MakeMyTrip Ltd (MMYT) 2023 Q2 法說會逐字稿

We'll start now. Hello, everyone. I'm Vipul Garg, Vice President - Investor Relations at MakeMyTrip Limited. And welcome to our Fiscal Year 2023 Second Quarter Earnings Webinar. Today's event will be hosted by Deep Kalra, our company's Founder and Chairman. Joining him is 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 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 safe harbor provision of U.S. Private Securities Litigation Reform Act of 1995. These statements are not guarantees 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 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 12, 2022. Copies of these filings are available from the SEC or from the company's Investor Relations department.

I would like to now turn over the call to Rajesh for his comments. Over to you, Rajesh.

Thank you, Vipul. Welcome, everyone, to our second quarter earnings call of fiscal 2023. To start with, just a couple of key performance highlights of the quarter. While the reported quarter was a seasonally weak period for leisure travel, we delivered strong results with gross bookings growing by 126.3% year-on-year on constant currency basis. EBITDA for the quarter was at $10.7 million as compared to an EBITDA loss of $0.6 million in Q2 fiscal year 2022. And adjusted EBITDA or adjusted cash operating profit stood at $18.7 million as compared to $10.5 million in the same quarter last year.

COVID-19 infections in India have steadily come down and continue to be mild. Hence, the impact of pandemic on travel decisions was negligible during the quarter. However, the inflationary pressure and visa issues are holding recovery momentum, especially in outbound international travel. As shared earlier, high fuel cost and inflationary pressures led to high airfares during Q1, while we witnessed some moderation in crude oil and [ETF] prices towards the end of Q2 where large part of the quarter, fares remained high. Domestic leisure traffic has recovered more than 100% of pre-pandemic levels and continues to be strong.

As per DGCA data, overall domestic daily flown passenger market has recovered to 85%. We are recovering faster than the market at 98% as compared to same quarter pre-pandemic. As a result, despite headwinds on outbound travel, we delivered more than 126% recovery on air gross bookings and 117% recovery in overall gross bookings on constant currency basis compared to the pre-pandemic Q2 fiscal year '20 quarter. As stated earlier, consumer sentiment continues to stay positive in terms of willingness to travel and therefore, fares getting rationalized with full restoration of passenger carrying capacity can aid to full recovery in outbound international travel in the next few quarters.

While travel industry continues to navigate short-term macro headwinds with resilience, the medium to long-term outlook for travel and tourism in India remains robust. Government of India estimates that by 2030, tourism sector will contribute $250 billion to India's GDP, up from $150 billion in 2024. And the aspiration is to take this contribution to $1 trillion, $1 trillion by 2047. Ministry of Civil Aviation has projected a phenomenal growth for India civil aviation, 220 airports by 2030 from current 153, overall fleet size of about 1,200 planes from current 700 in next 5 years and 400 million in air travelers from current 200 million in next 7 to 10 years. Government is looking to make all the necessary interventions, including investments in infrastructure to promote India as a leading tourism destination, which is great news for the industry and us.

From demand perspective, India is the second most populous country in the world and an underpenetrated market for travel. Propensity and willingness to travel is steadily increasing, fueled by growing Indian middle class. Middle class households are expected to reach 330 million in 2030 from 166 million in 2018. Also, digital revolution in the country continues, leading to ever-growing Internet and e-commerce penetration. Over last decade, Internet penetration has increased from 11% in 2012 to 47% in 2022. And e-commerce users have increased over 19x from 10 million users in 2012 to 190 million in 2022. Recently, 5G services were also launched in the country that should further accelerate this trend with high-speed Internet enabling richer content and higher e-commerce adoption.

We have been at the forefront of this digital revolution as well. And through this year -- through the years, we have invested and facilitated online penetration across different travel segments. We continue to digitize various travel use cases with our robust multiproduct platform with an aim to deliver best user experience and value. Coming to business segments now, starting with air business. We continue to maintain our leadership position in market share on the back of innovative products and industry-first features. We recently launched QuickBook feature for our frequent flight bookers. This feature leverages the user's previous booking history and provides their most preferred flight options, thereby helping them complete the flight transaction lightning quick.

