MakeMyTrip Ltd (MMYT) 2018 Q4 法說會逐字稿

I would now like to turn the call over to Jonathan Huang.

Please go ahead.

Greetings, and welcome, everyone, to MakeMyTrip Limited's Fiscal 2018 Fourth Quarter and Full Year Earnings Call.

We wish to remind everyone that certain statements made on today's call are considered forward-looking statements within the meaning of the safe harbor provision of the U.S. Private Securities Litigation Reform Act of 1995.

Forward-looking statements are not guarantees of future performance, and by their nature, are subject to inherent uncertainties.

Actual results may differ materially.

Any forward-looking information relayed on this call speaks only as of this date, and the company undertakes no obligation to update information to reflect changed circumstances.

Additional information concerning these statements are 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 18, 2017.

Copies of these filings are available from the SEC or from the company's Investor Relations Department.

On our call today are Deep Kalra, our Founder, Chairman and Group CEO; Rajesh Magow, Co-Founder and CEO, India; and Mohit Kabra, our Group CFO.

And now I would like to turn the call over to Deep to start off the discussion for today.

Thanks, Jon, and welcome, everyone, to our fourth quarter and full year earnings call for fiscal year 2018.

As we enter fiscal year 2019, the team and I are very proud of what we've achieved during the last year.

Immediately after the ibibo merger, I'm equally optimistic about the long-term runway ahead of us.

As the leading online travel agency in India with unrivaled market share, scale and brand recognition, we believe we are well poised to capitalize on the strong travel trends that India can provide as the fastest-growing large economy globally in 2018 and '19.

In fact, the strong domestic aviation recent growth trends continue to reaffirm our optimism as the market is expected to remain robust into fiscal year 2019 per CAPA's forecast.

For example, during the past quarter, reports from leading low-cost carriers have shown very high load factors driven by recent strong pent-up demand for air travel and increasing seat capacity.

In response to the strong growth trend, domestic carriers are expected to induct over 100 new planes in fiscal 2019.

Additionally, the second round of the government's regional airport connectivity program called UDAN has also awarded 50 additional new routes to IndiGo, SpiceJet and Jet Airways, which should help maintain the strong growth momentum seen lately in the industry.

Similarly on the hotel front, we remain bullish regarding the large opportunity ahead of us as the domestic online hotel market remains lowly penetrated at an estimated 15%, which is expected to double in the next 2 to 3 years.

From a longer-term perspective, we are even more excited about the headroom available from the steady demand for domestic travel in India as more travelers look to book hotels instead of staying with friends and family.

According to a recent Morgan Stanley report, India is roughly 8 to 9 years behind China in terms of trips per person.

Total domestic trips per person in India was 1.25 in 2016, which is similar to where China was in 2008, and India's total hotel room night demand per capita of approximately 0.3 lags China and other more developed markets significantly.

Fueling our continued optimism is the concerted push for digitization in India, driven by 0.5 billion-plus net users in the country today, making us the second-largest Internet population globally.

Furthermore, this number is forecasted to rise to over 850 million by 2020 as the rollout of mobile and affordable 4G data usage continues throughout the country and increasingly coming from places outside of the top metros.

In Tier 2 and Tier 3 locations, we believe that the next wave of Internet users will largely demand vernacular and localized content with machine-to-person interactions using voice.

We've already been preparing our products and technology in response to this emerging trend, as you will hear about shortly from Rajesh.

Furthermore, we continue to see rapid rollout and adoption of digital payments enabled by the Reserve Bank of India's UPI or Unified Payments Interface, which is making online transactions very easy for the masses.

Today, there are over 800 million bank accounts in India, which are linked to Aadhaar, a unique identification system which forms the backbone of UPI and allows instantaneous transfer of funds.

More encouragingly, in April alone, there were more than 200 million monthly UPI-based transactions that took place and that base is expected to keep rising as new products and platforms like Google's [Pay], Flipkart's PhonePe and WhatsApp payments have all been at the forefront of this new digital payment system for India's e-commerce users.

We believe these strong growth trends provide a long tailwind for MakeMyTrip over the next few years as many of the new Internet users should mature from consumers of online content-only to become actual e-commerce shoppers.

As the clear market leader today, we plan on expanding our leadership position further by continuously evolving our business to keep pace with rapid changes in technology and consumer trends while maintaining focus on reducing friction for travelers when they research, shop, book and travel with us.

Now I'd like to move on and reflect upon the accomplishments achieved by the MakeMyTrip group during fiscal 2018.

In the past year, we successfully combined 2 well-recognized OTA businesses and teams to strengthen our market leadership in India's online travel industry while accelerating the growth trajectory of market leader, redBus.

Along the way, we also achieved new financial and operational scale as our business continues to reach new highs.

For example, in Q4 alone, we had more than 167 million total unique visitors come to our platforms, registered nearly 31 million live to-date transacted customers and engaged with more than 18 million monthly mobile active users.

