MakeMyTrip Limited (NASDAQ:MMYT) Q1 2025 Earnings Call Transcript

MakeMyTrip Limited (NASDAQ:MMYT) Q1 2025 Earnings Call Transcript July 23, 2024

MakeMyTrip Limited beats earnings expectations. Reported EPS is $0.39, expectations were $0.2.

Vipul Garg: Hello everyone. I am Vipul Garg, Vice President, Investor Relations at MakeMyTrip Limited, and welcome to our Fiscal ’25 First Quarter Earnings Webinar. Today’s event will be hosted by company’s leadership team, comprising Rajesh Magow, our Co-Founder and Group Chief Executive Officer; and Mohit Kabra, our Group Chief Financial Officer. As a reminder, this live event is being recorded by the company and will be made available for replay on our IR website shortly after the conclusion of today’s event. At the end of these prepared remarks, we will also be hosting a Q&A session. Furthermore, certain statements made during today’s event may be considered forward-looking statements within the meaning of the Safe-Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995.

These statements are not guarantee of future performance, are subject to inherent uncertainties and actual results may differ materially. Any forward-looking information relayed during this event speaks only as of this date and the company undertakes no obligation to update the information to reflect changed circumstances. Additional information concerning these statements is contained in the Risk Factors and forward-looking statements section of the company’s annual report on Form 20-F filed with the SEC on July 2, 2024. Copy of these filings are available from the SEC or from the company’s Investor Relations department. I would like to now turn the call over to Rajesh for his remarks. Over to you, Rajesh.

Rajesh Magow: Thank you, Vipul. Welcome everyone to our first quarter call for fiscal 2025. We are pleased to share that we’ve started the financial year-on a strong note with the highest-ever quarterly gross bookings, revenue and adjusted operating profit with robust growth across all our businesses. We delivered these strong numbers despite the late pickup of the season for leisure travel due to general elections in April. Gross booking value for Q1 was more than $2.4 billion, with growth at 22% year-on-year in constant currency terms and the adjusted operating profit was $39.1 million, registering a growth of about 30% year-on-year. Our strategy of catering to various travel use cases and targeting different demand segments on multiple customer touch points is helping us deliver sustained growth.

A wide spectrum of travel products is also helping us increase our share of the wallet of Indian travellers’ overall travel spend. We now have a lifetime transacted user base of 75 million across all our three brands. To build strong — to build stronger loyalty, we relaunched our flagship loyalty program, MMT Black, with simplified two tiers and with new benefits, such as guaranteed room upgrades and meal upgrades for participating hotels and homestays, immediate myCash credit post booking and no cap on the number of times one can avail discounts on flight add-ons such as zero cancellation, in-flight meal, free date change, et cetera. Although it is early days of the new MMT Black program rollout, we have already seen improvement in the operating metrics compared to the earlier version, indicating better value for our Black customers.

On macroeconomic front, India’s robust economic growth has boosted the disposable income of its growing upper-middle class, leading to higher disposable income in their hands. As a result, there is a visible increase in spending on discretionary services, including travel and tourism. On the other hand, the lower-middle class is also a growing number, acting as a booster for domestic travel. Besides, the increasing number of households headed by the younger generation is helping drive a cultural shift towards taking more breaks in a year. The rise of flexible working arrangements has also influenced travel behavior. Many people are combining work and leisure through vacations and extended stays in different locations. The shift in work culture allows individuals to travel more frequently without compromising their professional responsibilities.

Q&A Session

As per a McKinsey report, India is currently the world’s sixth-largest domestic travel market by spending with growing middle-class powering travel spending, growth of roughly 9% per year. India’s domestic market could overtake Japan’s and Mexico’s to become the world’s fourth-largest by 2030. Domestic air passenger traffic in India is projected to double by 2030, boosted by government initiatives to build infrastructure and connect underserved domestic airports. Let me now turn to the business segments, starting with our air ticketing business. A positive development in this quarter was international outbound travel. As reported earlier, international outbound travel recovered fully in fiscal year ’24, but in this quarter, we witnessed robust growth of 25% year-on-year in international air segments.

It now contributes over 37% to our air ticketing revenue. Long-term outlook on outbound travel from India is also very positive with fast-growing pools of first-time tourists. Many short-haul and longer destinations are investing to increase their awareness for Indian tourists, considering India a very important source market. A couple of emerging destinations, like Turkey and Kazakhstan, the number of Indian tourists have significantly grown and touched new highs. For Kazakhstan, India is now the third-largest source market, witnessing a threefold increase in Indian tourists compared to 2021. For Turkey, the number of tourists from India has surged 34% in the first five months of 2024 compared to same period last year. We continue to invest in this opportunity and aim to increase our share of revenue from this segment over the years.