We continue to build on our new stack of products and features based on data science models. And our ZERO Cancellation product is seeing very good traction amongst travelers. We have recently extended the ZERO Cancellation product for international flights as well, where international travelers can now avail of full cancellation penalty waiver by purchasing this add-on product at the time of booking. International travelers who are unsure of their travel plans now also have the option of locking flight prices through our in-house price lock feature by paying a nominal amount. During the quarter, we also went live with HDFC SmartBuy platform where HDFC Premium Credit Card holders cannot only book to get -- can only book to get maximum reward points, but also utilize their reward points on their travel bookings.

Coming to our accommodation business, which includes hotels, packages and homestay segment, we continue to see strong growth on year-on-year basis. We have seen strong recovery in premium and mid-premium segments, while budget segment recovery has been slower. Our share of premium and mid-premium in the overall hotel volumes has increased significantly as compared to pre-pandemic levels that helped overall recovery to be almost 100% in hotels and packages gross booking as compared to pre-pandemic levels on constant currency basis. Pandemic has also changed travel habits to a certain extent. In addition to annual holidays, more and more people are now taking multiple short holidays on long weekends and traveling to nearby getaways giving a boost to domestic tourism.

For instance, in August, we touched our all-time high of single-day check-ins on the Independence Day long weekend. We continue to innovate and launch industry-first capabilities to serve our customers with best quality experience. We launched our new flexible payment option for users, which allows customers to book hotels without any upfront payment. We offer it to all customers across a broad base of properties. Customers who plan their trips early have found this as a perfect feature, thereby increasing our share of future bookings. Additionally, in our endeavor to tap the group booking customer segment, we also launched a dedicated funnel group bookings 5 or more rooms, besides the price benefit.

The product also innovates around payment policies, meal selection, et cetera, to make it easier for the customers to do group booking online. During the quarter, we re-launched our GoStays program, which offers top-rated affordable properties to customers. It comes with a money-back guarantee across over 2,000-plus properties Pan-India, which covers our main promise of hassle-free check-in with clean rooms, TV, AC and free Wi-Fi. We continue to add more properties as we build on customer experience in the budget segment.

We also launched our new use case of Hourly Stays with about 3,000 properties in 109 cities to cater to the short stay use case. Customers will now have flexibility to choose stay options as per their needs for 3, 6 or 9 hours with a price advantage. As mentioned earlier, homestays have been gaining popularity among consumers in India and we are investing behind creating more awareness of this category. We recently hosted India's Favorite Homestay Awards, a first of its kind annual celebration to recognize and reward the growing community of homestay hosts in the Indian market. We received about 2,400-plus nominations and 15 properties were selected as winners by a neutral jury across various categories.

Our domestic packages product has done phenomenally well with 166% growth in domestic volumes compared to pre-pandemic. Encouraged by the growth rate, we have ramped up our Holiday Experts team from 700 at the start of the year to about 1,000 women Holiday Experts now. This team operates on a variable cost structure. We also grew our franchise channel from 110 partners to about 140 active partners now. Coming to our bus ticketing business, we maintained our recovery momentum in the seasonally weak quarter. Our overall bus business gross bookings in quarter 2 recovered [to 111%] of quarter 2 fiscal '20 levels in constant currency terms. Product-related initiatives continue to focus on driving new customer acquisition and better user experience.

We launched the Hindi booking funnel in redBus as the first step towards full localization. Also, more than 80% of Primo bus operators were on-boarded for the instant refund program, which resulted in issue closure turnaround time improvement from over 3 days earlier to less than 6 hours now. Our other ground transport services such as intercity cabs, rail tickets, et cetera, continues to scale well and have already surpassed pre-pandemic volumes. This business contributes significant new users each quarter to both MMT and GI platform. Major part of this new traffic comes from the non-English-speaking Tier 2, Tier 3 cities, thereby expanding the reach of our offering to newer geographies and user segments.