The success achieved so far has been driven by our clear go-to-market strategy, which leverage multiple well-recognized brands and backed by our unwavering commitment to delivering the best possible online travel experience for our consumers across all income levels and travel preferences in a highly fragmented Indian travel market.

During fiscal 2018, we also greatly enhanced our user's experience by delivering highly relevant and more personalized content.

We are leveraging big data and machine learning.

We also introduced artificial intelligence or AI-based chatbots aimed to drive consistency across our post-sales experience.

In fact, our chatbot, Gia, is now serving up to 5,000 unique users per day for their post-sales queries.

Gia has also been trained to perform over 300 unique actions, including enabling web check-in for flights.

Going forward, we plan on rolling out more functionalities, including enabling travel bookings in a more conversational manner by leveraging the power of NLP, natural language processing.

We believe this will help us attract the next wave of first-time net users who may be more comfortable transacting over chat and voice and typically may hail from smaller towns and rural areas even, given the massive 4G mobile proliferation across the country.

In fiscal 2018, following our successful merger with Goibibo, we've been working relentlessly to drive higher customer loyalty and retention.

Towards that end, we launched 2 new loyalty programs called MakeMyTrip Black and a subscription-based program called MakeMyTrip Double Black, which now have 750,000 and 30,000 members, respectively.

I'm pleased to share that since the inception of both programs, we've been able to scale the Black program rapidly and see members contribute up to 20% of our top line with transaction repeat rates that are 2x greater than non-Black members.

The Double Black program, while still in its infancy, has provided us with invaluable customer insights and we are able to scale that up in the coming quarters confidently.

Going forward, we plan on leveraging both programs to drive greater loyalty and retention and to help further optimize our marketing investments.

During fiscal 2018, we also made a foray into the SME corporate market with the launch of myBiz.

Going forward, we plan on adding and enhancing features on this platform for our corporate users in order to further penetrate into this largely untapped travel segment.

Now before I hand the call over to Rajesh, who will discuss of recent quarterly accomplishments, I'd like to comment on our new partnership with Flipkart.

We are pleased to be able to partner with India's leading e-commerce platform to offer travel services on their platform.

With this partnership, we are able to bring MakeMyTrip's popular travel shopping experience to Flipkart's large base of e-commerce users.

While the partnership is fairly new, currently, we are happy to see that the leading online companies in India are working together to deliver the best possible experience for all end users.

With that, I'd like to turn the call over to Rajesh.

Thanks, Deep, and hello, everyone.

I would like to begin by sharing a quick summary of our accomplishments achieved in fiscal 2018.

I'm delighted to share that we continued to scale our business, and as a group, we reported gross bookings of over $4.5 billion and over $577 million in revenue less service costs, or net revenue, for the full fiscal year, which is a growth of nearly 111% on a reported basis.

The contribution of our hotels and packages business to total net revenue now stands at over 54%, which is in line with our long-term vision of scaling the accommodation business to over 70% in the business mix.

During the last year, we reached nearly 22 million actual room nights stayed across our entire hotels and packages business, which was a growth of over 21% year-on-year on a pro forma basis.

On a Standalone Hotels basis, we also achieved nearly 21 million room nights stayed, which is over 28% year-on-year pro forma growth.

In our air ticketing business, more than 33.3 million flight segments were flown by our customers during the last fiscal year, which was a growth rate of over 23% on a pro forma basis.

During Q4, our air segment also grew robustly by nearly 40% year-on-year on a pro forma basis.

And we continue to improve our unrivaled leading domestic air market share on the back of robust overall air percentage growth as well as continued bookings shift to online channels.

Our bus ticketing business also witnessed strong growth momentum with more than 39 million tickets traveled for the fiscal year, a growth rate of nearly 48% year-on-year and growth of nearly 55% year-on-year in Q4 on a pro forma basis.

Expanding reach to Tier 2 and 3. During Q4, we worked hard to further expand our brand's reach beyond top metros in order to position ourselves to accelerate the shift from off- to online bookings.

We introduced new mass media campaigns for brand MakeMyTrip aimed squarely at driving greater online hotel bookings with a best price guarantee proposition for users.

For brand Goibibo, TV campaigns were also employed to highlight the value of our digital wallet program and has led to the acquisition of brand new users and app downloads.

During the quarter, we also partnered with Connect India, a logistics operator with over 4,000 stores, to help drive travel bookings and drive app downloads at 400 locations across India.

We've also begun leveraging the free WiFi locations provided by Google to drive brand awareness across 450-plus rail stations in the country and are rolling out kiosks across new airport towns to further enhance our reach.

Recent innovations.

Beyond expanding our brand's reach we continued to drive the pace of innovations faster, utilizing machine learning and AI and launched new products and features, which are relevant for our customer base.

For example, we launched the Book Now, Pay Later option for our hotels and international flights products, allowing customers to make a reservation with only INR 1. Similarly, we have also introduced a product called Pay Later, whereby credit is extended to customers via third-party banking partners, and in some cases, via MakeMyTrip.

For this program, we have heavily leveraged proprietary algorithms enabled by machine learning to extend a limited credit for booking hotels on our platform.

