MakeMyTrip Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
October 31, 2023

There are 8 speakers on the call.

Operator

Hello, everyone. I'm Deepul Garg, Vice President, Investor Relations at MakeMyTrip Limited, and welcome to our fiscal 'twenty four Second Quarter Earnings Webinar. Today's event will be hosted by company's leadership team comprising Deep Kalra, our company's Founder and Chairman. Joining him is Rajesh Magu, 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.

Operator

At the end of these prepared remarks, we will also be hosting a Q and 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 U. S. Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance, are subject to inherent uncertainties and actual results may differ materially.

Operator

Any forward looking information relayed during this event speaks only as of this date and the company undertakes no obligation to update the information to reflect Changed Circumstances. Additional information concerning these statements are contained in the Risk Factors and Forward Looking Statements section of the company's Annual Report on Form 20 F filed with the SEC on July 12, 2022. Copies of these filings are available from the SEC or from the company's Investor Relations department. I would like to now turn the call over to Rajesh. Over to you, Rajesh.

Speaker 1

Thank you, Vipul. Welcome, everyone, to our Q2 call of fiscal 2024. We are pleased to report another quarter of strong operating performance where we maintained strong momentum both in terms of top line and bottom line growth year on year. Gross bookings for the quarter Leased $1,800,000,000 growing at 23.8% year on year in constant currency terms, While our adjusted operating profit or adjusted EBIT grew by 87% year on year to $28,200,000 as compared to $15,500,000 in the same quarter last year. We delivered this performance despite a short term air supply contraction challenge during the quarter and a temporary hit on demand due to unprecedented monsoon rains in some parts of the country.

Speaker 1

As for the macro outlook, India is expected to be growing large economies in the future, leading to a gradual increase in GDP per capita and a larger allocation towards discretionary spending, of which travel and experiences will garner a major share. According to the latest report by McKinsey, India is poised to witness One of the most rapid increases in travel expenditures among the world's top 10 countries from a travel spending figure of $150,000,000,000 In 2019, travel expenditures are anticipated to reach $410,000,000,000 making India the 4th largest global spender On the other hand, according to WTTC, travel and tourism sector contributed 7.6% to the global GDP in 2022, while in India, it accounted for 4.5% of the GDP, reflecting a huge headroom for growth. The contribution of travel and tourism industry to India's economy is growing steadily, Generating substantial revenue and employment opportunities across various sectors, including hospitality, transportation and local businesses, We expect travel and tourism in India to grow faster than the overall GDP during the next decade, which should act as tailwind for the overall industry. A large part of this growth will be led by the aviation and accommodation sector. This is corroborated by the fact that all the all major airlines I've placed record number of orders for new planes and all major hotel chains have announced the addition of new properties, which will help in supply expansion for many years to come.

Speaker 1

Homestay supply is also growing in the country with people investing in secondary homes to be used as homestays in key leisure destinations in the country. According to Government of India forecast, The current 145,000,000 air passengers in India are projected to rise to 425,000,000 by 2,035, That's driving growth for overall travel and tourism sector. While the air industry is facing short term headwinds on supply due to an engine repair issues, Supply addition projections looking good, indicating that the supply situation will improve in the coming quarters. We continue to stay excited about future opportunities and aim to further consolidate our position as a leading travel services company in the country On the back of our innovative travel solutions, brand strength and ability to deliver superior value to our customers and our partners, We've been working towards building a platform for the future. During the quarter, we introduced a fresh version of our homepage to bring out our new design language and iconography to make the discovery and buying experience more intuitive and delightful.

Speaker 1

I'm also delighted to share That MakeMyTrip is now GDPR compliant, thus making it accessible from regions where GDPR is applicable. This will help us cater to some of the inbound demand, especially from the Indian diaspora. As for business segments now, Starting with the air business, while domestic air ticketing had recovered a few quarters back and continues to grow well, this quarter, our international air ticketing business Surpassed the pre pandemic levels for the first time, which is encouraging. All short haul destinations have either grown beyond or recovered to pre pandemic levels Now and travel to long haul destination is also recovering rapidly now. We continue to innovate and add new features to our products to deliver better value to our customers.

Speaker 1

During the quarter, we went live with our hold booking initiative, wherein on selected international flights, customers can hold their seats till the end of the day, giving them time to decide without worrying about prices and availability. We also launched a quick checkout flow on our existing Quick Book feature, enabling customers to see the payment options on the review page itself to make the booking faster for our frequent flyer customers. We also revamped Goibibo's flight search results page, Baggage and cancellation rules on the itinerary page to aid faster information, assimilation and Slide selection helping us improve conversion. Our accommodation business, which includes hotels, home stays and packages, Witness strong year on year growth on the back of increased supply, improved discovery and deeper penetration beyond metros And Tier 1 and Tier 2 towns. We continue to expand our supply deeper into the country.

Speaker 1

We now have 77,000 plus properties listed on our platform, Covering 2,075 cities across India, further strengthening our supply mode. Along with the supply, we continue to And our distribution channels as part of our strategy to drive online penetration further. We went live with our hotel product on IRCTC website during the quarter, and the initial response is encouraging. Through IRCTC and our Mybiz platform, we are now getting new users from new smaller cities for leisure and business travel. International room nights growth picked up strongly this quarter as well.