In March 2022, we launched the stand-alone lightweight RedRail Android app for rail ticketing and info services. As of September, the app crossed 1.7 million installs and 300,000 monthly active users with an app rating of 4.25. For airport transfer use case, we had entered into an exclusive partnership with BluSmart offering. Customers 100% electric, hassle-free, guaranteed an on-time pickup and drop experience at Delhi Airport. Post the launch, we have -- that we are witnessing pickup in transactions. Our attach rate has increased by over 20% with an NPS of 62. myPartner, our other B2B2C demand channel, added 3,940 travel agents during the quarter, thereby increasing the penetration into underpenetrated areas of the country and taking the total count to about 32,000 by the end of the quarter.

Domestic corporate travel is now coming back to near normal, and both our myBiz and Q2T platforms catering to this demand segment continued to grow very well. Our corporate business is now more than 2x of the pre-pandemic levels in terms of gross booking and continues to stay. We have been adding new customers on both myBiz and Q2T platform, and the active corporate count has now reached to over 39,000 small and medium corporates on myBiz and 209 large corporates on Q2T, which is almost double as compared to pre-pandemic customer base.

On product side, we have recently added capability to enable easy integration with the expense management and client's ERP platform. We have also further strengthened supply of both flights and hotels to bring more value to our corporate customers. Our GCC business continues to scale organically. Gross booking value this quarter has grown over 9x albeit at a lower base as compared to same quarter last year. During the quarter, we launched our first digital-only brand campaign with the Unmatched Delights theme. This campaign resulted in a sharper uplift for both flights and hotels.

Before I wind up, I would like to reiterate that travel continues to rebound on the back of waning COVID infections and positive consumer sentiment. We have inflation-led macro pressure right now, but medium to long-term outlook of the industry look very robust. At MakeMyTrip, we are pleased to deliver consistent strong performance both in terms of revenue and profitability. And we continue to believe that as a leading travel company, we continue to garner a major share of future growth in demand on the back of our robust multiproduct platform and customer-first approach.

With this, let me now hand over the call to Mohit for financial highlights of the quarter.

Thanks, Rajesh. Hello, everyone, and I hope you are all staying safe and healthy. To start with, I would like to call out that while our operating business is largely in Indian currency, our financial reporting is in U.S. dollars. Significant weakening of the INR versus the U.S. dollar by about 3.4% during the quarter has had a translation and restatement impact. This notionally affects our growth numbers and our cash balance as we stated in U.S. dollars. And as a result, the finance cost on forex impact is higher during the quarter. Hence, I will focus on growth in constant currency to reflect the stronger underneath growth in the operating currency.

As highlighted, in the last couple of years during the pandemic, we are focused on tight cost control and operational profitability in view of the business uncertainties from disruption in travel services. As we are returning to business normalcy, our focus during this fiscal year is on business recovery and growth with operating leverage in the business continuing to drive profitability. During the first half of the fiscal, we have seen gross bookings grow [227.7%] year-on-year in constant currency terms, and the adjusted profit has come in at about $31.6 million versus a loss of $2 million in the first half during last fiscal year.

We are glad to report that for the first half, our adjusted operating profit came in at about 1 percentage points of gross booking in line with our targets and estimates. The other broad highlight for the quarter is that despite Q2 being a seasonally weak quarter and the macro headwinds, we continue to see rebound in travel demand and that has helped us achieve gross bookings of $1.54 billion, which is about 1% -- just about 1% lower compared to the seasonally strong previous quarter in constant currency terms. Our air ticketing adjusted margin stood at about $75 million, registering 109.2% year-on-year growth and 27.8% quarter-on-quarter growth in constant currency terms.

While the air traffic was impacted in July and August, it picked up during September due to easing of airfares and advanced bookings due to the festival season in October. We ramped up our marketing and promotional activities to capture some of this traffic. Airlines have also helped push the demand through additional consumer promotions on our platform as a result of which you also see that the margins during the quarter have been slightly higher at about 7.4%. Adjusted margin for our hotels and packages business, we stood at about $57.4 million during the quarter, witnessing a growth of 74.7% year-on-year in constant currency terms and the margins at 17.2% were in line with our expectations.