In the domestic air market, the supply situation improved marginally. The total number of domestic departures saw a slight increase in Q1 compared to the previous quarter. We expect the domestic supply situation to improve further from the second half of the financial year. The growth in the domestic air market continues to be muted. On a flown basis, the market grew by 4.5% year-on-year and we continue to grow faster than the market. To further improve our product experience, we have introduced GenAI-assisted chatbot named Myra on our international flight booking funnel. Myra assists users with various flight-related queries and actions, such as applying conditional filters, obtaining visa or transit, visa information, understanding baggage policies, learning about cancellation, date change penalties, et cetera.

Additionally, it can suggest the cheapest travel days for a destination and perform searches based on simple chat commands. AI-based feature enhancement is a journey. We plan to make Myra more and more intelligent using consumer insights in the future. Additionally, we have further expanded our integrated e-Visa feature now for five additional destinations, like Singapore, Indonesia, Vietnam, Azerbaijan and Sri Lanka. To increase affordability and address cash flow issues, we have introduced a new EMI feature that converts the international flight price into a six months EMI plan, thus addressing affordability concerns. On domestic flight front, we now have premium airport services such as meet and assist porter, and buggy transfer, along with regular flight booking.

We plan to expand this feature on our international funnel as well soon, thereby enriching the flight booking experience with additional services. Our accommodation business, that includes hotels, homestays and packages, continues to witness strong growth. We recorded over 27% year-on-year growth in the adjusted margin on a constant currency basis, contributing 44% to the overall revenue. As we improve our penetration, we continue to add more properties across the country and now offer properties in 2,100-plus cities in India. Our international outbound business for hotels continues to scale as well, contributing 15% of total accommodation business revenue. On the customer experience side, we have introduced the street view feature to enhance the user experience by providing an accurate view of the external surroundings of the properties, ensuring safety and visual appeal.

We are the first platform in India to introduce this capability for both domestic and international properties. We’re also now giving personalized recommendations for a customer across room types, meals and amenities, for example, highlighting options for properties in remote locations where meal plans are essential. This intervention not only enhances user convenience, but also helps improve conversion. We’ve also launched 360-degree imagery for virtual tours, initially covering 200 mid and premium properties with plans to expand to over 1,000 hotels. This feature gives users an immersive experience visualizing hotel rooms and amenities, leading to a higher conversion rate among users who interact with it and helping us promote higher ASP properties.

Our Homestay business continues to grow with increasing coverage of destinations. During the quarter, we sold over 19,300-plus unique properties across 850-plus unique destinations with strong growth across business and leisure destinations. We endeavor to grow this category by offering unique experiences to our customers. As part of our MoU signed with the Goa government, we launched Goa Beyond Beaches campaign, promoting homestays near temples and heritage homestays in city. The collaborative effort aims to further propel tourism in Goa and position it as vibrant year-round destination, moving beyond its iconic sun, sand and beaches. MakeMyTrip in collaboration with NITI Aayog launched Project Maitri, a women entrepreneurship program, aimed to empower female entrepreneurs from Northeast India by leveraging the untapped potential of homestays as a pathway to entrepreneurship, economic empowerment and independence.

30 hosts attended the inaugural workshop, wherein comprehensive training focusing on key areas, such as finance, legal, taxation, hospitality and OTA management was provided to help them set up and run a successful homestay business. Our Holiday Packages business delivered robust performance as well, achieving highest-ever gross booking numbers, driven by strong growth in international outbound packages with new destinations like CIS Countries, America and Japan leading the growth. Our packages team added new products like NextGenAdventures, specifically targeting millennials and Gen Z. These are experiential group tours catering to the 18 to 35 years-old age group. Our Bus business continues to grow well, driven by strong demand and expansion of supply.

The buoyancy in supply was due to the addition of new buses by many existing operators across the country, as the delivery of new buses gathered pace. However, an increase in supply and a reduction in diesel prices has led to a fall in average seat price in most regions, particularly in South India, which helped in robust volume growth in the segment for us. Keeping women’s preferences and safety in mind, we launched a women’s special feature that shows info such as buses that are highly rated by women, number of women traveling along, women-specific red deals, reviews by women, et cetera. 45% of women bookings are through this funnel with higher conversion rates in NPS than the regular funnel. We also launched Tamil booking funnel on Android platform in April ’24 in addition to the existing Hindi funnel, helping us cater to new regional users and drive deeper penetration.