Speaker 1

While the domestic accommodation business continued to perform well, with the introduction of new direct flights, we witnessed travel Pickup in new destinations like Tashkent, Almaty and Baku, while other key destinations in the Middle East and Southeast Asia Continue to be the popular among Indians. Learning from valuable stay related feedback and inputs from our customers, We have enhanced our quality checks to highlight alerts for our customers about properties consistently defaulting on service levels On one hand and on the other, we work closely with the partner and push them to improve the stay experience. We have observed that most of our partners take the feedback seriously and take corrective actions. Our homestays business continues to grow with increasing coverage of destinations. During the quarter, we expanded our supply across the country, including World Cup venues.

Speaker 1

During the quarter, we added about 8,000 properties To our homestay inventory, out of which about 1500 properties were added specifically in World Cup venues. The contribution of homestays to the overall bookings is steadily increasing, and we believe that this category will drive future growth. Our holiday packages business continues to scale on the back of our expanded offerings. During the quarter, We launched holiday cottages with homestays as an accommodation option, which is a first in the industry. We have now started to offer We've now started to also offer charter train packages catering to religious tourism demand.

Speaker 1

Our footprint in the holiday packages business has now expanded to 555 domestic cities versus a peak of 405 cities in the past. On the international package side, we sold holiday packages to 66 countries during Q2, which is the best number achieved so far. Our bus ticketing business sustained the growth momentum in Q2 despite a seasonally weak quarter as more and more corporates, Especially in the IT sector, our mandating work from office, the traditionally large bus markets in South India are witnessing good recovery. This increase in demand, along with the improvements in bus operator finances, is resulting in the addition of new buses, which bodes well for our business. In Q2, the inventory of UPS RTC was integrated into the platform.

Speaker 1

This makes Redbus the first private ticketing platform ahead of the festival to host UPS RTC's inventory. This will help improve the new customer acquisition rate in North India. We are making good progress on our journey with generative AI powered features on our platform. Our user review section now has Summary results leveraging generative AI and harnessing our extensive repository of user generated content. These summary results enable Customers to swiftly identify suitable properties and provide instant insights to each property's offerings.

Speaker 1

This feature has further improved the user experience in the property selection process. Similarly, in our bus business, we've deployed a voice based bot for solving customer queries before bus departure. Ground transport business is a parallel growth opportunity for us. It is a potential growth opportunity, I beg your pardon, for us. We already have a leading position in the bus market.

Speaker 1

In addition, we've been making organic investments in expanding our user base via rail bookings. We started our cab business with airport transfers and are gradually scaling intercity travel use case by cabs. Currently, Intercity Cabs is a highly unorganized and fragmented market, and with road infrastructure improving in the country, it presents a good future growth opportunity. So we have decided to strengthen this line of our business further with an inorganic investment in a well known intercity cab company called Savari. Mohit will share full details in his section.

Speaker 1

For all our product offerings, our direct B2C platform continues to be the leader In India, in terms of active users, number of transactions and reach, while our new channels are also gaining traction. My partner, which is our b2b2c platform for small travel agents, now has 40,000 plus travel agents and expanding every quarter with a very healthy repeat transaction rate. Our corporate travel business for both our platforms, Mybiz and Quest to travel, is gradually becoming meaningful. Our active customer count on Mybiz is now 55,000 plus. And for Q2T, active customer count has reached 297 with strong additions every quarter.

Speaker 1

Both our corporate platforms are focused on building a holistic tech solution wherein companies can seamlessly set policies, report without manual hassle, and sync with their ERP and HRMS systems, allowing the employees to handle their bookings for themselves without diluting the experience. Mybiz has been getting recognition from the industry forums as well, Recently has been ranked at the top in travel and expense management for APAC, marketing G2's fall report 2023. This is the 3rd consecutive category recognition for MyBiz. With this, let me now hand over the call to Mohit for the financial highlights of the quarter.

Speaker 2

Thanks, Rajesh, and hello, everyone. We have delivered robust operating performance this quarter with a strong year on year growth In gross bookings, revenue and adjusted operating profit in line with our stated strategy of profitable growth, demand for travel remained robust on the back of Positive consumer sentiment helping us deliver gross bookings to the Q and A of $1,800,000,000 during the Q2 of fiscal year 'twenty three, 'twenty four, Witnessing a year on year growth of 23.8% in constant currency terms aided by strong operating leverage, The adjusted operating profit grew by over 87% year on year from $15,100,000 in same quarter last year to about $28,200,000 in this quarter, translating to an increase of about $13,100,000 in absolute terms. The adjusted operating profit stood at about 1.5 percent of gross bookings during the quarter, which is in line with the previously reported quarter of the current fiscal year And almost a 50% improvement from the 1% levels reported in the same quarter last year. Our eticketing gross bookings for the quarter came in at about $1,200,000,000 witnessing a year on year growth of 20.8% in constant currency terms. Adjusted margin stood at about $80,200,000 registering a year on year growth of 10.7% in constant currency.