In our bus ticketing business, during the quarter, the adjusted margin stood at $16.9 million, registering a strong year-on-year growth of 129.8% in constant currency terms. The margins at 9% are again in line with our expectations. Adjusted margin from the other businesses during the quarter stood is stood at about $7.5 million, which is an 89.1% year-on-year growth in constant currency terms. Our operating costs were largely in line, and we continue to be prudent with our variable spends, especially with respect to customer acquisition costs. As a result, our marketing and sales promotion expenses came in at about 5.4% of gross booking value at almost the same levels as Q2 of last fiscal year.

We thereby post an adjusted operating profit or adjusted EBIT of about $15.1 million during the quarter, adding the noncash expenses, the adjusted cash operating profit or adjusted EBITDA, we stood at about $18.7 million as compared to [indiscernible] during the same quarter last year. During the quarter, we acquired additional liquidity interest and controlling stake in Simplotel Technologies Private Limited, a company engaged in managing hotel websites with booking engine capabilities in India. This was largely done via our primary investment in the company, which will not only help them scale up in India but also test their offerings in new lucrative markets like United States which can bode well for the long-term prospects of Simplotel.

We will continue to leverage our strong brand and cash position to drive investments in areas of future growth. Before I end, let me share a quick update on the recent CCI order. While we had communicated receipt of the public order on 19 October, we have received the confidential order on 29 October. The order is appealable before the National Company Law Appellate Tribunal of India within 60 days of receipt. We are currently reviewing the order, and we believe we have strong merits in the case. We are also working with our external legal counsels in determining our future course of action.

With that, I'll turn the call to Vipul for Q&A.

Thank you, Mohit. Thank you, Rajesh. (Operator Instructions) First question is from the line of Bryan Wang.

Congrats on your third straight quarter of IFRS profitability. On this front, could you let us know your views behind how you manage -- intend to manage S&M and operating expenses in the long-term? And how this might translate to higher levels of profitability?

And the second one, if I may. How do you manage customer inducement costs on the air ticketing side? And how should we think about this in the long-term?

Hello, Bryan. Maybe I can take that. And like I had called out, we're continuing to be very prudent on the customer-efficient costs overall. And therefore, we do believe we'll continue and see marketing and promotional expenses remain much lower than what they used to be at and during the pre-pandemic times. If you would recollect, pre-pandemic the marketing and sales promotion expenses used to be about 9 to 10 percentage points of gross booking. Although we've seen much higher number at about -- close to about 14% way back in 2017.

Now these were largely coming out of the significant investments that we are doing in terms of building online penetration in the hotels business or the accommodation business and also driving significant amount of customer acquisition on the mobile platform, particularly in the mobile apps, which were launched between 2015 to '17. So this was largely in keeping with our investments in customer acquisition on mobile platforms as well as in the hotel category. We have continued to see good growth in both these areas as a result of which you see the efficiencies coming through.

And now the customer acquisition costs is close to about 5.4 percentage points of gross booking. We do expect a little bit of an increase coming in, in the customer acquisition costs and this could scale up to about 6% or so. But this would largely be in line with our revenue mix kind of once again, improving in favor of hotels. Pre-pandemic, I would like to kind of bring to our attention that the mix of hotels in the -- or the revenue mix used to be close to about 50% plus. We are currently a little short of that because the recovery in the accommodation segment is slightly lagging the recovery in the air ticketing segment.

But as that kind of catches up, we do believe the overall blended margins will also improve a little bit, and there might be a slight increase in the overall customer acquisition costs as well. Coming to a slightly longer-term operating margins, we should continue to see operating leverage coming in from scaling up because we don't really see any significant increases in the customer acquisition costs in the near-term future. So that should really help us improve operating profitability year-upon-year. And this is what we are kind of seeing in the current first half also compared to what we had seen, say, maybe in the first half or second half of last fiscal year.