For our rail customers, we continue to add product features and strengthen our value proposition. As a result, we continue to gain market share in train bookings, leveraging all our brands, including MMT, Goibibo and redBus. For Intercity Cabs, we integrated supply from Savaari and were able to cater to peak season demand with high availability, fulfillment and quality of service. We have also scaled up assisted sales where high-value bookings and complex itineraries are routed to agents who help with the conversion. Our Corporate Travel business via both our platforms, that is myBiz and Quest2Travel is witnessing strong growth. Our active corporate customer count on myBiz is now over 59,700-plus. And for Quest2Travel, the active customer count has reached 458 large corporates compared to 272 large customers in the same quarter last year.

We have increased the personalization quotient on the platform by giving customized property ranking based on user preferences and featuring international hotels, popular with Indian travelers and tailored ranking for business trips. As regard to our UAE business, we had a successful marketing campaign, Let’s MakeMyTrip in the UAE. In time to capture the travel demand for the Eid season, the focus was to grow our brand awareness with the non-Indian population. Our loyalty program, MMT SELECT, in UAE is continuing to get strong traction as well. We now have close to 473,000 enrollments into the program and 40,000 — approximately 40,000 members are already in Silver and Gold tiers. With this, let me now hand over the call to Mohit for the financial highlights of the quarter.

Mohit Kabra: Thanks Rajesh and hello, everyone. We’ve started the year on a strong note, posting our highest-ever quarterly gross bookings of $2.4 billion compared to $2 billion in the same quarter last year with a 21.6% year-on-year constant currency growth. Apart from strong growth in bookings, the improvement in mix of higher margin businesses compared to the same quarter last year has helped us post 31.5% year-on-year constant currency growth in revenue and achieving our highest-ever quarterly revenue after $254.5 million as compared to $196.7 million in the same quarter last year. Moving on to our segment results, our air ticketing gross bookings for the quarter came in at $1.4 billion, witnessing a year-on-year growth of 17% in constant currency.

Adjusted margin stood at $89.1 million, registering a year-on-year growth of 21.2% in constant currency. Take rates for the air ticketing business were on expected lines at about 6.4%. Our international air ticketing business posted strong year-on-year revenue growth of over 37% in constant currency and now accounts for over 37% of adjusted margins in the air ticketing business. Gross bookings for the quarter in the Hotels and Packages segment came in at $611.3 million, registering a strong growth of 24.7% year-on-year on constant currency terms. Adjusted margin growth came in higher at 29.6% year-on-year, resulting in an adjusted margin of $107.3 million during the quarter. The take rates during the quarter in this segment came in on expected lines at 17.5%.

We continue to drive supply expansion by going deeper and wider in the Indian market and growing directly contracted hotels in key international markets which are of interest to Indian overseas travelers. Our international H&P business grew 88% year-on-year in constant currency and now accounts for about 15% of the adjusted margins from this segment. In the Bus Ticketing business, gross bookings for the quarter came in at $316 million, growing at 15.9% year-on-year in constant currency. Adjusted margin came in at $32.4 million, registering a year-on-year growth of over 20.7% in constant currency. The take rates for the business came in line at about 10.2% for the quarter. Besides driving strong bookings and revenue growth, we continue to remain focused on building strong operating cost efficiencies.

As a result, our expenses, which are largely in the nature of fixed costs such as personnel expenses and selling or general administrative expenses, have shown operating leverage on a year-on-year basis. Considering that the reported quarter was a seasonally high leisure travel quarter, coinciding with some softness in the early part of the quarter due to general elections, we have slightly increased the spends on marketing by rolling out brand campaigns, leveraging the cricketing events during the quarter. Accordingly, our marketing and sales promotion expenses on customer addition costs came in at 4.8% of gross bookings, which is slightly higher than the 4.6% in same quarter last year. As a result of the above, we are pleased to report our highest-ever quarterly adjusted operating profit of $39.1 million and our highest-ever adjusted operating profit margin at 1.64% as a percentage of gross bookings.

The comparable adjusted operating profit during the same quarter last year was $30.1 million in absolute terms and 1.52% in percentage terms. Our cash generation continues to be robust. During the quarter, we added net cash from operations to the tune of $42.9 million. We also saw temporary working capital releases as expected in a seasonally strong leisure travel quarter. As a result of this, our cash and cash equivalents at the end of the quarter stand at about $676 million. Besides maintaining a healthy watch-list, we will continue to leverage this strong cash position to invest in potential travel and travel-related organic as well as niche inorganic growth opportunities. Last quarter, we had called out our intent to pursue opportunistic share repurchases or buyback.

While no shares were repurchased from the market during the reported quarter, we remain committed to the program if and when the opportunity arises. Before we open up the call for Q&A, I would like to mention that our investments over the years in key strategic areas, such as expansion of travel and travel-related services offered on our platforms, the increasing breadth of such services across large number of cities in the country, sharper targeting of customer cohorts via non-B2C platforms, such as myBiz or Quest2Travel for corporate customers and myPartner and myAffiliate for wider penetration, and the underneath investments in technology have been yielding good results and helping us grow faster than the industry. As we begin fiscal year ’25, we look forward to continued investments in these areas and we’ll keep sharing progress on any significant milestones achieved.