Speaker 2

The take rates for margins for the integrated business were in line at about 6.8%. As mentioned by Rajesh, While the long term outlook for growth in the domestic civil aviation market is very strong with large aircraft orders being placed by the leading carriers, There are short term capacity headwinds in view of issues around supply and servicing of aircraft engines as well as the suspension of operations by GoFirst Airlines. Based on the NCLT order in May 23, for the appointment of a resolution professional To operate GoFirst on a going concern basis, we had been optimistic of restoration of its operations. However, considering that now over 5 and a half months have elapsed And there are ongoing legal challenges to the resumption. We have made a one time provision of all the recoverable amounts Towards deposits for ticket issuances, accrued incentives, taxes deducted or collected at source and recoverable from go first During this quarter, as a result of this exceptional provision to the tune of about $10,000,000 the year on year increasing in the operating profit as per GAAP is about $2,800,000 compared to about $30,000,000 increase in adjusted operating profit, which is not impacted by this exceptional provision.

Speaker 2

We expect small capacity increases in the second half of the year Followed by normalized growth in the domestic civil aviation industry from the beginning of the next fiscal year. Gross booking for the quarter For hotels and packages segment, it stood at about $432,000,000 witnessing a strong growth of 34.5% on a year on year basis In constant currency terms, adjusted margin for our Rodals and Packages business stood at about $75,700,000 in during the quarter, Witnessing a year on year growth of about 36% in constant currency terms. Margins for this segment also came in line At about 17.5%. In our bus ticketing business, gross bookings for the quarter came in at $219,700,000 Growing at an year on year basis of 21.2 percent in constant currency terms, adjusted margin stood at $21,800,000 We're showing a strong year on year growth of about 24% in constant currency terms. Margins for the bus business also came in at line At about 9.9 percent for the quarter, we continue to drive efficiency in our expenses and particularly so in our customer acquisition costs.

Speaker 2

Excellent top of mind recall of our brands has been driving a high mix of organic traffic for us. On top of that, almost 70% of the orders coming from our existing customers, helping us drive further cost efficiencies. Overall, marketing and sales promotion costs for the quarter Came in at about 4.6% of gross bookings as compared to about 5.4% in the same quarter last year. With the COVID-nineteen pandemic behind us and almost every line of business having recovered to pre pandemic levels or above, Our focus is now on continuing to drive profitable growth. Our strong balance sheet with over $500,000,000 in cash and cash equivalents Gives us the flexibility to pursue both organic and inorganic opportunities on driving supply or distribution side expansion.

Speaker 2

Across our portfolio of brands, we have built significant businesses in travel services such as air ticketing, Vodels and packages and bus ticketing. We have organically scaled up a variety of other travel service offerings such as airport transfers And rail ticketing for our customers. As part of our inorganic initiatives, we had invested in BookMyForex, which is a well known forex service provider in India. This investment helped us in strengthening the forex offerings for our customers who book overseas travel services with us And opened up another growth opportunity for us. Along these lines, we are pleased to announce the signing up of a majority investment In Savari Kaal Rentals Private Limited, which is a well run intercity cab services company, we believe that while intercity cabs And local city buses fall under the day to day commute services.

Speaker 2

Intercity cab services are akin to intercity bus services And therefore, are a segment of opportunity for travel service providers like us. This is a segment with low online penetration, Fragmented supply and lack of standardization in experience. We believe that there is an opportunity to transform this space With technology and offer a better value proposition, both for our suppliers as well as the customers in the years to come. The significant focus Of the government of India in terms of improving the quality of highways, apart from adding to the highway infrastructure across the length and breadth of the country Can add further impetus to this segment. This investment, which is likely to be closed in the next two months, It is intended to accelerate our plans of building a meaningful presence in the intercity cabs business or market in India.

Speaker 2

During the quarter, We also acquired the last tranche of equity from the founders of Quest 2 Travel, a company engaged in providing corporate travel services to large sized We had acquired an initial majority stake in 2019 and have been increasing our holding over the years. And this final tranche marks the completion of the process with the acquisition of 100% ownership in Quest to Travel. We will continue to look for search in organic investments to support our future growth initiatives as well. With that, I'd like to Turn the call back to Vipul for Q and A.

Operator

Thanks, Mohit. The vendor willing to wish who wish to ask a question can press the raise hand button on their screen and we will take the questions 1 by 1. I already have a few questions. The first question is from the line of Sachin Surlandankar of Bank of America. Sachin, you may please ask your question now.

Speaker 3

Thanks, Vipul. Good day, everyone. I have three questions. First, Mohit, again, I just wanted Clarify regarding this entire one off. So basically all the negative which It would be factored in as factored in that.

Speaker 3

Ideally, we should not see any incremental one offs coming from go

Speaker 2

first in coming quarters. Yes, Sachin.

Operator

That's right.

Speaker 3

Got it. Second question, just on this entire capacity issues at airlines. Again, one is a near term perspective, which you guys said, but there is also a risk about the Brad and Whitney, Indigo Engines continue to create a bit of an issue going into next year. So, just wanted to understand where Do you guys see this resolving and what kind of impact that could have, let's say, from a next 12 to 18 month perspective?

