MakeMyTrip Limited (MMYT)

Executive Summary / Key Takeaways

• AI as Market Expansion Weapon: MakeMyTrip's Myra conversational assistant is achieving 50% higher voice adoption in Tier 2/3 cities versus metros, directly addressing India's next 100 million travelers and transforming customer acquisition economics while deepening the company's moat in underpenetrated markets.

• International Outbound as High-Margin Growth Driver: International air ticketing revenue grew 29.6% year-on-year in Q2 FY26, roughly 2.5x market growth, while international hotels surged 42%, pushing the international revenue mix to 27% and creating a structurally higher-margin business that diversifies away from domestic aviation supply constraints.

• Portfolio Resilience Through Diversification: Despite a 3% year-on-year decline in domestic air passengers due to supply constraints, MakeMyTrip delivered 18% volume growth in hotels and 44% adjusted margin growth in bus ticketing during a seasonally weak quarter, proving the one-stop-shop model mitigates segment-specific shocks.

• Capital Allocation Excellence: The $3.1 billion capital raise and subsequent Trip.com Group (TC) partnership (16.9% voting stake) optimized the balance sheet while extending the buyback program to $200 million, signaling management's confidence in deploying capital for both growth and shareholder returns.

• Critical Execution Variables: The investment thesis hinges on Myra's ability to scale beyond 25,000 daily conversations while maintaining 70% "good conversation" rates, and on domestic aviation supply recovering to 3,200+ daily departures in H2 FY26 as management projects.

Setting the Scene: India's Travel Super-App

MakeMyTrip Limited, incorporated in 2000 and headquartered in Gurugram, India, has evolved from a simple online travel agency into the country's dominant travel super-app. The company's 25-year journey through the dot-com bust, SARS, 9/11, and COVID-19 forged a resilient operating model built on three pillars: comprehensive service integration, technological innovation, and deep penetration into India's tiered urban landscape. Today, with 82 million lifetime transacted users and 9 million new customers added in fiscal year 2025 alone, MakeMyTrip has achieved what no competitor has replicated—a true one-stop shop covering air, hotels, buses, rail, cabs, and ancillary services.

The Indian online travel market sits at an inflection point. Domestic travel is accelerating as infrastructure improves and disposable incomes rise, while international outbound travel remains dramatically underpenetrated from an online perspective. MakeMyTrip's strategy positions it to capture both waves simultaneously. The domestic market provides stable, high-volume cash flows through its redBus subsidiary (70% market share in bus ticketing) and 30%+ share in air ticketing. The international segment offers superior margins and growth, with revenue contribution climbing from 22% in FY24 to 27% in Q1 FY26. This dual-market exposure creates a powerful portfolio effect: when domestic aviation faces supply constraints, international air and hotels accelerate; when leisure travel seasonally slows, corporate travel and buses pick up slack.

Industry structure favors incumbents with scale. Airlines and hotels allocate inventory based on volume, giving MakeMyTrip preferential access. State Transport Corporations partner with established players, as evidenced by Gujarat and Odisha onboarding in Q2 FY26. Payment integration requires trust and regulatory compliance—MakeMyTrip's GDPR compliance and multi-currency support across 150 countries create barriers for new entrants. The shift from offline to online booking, still in early innings for hotels (only 18-20% online penetration), provides a decade-long tailwind. Recent policy tailwinds—including GST reductions for hotels under ₹7,500 and bus procurement, plus income tax cuts—could unlock $3-3.5 billion in additional consumer spending, disproportionately benefiting value-sensitive segments in Tier 2/3 cities where MakeMyTrip is investing aggressively.

Technology, Products, and Strategic Differentiation: Myra as Market Penetration Engine

MakeMyTrip's technological moat extends far beyond a functional booking platform. The August 2025 launch of Myra, an AI-powered conversational travel assistant, represents a strategic inflection point. Myra handles over 25,000 daily conversations in English and Hindi, with 70% classified as "good conversations"—meaning they progress toward booking or resolution without human intervention. The significance of this development lies in how it directly addresses India's linguistic diversity and low digital literacy in emerging cities, unlocking a customer base competitors cannot serve cost-effectively.