For instance, our corporate business via our myBiz and Q2T platforms crossed the $200 million gross booking milestone during the reported quarter. With that, I’d like to turn the call back to Vipul for Q&A.

A – Vipul Garg: Thanks, Mohit. [Operator Instructions] The first question is from the line of Sachin Salgaonkar of Bank of America. Sachin, you may please ask your question now.

Sachin Salgaonkar: Thanks, Vipul. Hi, all. Congratulations on a good set of operational numbers. I have three questions. My first question is on the tax what we saw this quarter. I just wanted to understand, it looks like a full tax, right? Do you guys have tax credits, are they fully utilized? And how should one think about the tax rate going ahead?

Rajesh Magow: So Sachin, you might recall, as we reported the full fiscal year last quarter, we had taken a deferred tax asset kind of — had been created and we’ve taken that benefit in the P&L. And therefore, what you see now is a reversal of the deferred tax asset created to the extent of profits generated during the quarter. So it’s going to be more a reversal of the deferred tax asset that had been created. And this is going to continue at least for the next couple of years. And we would therefore be kind of utilizing our carried forward tax losses to minimize our actual tax payouts. So this is more, I would say, an accounting kind of a treatment, whereby you kind of create the deferred tax asset in advance as soon as you have line of clarity in terms of realizing these tax losses and saving on the tax outgoes. And then as you kind of actually build profitability in the periods to come, you start kind of reversing or expensing the deferred tax asset.

Sachin Salgaonkar: Okay. So, Mohit, just to get to you clearly, this is accounting change, not actual tax paid, and maybe a couple of years down the line, there will be an actual tax pay, right?

Rajesh Magow: Absolute. Absolutely.

Sachin Salgaonkar: Got it. Second question, I mean, clearly you guys gave breakup in terms of how much does international contribute in terms of hotel as well as air. Wanted to understand a bit more on the margin side. Are the margins on international air and hotels similar to that what we see domestically? If not, are they higher or lower?

Mohit Kabra: It remains largely similar, more so in air ticketing. And when it comes to hotels, I think the only small difference that comes in is, like Rajesh has also called out, when it comes to international hotels, now the entire inventory doesn’t kind of come on contracted basis or directly contracted basis. And we also work with a set of affiliate partners, particularly for the long-tail of hotels. So that is where there is some amount of margin dilution. Otherwise, the margins are largely similar across domestic and international segments.

Sachin Salgaonkar: Got it. And last question, Rajesh did mention in his opening remarks that obviously our demand was intact, because of elections people didn’t travel. But just want to double-click on that point and understand, are we seeing any signs of slowdown anywhere in the travel or across air and travel, we see robust trends going ahead?

Rajesh Magow: Yes. Let me take that, Sachin. And maybe just to make one additional comment to the previous response that Mohit shared on the international hotels direct contracting, while structurally, we have obviously directly contracted hotels and partner hotels, but in terms of the business mix, about 65%, 70% is actually with the directly contracted hotels. So to that extent, we continue to keep getting the benefit of the higher margin. Just thought it was relevant for — a piece of information additionally for you. Now coming to the demand-side, like I mentioned, if you look at the domestic flight numbers flown — on a flown basis, about mid-single-digit growth and we definitely have grown higher. And to my mind, whatever we saw in the month of April was temporary, thanks to general elections.

Maybe in some parts of the country, it was also the climate, temperature really going beyond 50 and all. And some segments of the travel got impacted because of that. But we also did see May and June nicely recovering as well. So I would say, on an overall basis, what is sort of reflecting on our numbers as well, although the industry growth was relatively muted on an overall quarter basis, but if you look at standalone May and June, we didn’t really see any sort of concerning signs on the demand slowing down. We’ll see how it goes in this quarter, but I wouldn’t say there is anything, at least from the reported quarter that we saw on an overall basis with just a short-term disruption in the month of April, everything else was normal.

Sachin Salgaonkar: Got it. And if I could squeeze one more question to your point earlier, Rajesh. You’re expecting air recovery. Is this more like a five to six-month thing or it might be well beyond the six months also where we see a full recovery in the air?

Rajesh Magow: I would say, more like six months and beyond. I think we should just take second half is what generally directionally we’ve said. And there will be some improvement as we see the sort of delivery schedule of all the airlines and more and more planes will start coming in. But I think the meaningful impact will — I think you should budget for at least six months.

Sachin Salgaonkar: Got it. Thank you and all the best.

Rajesh Magow: Thank you.