Speaker 1

Yeah. And maybe Sachin, I can take that. No, I think it's a valid question. You know, I guess I was trying to sort of, highlight that as part of my script speech as well. So if there is, you know, this whole winter schedule that has been filed recently of any indication, That is actually quite encouraging where there is a net addition.

Speaker 1

All factors Considered including the engine issue, there is an overall net addition to the supply of about 7%, 8%. So, you know, which will give you a sense of the fact that, you know, And despite the fact that the go first supply has been out of the market now for a while, and And SpiceJet has also not necessarily been operating at 100% capacity, but both Indigo And, you know, Air India, including Air Express, Vistara, they've been adding more planes. And projections, and because the orders have been placed for last now, You know, a couple of quarters, the supply on an every month on a net net, on a net, sort of addition basis It's going to flow in every month pretty much. And that's the kind of projection that is already out there that has come from You know, all the all the airlines together. So that gives you an indication that the things are going to ease out definitely in the in the coming quarters.

Speaker 1

And from a long term outlook standpoint, to be honest, I don't really see an issue because, you know, ultimately, all these problems are going to get resolved one way or the other. Either it is going to be, you know, the engine replacement that is going to fall in place, slowly and gradually, or There are going to be other alternatives that are going to be available because the demand momentum from a long term standpoint is clear based on various other Sort of projections, if you see it more from a long term standpoint, multiple sources. And operationally, all these, You know, I'm sure everyone is sort of working hard to find alternatives if there are any blockers, that come along the way. So, But, you know, we love to obviously watch the situation. But, like I said, the next 6 months projection seem to be Giving an indication that it's going to start improving overall situation.

Speaker 3

Got it. Thanks, Rajesh. And in your opening remarks, you So commented about a bit of an issue on demand, especially given the harsh monsoon. I wanted to just understand how has been it progressing in the last few months Given the fact, you know, there is a World Cup, you know, we are heading into the Deepali season, any general comments on early December bookings? You know, are we still Seeing issues associated with demand or that's started to reverse?

Speaker 1

So so such in July, August, September, that Specific monsoon related issue was temporary and was confined to certain cities of the country, Not necessarily across and the demand overall sentiment remained positive. In fact, it was at its Speak around August, September, you know, in September, it was like, you know, all time high. And for the current quarter and as we know from the historical trends that the October, November, December again is a high season quarter. But it's early days right now because it's just, you know, end of October. Of course, you know, because of the World Cup, you know, wherever Specific, you know, where India was featuring as part of the games in specific cities, we've seen, you know, bookings and actual transactions growing both for hotels And flights.

Speaker 1

But on an overall basis, you know, the season will play out more in November. Historically also, it ends up sort Playing it in, starting with 3rd week of October, end of November and then goes into well into middle of December, Which is yet to come. And so I guess it's overall early days for the quarter, but I don't see any reason why it will be any different.

Speaker 2

Got it.

Speaker 3

Thank you. And last question is on your margins. Great job guys in terms of holding up these margins well despite the The GOV is something which you guys see is sustainable going ahead and hence, you know, there could be a bit of upside as to your medium term margins.

Speaker 2

As far as, you know, the medium term margins or the margins for this year are concerned, such and like we had called out during the last call as well, We would like to kind of consolidate around the around the 1.5 percent, you know, of gross bookings level or at about, you know, mid teens from a Adjusted margin point of view. So this is where we would like to consolidate for the year. And on an annual basis, We'll continue to look at, you know, small expansion, in the coming years as well.

Speaker 3

Thanks all and the best for future.

Speaker 2

Thank you, Sachin.

Operator

Thanks Sachin. Next question is from the line of Vijit Jain of Citi. Vijit, you may please ask your question

Speaker 4

Where are we in terms of budget hotel recovery in this quarter? I recall last quarter you had mentioned 80, 85% recovery. Where are we? Have Has that moved up since? That's question number 1.

Speaker 4

And, would like to understand if you have a, You know, if the reason why you believe these marketing costs can stay at these lower levels is because you can see the Budget hotel segment completely recovering, and this is the new normal there as well?

Speaker 2

So, you know, on the recovery side, we continue to be around the 85, 90% levels, you know, Vijay, on the on the budget segment. And like we've been explaining, This is a segment which has seen a significant amount of pricing reset and therefore is kind of, you know, the recovery is slightly lower than all the other price points And and which is kind of, you know, which is fine from an overall mix point of view. And and we do believe that, you know, it's just a matter of time before before even this segment kind of, you know, gets back to pre pandemic levels and above. So just an extended period for for that to play out considering the amount of price sensitivity that kind of, you know, the segment businesses. On the margin expansion side, like we've said, this year, we've already kind of significantly optimized Our our, you know, overall operating costs, including the customer action costs, and I've seen a decent amount of uptick compared to the last year.

Speaker 2

And therefore, like I said, we would like to consolidate around these levels. The reason we believe, if at all the margin, the the customer action costs are likely to go up. This will be in line with our, you know, any changes that would happen on the mix side. So say for instance, pre pre COVID, we have seen Hotels and packages kind of accounted for almost like up to 50% of the mix. Right now, we are seeing hotels and packages, you know, contributing to about 40% plus of the mix.

