Despite pandemic blues, MakeMyTrip raises $200 million through zero-coupon convertible bond

Even as the travel and tourism sector continues to reel under the pandemic impact, online travel company MakeMyTrip has managed to attract investors to back its growth ahead. The company has raised $200 million in debt through the issue of senior convertible notes at a zero-coupon rate. The debt securities offering was upsized by the company from the previous offering of $175 million announced on Wednesday. Senior convertible notes are debt securities that provide an option to convert notes into a predefined amount of the issuer’s shares and are relatively inexpensive for businesses. On the other hand, the coupon rate of a bond refers to the percentage of its face value payable annually as interest. So, a zero per cent interest coupon bond involves no interest to be paid.

The initial purchasers of the notes also have a 30-day option to buy up to an additional $30 million in aggregate principal amount of the notes. The sale to the initial purchasers is likely to settle on February 9, 2021. “The notes will not bear regular interest and the principal amount of the notes will not accrete. The notes will mature on February 15, 2028, unless earlier redeemed, repurchased, or converted in accordance with their terms prior to such date. The company may not redeem the notes prior to maturity, unless certain changes in tax law or related events occur,” according to a company statement. MakeMyTrip added that it intended to use the net proceeds from the offering for working capital and other general corporate purposes.

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“This raise will bolster our cash reserves allowing us to meet the working capital requirements as business recovery gathers momentum and also pursue any investment opportunities in the growing Indian market. This raise at zero-coupon and conversion premium of 37.5% reflects the appetite of global investors to invest behind strong Indian brands and businesses,” said Mohit Kabra, Chief Financial Officer, MakeMyTrip.

The company, in its Q3 FY21 results last month, had reported $56.8 million revenue, down 61.3 per cent from $146.9 million in the quarter ended December 31, 2019, primarily due to a decline of 62.1 per cent in its air ticketing revenue, 66.6 per cent decline in hotels and packages revenue, 43.1 per cent fall in bus ticketing revenue, and 49.9 per cent decline in revenue from other activities. “The decrease in revenue was primarily due to the continued impact of the Covid-19 pandemic, including lower travel demand due to travel restrictions,” the company had said.