MakeMyTrip Ltd (MMYT) 2024 Q3 法說會逐字稿

Anyone, we're just waiting for one minute for everyone to join and we'll start.

Hello, everyone.

I'm Vipul Garg, Vice President, Investor Relations at MakeMyTrip Limited, and welcome to our fiscal '24 third-quarter earnings webinar.

Today's event will be hosted by our company -- by our leadership team comprising 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 the conclusion of today's event.

(Event Instructions)

Furthermore, certain statements made during today's event may be considered forward-looking statements within the meaning of Safe Harbor provision of US 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 25, 2023.

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 over to Rajesh.

Over to you, Rajesh.

Thank you, Vipul.

Welcome, everyone, to our third-quarter call for fiscal 2024.

We are pleased to report another quarter of strong operating performance.

During this high season quarter for leisure travel, we witnessed robust demand for leisure travel for domestic as well as outbound travel and are pleased to report our highest ever quarterly gross bookings revenue and profit until late.

Gross bookings for the quarter reached $2.1 billion, growing at 21.7% year on year in constant currency terms, while our adjusted operating profit or adjusted EBIT grew by 70% year on year to $33.4 million as compared to $19.7 million in the same quarter last year.

As per government estimates, domestic aviation traffic is expected to double from current levels by 2030.

To cater to this increasing traffic, there is continued and increasing investment across all categories of travel infrastructure, resulting in significant upgrades across all categories of transportation, including airports, highways, rails.

And thus, offering customers more convenience and choice.

The current commitments are close to $11 billion in airport modernization should only help meet the near to medium-term requirements.

But for the first time, planned airport capacity we've put in place could exceed the projected demand for next five to seven years, which bodes well for the travel and tourism industry.

According to [One Standard] report, India has gradually been gaining share of the global travel market, now representing 2% of tourism receipts globally, up from 0.7% in 2000.

Domestic travel in India is already the fifth largest globally and is expected to become the third largest by 2027.

The size and diversity of India contribute to the strength of domestic market and the government's efforts to develop new tourism destinations will help in maintaining this growth momentum.

Outbound travel from India has also recovered to pre-pandemic levels and the growth momentum is expected to pick up pace in the coming quarters and years.

India is expected to be the fifth largest outbound market by 2027.

This should lead to India bond being the fastest-growing component of overall India travel spends.

We are excited about these opportunities and remain committed to excellence and innovation, meeting and hopefully exceeding the diverse travel aspirations of Indian travelers.

As for our business segments, let me start with our air ticketing business.

During the last quarter, I talked about near-term supply challenges, particularly in the domestic market due to the insolvency of [golfers] and the grounding of airplanes due to P&W engine issues.

The Indian carriers are taking various steps, including addition of large number of planes in the coming years to fill the supply gap.

As per estimates collectively, airlines are expected to add about 150 planes during next year, which will be the highest number of additions in a single year.

We are hopeful that the supply situation will start improving from the next financial year.

Despite the short-term headwinds, our growth on a flown basis was at 7.2% quarter on quarter, outpaced the market growth of 6%, allowing us to consolidate our market share at 30%-plus levels in the domestic air market.

As to our international air ticketing business, we have not only fully recovered but have started to grow above the pre-pandemic peak.

We continue to innovate and enhance our product proposition where demand for business and premium economy to get showing an increasing trend, we have now completely revamped the business-class funnel for international flights to provide an enhanced booking experience to our premium users and cater to their specific needs and preferences.

We have introduced an industry-first enhanced booking process for business-class flight tickets where customers came to view visuals of cabin comfort, meals, in-flight entertainment, and other amenities.

Customers also have a comprehensive view of the extensive business' fair inclusions, including lounge access, travel services, and priority services and can also preview the airline miles points before finalizing the booking.

It is early days, but we have started to see increasing engagement on our listing pages.

Additionally, we have further strengthened our UAE proposition wherein customers now have the option to seamlessly buy e-visa for UAE during their international flight booking process on our desktop site.

The initial response to this has been positive, and this feature will soon be launched on our apps as well.

Finally, we have further enhanced our price lock feature to now include multicontract price lock where customers can choose from different time durations for which the prices can be locked.

Our accommodation business, which includes hotels, homestays, and packages, witnessed strong year-on-year and quarter-on-quarter growth in the seasonally strong quarter as well.

During the quarter, we touched our highest ever single-line check-ins of close to about 200,000 people on the back of strong holiday demand.

We sold over 63,000 unique domestic hotels across 1,760 cities, giving us unparalleled reach and penetration within India.

On the supply side, we continue to expand our supply and we now offer over 78,000 domestic properties on our platform.

Our international outbound business continues to scale well.

During the quarter, new direct flights to various destinations like [Pashtun], Baku, and Bali have been announced and key international holiday destinations like Thailand, Sri Lanka, and Malaysia have announced the overall visa for Indian travelers.

This is likely to fuel greater demand for these international destinations in the times to come.

On customer experience side, we enhanced the multiroom booking experience.

Users are now shown most suitable room combination suggestions, and they can specify their preferences explicitly, thus simplifying their decision-making process.

We have also started offering super value packages, bundling various value-added services with the hotel room, which will help bring more value for the customers.