Next question is from the line of [Lester Pool].

Hello. I noticed that the -- it's also about the customer acquisition costs. In the last earnings call, you expected the cost to increase in this quarter, but actually, it was about the same or actually slightly lower. Is that due to any factors like branding, you spend less on branding or other variable factors?

Hello. Certainly, yes. I think we've been able to keep this at much lower levels than we had expected. And yes, to some extent, it has also been because one of the brand campaigns that we had planned got pushed out because we weren't really seeing a significant strength in the recovery on the accommodation side as we had expected. This kind of campaign is now planned in the next quarter, and therefore, we could possibly see a slight increase coming through in these expenses in the next quarter, but we should also be getting pretty much offset by the improvement in the volumes in the seasonally better quarter of Q3.

(Operator Instructions) Next question is from the line of [Tarbir Shahpuri].

Hello, Rajesh. This is specifically towards competitive intensity. Do you mind spending a few minutes on that and what your sense today and maybe a year out, what you're seeing on [indiscernible]

Sure, Tarbir. Let me just give you short overview of the competitive dynamics in the market. And for us, given that we are an all-segment player, so the way we see the competition is specific to a particular product and the offering. So let's say, for our domestic flights on an overall air market first, so the overall competitive dynamics remain the same. There is no real change from what we've been seeing for the last couple of quarters or more. It continues to be the same. There is some bit of the consumer promotions push from -- in the market.

And part of that, by the way, is also from the airlines because the endeavor really is for everyone to build the volumes given that the recovery is still short off -- in volume terms short of full 100% recovery in the domestic air market. So no real change from what we have been seeing in the past. It continues to be the same. And coming to hotels market, our competition there is the global players, whether it is Booking.com or Expedia or Airbnb for homestays market. And again, there also, we haven't really seen any significant change in terms of any aggressive competitive activity picking up or going ahead and making some investments in the marketplace from the competition.

So again, here, the competition is largely focused on the back of the product strengths or the supply strength in general and not necessarily driven by aggressive promotions, if you will. And coming to bus segment, given that we are the market leader by far there as well, there has been some competition for bus focus or ground transport focus OTAs at the local level whether it is iXiGO or Paytm to some extent on the horizontal side. Again, from there also, if I may say so, we have actually seen the intensity coming down a bit relatively -- relative to, I would say, a couple of quarters ago. And overall -- and as a result of that, we would have actually gained share on our bus segment in this quarter that we are reporting out.

That's really helpful. And if I can just get one short one in, it's something we all actually internally discussing it maybe I want to ask it publicly. Is there a plan for a stock cross-listing at all?

Hello. Tarbir, you mentioned cross-listing?

Listing in India, yes.

Listing in India. Yes, I mean I had called this out earlier also that 2 or 3 key considerations basis which we will consider our listing in India. I mean as far as you know, the need for funds is concerned, we don't really have a need for a fundraise right now because we're well capitalized. We have got over [$450 million] on the balance sheet in terms of cash and cash equivalents. So that's not really a driver. The only driver being overall shareholder value creation and unlocking and also leveraging the significant brand strength that we have in the operating market.

So something that we are considering. Couple of considerations which will drive the part to it will be, one, seeing the impact of the pandemic over the last couple of years, I think we're very keen that we should see the business getting back to growth over pre-pandemic levels. So that remains a key agenda and we are still to get there. And the other is ensuring that the operating model continues to be profitable and sees operating leverage coming through. This has got demonstrated over the last few quarters. And if we continue to remain on that path, that will possibly open the prospects for a listing in India as well.

The next question is from the line of Aditya Chandrasekar.

Hello. Just a couple of quick questions from my side. Firstly, can you give us a sense of the market share in each of the segments? Just broadly what would be the share and how it has moved maybe in the last couple of quarters, if at all it has moved?

And secondly, on the adjusted margin percentage, we see some fluctuation on the air ticketing side over the last couple of quarters. So it came down in Q1, back up again in Q2, is that purely a function of airfares going up and down or is there any kind of structural change in the way we make the adjusted margin there in terms of commission or maybe airline promotional activity, et cetera? Yes, those are the two questions.