Also, earlier this month, we have launched Goibibo Xpress, a conversation-based app targeting the next 100 million Internet users who are fairly new to the web and primarily users of low-cost smartphones.

The app is only 1.5 MB in size, supporting voice-based and chat-based inputs from users in both Indian and English.

This app currently allows hotel bookings, train status, updates and status check of waitlisted train bookings.

Soon, the app will also offer bus and train bookings and be positioned as the go-to app for the next generation of the net users across India.

Lastly, we have also deepened our integration with WhatsApp for business to better connect with our MMT Black and MMT Double Black loyalty members as well as launched AI-based post-sales support for flights on the chat platform itself.

In addition to these new customer-focused features, we have made further enhancement to our hotel supply, which now stands over 53,000 domestic accommodation properties available across India.

During Q4, our approach to our domestic hotel business remains in line with the previous quarters, which is to improve the quality of our room night bookings from customers while further improving the spread of unique properties booked relative to supply.

The MakeMyTrip hotels team continue to focus shopper's experience towards more premium hotels by adding collections of premium hotels and showcasing the experience versus value proposition that these properties can offer.

Furthermore, we have invested to vastly improve and upgrade the content available to users, added new smart filters and introduced highly personalized dynamic pricing that's all geared towards improving convergence.

We also continued to capture value-conscious customers via our Goibibo accredited hotels called GoStays.

I am pleased to share their progress in expanding this product has gone well as, during Q4, we have seen the number of unique hotels sold across -- exceed 90% of the 4,600-plus listed GoStay properties.

Furthermore, we are also creating a new and differentiated shopping and booking experience for GoStays, which will allow a user to purchase budget hotels easily through us.

This new experience has also been deeply embedded within the newly launched Goibibo Xpress app mentioned a moment ago.

At every location that has GoStays available, users can simply choose a location and budget and we will select -- auto book the best hotel available for them.

This experience will be backed by clear customer experience assurances and will be helpful for customers who are now -- who are new to a location and do not have full information about hotels in their desired destination.

Lastly, with recent -- our OYO Rooms integration, we have added 3,600 of their unique budget hotel properties onto our platform, which provides additional choice for our value-conscious customer base.

Now I would like to comment on the strength of our domestic air ticketing business where we continue to benefit from a very strong domestic air-passenger market in fiscal Q4.

As a group, our domestic air ticketing segment grew by over 38% year-on-year on a pro forma basis, outpacing the market growth of roughly 24%.

In the month of March, due to strength of the air market and our continued share gains, MakeMyTrip Group's share of the total domestic air ticketing market increased to an all-time high.

During the quarter, our outbound international air ticketing segment also continued to witness very strong momentum, which carried over from Q3 to grow in excess of 54% year-on-year on a pro forma basis.

In the quarter, we focused on partnering with air carriers as they begin new UDAN flights, which serve smaller towns and cities, to drive new customers' growth.

We also introduced new features like multicity booking capabilities since many of our travelers like to have multiple stops on their journey.

We have also added deeper integration of ancillary products like seat selections and onboard prepurchases of meals at the time of booking.

Furthermore, we are providing more relevant search results, leveraging machine learning by requesting more data from users at the beginning of their booking experience.

Now before I turn the call over to Mohit, I would like to share some highlights of the redBus business where we are aiming to further expand our domestic leadership in India's highly fragmented bus market and leverage the potentially large base of current bus customers to cross- and upsell other forms of ticketing and hotels.

During the last quarter, we continued to see high growth as we added new suppliers from regional government-operated bus companies on to our platform.

Similar to our other lines of business, we have leveraged the WhatsApp for business platform to automate and handle customer query in a conversational and vernacular manner.

We've also formed a WhatsApp group for fellow bus travelers to let them help one another with boarding locations, arrival times as well as connect directly with bus operators for any on-journey complaints in real time.

During Q4, we introduced LazyPay to allow payment at a later time for customers with good credit scores, to improve conversion rates, and added a redBus store on PhonePe to provide additional payment options.

Additionally, we rolled out free rescheduling to provide greater flexibility and encourage advanced booking behavior from customers.

Going forward, we plan on driving rapid growth of this segment by adding more domestic bus inventory, acquiring new customers in Tier 2 and 3 towns by localizing the user experience for non-English-speaking users and drive international growth with the brand.

Now let me hand it over to Mohit who will share more details of the quarter and full year financial performance.

Thanks, Rajesh, and hello, everyone.

I'm pleased to report that in the fourth quarter of fiscal year 2018, we continued to make significant progress in pursuit of our strategic and financial goals for the year, which were to drive strong year-on-year growth coupled with reducing quarterly losses via improved efficiencies across our operations, particularly in customer acquisition spend.

Considering that this is the first full fiscal year of operations being reported following the ibibo Group merger in 2017, I would like to begin by presenting highlights of our annual performance in constant currency terms as compared with the pro forma financials published for fiscal year 2017, including the ibibo Group.