Our homestays business continues to grow with increasing coverage of destinations and increasing customer awareness via our category building marketing efforts.

During the quarter, we sold about 16,500-plus unique properties across 800-plus unique destinations.

Our holiday packages business continues to scale on the back of our innovative offerings.

We have started building on our spiritual tourism product during the quarter.

We launched a [Youth Day] charter product with 800 passengers.

We plan to scale this and other similar offerings in the coming quarters.

For outbound packages, Bali and Singapore were the top destinations and witnessed strong growth, while new destinations like South Africa, Japan, India have started to grow meaningfully.

Our bus ticketing business witnessed robust growth in Q3.

RedBus is now also available Hindi, giving us a higher share of new customers from Tier 2 and 3 towns, particularly for bookings on RTCs.

We continue to work with various state road transport corporations to bring them online.

The government-controlled bus inventory on our platform has increased meaningfully with the onboarding of UP state RTC and additional inventory being made live by Kerala and Telangana RTCs.

The new RTC Chandigarh transport undertaking has also come on to the platform in this quarter.

We have undertaken tech optimization to improve real-time inventory status for RTCs to lower booking errors.

The overall sentiment amongst private bus operators is also very positive now, and we expect a steady increase in private bus supply over the next few quarters and should help drive growth.

On our redRail app, we are acquiring new customers in Tier 2 and 3 towns, driven by our continued efforts to scale up acquisition, seasonal demand, and driving organic growth by leveraging the redBus user base.

As a result, we continue to gain market share in train bookings on the back of all our three brands.

Leveraging on the strength of our extensive inventory, we launched a connected travel feature for users to discover, confirm travel options through bus and rail combinations on routes that have lower availability or lesser frequency of trains.

Let me now share some details on our brand campaigns during this high season quarter.

We leveraged the ICC World Cup, which was held in India, with multiple brand campaigns to build and maintain top-of-the-mind recall and showcase our value proposition to our existing and potential customers.

During the quarter, MakeMyTrip launched campaigns around hotels and homestays, while Goibibo launched its campaign with Kareena Kapoor, a well-known Hollywood celebrity, as brand ambassador.

During the quarter, we also integrated BookMyForex product offerings on the MMT platform and launched the new brand campaign to drive ForEx demand on our platforms.

Our corporate travel business, we have both our platforms, myBiz request to travel are scaling up steadily with every passing quarter.

Our active SME corporate customers count on myBiz is now over 56,000 and for Q2, the active customer count has reached 334 large corporates.

We continue to innovate our product offering based on customer feedback.

We recently reimagined our myBiz homepage, offering the corporates the capability to customize the homepage according to their preferences in terms of theme and layout.

Additionally, we have now provided the option to users to enter their preferences in terms of seats and frequent flyer numbers, leading to greater personalization for corporate employees on the platform.

We have also enhanced our workflow to include ground transport options in our corporate offerings.

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

Thank you.

Thanks, Rajesh.

Hello, everyone's.

During the first quarter of this fiscal year 2024, we had called out that while the pandemic is now willing to leave behind us, the business is well positioned to leverage the investments made during the pandemic-impacted years in key strategic areas such as building wider offering of travel and travel-related services, [dining] supply-side expansion and choices for our customers, and the technology investment in building efficiencies, improved personalization, and curated platforms to scale new demand segments.

It is heartening that these have helped us achieve multiple milestone numbers across financial and operating metrics, such as gross bookings, revenues, and operating profit during the seasonally strong quarter.

Gross bookings for the quarter grew by 21.7% year on year in constant currency terms to an all-time quarterly high of $2.1 billion compared to $1.7 billion in the same quarter last year.

The revenue as per IFRS grew by 26.9% year on year in constant currency terms to $214 million -- $214.2 million from $170.5 million in same quarter last year.

EBITDA witnessed a strong growth and has more than doubled with $29.4 million as compared to $14.3 million during the same quarter last year.

Adjusted operating profit or adjusted EBIT registered a growth of about 70% year on year and reached $33.4 million compared to $19.7 million in the same quarter last year.

Adjusted operating margin for the business has expanded by about 50 basis points to 1.6% of gross bookings compared to about 1.1% during the same quarter last year.

On a YTD basis as well, the adjusted operating margin stands at 1.55% versus 1.05% in the first three quarters of the previous year.

Our air ticketing gross bookings for the quarter came in at $1.3 billion, witnessing a year-on-year growth of 19.8% in constant currency.

Adjusted margin stood at about $79.2 million, registering a year-on-year growth of 14.2% in constant currency. [Take] rates for the air ticketing business were in line at about 6.3%.

As mentioned by Rajesh, while the longer-term outlook for growth in the domestic aviation market is strong with larger aircraft orders having been placed by the leading carriers, there are short-term capacity headwinds, giving issues around supply and servicing of aircraft engines.

We expect that these headwinds will start easing out by the next financial year.

Gross bookings for the quarter for the hotels and packages segment came in at $559 million, witnessing a strong growth of 27% year on year on constant currency basis.

Linked to seasonality and improved pricing, the adjusted margin growth came in much stronger at 38.8% year on year on constant currency terms and stood at $98.8 million during the quarter.