Vipul Garg: And Sachin, the next question is from the line of Aditya Suresh of Macquarie. Aditya, you may please ask your question now.

Aditya Suresh: Thanks, Vipul. Congratulations, Rajesh and team. Two questions. The first is just the hotels business. And I think Rajesh, you briefly touched on this as well, but I think your commission rates have gone up in this quarter. Can you just speak about what’s happening here? I do appreciate that with the more premium supply just kind of being onboarded, but perhaps the take rates there are lower. But could you just help us put in perspective what happened this quarter on take rates specific to hotels?

Rajesh Magow: Yes, thank you. Maybe I can take that very quickly as well. Aditya, thank you firstly appreciating the results. If you ask me, it’s actually not necessarily significant improvement. Of course, year-on-year, it is showing some improvement. But if you see quarter-on-quarter, it’s in the ballpark. If you would perhaps recall our general sort of broad guidance on hotel take rate, range has been between 17% to 18% in any case. So I wouldn’t read too much into it. Some part of it is within the quarter, it can be because of mix changing or some other small variables here and there. But directionally, there is no fundamental change here.

Mohit Kabra: And if I may add, Aditya,, if you look at it, while it’s a small increase compared to 17.2% in same quarter last year, if you look at it on a quarter-on-quarter basis, it’s like 17.5% versus 17.9%. So those small changes across quarters based on seasonality will continue to be there.

Aditya Suresh: Yes. I was looking at this more from an IFRS revenue divided by gross bookings. And so, I think there — on that measure, it looks a bit stocker. So I was trying to understand that. But I take your points. I guess, Rajesh, the second question is then on ancillary services. I hear your revenue has almost doubled, albeit of low base. It seems like, based on your new disclosures on gross bookings, the take rate is high as well in the kind of mid-30s thereabouts. My specific question was actually on the dropdown. So beyond revenue, like what is the cost of fulfilling this revenue? Is that — what I’m trying to understand is of this $21 million which you’re reporting as revenue in other and ancillary, is the dropdown close to being full to your profit line? Thank you.

Mohit Kabra: Maybe I’ll take that, Aditya. And the Other segment actually represents a host of travel and travel-related services that we offer and includes, say, for instance, in insurance services or ForEx-related services, advertising revenues, et cetera. And apart from that, it also includes certain other transport services such as the cab services that we offer, or the rail ticketing that we do. And therefore, if you see, this — beginning this fiscal year, we’ve also started reporting the gross bookings coming in from our other transport services, that is the cab services that we offer and the rail ticketing services that we offer, so that you can get some more color in terms of what is the gross booking from those businesses, which are — where the revenue is kind of included in the other segment.

Will be difficult to give a drop-down to the bottom line on this one. But like I said, it’s a mix of some of these services which have a low operating cost. And then there are some others, including transport services like cabs and rail tickets, where you would have effectively net margins similar to other lines of transport.

Aditya Suresh: Yes. But can you just like drill on that a bit more? Was that — is there a significant amount of — whether it be fixed costs which are being added to grow these businesses was, I guess the question? I mean, when I look at your headcount in itself, that’s not grown too much. So what I’m trying to understand is within your existing platform, these are new streams of revenue from an existing base of expenses, if I may. So that’s what I’m trying to understand here.

Rajesh Magow: Some amount of fixed-cost increases will be there, like say, for instance, we had called out kind of investments in the cab kind of services that we are going to offer, including an investment in a third-party called Savaari that we had called out last year. So yes, there is some small bit of increases. But like I said, in terms of overall headcount increases or personnel expenses, we’ll continue to see good operating leverage coming through on a year-on-year basis despite all of these investments.

Aditya Suresh: And if I may, just one last question was, any impact you can quantify or speak about related to this CrowdStrike issue?

Mohit Kabra: Nothing at our end actually. No real kind of impact coming in on our business per se.

Rajesh Magow: It was more an operating sort of disruption on the operations, the flights getting canceled and also obviously, the customer service function was super busy on that day. But — and very quickly, obviously, the teams stretched and worked very closely with airline partners to control the situation as much as we — as much and as fast as we could possibly do. But outside of that, the business that got disrupted, let’s say, the rate of bookings have dropped during that disruption because of the — some — obviously the desktops and the PCs et cetera were not working. So people had hard time to sort of access the platforms, et cetera. But very next day, even if that was Saturday, the volumes came back and in fact, the deficit got made up. So it was — net-net, there was no real impact on business.

Aditya Suresh: Thank you so much.

Vipul Garg: Thanks, Aditya. The next question is from the line of Manik Taneja of Axis Capital. Manik, you may please ask your question now.

