Title

Presentation

Vipul Garg: Hello everyone. I’m Vipul Garg, Vice President, Investor Relations at MakeMyTrip Limited and welcome to our fiscal 2024 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. 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 the 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. Additionally, 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 25th 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 to Rajesh. Over to you Rajesh.

Rajesh Magow: 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 till date. Gross bookings for the quarter reached $2.5 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 of 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 Bernstein 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 now 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 outbound 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 travellers.

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 Go First 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. With demand for business and premium economy tickets 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 can preview visuals of cabin comfort, meals, in-flight entertainment and other amenities. Customers also have a comprehensive view of the extensive business fare inclusions including lounge access, shopper services and priority services and can also preview 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 multi-contract 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 night 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 1760 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 Tashkent, Baku and Bali have been announced and key international holiday destinations like Thailand, Sri Lanka and Malaysia have announced waiver of visa for Indian travellers. This is likely to fuel greater demand for these international destinations in the times to come.

On customer experience side, we enhanced the multi-room booking experience. Users are now shown more 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 homestay 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 Ayodhya train 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 and Kenya have started to grow meaningfully. Our bus ticketing business witnessed robust growth in Q3. RedBus is now also available in 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 onboarding of UP state RTC and additional inventory being made live by Kerala and Telangana RTCs. A new RTC Chandigarh transport undertaking has also come onto 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 confirmed 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 Bollywood celebrity, as brand ambassador. During the quarter, we also integrated BookMyForex product offerings on the MMT platform and launched a new brand campaign to drive Forex demand on our platforms. Our corporate travel business, via both our platforms, MyBiz and Quest2Travel, are scaling up steadily with every passing quarter.

Our active SME corporate customers count on MyBiz is now over 56,000 and for Q2T, 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.

Mohit Kabra: Thanks Rajesh, and hello everyone. During the first quarter of this fiscal year 2024, I had called out that while the pandemic is now well and truly 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, driving supply side expansion and choices for our customers, and the technology investments 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 profits during this 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. Revenue, as per IFRS, grew by 26.9% year-on-year in constant currency terms to $14.2 million from $170.5 million in the same quarter last year. EBITDA witnessed strong growth and has more than doubled to $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 an 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 large aircraft outliers having been placed by the leading carriers, there are short term capacity headwinds given 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 a 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 multi-platform approach, while also increasing the breadth of our offering through directly contracted hotels, 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, further thus 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. Another highlight of the quarter was our strong working capital management during peak seasonality. While the previous quarter had seen a 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 profits 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 am 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 their right to tender the notes for repurchase at par by the company at the end of the third year of the notes as the terms and conditions of the indenture on 15 February 2024. We shall update the progress of the tender process in due course.

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

Vipul Garg: Thanks Mohit. [Operator Instructions] The first question is from the line of Vijit Jain of Citi. Vijit, you may please ask your question now.

Vijit Jain: 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 very well in the current quarter. I was wondering on two things. One, can you call out any specific benefits in terms of, either the 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 margins in this segment going forward? That’s my first question.

Rajesh Magow: Yes, maybe I can take that Vijit and thank you. You’re right. Hotel and packages growth. Given that this is also a season quarter and we had the demand momentum, especially after World Cup, it sort of picked up significantly because till the World Cup, it was sort of — the focus was lot more while there were some gains for specific cities where India was featuring in terms of their World Cup games, but largely people were sort of focused on watching World Cup matches over the weekend. And therefore the first half of that quarter of this quarter, till the World Cup was relatively speaking, the seasonality momentum hadn’t really picked up, but the moment World Cup was 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, momentum was great. But specific to your question, was there anything extraordinary, I won’t say there was anything extraordinary or temporary in nature. The mix, if you will see our overall mix of revenue on revenue basis 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 set of supply and also new demand use cases that have also emerged off late, which has added momentum to the overall demand on the hotel and accommodation side and within packages.

We saw outbound packages sort of coming back in this quarter with the bang as well. So I would say overall it’s a bunch of factors, but lot more on the demand side and sort of all segments sort of rising, which is helping the overall hotel and packages business grown this quarter.

Vijit Jain: Rajesh, just staying 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 outbound 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?

Rajesh Magow: Yes. No, so I think it’s a good question. So if you look at past couple of quarter’s data or more, and the ideas [ph.] on the premium segment, I would say even on the mid segment have been fairly robust. But I think we should never forget sort of factoring in the two years 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, normal inflation for last, I would say, 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, excepting for certain days where there will be exceptional demand over the long weekends, etcetera.