Take rates for the quarter were in line at about 17.7% in this segment.

We witnessed strong growth across both domestic and international destinations with our international hotel business surpassing the pre-pandemic peak.

We continue to work on sharper targeting of various demand segments via a multiplatform approach while also increasing the breadth of our offering through directly contracted defense, both in the domestic as well as the international markets.

This two-pronged approach is helping us drive strong growth in this business segment.

In our bus ticketing business, gross bookings for the quarter stood at $269.8 million, growing at 20.3% year on year in constant currency terms.

Adjusted margin stood at $26.9 million, registering a strong year-on-year growth of over 33.8% in constant currency.

Take rates for the bus business again came in line at about 10% for the quarter.

During this high-season quarter, we invested behind our brand campaigns to drive top-of-mind recall for our brands.

So that's helping us increase the mix of organic traffic.

As a result, the marketing and sales promotion costs for the quarter came in slightly higher at 4.9% compared to the 4.6% in the previous low season quarter but were lower than the 5.2% in the comparable quarter of last year.

While the return on these brand campaigns tends to build over a longer duration, the initial response has been positive and should help us continue to target around 70% of our orders coming in from our existing customers or via repeat orders.

All other costs were largely in line, and we continue to drive year-on-year efficiencies in our fixed cost base.

And the highlight of the quarter was our strong working capital management during peak seasonality.

While the previous quarter had seen and deployment of about $12 million in working capital as we were getting into peak seasonality, we saw a much higher working capital [release] of about $35 million during this quarter.

Accordingly, compared to the $37 million in cash operating profit for the quarter, the cash position has improved by almost $70 million over the previous quarter, taking our total cash position to about $608 million at the end of the quarter.

During the last quarter, we announced the signing of the agreement to take a majority position in Savaari car rentals and I'm happy to report that the transaction was concluded by early December.

The teams are working on consolidating all the supply with Savaari and thereby driving efficiencies in supply acquisition and management.

With this, we expect to drive much better efficiencies in our supply acquisition, facilitating the scaling up of our intercity cab business.

We recently filed an intimation for our 2028 note holders on the right to tender the notes were repurchased at par by the company at the end of the third year of the notes as per the terms and conditions of the indenture on February 15, 2024.

We shall update the progress of the tender process in due course.

With that, I'd like to turn the call back to people for Q&A.

(Event Instructions) Vijit Jain, Citi.

Thanks, Vipul, and congratulations on a terrific set of numbers yet again.

My first question is just looking at the hotels and packages business obviously has done really, really well in the current quarter.

I was wondering on two things.

One, can you call out any specific benefit in terms of either average realizations per room night or in terms of your profitability that you had during this quarter because of both Cricket World Cup as well as other in general travel appetite.

Is there anything -- any special or any extraordinary gains that you had in this quarter from that side?

And how should one think about pricing in your margins in this segment going forward?

That's my first question.

Yes, maybe I can take that, Vijit, and thank you.

You're right.

Hotel and budget packages growth given that this is also a seasonal quarter and we had the demand momentum especially after World Cup, it sort of picked up significantly because still the World Cup, it was sort of the focus was a lot more while there were some gains for specific cities or the India was [fishing] in terms of their World Cup games.

But largely, people who are sort of focused on watching World Cup matches over the weekend.

And therefore, in the first half of third quarter of this quarter, until the World Cup was in relatively speaking, the seasonality momentum has really picked up.

But the moment World Cup is over, it sort of took off.

And I guess sort of more than made up overall on a quarter basis.

So overall, seasonality momentum was a movement towards gain.

With specific to your question, was there anything extraordinary.

I wouldn't say there was anything extraordinary or temporary in nature.

The mix, if you would see our overall mix of revenue -- on revenue basis, the contribution coming in from the hotel and packages has improved from 40% to 45% now, which is great.

And that is on the back of the overall sort of mix changing.

But from a demand, in general standpoint, all segments actually that we saw demand going up.

And I guess additionally, the emerging trend on homestays specifically has also started helping because that has added on one side, a new sort of supply and also new demand use cases that have also emerged to our fleet, which has added momentum to the overall demand on the hotel and accommodation side.

And within packages, we saw bond packages sort of coming back in this quarter with demand as well.

So I would say overall, it's a bunch of factors, but a lot more on the demand side and sort of all segments sort of rising that is helping the overall hotel and packages business growth in this quarter.

Got you.

Just take on that hotels thing.

Do you have any comment to make on in general, the demand and the supply situation, at least on the premium hotel or the branded hotel space in India?

How do you think that evolving?

And do you think ADRs, therefore remain resilient or even go up further from here?

And a related question to that, do you think that is kind of at least in that segment impacting or bringing some shift over into the international outbound side from India?

You did mention international bond is doing very well.

So I'm just wondering if you're seeing some kind of a shift there and how does that affect you in general?

Yeah.

No.

So I think it's a good question.

So if you look at the past couple of quarters or more, and it is on the premium segment, I would say even on the mid segment have been fairly robust.

You should never forget sort of factoring in the two-year lull period where there was -- thanks to COVID, there was no real price increase on the hotel side on all segments that had happened.