Manik Taneja: Hi, thank you for the opportunity. My question was with regards to customer acquisition costs. You did allude to the fact that you stepped up some of this marketing activity in the second half of the quarter. But how should we be thinking about these costs, given that after the revenge travel and the strong growth that the industry witnessed through ’22 and ’23, one is hearing of some slowdown in terms of travel across certain parts of the world as well as including India?

Mohit Kabra: Hi, Manik, and maybe I can take that. We generally have a bit of variation when it comes to customer acquisition costs across quarters based on seasonality. This is what I had called out. And in this particular quarter, and with almost like every passing year, we are gradually increasing more and more the spends on the brand marketing side. As you can imagine, when it was — through the COVID period, obviously, it didn’t make much sense to kind of spend on brand campaign, but we’ve been kind of bringing back brand campaigns increasingly over the last couple of years and still kind of been maintaining the overall customer acquisition costs well within the 5% levels that we had called out. So I think we believe we’ll continue to remain in this range of close to between 4.5% to 5% when it comes to customer acquisition costs.

Manik Taneja: Sure. And the second question was with regards to our myBiz or the assisted-travel business. If you could throw — while you made some comments around that and the corporate business achieving almost $200 million of GTV in the current quarter, if you could help us understand both the corporate travel and the travel agent GTV separately and probably give us some sense of the air and the hotels mix, or the air and non-air mix over there and possibly some sense on the profitability on that piece.

Mohit Kabra: So when it comes to reporting the revenue as well as margins, we do it by the segment, not necessarily by the channel of distribution. However, we keep sharing additional color as might be kind of relevant. And, therefore, on one of the channels of kind of distribution, which is on the corporate side, if you would recollect, we had called out that we have been making investments in terms of adding more and more platforms to kind of target the non-B2C segment. Some kind of channels like myBiz and Quest2Travel, which were more kind of targeting the corporate customers, as well as kind of other channels like myPartner or myAffiliate for an indirect kind of targeting of the retail customers, particularly in the Tier-3 and beyond kind of cities.

When it comes to the corporate business, the overall gross bookings from this business has now crossed a certain milestone, and therefore, we wanted to kind of call out, so that people have an appreciation of the scaling of some of these channels over the years. So it’s more in that regard. The reporting still continues to be by the line of segment per se.

Manik Taneja: Sure. Thank you and all the best, Mohit.

Rajesh Magow: Thank you. Thank you, Manik

Mohit Kabra: Thanks, Manik.

Vipul Garg: Thanks, Manik. The next question is from the line of Gaurav Rateria of Morgan Stanley. Gaurav, you may please ask your question now.

Gaurav Rateria: Maybe congratulations on a good set of numbers. My first question, just wanted to get a sense of the comparative activity on the ground. Has there been any change, if at all, especially in segments like air and hotels?

Rajesh Magow: Gaurav, no — thanks for asking this question. Actually, there is nothing unusual in this quarter. There is no real change. It continues to be the same, as we’ve sort of spoken about it in the past as well. So segment by segment, there will be a different set of competition that we will have in the market. But if there is — the performance — is our own performance for this quarter is of any indication, we’ll give you a sense that we’ve been sort of gaining share pretty much across the board on all segments. Our growth rate is one higher than the industry growth rate and we do have some other surrogate data points to sort of believe that we’ve been gaining share on pretty much every business segment that we run. So I would say it will be fair to say that we’ve been sort of effectively competing in the market and continue to sort of gain share.

Gaurav Rateria: Got it. Second question with respect to margins, it’s a good start to the year with nice margin expansion, both on a sequential and a YoY basis. How should we think about FY ’25? Is this something that becomes a base and remains consistent, or there would be incremental levers as and when the volume for the industry as a whole recovers as per your expectations in second half?

Mohit Kabra: Gaurav, maybe I can take that. And as you know, the margins, particularly in the seasonally stronger leisure quarters like Q1 and Q3 tend to be better in our business. And therefore, I would say, we do expect kind of margins in the — for the full year also to largely remain closer to this number. So I would not say whether it would remain at about 1.6% or thereabouts, but largely around this, although, like I said, there could be small differences coming in based on seasonality, but this is largely also in line with our continued effort to kind of gradually take the margins to, say, about 1.8% to 2% in the longer term, say, over the next three to five years. And so, I think as part of that, we continue to kind of try and drive operating leverage and build small margin improvements on a year-on-year basis.

Gaurav Rateria: Got it. Last question, just a bookkeeping one. If you could share the data point that you always share around your market share in the domestic side. And do we have a similar number for the international outbound segment also? Thank you.

Mohit Kabra: So we do not have an international outbound exactly because that’s not kind of reported in that manner on the outbound side, but yes, on domestic, we continue to kind of retain 30%-plus market share. In fact, Rajesh had called out, while the industry has grown at about 4%-plus, we’ve actually grown about 5%-plus in domestic air.

