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India's MakeMyTrip Surges After Initial Share Sale

MakeMyTrip Ltd. posted the biggest first-day gain for a U.S. initial public offering since 2007 after becoming the first Indian company in four years to complete an IPO in America.

India’s largest online travel company surged 89 percent to $26.45 in Nasdaq Stock Market trading yesterday after selling 5 million shares at $14 each. The original midpoint price had valued the Gurgaon, India-based company at 5.41 times next year’s sales, higher than the average of 4.16 for its U.S.- traded rivals, data compiled by Bloomberg and Independent International Investment Research Plc show.

MakeMyTrip raised the full amount it sought after the last eight American companies to complete initial sales sold shares below the forecast range and DLC Realty Trust Inc. postponed its $520 million IPO. Indian companies are raising record amounts from share sales in their home market even as offerings in America languish below their 2007 levels, as economic growth in India outpaces the U.S. by almost three times.

“It’s a nice way to invest in India, which is a huge economy early in its development cycle, and increasing travel is a big part of that,” said Timothy Cunningham, who helps oversee $57 billion at Thornburg Investment Management in Santa Fe, New Mexico. “A lot of IPOs lately have done poorly. This is a huge standout, and the high pricing shows the quality of the company and opportunity it presents.”

Photographer: Rajkumar/The India Today Group/Getty Images

MakeMyTrip founder and CEO Deep Kalra. Close

MakeMyTrip founder and CEO Deep Kalra.

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Photographer: Rajkumar/The India Today Group/Getty Images

MakeMyTrip founder and CEO Deep Kalra.

U.S. Offerings

MakeMyTrip’s first-day climb was the biggest on a U.S. exchange since Athenahealth Inc. of Watertown, Massachusetts, jumped 97 percent after completing its IPO in September 2007, according to data compiled by Bloomberg.

The travel company convinced buyers to pay a premium for its shares after RealPage Inc., the Carrollton, Texas-based provider of rental-property management software, chopped its initial offering by 33 percent this week and DLC Realty, the Tarrytown, New York-based real estate investment trust that manages shopping centers, scrapped its sale.

RealPage advanced 32 percent to $14.52 yesterday.

While shares of companies that completed IPOs in the U.S. have lost 7.1 percent on average this year and more than half of this quarter’s U.S. offerings have left buyers with losses, offerings in India gained 18 percent, Bloomberg data show.

Indian companies have raised 689 billion rupees ($14.7 billion) from all share sales this year, putting the market on course to exceed 2007’s record 782 billion rupees, Bloomberg data show. U.S. offerings have raised $77 billion this year, on pace to total less than the $139 billion raised in 2007, when the Standard & Poor’s 500 Index rose to a record, the data show.

Scarcity Value

MakeMyTrip was the first IPO by an India-based company in the U.S. since WNS Holdings Ltd. raised $255 million in July 2006, Bloomberg data show. Genpact Ltd., a Hamilton, Bermuda- based outsourcing company spun off by General Electric Co. that operates in Indian cities from Bangalore to Gurgaon, sold $568 million of shares in an August 2007 U.S. IPO, the data show.

MakeMyTrip becomes just the fourth India-based company to complete its IPO in the U.S. since 1999, Bloomberg data show. At least 14 Chinese companies have sold shares in U.S. initial offerings this year.

India’s economy expanded at an annual pace of at least 6.7 percent during the period in which no companies listed in New York, while the U.S. suffered the longest recession since the Great Depression, data compiled by Bloomberg show. India will expand 9.4 percent this year as America’s gross domestic product increases 3.3 percent, according to estimates by the Washington- based International Monetary Fund.

High Growth

“Risk appetite exists as long as the IPO is in a space where there’s a perception that high growth will occur,” said Michael Yoshikami, who oversees about $1 billion as chief investment strategist at YCMNet Advisors in Walnut Creek, California. “In this case, that’s India.”

MakeMyTrip reported net income of $1.3 million last quarter, reversing a loss from a year earlier, after increasing sales by 49 percent, its SEC filing showed. In the prior three fiscal years, it lost a combined $32.5 million.

About 48 percent of the $1 billion in online travel reservations made in India last year were booked through the company, while Yatra.com and Cleartrip.com accounted for a combined 42 percent of sales. MakeMyTrip also cited Expedia and Travelocity.com Inc. as competitors.

The $13 midpoint IPO price valued MakeMyTrip at 5.41 times next year’s revenue, estimates from London-based Independent International Investment Research show. That’s based on sales of $120.3 million in 2011, the data show.

‘Much Deeper Base’

Five online travel companies traded on U.S. exchanges are valued at an average of 4.16 times analysts’ estimates for revenue, data compiled by Bloomberg show. The largest by market capitalization, Priceline.com Inc. of Norwalk, Connecticut, trades at 3.91 times, while Bellevue, Washington-based Expedia Inc. is valued at 1.85 times, according to the data.

ELong Inc. of Beijing, part-owned by Expedia, trades at 3.93 times. The company gets all its sales from China, which has almost five times the number of Internet users in India, the Internet World Stats website showed. Shanghai-based Ctrip.com International Ltd., China’s biggest online ticketing agent, is the only company with a higher multiple than MakeMyTrip.

“Investors have bought into the India story and travel and tourism is booming,” Deep Kalra, chief executive officer of MakeMyTrip, said in an interview in New York yesterday. “The U.S. offers a much deeper base of investors who understand new businesses like consumer Internet much better. We wouldn’t be surprised to see more Indian companies coming out in the U.S.”

To contact the reporter on this story: Lee Spears in New York at lspears3@bloomberg.net.

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