents
1,066,657
1,022,149
Net exposure
2,279,129
(6,409,905
)
The following significant exchange rates applied during the year:
Any change in the exchange rate of USD against currencies other
than INR is not expected to have significant impact on the
Group’s profit or loss. Accordingly, a 10% appreciation of
the USD as indicated below, against the INR as at March 31,2010 would have decreased loss and as at March 31, 2011
would have decreased the profit by the amounts shown below. This
analysis is based on foreign currency exchange rate variances
that the Group considered to be reasonably possible at the end
of the reporting period. The analysis assumes that all other
variables remain constant.
For the Year Ended
March 31
Particulars
2010
2011
(in USD)
10% strengthening of USD against INR
217,060
(610,467
)
A 10% depreciation of the USD against INR as at March 31,2010 and 2011 would have had the equal but opposite effect on
the above currency to the amounts shown above, on the basis that
all other variables remain constant.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Interest
Rate Risk
Profile
At the reporting date the interest rate profile of the
Group’s interest-bearing financial instruments was as
follows:
As at March 31
Particulars
2010
2011
(in USD)
Fixed rate instruments
Financial assets
Term deposits
14,471,404
16,941,920
Cash and cash equivalents
—
44,504,303
Financial liabilities
Convertible and redeemable preference shares
40,759,654
—
Finance lease liabilities
92,732
30,346
Secured bank loans
114,512
179,211
55,438,302
61,655,780
Variable rate instruments
Financial liabilities
Bank overdraft
3,996,066
3,855,977
3,996,066
3,855,977
Fair
Value Sensitivity Analysis for Fixed Rate Instruments
The Group does not account for any fixed rate financial assets
and liabilities at fair value through profit or loss. Therefore
a change in interest rates at the reporting date would not
affect profit or loss.
Cash Flow
Sensitivity Analysis for Variable Rate Instruments
An increase of 100 basis points in interest rates at the
reporting date would have increased loss as at March 31,2010 and decreased profit as at March 31, 2011 by the
amounts shown below. This analysis assumes that all other
variables, in particular foreign currency rates, remain
constant. The analysis has been performed on the same basis for
2010.
A decrease of 100 basis points in the interest rates at the
reporting date would have had equal but opposite effect on the
amounts shown above, on the basis that all other variables
remain constant.
Separable embedded derivative on convertible and redeemable
preference shares
48,382
48,382
—
—
48,382
48,382
—
—
Liabilities carried at amortized cost
Finance lease liabilities
92,732
92,732
30,346
30,346
Secured bank loans
114,512
114,512
179,211
179,211
Bank overdraft
3,996,066
3,996,066
3,855,977
3,855,977
Convertible and redeemable preference shares
40,759,654
40,759,654
—
—
Trade and other payables
20,408,757
20,408,757
20,051,811
20,051,811
Other current liabilities
554,170
554,170
1,706,618
1,706,618
65,925,891
65,925,891
25,823,963
25,823,963
Fair
value hierarchy
The table below analyses financial instruments carried at fair
value, by valuation method. The different levels have been
defined as follows:
•
Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
•
Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived
from prices).
•
Level 3: inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
Separable embedded derivative on convertible and redeemable
preference shares
—
—
48,382
48,382
Convertible and redeemable preference shares
—
—
40,759,654
40,759,654
The basis for determining fair values is disclosed in
note 4.
32)
OPERATING
LEASES
Leases
as lessee
Non cancellable operating lease rentals are payable as follows:
As at March 31
Particulars
2010
2011
(in USD)
Less than one year
1,188,061
1,561,760
Between one and five years
4,685,954
5,807,590
More than five years
1,024,265
1,194,632
Total
6,898,280
8,563,982
The Group leases a number of offices under operating leases. The
lease period ranges for a period of three to nine years, with an
option to renew the lease after that date. Lease payments are
increased after a specified period under such arrangements.