Our revenue less service costs for full year '18 grew by 39.5% on a year-on-year pro forma basis, and adjusted for the air ticketing onetime incremental revenue called out in Q3 of last fiscal, the growth was even stronger at 42.7%.

Net revenue growth in our hotels and packages business stood at 41% fueled by 55.6% growth in Standalone India Hotels booked online over reported pro forma of last fiscal year 2017.

The robust annual growth in hotels was driven by nearly 9 percentage point improvement in the average realization per room night through focused growth in premium segment of hotels while driving spend efficiencies in the budget segment of hotels.

As a result, this robust growth has been achieved along with reduction in adjusted operating losses over last year's pro forma numbers.

We have also built operating leverage in most of our key expense lines.

For instance, adjusted people cost, excluding share-based compensation, stood at 1.5% of gross bookings compared to 1.9% of gross bookings during the last year's pro forma results.

Similarly, SGA costs, which largely comprised of outsourcing expenses, also stood at 1.5% of gross bookings compared to 1.9% of gross bookings per pro forma results for last year.

This balanced performance through the year of high growth, along with the recent losses, was made possible by tactically focusing more on growth in the first half of the reported fiscal and followed by sharper gains in operating efficiencies in the second half.

Keeping in mind the prevailing competitive dynamics in the coming quarters of the new fiscal year, we will continue to tactically place sharper focus on driving growth and our operating efficiencies across the coming quarters of the new fiscal to keep driving our twin objectives of growth and reduced losses.

We believe the company's deep history and knowledge of India's travel market, our market leadership and a strong balance sheet with nearly $390 million in cash and cash equivalents, we are very well placed to leverage the growth potential in India's travel industry as well as counter any potential pricing rationality via an existing or new competitor.

I will now present a few snippets from our quarterly performance.

In the fiscal fourth quarter, we reported gross bookings of over $1.18 billion, representing reported growth of over 70% year-on-year in constant currency terms.

Net revenues at $145 million represented a year-on-year growth in constant currency terms of over 67%, driven by air ticketing growth of about 74% and H&P growth of about 55%, fueled by growth in India's Standalone Hotels Booked Online growing at about 156%.

Our Q4 adjusted operating losses at $23.5 million were lower than the previous quarter's losses of $33.9 million.

We are pleased with the operating efficiencies achieved during the quarter.

And for the first time post the ibibo Group merger, our marketing and sales promotion spends have dropped below 10 percentage points of gross bookings during any quarter, which is a marked improvement from about 12.5% spent in H1 or 11.2% spent during Q3.

As a result, our quarterly adjusted operating losses have reduced from about $52 million in Q1 to about $45 million in Q2 to $34 million in Q3 and $23.5 million in Q4.

During Q4, we also invested significantly behind promoting the Goibibo brand by creating a marketing campaign around India's wildly popular sport, cricket, by associating with one of the league teams of the Indian Premier League or IPL.

Lastly, I also want to share some inputs on adoption of the new revenue accounting standard, IFRS 15, with effect from 1st April 2018.

We have reviewed the new standard and have concluded that application of the new standard will not have a material impact on the consolidated results or financial position except for reclassification of certain expenses related to customer inducements or acquisition expenses, which were previously recorded as a marketing and sales promotion cost and will have to be recorded as a reduction from IFRS revenue in line with the new standard.

These sales promotion costs are primarily incurred to acquire customers and promote transactions across our various booking platforms and include upfront cash incentives, select loyalty programs among various other costs.

The company will continue to publish a non-IFRS financial performance measure that is revenue less service costs, as we believe that it reflects more relevant information regarding the value addition of travel services that we provide to our customers.

Revenue-less service costs represents IFRS revenue after deducting costs for the acquisition of relevant services and products for sale to customers and adding expenses in the nature of promotions, which are adjusted against revenues.

I would like to end by saying that having leveraged our multiple brands to sharply targeting multiple customer segments with improving efficiency, having found the right operating rhythm in the first post-merger year and having built strong partnerships in the Indian travel market during the reported fiscal year, we remain confident of pursuing our twin objectives of driving growth and operating leverage while making the most of the potential opportunity that the Indian travel market has to offer in the years to come.

With this, I would like to thank you for joining this call and open up the call for Q&A.

Operator, please.

(Operator Instructions) Our first question is from Manish Adukia with Goldman Sachs.

First question is just on the room night growth that you saw in the quarter.

I think on a pro forma basis, it's about 19% standalone room night growth, significant deceleration versus the previous quarter.

So if you could just throw some color as to what are we seeing in terms of trends in that particular segment.

And earlier, you were probably talking about north of 20% kind of room night growth on a sustainable basis.

Has there been any change to that outlook?

That's one.

Second, if you can comment a bit about your partnership with OYO that you announced a couple of months ago.

Press reports have indicated that you have delisted or in the process of delisting other budget providers like Fab and Treebo as part of that agreement.

What is the thought process there in terms of what OYO brings to the table for MakeMyTrip?

Sure.

Maybe, Manish, I'll take the first part of it and ask Deep or Rajesh to chip in on the second one.