Speaker 2

And therefore, if the mix kind of, you know, moves more and more in favor of hotels and packages over a period of time where it is likely to, In that case, we could see a improvement coming through in the blended take rates and also a little bit of increase coming in in the overall customer occasion costs. But other than that, we do believe we are kind of, you know, in a in a regime of, at least for the shorter term or medium term, In a in a regime of kind of, you know, stable margins as well as stable customer occasion costs. Got it.

Speaker 1

And sorry, sorry, Mohit, if I may just add one more important point, Vijith, if you

Speaker 4

Yeah, yeah, Rajesh.

Speaker 1

On the budget segment very quickly. Just to put things in perspective, I think it's an important one. So like Mohit explained that it is effectively the budget segment and solely in gradual recovery because Price point had changed and then market is taking a little bit more time to sort of adjust to that. But within that, You know, the recovery for any price point more than equal in 2,000 rupees a room night or more than 1,000 rupees a room night, the recovery is already there at In fact, the year on year growth numbers are also robust at about 115%, Like, you know, about 15% growth rate, achievement is about 115% as compared to pre pandemic. So the the only segment that might be a little bit behind is less than 1,000 rupees, which is effectively, You know, dollars 14 a room night.

Speaker 1

Now that was because of the historical reason. It has nothing to do with now demand not coming back. It is only because it was exceptionally lower price historically, during pre pandemic because of higher Sort of aggressive push to sort of get that segment going Very aggressively on the price points. And here, so from that perspective, I think it Just an overall recovery standpoint from our point of view, all segments have recovered very, very well now.

Speaker 4

Correct. Thanks, Rajiv. Next question is just on the air ticketing side. Now I know there's a little bit of mismatch in when you recognize Is these volumes and what we see in the DGCA data, but it looks like, I mean, Q o Q DGCA data shows 2%, 3% decline, right? And your numbers are up.

Speaker 4

So is that, international recovery here or is this just that mismatch that we were talking about? And a related question, if you can tell me what your market share in domestic is, domestic aviation is this quarter?

Speaker 2

Generally, I mean, it can be a bit of both. In fact, you know, you typically do see bookings kind of, you know, you know, holding strong I heard of getting into the peak seasonality quarter because people tend to kind of, you know, make good enough, you know, good pricing, which is available on advanced booking windows. So therefore, you know, you could see a little bit of, you know, seasonality tweak happening on the book versus loan kind of, you know, reporting. And secondly, you know, our our international has been improving. In fact, actually, the mix of international has been kind of improving quarter by quarter.

Speaker 2

In fact, now we are pretty much back to, you know, pre COVID kind of mix coming in, you know, from the international side. Like we have been mentioning, the On international had been slower, but now pretty much kind of, you know, back to full recovery and the domestic versus international mix is pretty much restored now.

Speaker 4

Got it. And Mohit, just your market share in the domestic side?

Speaker 2

Continues to be 30% plus.

Speaker 4

30% plus, Got it. My last question, if you can just tell me what the total investments in Quest to travel and Safari We're in 2q and in 3q. And just on, you know, thoughts on the convertible buyback. Thank you.

Speaker 2

Yeah. See, Q2D, we've already kind of reported the numbers. And as far as Savari is concerned, this again is going to be A small ticket kind of investment more in the less than $10,000,000 kind of a range. And coming to kind of use of proceeds from a repurchase point of view, I mean, we haven't still been able to kind of, you know, get into any repurchases, particularly on the convertible bonds. They can, they tend to be kind of the, their, The premium actually on the bonds has improved over the quarter.

Speaker 2

In fact, they are they are kind of trading at almost like, you know, double digit premium, Over 10% kind of a premium. And therefore, we haven't pursued any repurchases of these bonds. We do not expect, you know, any redemptions to come in because of the bonds already trading at a at a premium, And the put option being in February, which is like about 4 months away. So that's where we are.

Speaker 4

Got it. Thanks, Wirth. I think those were my questions. I'll jump back into the queue.

Speaker 2

Sure, Vijay. Thanks.

Operator

Thanks, Sujit. The next question is from the line of Gaurav Lothari of Morgan Stanley. Gaurav, you may please ask your question now.

Speaker 5

Hi. Thanks for taking my questions. So the first question is just trying to understand, typically in September quarter, what is the like The advanced bookings that you see for December quarter, and is this year something different because of the event of Cricket World Cup around? Has the advanced booking been Stronger than the usual September quarter that you see for the December quarter.

Speaker 1

Maybe I can take that, Gaurav. I won't say it is, we've seen anything, you know, dramatically unusual, Gaurav, to be honest. Only for certain pockets, for certain dates, for certain cities, thanks to this whole World Cup thing, Because of the sort of worry or concern around fares going up, etcetera, we've seen some sort of consumer different consumer behavior on On purchase side, but on an overall basis, nothing unusual. The only other thing that I would like, which is very interesting that we've been sort of noticing over the last, I would say, quarter or 2. And that is thanks to our book at 0 Our product on the hotel side is, and maybe to some extent as people have been sort of experiencing high rate, high fares Now for some time, because of the peak of demand, especially in the premium segment of hotels, There is some, more awareness that is getting created in the marketplace in consumers' mind, to plan their travel a little bit more in advance Booked their plan, travel more in advance.