Yes. So like I had called out, the fluctuation in the adjusted margin percentage for the air ticketing business is largely in line with the kind of promotional push that we see coming in from the airlines. So that's one of the key reasons for the fluctuation over there. We've seen it fluctuating very significantly through the pandemic. So it's linked to the overall load factor that the airlines are seeing and the amount of promotional activities that they would want to do on the platform. So largely coming in from that. It would just kind of taking it back to your first question --

I'll -- maybe I can take that, Mohit. It was about the market share. Maybe I can just quickly take that, Aditya. So the only line of business where we have the third-party authentic data of market share is actually domestic air because we do get the data from DGCA pretty much on daily basis, which is Director General of Civil Aviation in the country. And there we clearly have gained share. Pre-pandemic we used to be at about 27%. We, today, are about 30% of the total market. This is like offline/online all put together.

And we also believe in other segments, whether it is hotels or hotels and packages together or for that matter bus segment, we would have incrementally gained there as well given that we've been growing. When you pick up surrogate data, we've been growing faster than the market recovery pretty much on every segment. So, I guess, directionally, just from a trend perspective, we believe that we've been gaining share.

And just a quick follow-up on the adjusted margin again. So going forward on a sustainable basis, where do you think this number will lie between, say, 6% to 7% or how should we look at that number?

No. I think it should largely remain around the 6, 7 percentage points. But it all, like I said, is linked to what are the prevailing airfares during that particular quarter, and the kind of load factors and overall promotional activity in that particular space. We have seen this going up even to 9% plus in some of the quarters during the pandemic. So I think that little bit of volatility will remain until the overall domestic civil aviation market stabilizes and the pricing stabilizes.

The next question is from the line of [Raghav Bihani].

So my question was around the market share, but I think you've already taken that up. So, no question. Thank you.

We'll take the next question from the line of [Prashant Kothari].

Just wanted to understand on the personal cost, the increase that you say that's in dollar terms, I guess, if I have to convert it into rupee terms, will be more like 20% growth in personal expenses year-over-year. Can you just explain how much of it is headcount addition and how much of it is salary increase?

I'll take that. Just give me a second. I think overall we did expect certain amount of the inflationary impact to come through. And it's largely coming in from that but not necessarily in terms of significant headcount increase. So a larger part of it is coming from the inflationary increase, which [indiscernible] not necessarily seen any significant headcount increases.

Okay. So is it roughly 18%, 20% type of base increase across the board this year?

And we'll need to see because it would also possibly have a combination of people on roles and the -- and those on the call center. But that would be overall as part of the SGA part. Maybe I could share more details separately.

All right. Okay. And the second question, I'm not sure if you already answered this because I joined the call a bit late. On the hotels and — take the hotel segment, you said that the recovery is a bit slower. Is it just for us or is it reflection of what's happening to the overall industry?

Yes, Prashant. Maybe I can take that. Prashant, what we were trying to say as part of our commentary was actually the overall industry trend for the budget segment of hotels. And just the budget use case, say the price point per room night from INR 500 to INR 1,500 room night kind of a segment. And that too, if you go deeper, it will be more on business cities versus leisure cities. While the recovery has been fairly robust as we shared both for premium and mid-premium segment in terms of just surpassing the pre-pandemic levels on gross booking basis, very close to 100% recovery even on volumes basis.

On the -- specifically on the budget segment and this is across industry phenomenon, not on us specifically as we see it from all the industry sources. And that's the only segment. And I guess it's just a function of all the use cases just coming back in an absolute full-blown manner. And the reality also is that just the consumer price. I mean, there is a bit of an inflation there also in terms of the average selling price going up or relatively speaking to the pre-pandemic regime where there used to be a lot of the aggressive acquisition of the customers in this particular segment was happening across the industry. And maybe some part of the impact is because of that. But our belief is that it's just a matter of time. It's just taking a little long to come back.