In terms of the room night growth, there was close to about 28% for the India online Standalone Hotel bookings in terms of room nights that were booked.

And as we have been saying, the revenue growth was much ahead of that at about 55%.

So as I called out, the strategy during the year was that during the first half, clearly we were driving a much larger agenda on the growth side, and during in the second half of the year, we were clearly pressing the accelerator in terms of driving operational efficiencies and improved [inefficiencies], particularly in our marketing and sales promotion costs.

So these two had to go in tandem.

And therefore, overall, if you look at it for the year, it's been a pretty balanced growth, albeit you would have some quarters with much higher growth on transactions and some quarters with much better operating efficiencies.

Also, one of the key things that we kind of ensured during the second half of the year when we started kind of pricing efficiencies in these spends was that we've ensured that growth in the targeted or the much better placed mid to premium segment continues to be very, very strong.

So say, for instance, our premium segment still continues to grow upwards of 40% and therefore is showing robust growth.

It's only in the budget segment or the ultra-budget segment where we have been kind of pruning down spend in a significant manner, that we are seeing the de-acceleration in growth and we believe we should be able to kind of bring that back in a couple of quarters.

Mohit, if I can just clarify, I think, on the numbers.

So based on the published report, pro forma Standalone room night growth in the fourth quarter of the fiscal is about 19%.

And you mentioned you are growing...

Yes, yes.

I was...

Right.

And you mentioned you're growing at 40% or thereabouts for the premium segment, which means that in the budget segment, the growth must be really low for the blended number to be at about 19%, so I'm just trying to reconcile that number.

Manish, the Q4 number is 18%, 19% whereas what I was talking was largely the annualized number of about 28%.

And in Q4, although overall growth was about 19%, I was mentioning that the premium segment continues to grow in the 40s.

And coming to your second question, Manish, and maybe just one additional comment on the first question as well, just also see it in not necessarily in isolation only the segment's growth or the room nights growth, just look at the revenue growth.

So if you really look at the revenue growth at a net revenue level, that even -- that for Q4 is about 26%.

So like Mohit was mentioning, it was a bit of a conscious call to intelligently kind of see which are the segments that you maybe want to rationalize our sales promotion, keeping the stickiness in mind, keeping the price points, et cetera, in mind and to kind of drive this strategy.

And clearly, historically, as we all know, that the promotional expenses have been pretty high as we've kind of rationalized quite a bit as well.

So there's a bit of a lapping effect kind of coming up as -- when you look at kind of year-on-year growth as well.

So I think these are the factors, additional factors, that you'll have to keep in mind and I guess just look at the financial performance more overall rather than just looking at just probably one metric in isolation.

But coming to your second point, we entered into the partnership and looking at the depth of this inventory that we have in OYO, we've already given that number out, 3,600 hotels.

And we thought that with OYO and with our initiative on GoStays, which we've highlighted quite a bit in our script as well, which is where we are trying to also go to the market with a value proposition with [accreditation] of the brand, we are trying to solve basically the other real problem of the consumers from a better quality experience in that particular segment.

A combination of the two, we thought that we had enough coverage and therefore this was more a business call.

Whenever -- I mean, these are like evolving things.

So there's no real hard stance on a particular thing.

It's just right now and in the circumstances we saw that the coverage was pretty good and we would be from our -- in terms of just serving the consumer needs in the budget segment, the combination will be sufficient enough.

Our next question is from Shyam Patil with SIG.

This is Shyam.

I had a couple of questions.

First question is just on the competitive landscape.

If could you just talk about kind of what you've seen over the past quarter, especially in light of your partnerships with kart and OYO?

Sorry, which was the second question?

That's the first question.

The second question is if you could talk a little bit more about the Flipkart relationship and key early learnings thus far?

Sure, sure, sure.

Shyam, I'll take that.

This is Deep.

So the competitive scenario, I think it'll be fair to say that stays fairly, I think robust, perhaps a degree under intense.

But let's take the air market first.

On the air market, Paytm has been definitely very competitive on air ticketing.

And then we have the other Indian OTAs, Yatra, Cleartrip, et cetera, also fairly active on the ticketing front.

And then we have -- I think Supplier Direct (sic) [Supply Direct] has been something which has definitely been growing.

Particularly for the low-cost carriers, we are seeing a fair degree of growth as well as even some of the full-service carriers have been looking to build their direct programs, their corporate programs, et cetera.

So the overall growth is coming naturally like we have shared on the call, that there's an overall -- I think this has been the 22nd month straight of double-digit growth.

I should call out that there are now the first signs of aviation fuel getting more expensive, so basically oil prices going up and the dollar strengthening pretty significantly against the rupee, which is going to have obviously some impact on the continued growth going forward.

Coming to the hotel side of the business, on the premium segment, we are seeing Booking and Expedia as well as we also tend to see Agoda, all 3 are fairly active on the premium side.

We do have the Indian OTAs who are also there.

And then on the budget side, I think we have various hotel aggregators as mentioned before.

We're partnering with OYO now, but they have a large direct business as well.