The 50% higher voice adoption rate in Tier 2/3 cities versus metros is not a trivial UX preference; it fundamentally alters customer acquisition economics. Voice queries convert at higher rates than text, and 60% of voice queries occur in English versus just 20% for text, indicating Myra is bridging the language barrier for first-time online travelers. This creates a self-reinforcing data advantage: more conversations improve Myra's recommendations, which increases conversion rates, which generates more data. Competitors like Ixigo (IXIGO.NS) may have superior rail-specific AI, but they lack MakeMyTrip's multi-modal ontology spanning flights, hotels, buses, and cabs. Global players like Booking.com (BKNG) cannot match the linguistic and cultural localization—Myra's knowledge graph incorporates user-generated insights on Indian vegetarian breakfast options and proximity to wildlife hotspots, content that resonates specifically with Indian travelers.

The technology translates into tangible financial benefits. Myra reduces customer service costs by automating post-sales queries, contributing to post-sales cost growth of just 7% year-on-year in Q3 FY25 despite 26% booking growth. The agentic framework allows Myra to orchestrate specialized AI bots for flights, hotels, and cabs, creating a unified experience that increases cross-sell. When a user books an international flight, Myra can seamlessly recommend hotels, tours across 1,100+ international cities, and customized insurance plans. This drives ancillary revenue growth in the "30s" range, materially higher than core ticketing margins.

R&D investment focuses on expanding Myra's language coverage and predictive capabilities. The seat availability prediction feature for trains, powered by machine learning, improves conversion by reducing search friction. Flight track cabs, which dynamically adjust pickup times based on real-time flight data, enhance service reliability and Net Promoter Scores. These innovations aren't just features; they deepen switching costs. Once travelers experience the convenience of voice-based planning and AI-driven support, migrating to a competitor requires relearning an interface and losing personalized recommendations built on years of transaction history.

Financial Performance & Segment Dynamics: Resilience Through Diversification

MakeMyTrip's Q2 FY26 results demonstrate the power of portfolio diversification in action. Adjusted operating profit grew 18% year-on-year to $44.2 million, achieving a 1.8% margin on gross bookings—up from 1.66% in Q2 FY25. This margin expansion occurred despite domestic air passenger volumes declining 3% due to supply constraints and a seasonally weak quarter for leisure travel. The drivers include segment mix shifts and operational leverage.

The air ticketing business delivered $102.8 million in adjusted margin, growing 10.6% despite domestic market headwinds. International air ticketing volumes grew 16%, roughly 2.5x the 6% market growth, pushing international mix to an all-time high of 43% of air revenue. International tickets carry higher absolute margins and are less susceptible to domestic supply disruptions. The domestic air market share held steady above 30%, preserving the core business for when supply recovers in H2 FY26.

Hotels and packages emerged as the star performer, generating $105.8 million in adjusted margin with 21.6% growth. Stand-alone hotels accelerated from 18.5% to 23.1% growth quarter-on-quarter, while international hotels surged 42% year-on-year. The mix of international hotels and packages reached 23.4%, up from 21.4% last year. This segment's 17.7% take rate in Q1 FY26 dwarfs air's 6.8%, making every point of mix shift materially accretive to overall margins. Homestay supply expanded by 49,000 rooms in Q2 alone, a 35% year-on-year increase, positioning MakeMyTrip to capture the alternative accommodation boom in spiritual tourism cities like Varanasi, which saw 103% room supply growth.

Bus ticketing proved the ultimate stabilizer, delivering $37.7 million in adjusted margin with 44.1% growth—all regions grew double-digits, with North and Gujarat/Rajasthan exceeding 40%. Onboarding Gujarat and Odisha State Transport Corporations added 5,700+ services, while private inventory crossed 44,000 daily schedules. The GST reduction for bus procurement announced in September will spur private operator investment, ensuring inventory growth continues. This segment's 10.3% take rate and low customer acquisition cost (leveraging redBus brand equity) make it a cash flow engine that funds investment in higher-growth areas.

The "others" category—encompassing rail, cabs, and ancillaries—grew 29.7% to $20.5 million. The Zomato (ZOMATO.NS) partnership for "food on train" across 130 stations shows early promise, while cabs scale with flight track technology. Ancillary services like travel insurance and ForEx grow in the "30s," faster than core segments, indicating successful cross-sell. Corporate travel through myBiz and Quest2Travel reached 75,500+ and 527 active customers respectively, with the Happay Expense Management acquisition (expected to close Q4 FY25) creating a comprehensive T&E platform that deepens enterprise relationships.

