Why MakeMyTrip Became A Short-Seller Target

At the heart of the issue is the adjusted margin metric, which is seen as an analog for profits in the company’s disclosures

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A short-seller report sent MakeMyTrip’s stock to its lowest point in a year. The question at the centre of the controversy—how India’s largest OTA defines profit—was never hidden. It has been sitting in the company’s own SEC filings for four years.

At the heart of the issue is the adjusted margin metric, which has become an analog for profitability in the OTA space. Investor decks, quarterly earnings calls focus on the adjusted margins and not on the operating profit. 

MakeMyTrip defines Adjusted Margin in its own 20-F filing with the US SEC as revenue plus customer discounts and cashbacks after subtracting the cost of hotel or package procurement.

It’s the central term in this equation that has drawn significant concern. Discounts given to customers and cashbacks which are actually costs for MMT are added back when calculating Adjusted Margin. 

Money that left MakeMyTrip’s accounts, reappears on the margin line under this formula. This non-standard practice is........

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