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 base that is setting in the market, and which I think is sustainable in 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, etcetera, 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 where from a demand standpoint, we’ve seen, customers in general sort of upgrading on the back of, I think it’s a behaviour change that we have noticed in terms of maybe taking more holidays or maybe 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 that, I think it’s also a behaviour of, upgrading from a particular segment to the next level and for a 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 offsides or, specifically the mice activities or for that matter, weddings, that 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 to analyse 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 happen, which will be a function of regular demand and supply gap.

Vijit Jain: Got it, Rajesh. My last question, just on the international outbound from India, if you can give any colour on where you’re seeing, in terms of channels, at least where you’re 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 and domestic as well, you can answer that. Thank you.

Rajesh Magow: Sure. No, 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 its part of the script as well. And because we were expecting, I mean, two quarters 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, easier and smoother and convenient for people.

That definitely sort of helps because then there is a comparison point with the domestic, sort of comparable destination versus and short haul outbound 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 demand coming back. In terms of channels, we see it, a large part of it is coming from our holiday’s packages business this quarter. Standalone bookings, not necessarily packages with respect to hotels or flights, our B2B channel also contributes. 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.

Vijit Jain: Got it. Thanks, Rajesh. I’ll jump back into the queue.

Vipul Garg: Thanks, Vijit. The next question is from the line of Sachin Salgaonkar of Bank of America. Sachin, you may please ask your question now.

Sachin Salgaonkar: 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 a base of 36% growth, you guys are showing more like a 27% Yoyo growth. It does indicate that while 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 months to 18 months? And if you could help understand what are the, some of the drivers in terms of are Indians traveling a lot more than before or has something changed 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.

Rajesh Magow: Yes, 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, etcetera, was a standard purpose for travel or for work. But we have also seen now new use cases more and more emerging. And specifically in the echo space, we are seeing alternative accommodation, getting benefited out of it. Are the celebration use case of the milestone sort of celebration use case in 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 the celebrations, etcetera, more than what used to happen in the past? So these are the two consumer demand side on the behavior, on the buying behavior of 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 that 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 travellers 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 Ayodhya 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, 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 emerge into a new, sort of use case where people would want to go visit these destinations more for historical reasons, right. So, so I would say these are the two big factors that I think are more permanent in nature than temporary, as we’ve 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.

Sachin Salgaonkar: Got 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 GMB, it could be much lower than, let’s say, the earlier guided 5%?

Rajesh Magow: Go ahead, Mohit. Go ahead.

Mohit Kabra: Maybe I can take that. And we’ve largely remained, within the 5% kind of a guidance that we had rolled out, Sachin, 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 the scale in the coming years as well.

Sachin Salgaonkar: Got it Mohit, very clear. And my last question, and anecdotally, I’m sure you guys also want to seeing it, there is generally also a school of thought is coming that travel, traveling around is becoming expensive in India. For example, in New Year traveling to Goa 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?

Rajesh Magow: 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, are in the peak period, I don’t think this will have an impact on demand. It would, it would actually in turn mean that, there will be healthy competition between the markets. 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 a, 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 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.

Sachin Salgaonkar: Very clear, Rajesh. Thank you and all the best.

Rajesh Magow: Thank you. Thank you, Sachin.

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

Aditya Suresh: Hi, thank you so much. I have a few questions. The first one was on the B2B PC, you spoke a lot about on the B2C side, but on the B2B segment, you’ve seemed to have kind of scaled that have a partnership with Zoho as well. Rajesh, would you mind kind of giving us an update here on that segment and what that may mean for, whether that be growth or kind of the impact on working capital and the likes? I’ll be really curious to understand that. Thank you.

Rajesh Magow: Yes, 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 we, 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 revenues 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 Quest2travel. And the other point I would also make is that what we are trying to do on the product side, just 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 basis 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 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 travellers, 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 smooth and easier for the corporate travellers.

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 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.

Mohit Kabra: To your other part, which is on the working capital, capital and the overall margins on the B2B side, the way we’ve kind of put these platforms in place, we’re kind of significantly leveraging technology, particularly the core B2B, which is the corporate driven platforms, because the other platforms, which are the ones which are powering the small travel agents or say the affiliates, those are more extension of the B2C platforms, right, B2BC kind of a platforms. And on these corporate platforms, I think we’re kind of seeing that we are kind of gaining very good traction both with the small and medium enterprises as well as with the large corporates. So growth is coming in good. 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 travel demand.