So if you factor that in and adjust it to sort of overall cumulative inflation and normal inflation for the last, I would say about three years, you would realize that the price increase is about 10%, which is fairly reasonable in my view.

I don't see this sort of as an exceptional price increase except for certain days where there will be demand -- exceptional demand over the long weekends, et cetera.

That would always be the case.

Because there will be more demand and less supply, and then because of that gap, there could be increase in prices which to my mind is very normal and that happens in any market.

But otherwise, I think there is a certain degree of stability in pricing in terms of the new ways that is setting in, in the market and which I think is sustainable in like an overall level.

Now outside of that, I think it will be a function of whether it will further increase from here or sort of sometimes in the market where in certain weeks, certain weekends, certain around the events, et cetera, the prices could go more or could go less will be a function of how much demand and how much -- what's the sort of demand and supply gap equation that works out.

But it's going to be a very normal sort of up and down that we would see.

I think there is a new base that is set up there from a demand standpoint.

We have seen customers in general sort of upgrading on the back of -- I think it's a behavior change that we have noticed in terms of maybe taking more holidays or maybe taking -- spending more percentage of the available disposable income in consumers' pocket to experience travel, which means more demand in the market.

So there is definitely more upside on the demand, which is helping.

And therefore -- and within there, I think it's also behavior of upgrading from our particular segment to the next level and for the mid segment to let's say, a premium segment.

And last point I would make on this also is that it has also -- specifically to premium segment, lot of the non-leisure travel events, like whether it is the corporate off-site or it's a specifically the [mice] activities or for that matter, weddings, during the season, more and more you see the trend of these events happening in the hotels.

And because of which, obviously, there is more demand relative to the historical period.

And that's also sort of helping sustaining the price levels that you would typically see or are seeing in the market.

But I think all the factors will have to be brought together are to analyze and jump to conclusion in terms of what kind of -- whether this is sort of sustainable or not.

In my view, there is at certain level that these are sustainable with plus minus 5%, 10%, up and down, that will happened, which will be a function of regular demand and supply gap.

Correct.

Rajesh, my last question just on the international outbound from India, if you can give any color on where you're seeing -- in terms of channels, at least where you seeing growth from, is it coming more in the packages side or because you also have direct holiday booking feature available on your platform?

And then there's the travel agent business also that you do.

So I'm just wondering where do you see the most momentum overall?

My question is more on the international outbound side, but maybe if the answer is relevant in domestic as well, you can answer that.

Thank you.

So the specifically on international travel, we have seen actually momentum on our business on packages side for sure.

Like I was mentioning earlier, I think it's part of the script as well.

And because we were expecting, I mean two quarters now ago, the recovery on outbound was relatively slower and we were expecting that to sort of pick up at some point and it has picked up in this quarter.

And that is on packages.

It's also on international hotels.

We have seen similarly for flights as well.

And in fact, what also adds to this international travel momentum is the -- as I was mentioning, even in this script, the announcement that happened on either the direct connectivity, solving for direct connectivity like the three examples that I gave.

And similarly for making the visa more easier and smoother and convenient for people.

That definitely sort of helps because then there is a comparison point with the domestic sort of for comparable destination [versus] and short or lower bound destination and then you end up taking the call.

And the fact that the outbound travel was slow, was a little sort of slow to pick it up and get back to pre-pandemic level, it has now reached to pre-pandemic level because of your [mind] coming back.

In terms of channels, we see it a large part of it is coming from our holidays' packages business this quarter.

Standalone bookings, not necessarily packages with respect to our flights, our B2B channel also contribute.

In fact, pleasantly surprised with the contribution coming in from there as well besides the B2C which is the regular sort of channel which when we see the demand coming back on an overall platform in terms of traffic growth, all sort of products and services we have on our platform get benefited out of it.

Sachin Salgaonkar, Bank of America.

Thanks, Vipul.

Congrats again for a fantastic set of numbers.

I have three questions.

First question, just wanted to understand on pent-up demand versus actually demand where consumers are traveling a bit more.

And clearly, when we look at this quarter numbers on the base of 36% growth, you guys are showing more like a 27% YoY growth.

It does indicate that, well, the pent-up demand is behind, the growth is strong.

So the question out here is -- and I know it's difficult for you guys and you guys don't give a guidance, but should general growth for the sector continue to remain strong in next 12 to 18 months?

And if you could help understand what are the some of the drivers in terms of our Indians traveling a lot more than before has something change which is leading to that growth?

And a related question is of course any color you could give in terms of how this upcoming quarter is trending?

That would be helpful.

Yeah, Sachin.

So thank you, firstly.

And I would actually say two factors.

And I would stay away from saying whether it is 6 months or 12 months or 18 months.

But two fundamental factors from an outlook standpoint, we feel clearly that seems to be happening.

And one is on the demand side, and the second one is on just the overall improvement of the infrastructure.

On the demand side, from a consumer behavior standpoint, we certainly have seen now there is a pattern that is emerging where the frequency of breaks that the consumers were taking earlier is definitely going up, point number one.

Point number two which to my mind is a fundamental change.

Point number two is that we've also seen some new use cases that are sort of emerging which is also adding to the regular standard use cases for travel.