During the year ended March 31, 2011, USD 1,394,969
was recognized as rent expense under other operating expense in
profit or loss in respect of operating leases (March 31,2010: USD 1,244,798).
33)
CONTINGENCIES
During the year ended March 31, 2009, a general industry
wide inquiry was initiated by the Mumbai Zonal Unit of
Directorate General of Excise Intelligence & Customs
(regulatory authority) on various travel agencies across India
with regard to compliance with service tax rules and regulations
by travel companies in India. Pursuant to the audit conducted by
the Service tax authorities, the Company has received a notice
during the quarter ended September 30, 2010 with a demand
of service tax on certain matters, some of which are industry
wide issues and involve complex interpretation of law. Based on
legal advice, the Company believes that it has a strong case in
its favour and has filed an appropriate response in consultation
with its legal advisor to the service tax authorities dated
March 18, 2011. In view of the above, the Company believes
that at present neither it is probable that an outflow of
resources embodying economic benefits will be required to settle
the obligation nor a reliable estimate can be made of the amount
of the obligation.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
34)
CAPITAL
COMMITMENTS
Estimated amount of contracts remaining to be executed on the
capital account and not provided for (net of advances) aggregate
USD 2,464,731 as at March 31, 2011 (March 31,2010: USD 90,973).
35)
RELATED
PARTIES
For the purpose of the consolidated financial statements,
parties are considered to be related to the Group, if the Group
has the ability, directly or indirectly, to control the party or
exercise significant influence over the party in making
financial and operating decisions, or vice versa, or where the
Group and the party are subject to common control or common
significant influence. Related parties may be individuals or
other entities.
Related
parties and nature of relationships where control
exists:
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Transactions
with entity having significant influence over the
Company:
For the Year Ended
March 31
Transactions
2009
2010
2011
(in USD)
Revenue from air ticketing
—
—
17,075
As at March 31
Balance
Outstanding
2010
2011
(in USD)
Trade and other payables
—
—
Transactions
with party controlled by key management personnel:
For the Year Ended
March 31
Transactions
2009
2010
2011
(in USD)
Revenue from air ticketing
—
—
4,560
Purchase of marketing services
18,322
19,300
25,100
As at March 31
Balance
Outstanding
2010
2011
(in USD)
Trade and other payables
455
455
Trade and other receivables
—
37,077
Advance to vendor
—
8,000
Transactions
with Key Management Personnel:
Loans to
Key Management Personnel
No unsecured loans were given within a period of 12 months.
At March 31, 2011, the loan balance outstanding was USD Nil
(March 31, 2010: 88,284, March 31, 2009:
USD 44,234).
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Key
Management Personnel Compensation*
Key management personnel compensation comprised:
For the Year Ended
March 31
Particulars
2009
2010
2011
(in USD)
Short-term employee benefits
327,282
208,428
473,592
Contribution to provident fund
12,332
11,920
19,687
Share based payment
32,247
1,880,398
—
Legal and professional
—
—
10,000
Total
371,861
2,100,746
503,279
Note: *
Provision for gratuity and
compensated absences has not been considered, since the
provisions are based on actuarial valuations for the
Group’s entities as a whole.
On May 9, 2011, MakeMyTrip acquired an approximately 79%
equity stake in Luxury Tours & Travel Pte Ltd (LTT) in
accordance with the terms of the Share Purchase Agreement (SPA)
with LTT and its existing shareholders dated February 9,2011. MakeMyTrip has paid cash consideration of approximately
USD 3 million, subject to working capital adjustment
in accordance with the terms of the SPA. MakeMyTrip plans to
invest approximately USD 0.75 million in one or more
tranches until June 2012 for subscription of new equity shares
to be issued by LTT.
MakeMyTrip will also acquire the remaining shares of LTT from
the existing shareholders in cash, in three tranches, over a
three year earn-out period ending June 2014. The earn-out will
be based on valuation linked to future profitability of LTT.