Yes. And you do plan to increase your investment in that segment. So you think that would help revive the demand? I mean what's the thinking there in increasing the marketing spends?

Yes. No, sure. Not necessarily marketing spend. In fact, we have been actually pushing and making investments in terms of just on having the right supply with right experience on our platform. As you might have noticed in the commentary, we covered as well that we re-launched our GoStays proposition, which is specifically in the budget segment. And we are obviously trying to work with the partners to also ensure and give them all the intelligence that we get on our platform in terms of what conversion rate will happen on what price points, et cetera, and get them to do the price adjustments on their fares differently for different periods, now weekdays versus weekends or long leave weekends versus just the regular days.

And seasonality wherever there is high seasonality versus low season pricing or for that matter destination-based where there could be a different pricing intelligence that goes back to them, let's say for, if there is any kind of a pilgrimage festival that seems to be happening on some of these -- some of the pilgrimage destinations. So all kinds of variety of intelligence gets passed on to the partners. And then they end up making the price adjustments or doing promotions on our platform. So all kinds of interventions are happening both on the product side, supply side, product side coupled with supply side on the front end on our platform and also through our partners even on the pricing side.

And just one last question. The service cost for the hotels and packages segment has increased a lot this year. Can you just explain what is it?

Yes. I think we've seen sharper growth coming in the packages division, which gets reported on a gross basis. So therefore, you see the cost of service increasing on a year-on-year basis.

Yes. If I may just add. Prashant, I had called this out, the domestic packages for us grew 166% year-on-year. And like Mohit pointed out that only the packages business gets reported on a gross basis and the cost of servicing is nothing but the cost of sales for the packages. And so that would have grown in line with the growth in revenue.

So if we are looking at the adjusted margins of the segment, roughly what part would be contributed by packages and what part is the stand-alone nights?

So while we do share operating metrics on stand-alone hotels as well, but if you kind of look at broadly the mix between, say, hotels and packages at a margin level, it's predominantly hotels. So it's in the high 90s coming in from the hotel side. But yes, as a gross booking break down, there is the mix of hotels — of packages is much higher.

The next question is from the line of Santosh Sinha.

My question is regarding the forex product that was launched recently. So how has been the traction in this segment, forex segment? And what kind of actually revenue or margins you are expecting from this segment?

Yes. Santosh, if I may just take that. Good question. And I would say at the outset, early days. I mean we just launched -- in fact, this last quarter we just finished the integration with the BookMyForex, the company that we had, that's focusing on forex sale on B2C platform and we were supposed to be integrating with them. So we just finished the integration in this quarter, in fact, just more recently spilling over to current running quarter as well.

And we have started to see some traction more traffic going from our platform to also opting for forex product. So really early days, but BookMyForex again that also we've just consolidated only part of the quarter. So I think in the coming quarters, we should be able to give you a better sense of how much is the contribution coming for -- from this ancillary product called forex, and how it's growing and what margin, et cetera. But right now for the reported quarter, it's insignificant.

That was helpful. Next question is regarding the hotels business again. So as the share of homestay -- or GoStays increase in the revenue, will it impact margin for the company? And also as the lower segment of the hotels actually revive, budget segment actually revives. So will its share increase, will it impact margins for the company?

There could be slight overall improvement in the margins with the budget segment mix improving. But like we had called out, we do expect overall hotel margins to remain within the 17% to 19% kind of a range overall. So I would leave that as a larger range to keep in mind, even as the mix changes.

The next question is from the line of Vijit Jain.

Hello. Sorry, I joined a little bit late. Apologies if this question was already answered. But two questions from my side. One, can you comment on the supply recovery currently as it stands from the pandemic overall across the segment?

And my second question is the BookMyForex that you mentioned that you've consolidated only in part of this quarter in terms of revenues. Can you talk about what was the impact of it in terms of costs, employee costs and other costs in this quarter? And how should we look at that cost increase Q-o-Q next quarter when it is fully in the numbers?

Vijit, what was the first one that you had asked? Sorry.

The supply recovery from the pandemic at the moment.

