MakeMyTrip's India Listing Ambitions Face Scrutiny
MakeMyTrip's plans for a domestic Indian listing are under scrutiny following a critical report from activist short-seller Morpheus Research. Released on March 30, the report alleges the travel booking giant continues "anti-competitive practices" and defiance of a Competition Commission of India (CCI) order from October 2022, which resulted in a $26 million fine. These allegations threaten the company's growth story and its strategy to list its Indian business locally.
Persistent Regulatory Scrutiny
Morpheus Research claims MakeMyTrip uses indirect methods, like a "price competitiveness score," to ensure hotels charge similar prices, repeating concerns the CCI previously raised. The report also alleges accounting irregularities, such as not adequately setting aside funds for money owed by the failed GoAir airline. It claims MakeMyTrip uses adjusted financial figures that differ greatly from international accounting standards, potentially making profits look higher than they are. As of March 30, MMYT shares closed at $36.33, a modest 1.93% gain, suggesting the market had not yet fully reacted to these new claims, which emerged over the weekend.
Valuation vs. Risk
MakeMyTrip's current valuation is high compared to global peers. Its Price-to-Earnings (P/E) ratio is between 72.59x and 81.18x, far above Expedia Group's 21.88x and Booking Holdings' 24.39x. While analysts mostly rate MMYT a "Strong Buy" with an average price target of $106.33, this optimism may not fully reflect the growing regulatory risks. However, the Indian online travel market is a strong growth area, expected to reach $25.38 billion in 2026 and grow at an average annual rate of 8.74% through 2031. This growth, driven by more people using smartphones and a growing middle class, provides a good backdrop for MakeMyTrip, which has a leading 50% share of the domestic online travel agency (OTA) market.
Strategic Setbacks and Financial Weaknesses
Despite the market outlook and analyst ratings, MakeMyTrip faces significant challenges. The main argument against the company is its alleged continued defiance of the CCI's 2022 order, which demanded an end to similar hotel pricing and other anti-competitive practices. Morpheus Research claims evidence of indirect enforcement persists and suggests a new CCI investigation is underway, with results expected early this year. The activist short-seller also points to potential accounting manipulation, including a large amount owed by the failed GoAir airline for which funds are allegedly not adequately set aside. Combined with claims of artificially boosting profits and using "dark patterns" to trick customers, this raises concerns about financial and operational integrity. The planned Indian listing, meant to drive growth and access local capital, could face major regulatory obstacles or lower investor interest if these claims are proven. Unlike competitors like Booking Holdings or Expedia, which operate under different rules, MakeMyTrip's exposure to Indian antitrust actions directly affects its main growth market and plans. The company's leadership, including Group CEO Rajesh Magow, faces a critical point where past compliance issues could harm future growth.
Optimism Tempered by Uncertainty
Analysts remain largely optimistic, with a "Strong Buy" rating and an average price target suggesting significant potential gains. The company's strategic moves, like merging RedBus India and acquiring Flamingo Transworld, aim to strengthen its market position and drive long-term growth. However, ongoing allegations of regulatory non-compliance and accounting issues create significant uncertainty. The success of MakeMyTrip's India listing strategy and its continued market leadership will depend on its ability to clearly address these serious accusations and satisfy regulators and investors.