And therefore, there is a long or big headroom to kind of keep making gains in this area. And with the unit economics kind of addressed to kind of meet B2C like kind of net margins, growth should come in 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 kind of pay and kind of transact kind of setups that we have created without having to invest significantly in working capital for getting B2B businesses.

Aditya Suresh: Thanks. The second question I had was more on the outbound opportunity, right? Now you spoke a lot about the connections and the new routes and a few use cases. But Rajesh, should 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 over the next, say, 2 to 3 years compared to where our domestic businesses are, because I think a lot of our modeling, etcetera, is focused mainly on the India domestic piece. And so I’m really curious to see how you’re thinking about scale of international outbound.

Rajesh Magow: Yes. Aditya 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, given the next, say, next 3 years or 5 years, or more and then some record orders have been placed already, as you know, a 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, let’s say, a middle class to the upper middle class to HNIs, the ways of per capita income or the disposable income growing in the country, that’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 CAPA, for example. I don’t know if you have seen it or not. I mean, 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 3 years to 5 years as well. In fact, headlined it as outbound could be the new domestic for the next 3 years to 5 years as well. And it’s 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.

Aditya Suresh: Thank you so much Rajesh. And I guess the final piece for me was, I guess, as finally, the platform is kind of reach a scale, you see that the kind of after kind of come through with the cost discipline. Industry structure is kind of a bit more favourable compared to previously discretionary rising, all those kind of demographic dynamics are playing out here. Plus, there’s cost of discipline. So a specific question for you is about — and also given the fact that you kind of cashed up, the platform is generating free cash flow. I guess specific question to you is what worries you? Like what are some of the things which you’re guarding against as you kind of plan the business in the next 6, 12 months?

Rajesh Magow: An interesting question, Aditya. I guess the worry is 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 some time back, the new variant of COVID, the murmurs had started, and that definitely causes concern as we know happened during COVID, etcetera. And so fundamental structure overall, as you rightly mentioned and articulated, seems to be well in place now, poised for a new level of growth, etcetera, both on the demand side, supply side, everyone is an investment loan, infrastructure improving, all of that is great. You don’t really want any disruptive macro event happening. It’s 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 caused a concern over in the whole industry’s mind, if you will, than your own sort of micro issues or items.

So operationally, within the organization, we feel much better and confident, well poised. Not to say that the eyes have to be taken off from an execution standpoint relentlessly because this business is also about — a lot of it is also about consistent and relentless execution as well. But that 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 would only be any of the macro events. So if we have a smooth run on that, I think industry is definitely poised for better times in the coming years.

Aditya Suresh: Thanks Rajesh. All the best.

Rajesh Magow: Thank you.

Vipul Garg: Thanks, Aditya. The next question is from the line of Manish Adukia of Goldman Sachs. Manish, you may please ask your question now.

Manish Adukia: Yes. Thanks Vipul. Hi, good evening. Thank you so much for taking my question. Just picking up the concession from where Aditya left. When you think about in the last two years, right, the single biggest driver of your profitability has been the fact that marketing promotion spends have come down quite dramatically. And even from an outsider’s perspective, 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, next one or two years. Your thoughts, please?

Rajesh Magow: Right, Manish. Again, a very interesting question. You know what, the way I would address this, Manish, is not specific to, let’s say, MakeMyTrip or within travel. I think this is a very welcome change in the ecosystem overall. The competition is still there, as you ready pointed out. It’s not that competition will never stop and healthy competition is always welcome. What has changed 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 in the entire Internet ecosystem. To my mind, it’s a very, very welcome chain 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 the — 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 win the market. And I think it’s also to do with the learnings from the past, it’s also to do with how the market has evolved and people have also become a 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 2 decades definitely old, if not a little bit more. And that is a good enough time for anyone to run the amount of capital that has got invested in this market is also huge. So — and I think this response is the answer to your second question as well, that what would change for it to go back to again sort of same high-end density competition, etcetera. I actually think, given the fact 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 has a 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 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 10 years ago.

Manish Adukia: 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 north of 20% right now. And let’s assume that your marketing promotion intensity stays in the same ballpark. Some of the other expenses, employee costs, outsourcing, etcetera, how should we think about what, let’s say, the right growth number for that could be in the next, let’s say, 2 or 3 years. Rajesh or Mohit, your thoughts there?