Cash flow generation remains robust. The company ended Q2 FY26 with $835 million in cash, up $31 million sequentially, despite recognizing $28.3 million in non-cash interest costs from the $1.4 billion zero-coupon convertible notes. Operating cash flow of $47.79 million in the quarter funded $21.7 million in share repurchases during FY25 at an average price of $92.20. The extended buyback program, now totaling $200 million through March 2030 with an annual limit of $100 million, signals management's confidence in deploying capital at attractive returns while maintaining growth investments.

Outlook, Management Guidance, and Execution Risk

Management's guidance frames a clear trajectory: maintain growth in the "20s" medium-term while expanding adjusted operating margins toward 1.8-2% of gross bookings. This isn't aspirational; it's based on observable tailwinds and strategic positioning. The domestic aviation supply outlook for H2 FY26 shows daily departures crossing 3,200+, similar to Q3 last year, which should restore domestic air growth to the mid-20s. Rajesh Magow's assertion that supply constraints are "short term in nature" is supported by fleet expansion plans and safety check completions.

The international outbound opportunity provides the most compelling growth driver. India is projected to become the world's fifth-largest outbound travel market by 2027, yet online penetration remains nascent. MakeMyTrip's 2.5-3x market growth rates in international air and hotels indicate aggressive share capture from offline agents. The standalone tours and attractions funnel, offering 215,000+ experiences across 1,100+ cities, creates a new revenue stream with minimal customer acquisition cost. Part payment options and value bundles for international air tickets, including visa rejection refunds, address affordability concerns and reduce booking friction.

Macro policy support creates a favorable demand environment. The combined fiscal and monetary stimulus from GST reductions, income tax cuts, and interest rate reductions could unlock $3-3.5 billion in additional consumer spending in H2 FY26. The GST cut for hotels under ₹7,500 specifically targets value-sensitive segments in Tier 2/3 cities, aligning perfectly with MakeMyTrip's supply expansion in these markets. Spiritual tourism, with pilgrimage cities growing 95% year-on-year, demonstrates how event-driven demand creates predictable peaks that the platform can monetize through dynamic packaging.

The GenAI journey represents both opportunity and execution risk. Myra's 25,000 daily conversations are impressive but remain a fraction of total platform interactions. Management's focus on leveraging proprietary data—"very rich data, all three brands put together"—differentiates MakeMyTrip from competitors using generic LLMs. The agentic framework, where Myra orchestrates specialized bots for each product, creates a scalable architecture. However, the success depends on maintaining the 70% "good conversation" rate as query complexity increases and languages expand.

Margin expansion potential appears structural. Mohit Kabra's guidance that accommodation mix growth could drive margins "slightly better" than the 1.8-2% target implies operating leverage as hotels/packages (higher take rates) grow faster than air. Marketing and sales promotion expense at 5.2% of gross bookings, up from 4.6% last year, reflects investment in AI and international expansion. If Myra reduces dependence on price comparison and builds brand loyalty, this ratio could normalize, providing additional margin upside.

Risks and Asymmetries

The thesis faces two primary execution risks. First, Myra's scaling challenge. While 25,000 daily conversations demonstrate product-market fit, scaling to millions while preserving conversation quality requires continuous model refinement. If voice adoption plateaus or "good conversation" rates decline, customer acquisition cost advantages evaporate. Competitors like Ixigo, with superior rail-specific AI, could challenge in specific segments, though MakeMyTrip's multi-modal integration provides defensibility. The risk is medium probability but high impact: failure to scale Myra would cede the Tier 2/3 opportunity to offline agents or simpler apps.

Second, domestic aviation supply recovery may disappoint. While management projects 3,200+ daily departures in H2 FY26, fleet induction depends on airline financial health and regulatory approvals. If supply constraints persist into FY27, domestic air growth could remain in single digits, dragging overall revenue toward the low end of the 20% target range. This risk is mitigated by the international segment's momentum and bus ticketing's resilience, but it remains the key variable for achieving mid-20s growth versus high-teens.

