MakeMyTrip (MMYT): The 29% Drawdown vs. the One-Stop-Shop Stress Test
A year that compounded shocks: Pahalgam terror attack, an Air India crash, FDTL pilot duty rules cutting domestic capacity, monsoon flooding in Northern states, INR depreciation, GST optical drag, and Trip.com pivoting from largest shareholder to competitor backer. Through all of it, MMYT's diversified portfolio delivered 20%+ adjusted margin growth across three consecutive quarters. The market said one thing. The income statement said another.
After ~29% drawdown from prior highs
First $50M+ adjusted operating profit quarter
Q3 FY26 YoY constant currency
Stable through GST rationalization mix shift
The Stress Test
Q1 FY26 (April-June 2025): the Pahalgam terror attack disrupted leisure travel sentiment; the Air India 171 crash in June added a second shock. Domestic air traffic degrew. Q2 FY26: monsoon flooding in Jammu & Kashmir, Ladakh, and Himachal Pradesh produced regional degrowth in the 20s. Domestic air supply remained constrained. Q3 FY26 (October-December 2025): Indigo, India's dominant carrier, cut roughly 10% of capacity due to new flight duty time limitation rules for pilots; December domestic departures came in at -5% YoY against expected 5% growth.
Three quarters. Three different headline shocks. Each hit air ticketing — MMYT's most concentrated supplier-risk segment — directly. The market response was straightforward: a 29% drawdown from prior highs, magnified by INR depreciation creating reported revenue drag and by the GST rationalization on hotels under Rs 7,500 creating ~5 percentage points of optical GBV deceleration that will persist for four full quarters until the prior-year comparable normalizes.
The operating response was different. While domestic air degrew or crawled, Hotels & Packages volume held above 18% across every quarter, accelerating to +20.3% in Q3 FY26 as the GST cut unlocked budget-segment demand. Bus ticketing margin grew 26-44% YoY constant currency. The Other segment — corporate travel platforms (MyBiz now 77,500 customers vs 64,000; Quest2Travel 539 large corporates vs 493), HAPPAY for T&E, BookMyForex, Savaari cabs, rail ticketing, insurance, visa services, and the new Tours & Activities — grew 29.7% in Q2 and 45.5% in Q3 in constant currency.
What the Five Lenses Said
Diversification absorbed three disrupted quarters with 20%+ adjusted margin growth, but a decade of pre-FY23 operating losses creates structural fragility priors.
Domestic hotels effectively uncontested among listed Indian OTAs. Three-brand portfolio captures distinct demand pools competitors haven't replicated.
Operating execution stayed strong; reported earnings noise is accounting artifact. The OpenAI partnership narrative is NOT supported by 20-F or transcripts — Myra is internally built.
$835M cash post Q1 FY26 recapitalization. The $3.1B Class B repurchase was strategic cleanup, not liquidity. Operating cash generation continues.
Recent M&A pattern (HAPPAY, Savaari, BookMyForex) is bolt-on adjacencies that work; legacy transformative deals (Goibibo, Hotel Travel) impaired.
The Trip.com Pivot
For years, Trip.com (formerly Ctrip) was MMYT's largest Class B shareholder via Travelport — patient strategic capital, supply relationships into international hotel inventory through Switch, and operational expertise from China's dominant OTA. In Q1 FY26, MMYT raised $3.1B (a mix of $1.7B primary equity and $1.4B 2030 zero-coupon convertibles) and used the entire proceeds to repurchase 34.4M Class B shares — Trip.com's position. By September 2025, Trip.com was out.
Then management disclosed on the Q2 FY26 call that Trip.com had invested in an Indian competitor. That changes the picture. The cap-table cleanup removed governance overhang and any awkward conflict-of-interest dynamic. But the competitive risk is now real and well-capitalized: Trip.com brings global OTA technology, deep supply relationships, and patient capital to a market where MMYT had a uniquely uncontested position in domestic hotels.
The Moat Mapper lens treats this as a material new competitive vector. The Consolidation Calibrator lens treats the cap-table cleanup as strategic discipline. Both are correct on different timescales. The cleanup was overdue and well-executed; the competitive threat is genuinely new and won't resolve until whatever Trip.com is funding shows market traction.
The Reported-vs-Adjusted Earnings Gap
For investors who anchor on reported net income, MMYT looks worse than it is. Q3 FY26 reported net profit was $7.3M. Adjusted net profit was $51.4M, and adjusted diluted EPS grew 33% YoY. The gap is accounting mechanics: ~$28.3M of non-cash interest each quarter from the 2030 zero-coupon convertibles (under IFRS effective interest method, $319M of embedded equity option amortizes over 3 years until July 2028), plus FX translation losses ($14.3M in Q2 FY26, $5.3M in Q3) on INR-denominated operations reported in USD.
None of this is operating cash outflow. The 2030 notes are zero coupon — no actual interest is paid; principal comes due in 2030 (or sooner via conversion if the stock appreciates). The FX losses are translation noise on naturally hedged operations (revenue and costs both INR). But the reported earnings are what hits earnings screening tools, what drives forward EPS estimates, and what retail-investor sentiment reads. That gap is durable through July 2028 — roughly nine more quarters of optical depression that will require investors to look at adjusted operating profit and constant-currency growth to see what's actually happening.
Three Conditions for Re-Rating
The investor posture is HIGHER_SCRUTINY rather than STANDARD_DILIGENCE because the path forward depends on three conditions clearing:
- Domestic air recovery. The Q3 FY26 FDTL disruption should normalize through Q4 (JFM); management expects departures back to flat-to-positive YoY. Until air segment growth resumes mid-teens, the largest revenue segment remains a drag.
- Myra monetization disclosure. 50,000 daily conversations with quality scores look promising, but no attribution to bookings or conversion lift has been disclosed. First disclosure will be a material narrative event — confirming AI as moat-reinforcing rather than just engagement metric.
- Trip.com competitor traction or absence. If whatever Trip.com is funding shows market traction in 2-3 quarters, the competitive threat moves from latent to active. If it doesn't, MMYT's domestic hotel uncontested status re-establishes.
The Read
India's travel market structural growth is real. The government's recent policy direction (GST cut on budget hotels, income tax cuts, RBI rate cuts) is unambiguously pro-discretionary spending — analysts estimate $3-3.5B incremental consumer spending unlocked in H2 FY26 alone. MMYT's portfolio is structurally positioned to capture it across segments and price points.
The drawdown reflects real concerns (Trip.com pivot, AI category overhang, FX translation drag) but undershoots the underlying operating performance. The investor education gap is real: reported earnings will continue to be optically depressed through July 2028, and the GST optical drag persists through Q3 FY27. Investors who watch volume growth, take rate stability, Other segment compounding, and adjusted operating profit will see a different business than those who read GAAP-equivalent net income.
The five-lens committee landed on HIGHER_SCRUTINY with MEDIUM confidence. Operating execution well-evidenced; competitive trajectory has more uncertainty. The full analysis with all signals, debates, and monitoring triggers is on the equity page.