Speaker 1

Book at 0 also gives you flexibility, specifically, I mean, this I'm talking about the hotel bookings. It also gives you flexibility on, if you are sort of even on the edge planning for your trip, You can still go ahead and book it and then cancel it without any sort of hit on your pocket. So and that is Also sort of shaping the consumer behavior to an extent. But, future quarters, at least 3 or 4 quarters down the line will tell us Whether there is any kind of a permanent shift on just the buying habit of the Indian consumers or not, But not in this quarter. In the reported quarter, we didn't see anything unusual.

Speaker 5

Got it. Very clear. Second question is around your investment thesis in the intercity cabs. If you could highlight some Bits of, you know, what's addressable market here, what's the current online penetration and how you're thinking about this segment?

Speaker 2

Maybe I can, share some color and Rajesh can add. So, we've been identifying, like we've been calling out, Ground transport overall is has been an area of focus for the, for the company. And and as you know, we kind of have a, You know, a leader in the bus ticketing space in terms of Redbus, that brand kind of, you know, has a significant amount of, you know, leadership in the online bus ticketing space. And we have also dialed up over the last couple of quarters, we have also been dialing up the entire Rail ticket offering and trip info services as that's another kind of very good source of customer acquisition. And we believe when it comes to non, flight transport, the customer has a very easy option to choose between Bus tickets, you know, choosing to kind of, you know, commute by bus or kind of, you know, travel by rail or travel through Intercity caps.

Speaker 2

So, you know, as a as a result, we've kind of been trying to dial up the the service offerings on the on the rail ticket side, as well as on the intercity caps. Intercity Cabs overall from a market sizing point of view, while there is no, you know, Ready report, but our estimate is it would be close to about $3,000,000,000 kind of a market, with very low online penetration. Online penetration It's likely to be in the high single digit. So it's a pretty good opportunity to get into and a meaningful opportunity to get into. And more importantly, like we have been calling out with this entire focus that the government has been having on infrastructure building now, While the while the, in a civil aviation market has been seeing the benefit of, you know, the significant expansion on the on the airport side, And also we've been seeing new kind of, you know, supply coming in, particularly on the private bus side, with the with the significant amount of, you know, highways That are getting laid and kind of, you know, created over the across the length and breadth of the country.

Speaker 2

We believe intercity cabs market could also grow very significantly In view of this, significant growth in the highway infrastructure, so that's been An area that we've been kind of eyeing for some time. Savari has been an existing, you know, supplier on the platform, And therefore, we thought it would be a logical kind of, you know, investment to look at. And we are glad that we've been able to kind of, you know, That this transaction has worked out and it should help us, you know, accelerate our plans on the on the intercity offering side. This is clearly a Space where, you know, there is a significant amount of scope for creating a much better kind of, you know, Aggregation of the supply side and also creating a much better kind of, you know, shopping experience, you know, for the customers as well. So we believe With our expertise on the various kind of travel services and the online dispensation, we should be able to create a meaningful kind of impact In the intercity cabs market as well.

Speaker 5

Great. Thanks a lot. Mohit, last question on the comments that you made around generative AI. So If I just look at, you know, how how to think about the eventual outcome of our early investment on the three factors, 1, competition, or your competitive mode. 2nd, addressable market.

Speaker 5

And 3rd, the efficiency that can help to lower your cost structure. Thank you.

Speaker 1

It's a great question, Gaurav. In all three, the sort of Separate variables that we should look to see how this new technology is going to impact. See, it's going to be a long journey, by the way. And, you know, and we've started and we started looking and, in fact, looking at all three aspects. I think the first two will get reflected In either the overall online penetration increasing, you know, because the overall experience is ultimately this this technology is going to help us improve the customer experience on the Making it far more intuitive, making it far more easier, discovery can be lot better.

Speaker 1

We can, you there are use cases We are already working on, we've done soft launch as well. We can, the, you know, the intelligent bots can Come up with an innovative, you know, vernacular based, voice based interface as well, which would mean that it will sort of expand our reach to the smaller cities beyond the, let's The top 20, 25 cities of the country. And all of that would mean effectively that, on one side, the webinar. Customer experience will continuously improve and people will feel more and more comfortable to come and buy online. And 2, it will go beyond 25 cities as well, More and more and trying to obviously, also resolve the language issue beyond English.

Speaker 1

Now this is the Specifically, the language issue to crack commerce on vernacular language is going to be a long journey. It is not necessarily going to be an overnight solution. But on the other side, on the experience side, you know, we've already started getting some good feedback from customers that This feature is helping and that feature is helping. But I think this overall, this new technology is definitely looking more Promising. Now on the 3rd side, on the efficiencies also, there are use cases identified already for, you know, at our end.