So when I say use cases, it's effectively purpose for travel.

So purpose for travel, for leisure, for pilgrimage, for visiting family, et cetera, was a standard purpose for travel or for work.

But we've also seen now new use case, there's more and more emerging.

And specifically, in the eco space, we are seeing alternative accommodation getting benefited out of it or the celebration use case of the milestone sort of celebration use case and the family with the friends, extended family, group travel, trying to celebrate whether it's a birthday or an anniversary or some other family milestone and getting together and sort of doing this celebration, et cetera, are more than what used to happen in the past.

So these are the two who consumer demand side on the behavior, on the buying behavior or travel or spending more on travel experiences clearly are emerging that we can see.

And on the other side I would say from an overall outlook standpoint, the infrastructure improvement and the expansion is definitely going to add more.

Because more and more, we make it smoother, easier, and convenient for the travelers and also develop infrastructure in the new destinations.

We've started creating huge amount of awareness for instance, of nearby destination, to any key destination, and we've seen demand picking up on those destinations.

Now, tomorrow, like I was just mentioning in the script, the spiritual tourism.

Now if that picks up, let's say the [DRU Day] event which is likely to happen because there's also an infrastructure development that has happened in that city, I see no reason why people and more number of people would want to sort of travel and experience for some of these new destinations, which they had not really explored in the past or the use case earlier was going for offering for prayers and sort of hardcore pilgrimage use case.

It might just be an experience emerging to a new use case where people would want to go visit these destinations, more for historical reasons.

So I would say these are the two big factors that I think are more permanent in nature than temporary.

As we have sort of seen the pattern emerging and that should help the outlook or the growth outlook for travel and tourism industry going forward.

So that that would be my take on it, Sachin.

Called it.

Very clear, Rajesh.

Second question and it's just taking from where you left.

Clearly, demand is good and some new cases are coming.

So does that mean MakeMyTrip doesn't have to spend so much on marketing going ahead?

And as a percentage of GMV, it could be much lower than let's say the earlier guide at 5%?

Go ahead.

So maybe I can take that.

And we've largely remained within the 5% kind of our guidance that we had rolled out searching through the year.

And therefore, I believe that continues to hold good.

I mean, overall, if you really see this quarter also and generally, we tend to do this, if you look at historically also.

During peak seasonality quarters, like Q1 and Q3, we generally tend to kind of spend a little more on the brand marketing side and which is what we have seen even during this quarter.

But even with that, the overall spends came in at about 4.9% and still kind of well below the 5.3% in the same quarter previous year.

So I guess the 5% kind of a ballpark number should be a good number to kind of keep in mind at least for this year.

And we'll continue to see if we can kind of keep building efficiencies, some efficiencies with scale in the coming years as well.

Perfect.

Very clear.

And my last question anecdotally, I'm sure you guys also want to see it.

There is generally also school of thought is coming that travelling around is becoming expensive in India.

For example, in [Australia], I was trying to go, it was a bit more expensive than let's say going towards Thailand or Bali.

Is that something a risk?

What you guys are seeing which could potentially impact some demand and how do you guys think in that direction?

You know, I would say, Sachin, I think we should see this scenario more from a healthy competition between the destinations.

Now whether it is going to be a domestic market destination or an international market or comparable to domestic destination for that matter in the peak period, I don't think this will have an impact on demand.

It would actually in turn mean that there will be healthy competition between the markets and.

And from that point of view -- because I don't think that's going to impact the travel demand because if let's say all three hypothetically comparable destinations are pretty expensive, then people will still travel, but they might go to their plan b destination.

But it may not mean that they would not travel.

So I don't see that scenario happening given at least based on whatever patterns that we've seen in emerging.

And which therefore would mean is that every, in the ecosystem, people would start to sort of look at specific markets, would start to look at all the data and accordingly price their products, rather than sort of taking one destination as a threat to the other.

I think that is what is likely to happen rather than overall because it's expensive, and therefore, I would not really travel.

Aditya Suresh, Macquarie.

All right.

Thank you so much.

I had a few questions.

So first one was on the B2B, B2C.

You spoke a lot about on the B2C side.

But on the B2B segment, you've seemed to be -- have kind of scale that, have a part as well.

Rajesh, would you mind giving us update here on that segment and what that may mean for that that peak growth or the impacting working capital and the likes.

I'll be really curious to understand that.

Thank you.

Yeah, sure, Aditya.

No.

I think it's a good question.

And I think we gave a couple of data points to give an indication of how our corporate business is growing.

And just from an outlook standpoint, I do see there is headroom for growth there.

There's actually good headroom for growth there.

And the way they -- our product has been sort of recognized in the market for whatever it's worth.

Just from a voice of customer standpoint, we feel very confident that this definitely is going to add more and more sort of growth avenues for us, both in the small and medium enterprises, as well as in the large enterprises for both the platforms that we have, whether it is myBiz or request to travel.

And the other point I would also make is that what we are trying to do on the product side just to enhance, just continue to keep enhancing the experience significantly, just based on feedback, keep sort of adding more features for our B2B customers, which is a delightful experience for them.

And this is that we have our retention rate, which is like benchmarked with the world-class B2B outfit already.

