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) -- Shares of

MakeMyTrip Ltd.

(MMYT) - Get MakeMyTrip Ltd. Report

were grounded Monday after the India-based online travel company delivered in-line results in its first quarter as a public company and disclosed a potential tax issue.

Before the opening bell, the company, which was founded in 2000 and

debuted on the Nasdaq in mid-August with the sale of 5 million shares at $14 each

, reported a fiscal second-quarter loss of $1.8 million, or 7 cents a share, for the three months ended Sept. 30, down from a year-ago profit of $19,000.

On an adjusted basis, excluding certain items, MakeMyTrip said it earned $579,000, or 2 cents a share, in the latest quarter, meeting the average estimate of three analysts polled by

Thomson Reuters

. Revenue rose nearly 41% year-over-year to $23.8 million in the September quarter from $17 million last year. Less service costs, revenue totaled $12.9 million for the period, up 42%.

Expenses also expanded across the board, however, with personnel costs rising to $3.4 million from $2.4 million a year ago and other operating expenses such as payment gateway charges, advertising and business promotion expenses and outsourcing fees swelling to $8.7 million in the latest three months, a jump of 43% from last year.

A bigger problem for MakeMyTrip may be the tax issue, which stems from an industry-wide audit initiated by the Indian government for the fiscal year ended in March 2009. The company said Monday it received a notice during the September quarter seeking payment of an undisclosed amount of service taxes, a determination MakeMyTrip said it plans to argue against.

"Based on legal advice received, the company believes that it has a strong case in its favor and is in the process of preparing an appropriate response to the notice issued by the service tax authorities," MakeMyTrip said in its statement. "However, at present no reliable estimate can be made of the amount of the obligation, if any."

That last statement is the most troubling as Wall Street hates uncertainty. MakeMyTrip did offer up what it termed an "optimistic" outlook, saying it expects revenue less service costs of between $58 million and $61 million for fiscal 2011, but that forecast did little to stem the selling in the stock, which based on Friday's close at $38.15, was up more than 150% from its IPO price.

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The shares finished Monday at $28.02, losing 27%, or $10.13. Volume of 2.8 million was nearly six times the issue's trailing three-month daily average of around 500,000, and the heaviest trading the stock has seen since its August 12 debut.

A recent run-up in the stock amid a rally in the online travel companies after


topped Wall Street's earnings expectations for an eighth straight quarter last week may have contributed to the depth of MakeMyTrip's plunge on Monday.

The stock was trading at around $32 before's report on Nov. 8, and it rose in three of the next four sessions leading into the release of its own numbers, getting as high as $39.60 on Friday. Names like


(EXPE) - Get Expedia Group, Inc. Report


Orbitz Worldwide



Ctrip International

(CTRP) - Get International Ltd Sponsored ADR Report

enjoyed similar run-ups, and all three were down about 3% on Monday.


Written by Michael Baron in New York.

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Michael Baron


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