Speaker 1

And one of them is the post sales experience that we are already looking at further, You know, right now, all the, you know, the 1.0 or maybe the 2.0 journey For post sales experience, customer journey from customer journey perspective was, you know, how do we sort of automate and, you know, make the transition from, let's say, contact Center servicing to doing the self-service or self help. You know, most of the use So that can be done on phone, on a click or button, etcetera, which we achieved, which we have achieved quite significantly with a lot of the share is now self-service. And I think the 3.0 is going to be now further in that journey. How could we, on one hand, either the, you know, sort of Get some more productivity gains for the agents, for the call center agents for the really, you know, sort of complex cases by providing a lot of the information in or filtering a lot of the information using this technology. Or You know, we sort of look at, again, introduction of bot at some level in the journey, which can filter the generic queries that come our way on the post sales, the service queues.

Speaker 1

So that's one area that this work on, which will clearly give us more efficiencies. And of course, we'll also enhance the customer experience for the post sales queries, etcetera. And on the other hand, I think there's going to be, some low hanging fruits also on the software development side, on the programming side for the engineers, where, you know, there is, this technology again can be leveraged to look at the basic, the first level of sort of For programming queries, just to make life easier and efficient for the engineers at the sort of first level, which would help us get some productivity gains, you know, on that front as well. I would just say that the work on our side is actually on all fronts. But it is going to be a journey and we will keep sort of working on use cases on one side, which will impact the customer.

Speaker 1

And on the other side, we will continue to keep focusing on wherever we can get some productivity gains internally.

Speaker 5

Thank you for the detailed answer, Rajesh. Just a clarification here in terms of what's our dependence on paid traffic, and do you think That dependence also can come down with this use of this technology. Thank you.

Speaker 1

Right. That's an interesting one. Actually, we are already, Gaurav. You know, a lot of our traffic is direct. So our dependence on paid traffic is relatively speaking low.

Speaker 1

And, On the back of brand that has been established, all our brands actually make Montreal Breadbus and Goibibo even from an OTA overall brand standpoint as compared to the rest of the market. And dependence is already low. There are areas there also, Specifically on search engine optimization, we've already seen some gains, that we have, I should have actually mentioned about that as well that we have a We have leveraged or we've started to leverage this technology there as well. And and that would help more conversion Because SEO traffic is not necessarily a paid traffic. And we'll keep sort of, you know, sort of learning more and and keep Looking at it and exploring more areas to see if there are any further gains, even on this side can come from here from leveraging this technology.

Speaker 1

But like I said, the dependence is already Relatively quite low, and it's an underpenetrated market overall, and we still need to have a healthy mix of new users coming in. And so therefore, do I really see immediate immediate gains that, or material immediate Gains that will come from this area, perhaps not. Maybe we'll get balanced out because we will also continue to keep investing and getting some new users in.

Speaker 5

Thank you so much. All the best.

Speaker 1

Thank you. Thank you, Gaurav.

Operator

Thanks, Gaurav. The next question is from the line of Ashwin Ashwin, you may please ask your question now.

Speaker 6

Yes, Vipul, can you hear me?

Operator

Yes, we can.

Speaker 6

Yes, congrats on good set of numbers. I had a question on the take rates. So we've seen bump ups in terms of take rates in Both air as well as hotels and also in bus ticketing, we've seen stability on take rates at elevated levels versus historical. So what are the drivers for these take rate improvements and how sustainable near term do you see these take rates to be?

Speaker 2

Hi, Ashwin. Actually, you know, the take rates across segments have been have been reasonably stable for us. I mean, you know, there is generally a little bit of Variation linked to seasonality. So, you know, slightly lower seasonality quarters like q2 andq4, You know, you would possibly find the take rates to be slightly better compared to peak seasonality quarters of Q1 and Q3. I mean, it comes in both from the fact that, you know, the suppliers are trying to kind of, you know, more and more promote, to build load factors.

Speaker 2

And secondly, also the the ASPs tend to be slightly lower compared to peak seasonality quarters and therefore optically also, You know, the the margins look slightly better in the in the weaker seasonality quarters. That that possibly Is the is the only only reason. Otherwise, we kind of like a call log, we're kind of, you know, seeing Feasible kind of, you know, stability in the in the take rates, by the business segment.

Speaker 6

So, Mohit, in terms of the stability that you are seeing on Or or the recovery that you're seeing on the budget hotel side, do you think the take rates have scope to go up from here because typically budget hotels are higher take rate properties.

Speaker 2

Pretty marginally, if at all, Shwin. Likely to kind of remain Around this range, half a percentage point, plus or minus, but no significant changes are expected on the overall take rate.

Speaker 6

And the second question was in terms of in terms of we saw sequentially a reduction in terms of hotel and bus ticketing transactions. Now part of it is Seasonality, but were there impacts of, say, floods, which were more accentuated in hotels or bus compared to air for us or would you say it was largely in line with expectations in terms of seasonality?

Speaker 2

Largely seasonality.

Speaker 1

No. It is seasonality only, Ashwin. And, you know, if you go back in history, you will see similar trends between air and hotels. See, the air As all the use cases, the seasonality is only about leisure segment and which is more sort of reflected always On the hotel business, the LDR business.

Speaker 6

Okay. Fair enough. Congratulations and all the best.

Speaker 1

Thank you, Ashwin.

Speaker 2

Thank you, Ashwin.