Yes. Hello, Vijit. I will now answer the question. So let me just give you an overview on the supply recovery first and then Mohit can take on the second question. As far as domestic flights is concerned, overall supply recovery is about 85% in terms of number of flights that if you compare them apples-to-apples with pre-pandemic. And as far as hotels is concerned, the supply recovery is pretty much there like there may be a churn of the hotels that might have happened, which might be 5% to 10% is our best estimate, but otherwise 100% of the supply is back in business.

And similarly for bus. I don't think there is any constraint on bus supply recovery per se. It's just that on volumes terms, some use cases would still be like I was mentioning for the hotel case some budget segment use case is still to come back. And in case of bus, there may be small sort of a use case that is first-time office goers or people working in the big IT industry -- IT companies back and forth travel that happens through bus especially in the south region. That has to come back 100%. More and more IT companies are mandating people to come back to office and all. But on supply side, the recovery is almost 100% there as well.

Rajesh, if I -- just a quick follow-up to that question. On the hotel side, right, one of the things we see in some other parts of the economy is the premium segment, in general, not just for the hotels, but on other segments as well, has done well so far from the pandemic and the budget. The demand side has also been on the weak side. So if you -- I don't know if you can strip out the supply-related impact on the budget segment from the demand-related impact, but do you see the same? Or if I put it in another words, do you see the Goibibo app relatively lagging behind MakeMyTrip when it comes to hotels?

Given that Goibibo, yes, it was leading the budget segment or the sweet spot for Goibibo platform for budget and mid-segments. So while mid-segment by the way is doing there also very well, so -- which is comparable with MakeMyTrip as well. But specific to budget segment, yes, it's lagging behind, but it's lagging behind both on MakeMyTrip and Goibibo. So like I was just sharing earlier, you might -- may not be on the call at that point in time that it is more like an industry phenomena.

And I would say less on the supply side, relatively speaking, more on the demand side because of the fact that the prices have also firmed up in the budget segment across the hotel partners or the hoteliers relative to what it used to be, because there used to be aggressive promotions pre-pandemic focusing more on aggressive acquisition of the customers in this particular segment, which definitely drives more demand. And sometimes some part of the demand can be superficial. And as the rates have firmed up, that demand might be taking more time to come up because as people get used to the new levels of the pricing. So to my mind, it's more the demand side than the supply side.

Mohit, if you can take my second question, which is on costs. In terms of employee costs, other costs, et cetera, the full impact what it would be like of BookMyForex?

It could be large. Actually, we've started consolidating BookMyForex and the same will happen with Simplotel. But between the two put together, there won't be any significant impact coming on the people cost side. All of these are going to be marginal increases, nothing meaningful. Large part of the increase actually continues to be the inflationary increase that we had called out will happen when everyone look at it on a comparative basis versus the previous fiscal.

The next question is line from -- from the line of [Manik Taneja].

My apologies that I joined the call late and probably you might have answered the question earlier. But if you could help us understand what drove the sequential improvement in the take rates on the airlines business this quarter. Are there any one-offs and how should one be thinking about the take rates on the airlines business going forward?

Yes. Manik, I had picked that earlier. So we'll possibly call it out briefly that it's largely in line with the increased promotional spending, which is coming in from the airlines because the overall load factors have been under stress during the quarter. So it's largely coming in on account of fluctuation on promotional spends, which are funded by the airlines.

And if you could want to comment on the relative market share between players over here. That would be really helpful.

Our market share has largely remained around the 30% levels, in line with the previous quarter. So no significant changes over there.

And any changes in competitive intensity from some of the other players in the space?

Not really. Not really to the quarter.

(Operator Instructions) I guess that was the last question. Rajesh, closing comments for you -- from you and then we can end the call.

All right. Thank you. Thank you, Vipul, and thank you, everyone, for sparing time. Thanks for all the curious questions as well. And we'll keep you all updated as we go along. Thank you. Thanks a lot.

Thanks, everyone.

Thank you, everyone, for joining. You may now disconnect the call. Thank you.