And we'll continue to keep doing that on two counts.

One, adding in more products and more use cases so that it becomes a one-stop platform for the corporate.

And the second is, like the way conceptually we do personalization on B2C.

Use that concept to actually do a personalized customer experience for the corporate travelers, which would be very different than B2C because the behavior when you buy your own travel for your personal purpose is very different than what you end up doing it as part of your work trip on any of the corporate booking platform.

And we have great insights on that and we are focusing on that and just enhancing the customer experience significantly to make it very, very smooth and easier for the corporate travelers.

So on those two areas, we've been working very hard, and we continue to keep sort of rolling out new features.

So therefore, looking at the growth that we already have, the acquisition engine that has already been established, and how the wallet share is sort of increasing, and the fact that we our product will continue to keep improving to become world class, I definitely believe there is a lot of headroom for growth for us in the B2B segment.

Your other part which is on the

--

Working capital, yeah.

Capital and the overall margins on the B2B side, I mean in the way we've kind of put these platforms in place.

They kind of significantly leveraging technology, particularly the core B2B, which is the corporate driven platforms because the other platforms which are these -- ones which are powering these small travel agents, or say, the affiliates, those are more extension of the B2C platforms, B2B, B2C kind of platforms.

And on these corporate platforms, I think we kind of seeing that we're kind of gaining very good traction both with the small and medium enterprises as well as with the large corporate.

So growth is coming in gold from an opportunity sizing point of view like we have said, at least one-fourth, if not, one-third of the market would be kind of largely business driven or corporate-level demand.

And therefore, there is a long or big headroom to kind of keep making gains in this area.

And with the unit economics addressed to meet B2C like net margins, growth should come in a kind of accretive both at the top line and the bottom line and on the working capital side as well.

We don't really kind of deploy working capital on the B2B side because like I said, these are largely pay and transit setups that we have created without having to invest significantly in working capital for getting B2B businesses.

Thanks.

The second question I had was more the outbound opportunity.

Now, you spoke a lot about the connections and the new routes and a few use cases.

But Rajesh, it'd be great if you can maybe frame that opportunity for us.

So in broad terms, how should we think about the scale of this opportunity, even if it's or let's say two to three years compared to where our domestic businesses are.

Because I think a lot of our modeling, et cetera, is focused mainly on the India domestic piece.

And so I'm really curious to see how you think about scale of international bound?

Yeah.

As I was alluding to earlier, it is if you look at it from a little midterm to long-term perspective, the outlook is actually quite positive for outbound.

And the fundamental sort of underneath point for that is all what you have to look at it is the airlines, all the airlines orders that have been placed, bringing in new fleet into the market the next say, next three or five years or more and there is some record orders have been placed already, as you know.

Significant chunk of that is also going to get deployed in the -- to open up some of the foreign destinations for them or to grow the foreign destinations for them.

So I think that is one data point which is important.

And if you -- from a demand standpoint as I was making the point earlier, on an overall demand standpoint, I definitely see from a, let's say, a middle class to the upper middle class to [H&Is], the way sort of per capita income or their disposable income growing in the country, there's definitely going to be the other driving force for sort of demand to go up for the outbound destinations.

And there are, by the way, some third party reports and maybe we can take this offline and you can look at some of those specific reports on outbound specifically from [Kappa], for example.

I don't know if you've seen it or not and that independent research has also captured many data points to make this point.

And they have tried to sort of size the overall opportunity in the next three to five years as well.

In fact, headlined it as outbound could be the new domestic for the next three to five years as well.

And the quite neutral and credible sort of research report and maybe you should look at that.

And maybe form your own view on top of that.

But in terms of just the drivers for this, these would be the two drivers and we'll be happy to share the report, if you want, offline.

Thank you so much, Rajesh, for that.

And I guess that the final piece for me was, again, so finally, the platform is kind of reach the scale.

You've seen the kind of after we kind of come through with the cost discipline, industry structure is kind of a bit more favorable compared to previously discretionary spend is rising.

So all those kind of demographic dynamics are playing out here.

Plus there's cost discipline.

There is a specific question for you is about -- and also, the fact you're kind of cashed up the platform generating free cash flow.

That gives us a specific question to you is what worries you?

Like what are some of the things which you're guarding against as you can apply for the business in the next 6 to 12 months?

Interesting question.

I guess the worry in this business as we've seen in the past is more the macro than the micro.

So we would always sort of wish like sometime back, the new variant of COVID, again, at the moment it had started and that definitely causes concern, as we know what happened during COVID, et cetera.

And so fundamental structure overall as you rightly mentioned articulated seems to be well in place now, poised for a new level of growth, et cetera.

Both on the demand side, supply side, everyone is in investment on infrastructure improving.

All of that is great.

You don't really want any disruptive macro event happening, which means neither you nor I can or anyone for that matter can control.

But if there is one disruption that we've seen over the last -- let's say, over two decades that we've been in the business, it is the macro events that sort of cause a concern over in the whole industry's mind, if you will, then your own sort of micro issues or items.

Operationally, within the organization, we feel much better and confident, well poised.

And not to say that the eyes have to be taken off from an execution standpoint relentlessly because this business is also about -- lot of it is also about consistent and relentless execution as well.