Gaurav Rateria: Thank you very much.

Vipul Garg: Thanks, Gaurav. The next question is from the line of Vijit Jain of Citi. Vijit, you may please ask your question now.

Vijit Jain: Thanks, Vipul, and congratulations guys on a great set of numbers. Just focusing on the hotels business, if I look at hotels business’ five different pieces, right, say, premium, budget, alternative, B2B and international, right, would you give us — could you please give us a sense of what the growth was like, which of these sub-segments grew ahead of the overall number? And in general, I would imagine that the alternative and the budget segment would be much higher take rate versus the others, right? So just wanted to get a sense of how those pieces are playing out. Thank you.

Mohit Kabra: Vijit, maybe I can take that. While there is no significant change in terms of mix by price points, we did kind of share color in terms of the overall growth as well as the growth kind of being stronger coming in from the international hotel segment. So international hotels, like we had called out, grew much faster compared to, say, domestic because the base is also smaller and we’re kind of adding a lot more supply over there. That’s probably the best color. So the international business on H&P side, Hotels and Packages, grew at about 88%, while the overall growth in this segment, including both domestic as international, came in at about 29.6%.

Rajesh Magow: And within that, maybe just one additional comment, Vijit. Within the segments, I mean, if your reference is to the past commentary specifically to budget segment and all, now there is no segment which is not necessarily in the growth mode. That is thing of the past. All segments within the small, medium, premium, super-premium, [or techo], of course, all of them are sort of growing now directionally. Of course, there will be base effects, some will grow higher and some will grow are at a relatively lower growth rate. But overall all segments are growing now.

Vijit Jain: Thanks, Rajesh. Just one follow-up on that one. In general, the take rate across these various segments, right, my understanding would be, in general, premium hotels could be closer to the international benchmark, which is maybe mid-teens. Budget segment has been traditionally higher, you’ve highlighted it’s closer to 20%. So for alternate and for B2B, what is a broad range of take rate that you get, if you can just give a broad sense on that, that would be helpful. And my second question, I may just ask that right away. Looking at your employee cost overall, it’s up maybe 12%, 13% YoY now. Bookings in a pretty tough macro-environment is up 20%. So it does look like operating leverage is playing out nicely here. So just trying to understand, are you basically being a bit cautious on the overall EBIT margin front?

Mohit Kabra: Vijit, I can probably take both. I think when it comes to personnel expenses, I think like we’ve been calling out, we do believe in our personnel expenses, we’ll continue to show operating leverage, like in, say, the last few years. And therefore, that is something that we’ve kind of continued with even in this particular year. The only area where we have seen slightly more investment being made is in terms of longer impact brand marketing expenses during the quarter. Sorry, on your previous one, could you just repeat the question on –

Vijit Jain: The take rate on the B2B and the alternative accommodation side?

Mohit Kabra: Sure. I’ve already covered in one of the earlier questions that the take rates are kind of largely similar between, say, international and domestic because that was also part of your question for the fact that some part of the international inventory, close to about 25%, 30% comes in on an affiliate basis. And there we see some dilution. But as far as — that might be the — more the B2B part from a supply side. But otherwise, yes, largely similar take rates as the domestic. And yes, you’re right that the take rates tend to be generally lower in the higher ASP kind of hotels and a slightly higher-margin percentage in the lower ASP hotels. It stands to reason because most of the budget or mid-segment properties would be more standalone properties and would find it difficult to kind of market themselves, and therefore — directly, and would therefore kind of use platforms like us a lot more effectively and therefore, will be able to kind of give slightly better margins.

Vijit Jain: Got it. Thanks Mohit. Those were my questions. Thank you so much.

Rajesh Magow: Thank you, Vijit.

Vipul Garg: Thanks, Vijit. The next question is from the line of Aditya Chandrasekar of UBS. Aditya, you may please ask your question now.

Aditya Chandrasekar: Yes, hi. Congrats on a good set of numbers. Just a couple of questions from my side. On the recovery that we kind of expect in the second half as the airline deliveries start coming in, or the aircraft delivery start coming in, do you see some risk there because I think Airbus has also kind of flagged some difficulties in meeting its production guidance and Boeing also — I mean, we all know it’s facing its own set of difficulties. Do you think there’s some downside risk there in terms of the — some of the deliveries getting delayed maybe to the next year, which in turn causes some demand constraints this year? Just wanted to get your sense on what you’re hearing from the airlines and how we should think about that potential risk.