Currency fluctuation poses a financial risk but limited operational impact. The $14.3 million foreign currency loss in Q2 FY26 from rupee depreciation against the dollar created a reported loss of $5.7 million versus a $17.9 million profit in Q2 FY25. However, management correctly notes that Indian travelers don't cancel trips when destinations become more expensive—they shift to alternative locations. This behavioral insight suggests revenue impact is minimal, though reported earnings will remain volatile.

Competitive dynamics warrant monitoring but appear manageable. EaseMyTrip (EASEMYTRIP.NS)'s zero-commission model pressures air ticketing margins, but its 19% revenue decline and net losses in Q2 FY26 indicate the model struggles at scale. Yatra (YTRA)'s 48.5% revenue growth in corporate travel is impressive, but MakeMyTrip's 75,500+ myBiz customers and Happay acquisition create a more comprehensive T&E solution. Booking.com's global inventory advantage in hotels is offset by MakeMyTrip's localized content and payment integration. The real threat would be a well-funded superapp like Paytm (PAYTM.NS) integrating travel deeply, but MakeMyTrip's 25-year brand equity and supply relationships create high switching costs.

Valuation Context

Trading at $73.10 per share, MakeMyTrip commands a market capitalization of $6.96 billion and enterprise value of $7.51 billion. The stock trades at 6.88 times trailing twelve-month sales and 44.56 times free cash flow, reflecting a premium for growth and market leadership. The price-to-operating cash flow ratio of 41.44 indicates investors are paying for the quality of cash generation, which at $185.29 million annually represents a 19% conversion rate from revenue.

Profitability metrics show a business reaching scale. The 15.02% operating margin and 7.57% net margin demonstrate operational leverage, while the 57.56% gross margin provides ample room for technology investment. Return on equity of 12.71% and return on assets of 4.89% are respectable for a capital-efficient platform business. The debt-to-equity ratio of 46.60% is elevated due to the $1.1 billion recognition of convertible notes as debt, but the $835 million cash position and zero-coupon nature mean no cash interest burden until 2028.

Peer comparisons highlight MakeMyTrip's unique positioning. Booking Holdings (BKNG) trades at 6.28 times sales with 44.90% operating margins, reflecting global scale but slower India growth. Ixigo shows 958.52 times sales with negative operating margins, indicating speculative premium on AI potential without profitability. MakeMyTrip's valuation sits between these extremes—premium to global peers on growth, discount to unprofitable disruptors on execution risk. The EV/EBITDA multiple of 47.13 appears high but reflects the company's transition from growth to growth-plus-profitability.

The capital allocation framework supports the valuation. With $200 million in authorized buybacks and management's stated appetite to "deploy a much higher number," the company is effectively putting a floor under the stock. The Trip.com partnership validates strategic value, while the ESOP cost guidance of $35-40 million annually shows disciplined expense management. Tax benefits from carried forward losses through FY26 provide near-term earnings support before transitioning to full rates in FY27.

Conclusion

MakeMyTrip's investment thesis centers on two powerful, complementary engines: an AI-powered invasion of India's Tier 2/3 cities that rewrites customer acquisition economics, and a high-margin international outbound business growing at 2.5-3x market rates. The company's 25-year survival through multiple crises forged a resilient, diversified platform that delivers consistent 20%+ growth even when domestic aviation supply contracts. Myra's early success—with 50% higher voice adoption in emerging cities—demonstrates that technology investments are not just efficiency tools but market expansion weapons that deepen competitive moats.

The financial profile supports this narrative: 18% operating profit growth in a challenging quarter, margin expansion to 1.8% of gross bookings, and robust cash generation funding both growth investments and shareholder returns. The Trip.com partnership and extended buyback program signal management's confidence in capital deployment at current valuations. While risks around Myra's scaling and domestic supply recovery exist, the diversified portfolio and international momentum provide multiple paths to achieving the mid-20s growth target.

What will determine success? First, whether Myra can scale to hundreds of thousands of daily conversations while maintaining quality, cementing MakeMyTrip as the default search engine for Indian travel. Second, whether domestic aviation supply recovers to 3,200+ daily departures in H2 FY26, restoring the core air business to market growth rates. If both execute, the combination of AI-driven Tier 2/3 penetration and international margin expansion could drive earnings power well beyond current expectations, justifying the premium valuation through durable competitive advantages and expanding addressable markets.