MakeMyTrip (MMYT): Bookings +19.9%, Profit -65%. Is MMYT a Buy?

MakeMyTrip Limited (MMYT) Q1 FY2027 — Reported August 3 (Q1 FY2027, the three months ended June 30, 2026 — MakeMyTrip's fiscal year ends 31 March, so the June quarter is Q1 of FY2027). Gross bookings $2,854.7M, up 9.4% reported and 19.9% in constant currency. Revenue $285.6M, up 6.2% reported and 16.1% in constant currency. Adjusted operating profit $51.4M, up 8.6%. But profit for the period fell 64.7% to $9.1M and diluted EPS fell from $0.22 to $0.09, because net finance costs went from $4.0M to $28.3M — $29.2M of non-cash discount accretion on $1.6625B of 0.00% convertible notes. Adjusted diluted EPS was $0.53 (vs $0.42) on revenue of $285.58M. The stock closed at $61.78, UP 8.5% from a $56.95 close, having traded $60.16 to $65.00. The number nobody put on air: MakeMyTrip's reported profit fell 64.7% not because the business weakened but because of a decision made thirteen months earlier. On June 23, 2025 it issued 18.4M shares at $90.00 ($1,656.0M) plus $1,437.5M of 0.00% convertible notes due 2030, and used the combined $3,038.8M to repurchase 34,372,221 Class B Shares from Trip.com at roughly $88 a share. The stock is $61.78. The notes pay no cash coupon, but IFRS still accretes the discount — $29.2M this quarter against $6.1M a year ago. Total equity at June 30 was NEGATIVE $59.3M. THE CALL: AVOID (4/5, GREAT FRANCHISE, AND THE PRICE IS OUR BULL CASE.) — base-case value ~$37.0 vs ~$61.78 today. KEY METRICS: - CALL: AVOID 4/5 — fair value ~$37 vs $61.78 (about 40% BELOW). An OWNER-EARNINGS DCF, because MakeMyTrip is IFRS-profitable and free-cash-flow positive. THE BUILD: FY2026 (year ended 3/31/26) operating cash flow $182.5M, less capex of $12.4M (PP&E $5.5M + intangibles $6.9M), less share-based compensation of $23.0M — a real cost paid in dilution, and one every adjusted measure in this release adds straight back — gives owner earnings of ~$147M. Grow 13% for five years and 9% for five more IN REPORTED DOLLARS (not constant currency), 4.0% terminal, discount 10.5%: enterprise value $4.11B, less net debt at par of $638M, divided by 100.0M as-converted shares = $35. Bear (8%/5%, 3.0% terminal) $18; bull (19%/13%, 4.5% terminal) $61. Probability-weighted 25/50/25 = $37. SHARE COUNT: 90,448,984 ordinary shares (including 1,686,012 treasury) + 5,295,690 Class B at 3/31/26 = 94.06M outstanding, plus 5.94M from the $230M 2028 Notes which are IN THE MONEY at a $38.75 conversion price. NET DEBT: $1,432.5M of 2030 Notes at par (the $121.50 conversion price is nearly double the stock, so they are cash to repay, not equity) less $370.7M cash and $423.6M term deposits. - THE REVERSE DCF IS THE CALL: at $61.78 the enterprise value is $6.82B — 36x FY2026 adjusted operating profit of $188.8M, 33x the annualised Q1 run-rate, 6.5x FY2026 revenue and 46x our owner-earnings estimate. Discounted at 10.5% with 4% terminal growth, that price requires ~21% owner-earnings growth for five years and ~15% for five more, in reported dollars. Delivered this quarter: adjusted operating profit +8.6%, free cash flow $19.9M vs $37.9M (MINUS 47.5%). The price is almost exactly our BULL case ($61 at 10.5%), which is the definition of no margin of safety. - THE UNDER-COVERED ANGLE — MAKEMYTRIP IS BUYING THE GROWTH: customer inducement costs, which are booked as a REDUCTION OF REVENUE and therefore never appear as an expense, were $106.833M (vs $89.070M). Add marketing and sales promotion of $48.785M (vs $43.925M) and total demand spend was $155.6M, UP 17.0% against adjusted margin growth of 9.4%. That is 5.4% of gross bookings (management gave the same figure on the call, vs 5.2% in the preceding quarter) against 5.1% a year ago — and 50.2% of adjusted margin, up from 47.0%. Half of every dollar of gross