Rajesh Magow: Aditya, basis what we hear right now as things stand today, the estimate is that things will start improving and that’s the reason, as I was talking about earlier in response to the earlier question as well, was taking on a margin more six months rather than three months kind of a timeframe, that from six months hence from today, we might start to see some sort of material improvement happening. Now the downside risk if we really have to hazard a guess, can only be the timing. So it could be a quarter — I don’t think it will be faster, it can only be a quarter later, right? So that is the only potential downside risk. But it needs to be viewed slightly differently, to be honest, because if the outlook, which is what was being projected today on the demand side, if it continues to the same way, it follows the same trajectory, and let’s say, if there is supply constraint on the domestic flights market, there are today other alternative options, other modes of transport and they are growing very nicely and there would be a share shift.

In the past also, we have seen, if the prices were high and then the share shift moved to the high-quality trains or the intercity private buses, air conditioned and so on, depending upon the route that you look at. So I don’t think the momentum on sort of demand side will slow down just because of the supply-side constraint, if at all that happens or does not improve in the domestic air market, because there are other alternative mode of transport and equally good at times, where people fall back on. So I think that — so it will sort of — at least partially will get mitigated if that happens. But I guess we’ll have to watch this space in terms of the deliveries coming on time and how fast they come and how fast they sort of start making the — or start helping the supply side, but the current estimate suggests, based on our conversations, is that it should be around the six months that it should start improving.

Aditya Chandrasekar: Got it. That makes sense. The second question I have is on the margins. So you’ve said that probably this year will remain at this 1.6%-odd number and probably head towards the 1.8% to 2% range in the next three to four years. Just wanted to understand, so if your airline recovery happens as expected, say, within six to eight months or even with a quarter’s lag, your hotel business continues to grow at a healthy level. Your costs are pretty much stable, marketing expenses are within that 5% range. And there is a lot of operating leverage flowing through, right? If all of these numbers kind of pan out as expected, we should be hitting that 1.8% to 2% range much earlier, right? Just wanted to understand if we need to kind of factor in, some kind of leverage starts slowing down going ahead, or how we should look at it because it just seems that 1.8% to 2%, three to four years out, seems a bit conservative from your end in terms of guidance?

Mohit Kabra: Hi, Aditya, maybe I can take that. And I think there would be variables like the one that you just called out, the question before this, in terms of how quickly the domestic air industry kind of comes back or bounces back to good growth. And also I’m sure we’ll have an opportunity to kind of keep sharing more color on the estimates going forward at almost every quarterly — on a quarterly basis. So if there is anything more to add, I’m sure we’ll keep sharing more color with every passing quarter.

Aditya Chandrasekar: Sure. That makes sense. Thanks a lot.

Vipul Garg: Thanks, Aditya. And the next question is from the line of Prashant Kothari of Pictet. Prashant, you may please ask your question now.

Prashant Kothari: Hi. Thank you for the opportunity. Just one small question on — you mentioned that the international air travel has definitely grown much better for us versus domestic. But when I look at the average transaction size, that has grown up by only like 4% year-over-year. Can you just explain that? I would have thought that the mix change of international should kind of help the transaction size grow much bigger, or was there any kind of a dip in overall ticket prices which led to this outcome?

Mohit Kabra: No, I think the overall kind of pricing, say, within the international segments or say, for instance, within the domestic segments hasn’t really seen any significant change. I think what’s happened is the overall price increases that used to happen in the past used to be probably slightly more stronger. This quarter, we haven’t really seen very significant increase in terms of ASPs per se. But otherwise, there is no real change in the average ASP, I would say, by domestic or by international segment as such.

Rajesh Magow: And I think, Prashant, this will — the point that you are sort of looking at, while at an ASP level there will be — there is no real significant change, but this will — the mix will change or the higher growth on international front will reflect more in gross bookings number for the air as a whole. If you look at the total gross booking number versus the segment growth, you will see — so the growth which is driven by the mix change is sort of reflecting — that increase is reflecting.

Prashant Kothari: Okay. Thanks. And one of the questions that we frequently ask Vipul, any update on the India listing front?

Mohit Kabra: I think there’s nothing more to add over there. Like we had said, we are not really kind of looking at raising any funds right now and therefore not looking at any capital market activity per se. But should there be a kind of a thought of doing so, I’m sure we will share color in the quarters to come.

Prashant Kothari: Alright, perfect. Thank you very much.

Vipul Garg: Thank you, Prashant. At this time, we have no further questions. And any last questions, any attendee wants to ask, otherwise, we can end the call. So Rajesh, we have no further questions. Over to you for your closing remarks.

Rajesh Magow: Thank you, Vipul, and thank you, everyone. Thank you for all asking all the right set of questions. They were all relevant. And thank you for your patience. Look forward to see you next quarter.

Mohit Kabra: Thanks, everyone.

Vipul Garg: Thank you, everyone. You may please disconnect the call. Thank you.