Whalesbook
MakeMyTrip Considers IDRs for India Listing
Nasdaq-listed travel giant MakeMyTrip is reportedly considering listing its Indian operations via Indian Depository Receipts (IDRs), a less common route than a traditional domestic IPO.
The company aims to tap into India's large domestic investor base while avoiding tax issues and regulatory hurdles that can affect overseas companies listing locally. MakeMyTrip confirmed it is assessing a listing to support growth and capital access, pending market conditions and approvals.
This follows MakeMyTrip's internal consolidation of key brands like Goibibo and RedBus under its Indian entity, signaling readiness for a listing. The choice between an IPO and IDRs means balancing tax efficiency against the established reliability of a traditional listing.
IDR vs. IPO: How They Differ
A traditional IPO would mean directly listing MakeMyTrip's shares on Indian exchanges, benefiting from familiar market structures and liquidity. An IDR, however, lets a company keep its main overseas listing while issuing local instruments representing its shares, held by a custodian.
Investors buy these receipts, which are essentially claims on the underlying equity, not direct share ownership. This structure allows access to Indian capital without immediate tax for current shareholders, but IDRs depend heavily on market acceptance and trading volume.
Abhishek Jain of Arihant Capital Markets notes the main risk isn't a failed listing, but one with low trading volumes and erratic prices, harming its credibility as a mainstream route.
Valuation and Competitor Comparison
MakeMyTrip currently trades at a significant valuation premium compared to global peers. With a market capitalization around $4.37 billion, its trailing twelve-month P/E ratio is between 92 and 95.
This valuation contrasts sharply with U.S. hospitality sector averages around 21.8x, and global competitors like Expedia Group (P/E ~24.1) and TripAdvisor (P/E ~32.2). While some Indian e-commerce players have exceptionally high P/E ratios, MakeMyTrip's current multiple suggests future growth is already priced in, making any listing misstep more impactful.
The company's stock has seen considerable volatility, dropping sharply over the past year to a 52-week low of $32.67 before recovering to about $46.02. Despite this, analyst sentiment remains largely positive, with a consensus 'Strong Buy' rating and average price targets ranging from $82.00 to $106.33.
However, recent price target adjustments by firms like Citigroup and Bank of America indicate concerns about near-term travel disruptions.
IDR Risks: A Perilous Path
The IDR route, despite potential tax benefits, faces historical underperformance and structural challenges. The Indian Depository Receipt market has seen little activity, with Standard Chartered Plc's 2010 issuance being the only major example, which eventually delisted.
This lack of precedent creates uncertainty around investor interest and liquidity. A key concern is that low trading volumes and erratic price discovery could undermine the goal of broader capital access.
MakeMyTrip has also faced scrutiny, including a short-seller report from Morpheus Research alleging regulatory defiance and accounting irregularities, adding skepticism about management's transparency.
Combined with geopolitical factors affecting India's travel sector, like oil price volatility, the path for a successful, liquid IDR listing seems more uncertain than a traditional IPO.
The Securities and Exchange Board of India (SEBI) is exploring ways to revive IDRs with enhanced disclosures and investor protection, but the market's embrace of this instrument remains unproven.
Outlook and Market Sentiment
The success of MakeMyTrip's potential IDR listing will largely depend on how Indian investors view the instrument's liquidity, transparency, and long-term value. While MakeMyTrip has strong brand recognition in India, demand for the IDR will likely follow proven performance.
Investors will watch for regulatory changes designed to boost IDR liquidity and how easily they can be exchanged. Analysts are generally optimistic long-term, shown by their price targets, but the chosen listing vehicle could cause short-term volatility and investor caution.
The decision could set a precedent for other offshore-based Indian companies looking at domestic capital markets.