The previous question, we had mentioned Treebo and Fab, they have a direct business as well.

So there's a fairly active market on competitive scenario on the hotel side, both from international players and domestic players.

Yatra and Cleartrip are also in the market.

So that's broadly what it is.

But on the hotel segment, I think the excitement really comes from the fact that, at best count, about 15% of that market is penetrated online.

The Supply Direct business there is still fairly limited to the high-end chains.

And if you were to include alternate accommodation or homestays, then that penetration level is probably even smaller.

It's hard to estimate that market, but then penetration level, we believe, actually is closer to 10% than to 15%.

So that's overall the broad competitive scenario.

Regarding Flipkart offering, as mentioned on the call again, it's fairly early.

We have just released this out on the Android platform right now, but this is going to be a travel offering to their customers with branding.

So this is not a white label, this will be a branding with MakeMyTrip, and again, in a partnership format.

And it's already out there, light.

We will be introducing more products as we go along and also across other platforms as we go along.

Servicing of customers, post-sales service, et cetera, for travel will be handled by us as well.

And our next question is from Viju George with JPMorgan.

I guess, your sales and marketing expenses have come down to about 9 point -- a little over 9% of total gross bookings, correct me if I'm wrong there.

The way to look at this -- I'm just thinking how's the way to look at this?

If you want to get this down over time, do you think that there is a constant fine balance that you must walk against the room night growth which is currently at 18%?

You are suggesting it's still not a matter of concern, but as you plan (inaudible) deliver further on promotional expenses, do you think this 18% can get down to 12%, 13%, whatever?

Viju, no, the way we are thinking about it is actually as Deep was mentioning in response to the earlier question as well, that there is going to be maybe 1 or 2 quarters more that there may be a lapping effect there where there was a fairly aggressive promotional activity in the previous period, same -- previous year, same period.

We are not necessarily from the midterm to long-term average, frankly, on the growth side.

So don't think significantly there is going to be tradeoff that if we continue to keep going down this path of rationalizing promotional expenses that we are going to just trade off with growth significantly.

We don't believe that would be the case.

The growth is likely to come back soon and it probably will be a matter of 1 or 2 and would probably from a mid to long term would be in the range of between 25% to 30% in terms of room nights growth as we see the market dynamics today.

And the reason for that is the under-penetrated market.

The reason for that is there is tremendous amount of work that we are actually doing, which will bear fruits in the coming future in terms of just acquiring new segments, targeted approach to acquire new segments whether they are value-conscious customers, let's say, students or pilgrimage or the small traders and the businesses, and our corporate business initiative has shown some traction already.

We are already doing about 1,000, 1,200 room nights on a daily basis but that's likely to scale up as well.

So a lot of the initiative that are product side, supply side, our marketing side just from an [expansion standpoint] product offering overall.

A lot of the work is going live and is in the works, which is going to bear fruits in terms of just helping us grow the room night growth as we go down the path.

So frankly, not really concerned about that growth right in this particular quarter doing 19%, but also kind of looking at a higher segment or premium segment growth at 40%.

And on an overall year basis, the growth is pretty robust as well.

So I wouldn't read too much into it.

I would -- we will definitely be around this spot unless dramatically the competitive dynamics change, which is not the case like Deep was mentioning earlier, to a degree less intense today just in terms of just kind of crazy promotions all around, et cetera.

And if that continues, I think -- we believe that this is the right path to go for another quarter or two.

And then we definitely see, because of the reasons that I mentioned and also the base effect going, that we definitely see growth coming back.

Right.

And a follow-up from here.

You did mention, I think, in your opening prepared remarks that the penetration, online penetration, of hotels is maybe 15%, you surging to 30% over the next maybe 3 years, which suggests at least 25% growth in this space itself.

But my question is that how much of this do we think is really revenue growth?

Because I would think that the premier segment would have already gone online now, right?

And the large part of what is the 70% left to go online might be really the -- either the far-flung areas or the budget segment.

So in terms of revenue growth, it might be -- it could be lower than the market growth, right?

I would actually allow a guess that it would probably be in line with that because don't -- it's not necessarily that growth is going to come from the budget or the ultra-budget or the alternative accommodation -- budgeted alternate accommodation alone.

There is -- lot of the under-penetration we do is on the mid-segment as well.

So just the super-premium, maybe the online penetration is higher given that there is inbound and then there is business travelers, et cetera.

But that's a very small portion of the overall total inventory depth, if you will.

So of the total 5-star category, or let's say, 4- to 5-star category would be in the range of 20%.

80% of the total inventory is the mid segment and lower, mid and budget.

And then there is alternative accommodation, which has 2 categories as well, budget -- actually 3, budget, mid and totally high-end like luxury -- luxurious villas and stuff like that.

And we are kind of getting -- foraying into that as well just in terms of just curating that inventory and also focusing on luxury and superluxury segments on MakeMyTrip.

You will probably notice some of the curated content, curated inventory already on our platform on that segment.

So if I look at it overall, I would think that it might be in line or thereabout.

I don't think it'll be lower than the room night growth.