Mohit Kabra: Yes, sure. Kind of the way we are looking at operating leverage being continuously driven is that we have seen a good amount of improvement at the net level coming in over the last few years, and we want to kind of maintain that moment down, but we also want to kind of make sure that we are kind of more and more skewing towards growth and kind of not necessarily kind of trying to optimize only on driving profitability improvement. So I think the medium term kind of the next 2, 3 years kind of an approach would be to try and see if we can take this close to 15% on adjusted margin or, say, 1.5% 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 kind of adjusted operating profit margin level to kind of maintain, and that would be the endeavor to kind of see coming in as an improvement over the next 2 to 3 years.

Manish Adukia: Thank you. Last question on use of cash. So the buyback amount that you’ve carved out, $136 million, well understood and thank you again for sighting that. But when you think about the business, I mean, this quarter alone, $37 million of cash EBITDA annualized close to $115 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, could buybacks become like an annual affair in the business? Because from what I recall last you mentioned that 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 2, 3 years? Thank you.

Mohit Kabra: Sure, Manish. Clearly, the first priority would be to kind of keep looking for inorganic as well as organic investment opportunities in the business. But beyond that, and clearly, like you called out, we have now close to $600 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 kind of exercise in the years to come. Like we have 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 earnings call [ph.] that we would want to kind of see through this put option date.

And by then, we would also be kind of 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 into the buyback plan or the share repurchase plan in the right earnest. The quantum in size, again, would depend upon the market and the timing around it. But yes, this is one potential avenue of deployment of the cash.

Manish Adukia: Thanks so much for taking my questions. All the best.

Mohit Kabra: Thanks Manish.

Vipul Garg: Thanks, Manish. We are almost out of time, and we will take one last question for now from the line of Gaurav Rateria of Morgan Stanley. Gaurav, you may please ask your question now.

Gaurav Rateria: Hi, am I audible?

Vipul Garg: Yes, yes please go ahead. 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, which are things will ease out based on the plans that you see for the airlines?

Rajesh Magow: 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 first half. I think we’ll see some improvement happening first half based on the plan that we see because that is practically every month, there are more planes coming and there is wet lease sort of options being explored, etcetera. But we’ll see improvement pretty much now that the improvement could be small in the first quarter and the second quarter, it could be higher, etcetera, but that would be a matter of detailing. But we’ll see improvement pretty much every quarter.

Gaurav Rateria: 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?

Rajesh Magow: I think that will be fair to assume, yes. I mean all things being equal, right? I mean there should not be any new development. But all things being equal as of today, I think that will be a fair statement to make.

Gaurav Rateria: Got it. My second question is on the volume growth in the hotel and package segment. It’s 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 20s. Just trying to understand where we are in the journey of online penetration? And what is the scope headroom for growth from next 2 to 3-year perspective?

Rajesh Magow: So let me try and address, Gaurav, this one rather than just specifically calling out a number because you’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 thereabout as compared to 65 odd percent penetration for domestic flights, there is obviously a 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 the, in many markets, it got to about 40% world markets in the western side that I’m talking about, 40%.

It’s 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 rights 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 the double-digit growth rate, anywhere, if I look at some of the third-party reports, it talks about 10% to 12%, I think we should think about online growth more in terms of like, say, 1.5 to 2x kind of a range of the overall industry growth just as a thumb rule and then see how the demand patterns emerge in the quarter and basis which we can sort of form of you.

Gaurav Rateria: 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 kind of stands apart for us and kind of creates a competitive advantage for us? Thank you.

Rajesh Magow: 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 sort of at the core DNA of the company 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 and some of the features we’ve called out an industry first. And on the back of leveraging the huge sort of data that we have, which probably is uncomparable 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 fare lock or a zero cancellation or book at zero for tiles [ph]. And not to forget that AI led some of the innovation that we’ve already done for our hotels reviews. And there are more — 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 future will always be out there, and so theoretically, it can get copied. But I think some of these inherent advantages that we have and the fact that the at the core of our sort of belief and a very core part of our strategy is to continuously keep enhancing the experience and keep it cutting edge almost all the way, all the time, will always be some competitive advantage for us, I would have thought.

Gaurav Rateria: Okay, perfect. Thank you and all the best.

Rajesh Magow: Thank you.

Vipul Garg: 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.

Rajesh Magow: Yes. 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.

Mohit Kabra: Thank you.

Vipul Garg: Thank you, Rajesh. You may please disconnect. Thank you.