profit now goes straight back out to buy the next booking. That is why +19.9% constant-currency gross bookings converted to +8.6% adjusted operating profit. - TAKE RATES AND MIX: Adjusted Margin % (adjusted margin divided by gross bookings — the company's own take-rate measure) fell in AIR TICKETING from 6.8% to 6.4%, on 54% of group gross bookings. Underneath it, FLIGHT SEGMENTS FELL 2.0%, from 14,479k to 14,185k — air gross bookings rose 7.6% reported on higher fares (fuel costs, capacity cuts, elevated airfares), not on volume. Hotels and packages improved to 18.0% from 17.7% on 19.9% room-night growth (12,773k vs 10,657k) and is now the largest adjusted margin contributor at $134.5M. Bus ticketing, the fastest grower at +31.4% cc gross bookings and 23.9% more tickets, earns only 10.3%. Segment adjusted margin: air $98.5M (+10.8% cc), hotels & packages $134.5M (+21.3% cc), bus $51.8M (+32.4% cc), others $24.9M (+27.2% cc); total $309.7M. - THE CURRENCY WEDGE AND THE BALANCE SHEET: MakeMyTrip reports in USD but the functional currency of its material subsidiaries is the INR, which depreciated MORE THAN 10% year on year in the quarter. Reported revenue growth 6.2% vs 16.1% constant currency — $26.6M, or 9.9 points, of pure translation drag; gross bookings 9.4% vs 19.9%; air ticketing revenue actually FELL 7.5% as reported while rising 1.1% in constant currency. On the balance sheet at 6/30/26: cash and cash equivalents $370.656M (including $2.6M restricted) plus term deposits $423.6M = $794.3M, against $1,662.5M of convertible principal ($230.0M of 0.00% 2028 Notes at $38.75, $1,432.5M of 0.00% 2030 Notes at $121.50 after $5.0M was repurchased in FY2026). Loans and borrowings $1,435.4M. TOTAL EQUITY IS NEGATIVE $59.305M. Interest expense on financial liabilities measured at amortised cost: $29.219M this quarter vs $6.064M. - STREET vs US: eleven analysts, consensus rating BUY (8 buy / 3 hold / 0 sell), consensus 12-month target $77 with a range of $70 to $84 — about 25% above the $61.78 close. HSBC initiated coverage at Buy with a $70 target; a separate ten-analyst panel shows an average nearer $71.90 with a low of $58. We do NOT align and we are far more CAUTIOUS: our $37 is 40% BELOW the price. The gap is not the operating forecast — we model the same ~20% constant-currency booking growth. It is three choices. One: we discount REPORTED DOLLARS, because a US-listed shareholder is paid in dollars and the rupee is a standing tax. Two: we treat $1.6625B of zero-coupon principal as DEBT AT PAR, because a $121.50 conversion price against a $61.78 stock is not equity. Three: we DEDUCT share-based compensation from owner earnings rather than adding it back. What to watch: Bullish: the air ticketing Adjusted Margin % holding at or above 6.4% for two more quarters while flight segments return to growth (that would prove the take-rate slide was fuel and fares, not competition); the MMT India IPO — a pre-filed DRHP went to SEBI on July 17, 2026 for a Main Board listing of up to ~$1B, entirely offer-for-sale by the Mauritius parent and ibibo Group — pricing the Indian subsidiary at a multiple that makes the Nasdaq parent look cheap on a look-through basis, with proceeds visibly retiring the 2030 Notes; AI cost leverage converting to operating margin (AI now writes >75% of code and resolves >50% of support calls, with management targeting 65-70%). Bearish: customer inducements plus marketing rising through 5.6% of gross bookings year over year, which would mean Cleartrip/ixigo/EaseMyTrip are forcing the pace; the air ticketing Adjusted Margin % breaking below 6.2%; a further leg down in the INR that keeps reported dollar growth in mid-single digits while the constant-currency headline stays glossy. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.