Sure.

And the last question from my side is with OYO now coming onto your platform, does it mean that it ceases to be an aggregator and they're already a supplier now?

They are, actually.

And clearly, not only stated, I mean, we've kind of looked at it practically as well.

So that clearly their vision, it seems, is to become the hotel chain and completely have moved or shifted their strategy from an aggregator to 100% inventory run -- a little bit light-touch hospitality management.

And therefore, that was like one of the fundamental reasons that we entered into this partnership.

Our next question is from Sachin Salgaonkar from Bank of America.

I have 3 questions.

First question is regarding this entire IFRS reclassification of revenues.

Mohit, help me understand why expenses are added on to the revenues.

And in your opening remarks, you did mention that these are the sales and promotion to acquire customers.

So how should one classify what are expenses which are meant to be acquired for customers, and what are the other expenses?

I mean, to put it in other words, am I right in terms of looking at it that you are -- if we add that $24 million for this quarter, which you sort of separately showed that expenses into your marketing expense of $93 million, your marketing and sales promotion is not below 10%?

So help me understand that.

And [equally], if we could get these numbers for last year, 2017, that would be helpful.

Second question is on hotels.

Now clearly, Paytm is out of it.

Are you seeing a possibility of them making a comeback?

Or is that -- they have given up so easily on this space?

And again, if your hotel revenue growth is a bit weak, i.e., I mean, in the overall budget segment, do we think you are losing market share out here and someone is gaining at your expense?

And third question is, I mean, if you look at the trends for last couple of quarters, we are seeing a bit of a slowdown in revenue versus compared to historical growth.

But also, we are seeing sort of a decline in EBITDA loss.

So directionally, are you comfortable with being EBITDA positive in a year or so while maintaining a constant currency growth of more than 30%?

Sachin, thanks so much.

I'll take most of those.

See, if you just look at the way we've been kind of guiding on the business performance, and even in the past, all our guidance is to be on a non-IFRS measure, which is net revenue or revenues less service costs because we feel that's a much better representation of the value-add that we kind of provide as an intermediary to the travel services booked by the customers.

So let me just explain what the IFRS number -- net revenue measure is.

It is essentially the IFRS revenue adjusted after -- from that, we deduct all kinds of cost of services, particularly in case of our offerings that we award on a principal basis, say, for instance, cost of service for our packages business, that is kind of reduced from the IFRS revenue and also any promotions, which hitherto have been kind of netted off from revenue get added back, okay?

Just to kind of show more the entire margin from the supplier and the customers that we are on so that the segment-wise margins are kind of a lot more clearer because, otherwise, based on the promotions that we are running or the customer acquisition spends that we are doing on a quarter-to-quarter basis, this could look very different across quarters.

Whereas, typically, supplier and customer margins tend to remain largely at similar levels across quarters, albeit with small differences thereto.

So essentially, what we are saying is now if you look at in terms of the new revenue guidance that's come in, in IFRS 15, a lot of customer acquisition expense which we used to kind of show as either marketing or sales promotion, could perhaps will have to be kind of netted from revenue.

And therefore, the IFRS revenue measure might go down.

However, what we are saying is the non-IFRS measure of revenue less service costs or net revenue will continue to remain largely as is because anything that kind of gets netted off in computing the IFRS revenue as reduction on account of promotional expenses gets added back when we are calculating this non-IFRS measure.

So it will continue to be more relevant to keep evaluating the business performance like in the past, in the future also on the non-IFRS metric.

I'll just move on to talking about the couple other questions while (inaudible)

Sorry.

[Just following up on that.] The marketing and sales below 10%, is it IFRS basis or non-IFRS basis?

What I'm talking of, the less than 10% is all marketing [and sales] promotion put together irrespective of whether that has been netted off from revenue or not -- once we kind of [gross] it up together, the entire expense.

And that is the whole purpose.

Through that non-IFRS measure, it can show what is the total margin on one side and what is the total expense, marketing and promotions, put together in one bucket.

So when I'm talking of coming down to less than 10%, I'm talking of the expenses all put together irrespective of how they are presented in IFRS.

So in terms of hotel growth, just in case we're kind of tending to lose out on market share over there, this growth still continues to be higher than market growth overall.

So I don't think the concern over there is whether we are kind of losing out on market share.

And that, honestly speaking, a quarter or 2 of a little bit of a sustained or even a small loss in market share, I don't think kind of really makes a big difference so long as directionally over a longer-term period -- so if we really look at it over the last 3 years, and I'll call out that we kind of expect to keep growing at a good pace in the hotels segment even in future, I don't think (inaudible) overall cyclical growth in the hotel segment.

I think we are very clear of the fact that if you have one thing to drive marketing efficiencies and promotional efficiencies, for Q -- quarters we'll need to kind of see the impact coming through in terms of softer growth because as you kind of keep tapering off the burn, clearly there is an impact because there's a large chunk of population, which still tends to kind of make their final call on a booking or otherwise based on the kind of quantum or promotion, which has been rolled out.