Operator

Thank you, Ashwin. We'll take the last question now from the line of Aditya Chandrasekhar of UBS. So Aditya, you may please ask your question now.

Speaker 7

Yeah, hi. A couple of questions from my side. Firstly, I just wanted to understand your kind of risk assessment of SpiceJet. What are you seeing on the ground and if it's possible, could you quantify your overall exposure to SpiceJet also Similar to the I mean, equivalent to the $10,000,000 provision you made for GoAir? That's the first question.

Speaker 7

And second question on the bus side, On a Y o Y basis, I think we are seeing growth kind of stabilize at around 17% in the last couple of quarters. Just wanted to understand your overall kind of Outlook on this segment, is it kind of stabilizing at these levels? Are penetrations kind of saturated in this segment? And how we should look at this going ahead? Thank you.

Speaker 1

Alright. And maybe maybe I can take, I can start with this and, you know, Mohit, please feel free to add. Listen, Aditya, as far as SpiceJet is concerned, again, everything which is there, SpiceJet is a listed company and whatever is there in the public domain It's known to all of us, and we have been rating. Just from a day to day operations standpoint, You know, we have only seen in the last, especially in the last few weeks or couple of months That the immediate situation in terms of pressure on the cash flow, In terms of, a couple of payments that they were supposed to be made, they were supposed to be doing, you know, basis the quoted Court orders and stuff like that, they've been honored actually, already a couple of them, which is good sign. And in terms of actual Departures also, you know, contrary to what we might be thinking or generally building a perception, they're adding more planes.

Speaker 1

At least about 6 more planes that they are adding during this season quarter. So I guess we will have to just wait and watch, you know, how they operate. They've been so far able to sort of navigate On the situation, I would say, reasonably well, not to say that they are in a You know, they're in a very good shape because they're obviously not operating at 100% capacity today. From our point of view, we are keeping a close watch And continue to keep sort of monitoring day to day operations, seeing the how the schedules are being projected and then accordingly sort of operate From a day to day business standpoint with them, I don't think there is any Sort of as at any particular day, it will be fair for us to be able to start estimating the exposure at this point in time because, you know, from our point of view, we're just monitoring it And keeping it business as usual based on their volume of business with them. So I don't think that would Be fair to sort of estimate at this point in time, because there's no real indication of that sort at this point in time.

Speaker 1

I guess, you know, your second question was on the bus side. No, I don't think that it has reached The saturation level, I don't think the penetration has reached a saturation level yet. In fact, we've been talking about as part of our, you know, sort of quarterly Commentary in the past as well. The next wave of growth in bus segment could, is likely to come from 2 counts. 1, there are still underpenetrated regions, where even the private sector bus market It's not necessarily very well penetrated in terms of supply coming online and the adoption from the consumers who are buying online.

Speaker 1

You know, the south and the west, for example, are, have penetrated well and grow and, you know, have grown and continue to keep growing. But on the north side, it is still underpenetrated. And that is where, you know, where our focus is, we are trying to sort of Add more inventory, create more awareness and trying to see if we can just get some more next level of growth from those regions, Including, that is the second, you know, sort of area from where we expect the growth to come in Is the non private sector supply. Now that is completely underpenetrated and a huge amount of opportunity equal the size of Opportunity that the private sector, you know, bus space offer. And the beginning of that journey has started already coming out of pandemic.

Speaker 1

We started to get a lot of RTC's supply on digitized and on our platform, and we are making good progress on that. Now the question is to create more and aware more and more awareness and also expand our reach To get those consumers who've been traveling through RTC buses also buy online. I think that is where our focus is, You know, like, both these areas were to drive the next level of growth. I but, I don't think I I think it'll be early to conclude to say that this 17% or 17%, 18% would be the sort of steady state growth. I think, we do see potential to get it to mid-20s at some point in time as well.

Speaker 7

Thank you.

Operator

Thank you, Aditya. This was the last question, but I'll request Rajesh for his closing remarks.

Speaker 1

Yes. Thanks, Vipul, and thank you, everyone. Thanks for your patience, and I wish you all the best. See you next quarter.

Operator

Thank you, Rajesh. You may now please disconnect the call. Thank you.

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Key Takeaways

  • MakeMyTrip reported Q2 FY24 gross bookings of $1.8 billion, up 23.8% y/y in constant currency, and an 87% increase in adjusted EBIT to $28.2 million despite air-supply constraints and monsoon headwinds.
  • Domestic and international air ticketing both recovered strongly, with international bookings surpassing pre-pandemic levels and new features like “hold booking” and quick checkout boosting conversion.
  • The accommodation segment expanded to over 77,000 listings, added 8,000 homestays (1,500 in World Cup venues), and grew holiday packages to 555 domestic cities and 66 countries.
  • Leveraging a $500 million+ cash balance, MakeMyTrip made a majority investment in Savari to enter the intercity cab market and acquired 100% of Quest2Travel for its corporate travel business.
  • Product innovation included a redesigned homepage, GDPR compliance for global reach, and generative AI features like AI-summarized reviews and voice bots to improve user experience.
AI Generated. May Contain Errors.
Earnings Conference Call
MakeMyTrip Q2 2024
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