In December 2018 MakeMyTrip (MMT) CEO Deep Kalra assured the investors that the company would break even by March 2020. MMT was firmly on track to keep its assurance. In the third quarter of FY 2019-20 (i.e., October-December 2019), the company reported a quarterly revenue of $206.7 million, with a massive dip in operating losses - about $11 million as against $22.2 million during the same quarter a year ago. It seemed the prolonged rough patch was set to get over (MMT had reported operating losses consistently, except for fiscal years 2011 and 2012).

Page 3 of 4 The following quarterQ4 FY20too started on a promising note. Then came the pandemic. The impact of Covid was very sharp in March. It only got worse as the country went into a prolonged lockdown. The route-to-profit plan got tripped. Revenues vanished and losses piled up. The storm only got intense as, in the first quarter (April-June) of FY21, year-on-year revenues dipped by a staggering 95.5 percent. The free fall continued in the following quarter with revenues slumping by 82.2 percent year on year. However, the CEO sees a couple of positives to keep afloat. First, the companys excellent track record in survival. From the dotcom bust at the turn of the century, the 9/11 attacks and the SARS epidemic of 2003 to the global financial crisis of 2008-09 and Indian aviation blues in 2012 and 2019 with the grounding of Kingfisher Airlines and Jet Airways, respectively, MMT has seen it alland lived to tell the tale. Second, in last two quarters, the company reported a sequential growth in revenue, from $6.4 million in Q1 (Apr-Jun 2020) to $21.1 million in Q2 (Jul-Sep 2020). And the losses have been contained during the same period: From $34.6 million to $21.1 million. About 40 percent of the hotel booking business is back for MMT, so is 50 percent of the flight and inter-state travel business. The CEO thinks that it is revenge tourism that is behind the spurt. People are sick and tired of being confined to their homes during the protracted lockdown. From staycations (short stays), weekend gateways, workation (working from hills) to making trips to Goa, Dubai and Maldives, Indians have hit the road, and boarded the flight to get over pandemic fatigue. Weekend getaways at premium hotels, resort-style properties and premium villasmany within driving distances of metrosmean premium properties are seeing a better rebound than budget ones. Though the green shoots are clearly visible, they might not be enough to help any online travel aggregator (OTA) or hospitality player survive the unprecedented crisis. What would be of immense help, Kalra adds, is the amount of cash a company has on its balance sheet get. When revenues dip sharply, the only safety cushion is cash. Thankfully, MMT is safe on that front. At the end of the second quarter, the company had $197.7 million in cash, cash equivalent, and term deposits. Theres another $100 million as back-up liquidity for contingency or investment. This gives MMT enough runway for the next few quarters. MMT worked on a war-footing to conserve cash by cutting down variable and semi-variable costs urgently. A big positive for OTAs is high variable cost structures such as sales and marketing expenses. A comprehensive review of cost structures was undertaken, salary cuts were rolled out, and marketing and promotion costs were slashed. The company shifted its focus on automating as many potential post-sales queries as possible, and right-sized headcount, largely in the packages business, by shifting to variable cost-driven offline sales channels. Pre-Covid, MMT started increasing its franchisee store footprint, and signed about 150 centres. This allowed it to shut all its company-owned offline retail stores across the country during the crisis.

Page 4 of 4 While the trend of optimising cost and minimising losses continued to play out during the second quarter, one more shift was clearly visible: The business revival would be led by the domestic market, as international travel was still restricted, taking a toll on the airlines. For MMT, the pandemic has brought in its wake an underlying tailwind: A quicker shift to the online medium. An investor presentation by MMT in September gives a glimpse into the immense headroom for growth. Online flight booking for domestic and international travel was at 54 percent and 30 percent, respectively, in July. In contrast, online hotel booking stood at 15 percent, and is estimated to touch 40 percent over the next five years. For inter-city bus ticketing, online booking component was 46 percent. What is also perceptible is low competitive intensity, which means less of cash burn. The fruits of revenge travel, though, might not turn out to be so sweet if Indians continue to stay reckless and the pandemic surges on. Kalra is keeping his fingers crossed. Kalra is betting big on a successful vaccine. The days of carefree, leisure, discretionary travel could gradually return once the virus is adequately controlled or an effective treatment or vaccine is developed, he said in an earnings call in June. But we have a long climb ahead, he added. a. Use Porters Five Forces to comment on the industry dynamics how the forces have changed due to COVID and what is driving the confidence of the CEO? (5 marks) b. Define the value chain of MMT and use it to highlight the areas where cost reduction has been done and how it might impact the revival of the company? (5 marks) c. Comment on whether MMT should consider repurposing its business. Given that it has got a platform that allows it to aggregate different assets (hotels, airlines, car rental) and improve customer experience, why cant this platform be extended to the education sector where students can be allowed to pick and choose courses/labs/mentors from different sources to improve learning? (5 marks)

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