So while that number kind of keeps getting lower, as you get into a much larger base and more importantly a base which is repeating more often on you and there is the whole rational part kind of doing this large customer acquisition programs, that as the customer repeat kind of enhances this dependency or variability linked to quantum or promotional discounting offer kind of tends to keep going down.

However, some part of it will always be there and therefore we're kind of looking at a balanced growth.

Again, this will be tactical, taking a quarter-on-quarter approach so therefore you could, again, just like in the previous year, you could have quarters where perhaps growth will be higher than what would be -- than normal in some other quarters and there will also be some quarters where perhaps we'll do much better in terms of spends and efficiencies, et cetera.

So I think we'll have to take a balanced approach and look at it quarter-by-quarter while keeping the overall annual objective in mind.

On the declining trend in adjusted operating losses, clearly that's a direction that we want to kind of move on and I think we've made significant progress over there compared to where we started during the year in Q1 and where we've kind of ended in Q4.

And all things put together, unless there is a dramatic shift in the competitive dynamics, I guess we would want to kind of have a repeat of improving trend as we start or get into the new fiscal and by the time we kind of exit out of it over the next 4 quarters.

Are we comfortable getting into breakeven or EBITDA positive?

Of course, why not?

I think we'll have to largely kind of keep it in mind that I don't think that's the sole objective.

The twin objective over there is to kind of keeping driving growth in line with what the competitive situation is while trying to pursue cutting down of losses.

Yes.

So Sachin, on Paytm, I mean, as you rightly pointed out that they are not right now focusing on hotels.

They continue to focus on flights and bus, and of course, rail, so it seems like more ticketing kind of space rather than just getting into the accommodations.

So to the best of our knowledge, at least at this point in time because the team was also dismantled and all, we don't know, frankly, but at this point in time they are not and doesn't look like in the near future that they would want to get into because it's a harder kind of space, more involved experience and so on.

But at some time in the future, would they want just come back and do one more attempt to that, time will only tell.

And we would obviously keep watching this space, but right now it doesn't look like.

Our next question is from Shaleen Kumar with UBS.

I think there's a good control on the cost, which I'm liking over here.

Just want to understand from you guys on the competition bit and are you guys seeing a bit of an increased activity from Expedia over here, because you guys have some sense -- been sensing some bit?

And just one more question.

In terms of -- you talked about like 40% growth in our [non-billet] kind of category.

What proportion does it contribute in terms of the revenue or transaction, whatever you'd like to give a broad range of our total hotel segment revenue contribution, transaction contribution?

Okay, on Expedia, it's kind of nothing unusual that we've seen.

I mean, nothing -- no serious aggression, no massive campaigns and all.

Although in the international hotels and international flights, we do see them coming up, I mean in their participation on meta and stuff.

So I would say kind of same intensity, nothing unusual as far as Expedia is concerned.

But we definitely keep them -- we keep watching them very, very closely as one of our key competition, whether it is Expedia or Booking.com, a clearly incredible global company, so we keep watching them, for sure, very closely.

And the player that is kind of more aggressive maybe just from going on the air and a regular campaign, et cetera, is more trivago and trivago is more meta search.

And we have been also participating on -- for certain lines of businesses both on trivago and TripAdvisor just to get the traffic acquisition there.

And you would see some of these international players participating in both the meta channels as well.

So I guess that's as far as, let's say, the competition from the multinational companies that are the Expedia or trivago or TripAdvisor or for that matter Booking.com.

So yes, they are very much part of the competitive set.

Have we seen anything different, any more aggression or anything unusual?

Perhaps not.

Do we watch them closely and keep looking at them every now and then?

The answer is yes.

And Shaleen, while we haven't kind of given any segment-wise color, ballpark, if you would recollect, we've been generally saying that in -- our skew is towards mid- to premium.

Ballpark, each of the segments, whether it is budget and ultra-budget or whether it is mid or whether it is the premium segment, we generally tend to kind of have an equal share between these segments on a ballpark basis average.

So I think that should give you enough color of the weight-age of the premium segment.

Our next question is from with [Manji Jaswal] with Jefferies.

So I would like to understand how the gross booking had performed in terms of pro forma basis compared to last year, so if you can give that number?

So we have instead of reported gross bookings on a pro forma basis last year, so I have kind of already shared color on net revenue basis compared to the pro forma for last year.

I mean, that's about all that we can provide.

So can you please repeat that number from net revenue on a pro forma basis last year?

Compared to last year?

Yes.

Yes, sure.

I think I just called that out, I'll just give you that.

In terms of overall net revenue growth, we saw 39.5% year-on-year growth, including about 42.7% in rail ticketing and about 55 point -- 41% from hotels and packages wherein Standalone India Hotels was about 55.6%.

And I'm showing further questions.

I would now like to turn the call back over to Jonathan Huang for any further remarks.

Thank you, everyone, for joining our earnings call today and we look forward to speaking with you very soon.

That concludes our call for today.

Ladies and gentlemen, thank you for participating in today's conference.

You may now disconnect.

Everyone, have a great day.