MakeMyTrip.com - Emerging
Leader Of Online Travel
Online travel market
has been one of the most exciting ones over past few years from a growth
standpoint. Starting with government sites like IRCTC, and then followed up by
online travel agents (OTAs), this category has
witnessed great expansion. Amongst other things, it has also contributed to
bring a large number of shoppers online. As a category becomes large,
specialized plays become feasible – focus on specific products, business
models, customer segments or experiences can create a second tier of businesses
that can create and realize value.
MakeMyTrip, one of India's leading online travel companies,
has made a dream debut on the US market with its shares soaring over 90 per
cent, hours after its listing on leading American stock exchange, NASDAQ.
"It is fair to say it's been a fairytale listing for us
now," Deep Kalra, CEO of MakeMyTrip said. "We are very excited. I
don't think anyone anticipated this."
The company had raised $70 million
at an Initial Public Offering (IPO) of 5 million shares to US investors. At an
offer price of $14 per share, the company was valued at close to $480 million,
prior to the listing. But after the surge in stock price, the valuation has
jumped to around $800 million with shares closing at $26.45 on the NASDAQ.
MakeMyTrip,
based in Gurgaon near New Delhi, planned to use the proceeds from the share
sale to acquire or invest in businesses and for working capital, it said. The
company is the largest Indian online travel firm based on gross bookings last
year, it said, citing data from travel research firm PhoCusWright Inc.
If you’re going to be a copycat, do it the right way. MakeMyTrip isn’t exactly a new idea. The functionality and even the look-and-feel are similar to a lot of US online travel sites. But Kalra played the copycat game the right way. Online travel is almost always one of the first categories to take off in new markets, in part because since many of the tickets are issued electronically, it has a clear revenue model that doesn’t rely on mature advertising markets or sophisticated shipping routes. And in the early days, he designed his site for India’s domestic travel market— an area where business US competitors weren’t going to target. Unlike entrepreneurs who work hard in trying to build, say, “an Indian Facebook” – MakeMyTrip wasn’t a re-skin, it actually solved problems unique to India. One can’t copycat something one don’t deeply understand. Kalra assiduously studied competitors, those in the United States and ones in other emerging markets like China, to analyze what had worked for them and what didn’t. When done well, copycatting is about adjusting to local markets and learning what the first generation did right and wrong. Timing the Market Isn’t Everything, but It Helps: There are a number of worth mentioning things MakeMyTrip did right, but let’s face it—a lot of this stock pop has to do with scarcity. After all, the company’s revenues are growing at an impressive 49% a year, but its net income is a paltry $1.3 million a quarter. The company began
operations in 2000 by offering travel services to non-resident Indians in the
U.S., according to the filing. It started offering services domestically in
September 2005, and posted a loss of $6.2 million for the year ended March,
according to the filing.
But in the markets, what a company is “worth” is in the eye of the investor and MakeMyTrip is the first Indian company to go public in America in four years and it was just the fourth India-based company to go public in the US since 1999. For the sake of comparison, 14 Chinese companies have gone public in the US just this year. So while China’s economy may be growing faster, NASDAQ and NYSE investors have more chances to buy a piece of it than those interested in India. The tremendous interest of investors came from MakeMyTrip's
dominance in the Indian travel market, where the growing middle class is
travelling more and Internet penetration is growing in the emerging market.
"We are very bullish that the takeoff on Internet (in India) is something
that is going to happen," Kalra added. "More importantly, we expect a
lot of the people coming online to be on broadband. We expect to see phenomenal
growth as more people get to enjoy the online experience."
Question Of Discussion:
What strategic planning did Mr. Kalra had before starting up
the Online Traveling Site?
ABHAY SINGH
MSCLIS- 1st Sem
IIIT- ALLAHABAD
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