But there, we feel better and confident and given the track record, we'll be at it.

But if there is one thing that would I have to call out as potential concern or worry area, it would only be any of the micro events.

So if we have a smooth run on that, I think industry is definitely poised for better times in the coming years.

Manish Adukia, Goldman Sachs.

Yeah, thanks, Vipul.

Hi and good evening.

Thank you so much for taking my question.

So just picking up the conversation from where -- to your left, when you think about it in the last few years, the single biggest driver of your profitability has been the fact that marketing promotional spends have come down quite dramatically and even from an outsiders' perspective, where it seems like the market is fairly competitive with a number of players.

Your numbers suggest that competition is relatively low, at least lower versus what it used to be pre-pandemic.

One, in your view, why is competition low?

And a related question, what may need to change or what could potentially change for competitive intensity to go up again, let's say in the next one or two years?

Your thought skills.

All right, Manish.

Again, a very interesting question.

The way I would address this one issue is not specific to, let's say MakeMyTrip or within travel.

I think this is a very welcome change in the ecosystem overall.

And the competition is still there as you rightly pointed out.

It's not that competition will never stop.

And healthy competition is always welcome.

The board has changed it within that competition.

It is not necessarily super disruptive or just super aggressive for the sake of being aggressive.

And now, within competition, everybody is sort of also focused on profitability at the end of the day and the entire Internet ecosystem.

To my mind, it's a very, very welcome change for the entire Internet industry.

Forget about travel tech industry for that matter.

And that is what has happened.

And the other aspect of this also I believe is, which is again a fundamental ecosystem level change, is also just the availability of capital.

And from the investor side, I think everybody is sort of more cognizant of investing behind the right assets and the right areas.

And that's the sort of guidance rather than just playing super aggressively with the sort of aggressive amount of capital push and trying to sort of in the market.

And I think it's also to do with the learnings from the past.

It's also to do with the how the market has evolved, and people have also become lot more knowledgeable of what works in the market and what doesn't really work in the market and what's sustainable, what is not sustainable in the market.

So part of it, I will attribute it to the evolution of the market.

So I think it has reached that stage where because it's been going on now for -- I think Internet industry in India is over two decades definitely old, if not, a little bit more.

And that is a good enough time for anyone to then the amount of capital that has got invested in this market is also huge.

And I think in this response is the answer to your second question as well, that what would change or for it to go back to again sort of same high intensity competition, et cetera.

I actually think given the fact that this is far more -- and part of it could be wishful thinking as well but bear with me for that.

But I do think given the fact that the market overall is relatively evolved and matured, and the entire ecosystem is tremendous amount of learning at every stakeholder level.

For it to go back to the same super aggression in the market for the sake of being aggression, being aggressive, I'm not sure, I mean the likelihood of that.

Who knows for future.

But likelihood of that might be relatively speaking much less than what I would have said maybe 20 years ago.

Thank you, Rajesh.

That makes a lot of sense.

My second question.

How should we think about the operating leverage in the business?

I mean, you're growing top line at north of 20% right now and let's assume that your marketing promotion intensity that this isn't the same ballpark.

Some of the other expenses, employee costs, outsourcing, et cetera.

How should we think about what, let's say, the right growth number for that could be in the next let's say two or three years?

Rajesh, share us with your thoughts there.

Yeah, sure.

The way we're looking at operating leverage being continuously driven is that we've seen good amount of improvement at the net level coming in over the last few years.

And we want to kind of maintain that momentum, but we also want to kind of make sure that we are kind of more and more is going towards growth.

And kind of not necessarily kind of trying to optimize only on driving profitability improvement.

So I think the medium-term for the next two to three years approach would be to try and see if we can take this close to 15% or an adjusted margin or 7.5% of gross bookings in adjusted operating margins that we have, more closer to say about 1.8 to 2% of gross bookings.

I think that would be a very healthy adjusted operating profit margin level to kind of maintain.

And that would be the endeavor to see and coming in as an improvement over the next two to three years.

Thank you, Mohit.

Last question on use of cash.

So the buyback amount that you've got, about $136 million, well understood.

And thank you again for flagging that.

But when you think about the business, I mean this quarter loan $37 million of cash EBITDA annualized was to $150 million and that number is only growing.

So and then you have $600 million plus of cash in the book.

So like when you think about a steady return to shareholders.

I mean, good buybacks become like an annual affair in the business because from what I recall last you mentioned, there are not too many meaningful M&A opportunities out there.

So how do you think about this growing cash balance and uses of cash as you go along next two to three years?

Thank you.

Sure, Manish.

And clearly, the first priority would be to keep looking for in organic -- as well as organic investment opportunities in the business.

But beyond that and clearly like we have now close to about [$100 million] in terms of cash and cash equivalents.

And that is a large balance to have.

And therefore, we have been calling out that we do believe that we kind of feel actively look at buybacks as an option to exercise in the years to come.

Like they also kind of intimated this quarter, we have kind of put in the intimation on the 2028 note holders because there's a put option that is kind of coming up in the next month.

And as we had called out in the previous (technical difficulty) then we would want to see through this production date.

And by then, we would also be close to the end of this fiscal year.

And therefore, from next fiscal year onwards, we would want to kind of possibly dip in into the buyback plan or the share repurchase plan in the right earnest, the quantum and size, again, would kind of depend upon the market, and the timing around it.

But yes, this is one potential avenue of deployment of the cash.

Gaurav Rateria, Morgan Stanley.

So thanks for taking my question.

The first question actually is on the -- if you can elaborate on the short-term impact on air business that you talked about in the near term and also you, talked about things easing out from next fiscal year.

Is it likely to be more like a second half?

Or you think immediately in the first half I would say, things will ease out based on the plans that you see for the airlines?

I think, Gaurav, it's going to be every quarter some improvement.

I don't think it's going to be second half more than the first half.

I think we'll see some improvement happening based on the plan that we see because that is practically every month, they're more planes coming.

And there is at least options being explored, et cetera.

But we'll see improvement pretty much now.

The improvement could be small in the first quarter and the second quarter could be higher, et cetera.

But that would be a matter of detailing.

But we'll see improvement pretty much every quarter.

So fair to say that it kind of bottoms out from the supply issues perspective in the fourth quarter of this fiscal year.

And from there on, every subsequent quarter, there is an actually improvement.

I think that will be fair to assume, yes.

Okay, right.

I mean, all things being equal, right?

I mean there should not be any new development.

But all things are being equal as of today.

I think that will be a fair statement to make.

Correct.

My second question is on the volume growth in the hotel and package segment.

It is pretty strong on the back of strong last year.

But let's say on a steady state given where we are in the online penetration journey, how should one think about this volume growth?

Is it like going to be more like in teens?

Is it something that can actually be in 20s?

Just trying to understand where we are in the journey of online penetration and what is the scope headroom for growth from next two to three perspective.

So let me try and address, Gaurav, this one, rather than just specifically calling out a number because we'll see how it goes.

But from a penetration standpoint relative to the flights market, clearly, it is there's much more headroom there, especially when you add homestays category also, which is an emerging category and adding more supply by the month.

It becomes even more fragmented and the online penetration for that category is also low in relative terms.

So I would say all things considered even if we assume like a 20% online penetration or thereabouts as compared to 65%-odd penetration for domestic flights, there is obviously significant headroom.

And I'm saying even if you don't want to consider it going all the way and we look at global benchmarks, the next milestone number for online penetration for hotels and accommodation overall would be 40% at least because that has been (technical difficulty) in many markets, it got to about 40%, if not, all markets in the western side that I'm talking about.

The 40% -- is just that relative to the transport.

It always has taken in every market, relatively speaking a little bit more time than the transport.

Because there are transport, actually, because of the fact that it's very unidimensional product, it moves really quickly online.

Railways is a good example of that versus a good example of that and domestic flights for that matter.

Wherever there is more involved purchase experiences and fragmented market on the supply side, it just takes more time for it to move online completely.

So from that perspective, I think we should probably see it, let's say, if the overall travel and tourism market annually is going to grow at a double-digit growth rate anywhere, if I look at some of the third-party reports, it talks about 10% to 12%.

I think you should think about online growth more in terms of like say 1.5x to 2x kind of a range of the overall industry growth just as a ton of room.

And then see how the demand patterns emerge in the quarter and this is which we can sort of form a view.

Great, that's really helpful.

And last question, I think you made a very significant product enhancement and you have been highlighting every single quarter.

How easy or difficult it is for competition to replicate that and have you seen them actually even replicating?

Or this is something that stands apart for us and creates a competitive advantage for us?

Thank you.

I would like to believe -- on an overall basis and on a continuous basis, it's not necessarily a one-quarter thing.

It is actually, if there is one at the core DNA of the of the company, it is continuously keep improving the customer journey, continuously keep improving the customer experience end to end, whether it is pre-booking experience or a post-sales experience and so on.

And come up, keep coming up with some of the features we've called out our industry first.

And on the back of leveraging the huge data that we have, which probably is incomparable to anyone else in terms of how much more do we have versus any of the other players in the market.

So that gives you an inherent sort of advantage for us to be able to build on top of that very innovative features and there are many, whether it's a trip guarantee or a fair lock or a zero cancellation or book at zero for hotels.

And not to forget, the AI led some of the innovation that we've already done for our hotels' reviews.

And there are more -- but there's more work on a continuous basis happening on that front as well just to continuously keep improving the overall customer journey.

And given that we are in a B2C business, and the feature will always be out there, theoretically, it can get copied.

But I think some of these inherent advantages that we have and the fact that the core of our sort of beliefs and very core part of our strategy is to continuously keep enhancing the experience and keep it cutting edge almost always all the time, would always be some competitive advantage for us, I would have thought.

Thank you, Gaurav.

As we are out of time already, we'll not be able to take any more questions.

Anyone whose question are unanswered, we can take them offline.

That will bring us to the end of the call.

Over to you, Rajesh, for your closing remarks.

Yeah, thank you, Vipul, and thank you, everyone.

Thank you, everyone, for your patience.

Thank you, everyone, for your time.

And look forward to seeing you next quarter.

Thank you.

Thank you.

Thank you, Rajesh.

If you would please disconnect.