MakeMyTrip Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
October 23, 2024

There are 10 speakers on the call.

Operator

Hello, everyone. I'm Vipul Gheg, Vice President, Investor Relations at MakeMyTrip Limited, and welcome to our fiscal 2025 Second Quarter Earnings Webinar. Today's event will be hosted by company's leadership team comprising Rajesh Margo, 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 the Araya website shortly after the conclusion of today's event. And at the end of these prepared remarks, we will also be hosting a Q and A session.

Operator

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 1990 5. 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.

Operator

Additional information concerning these statements is 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 2, 2024. 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,

Speaker 1

Rajesh. Thank you, Vipul. Welcome, everyone, to our Q2 call for fiscal 2025. We are pleased to report another quarter of strong business results with robust growth in the top line and bottom line. Gross booking value for the quarter stood at $2,300,000,000 registering strong year on year growth of 24.3% in constant currency terms.

Speaker 1

Adjusted operating profit at $37,500,000 registered a year on year growth of about 33%. We managed to deliver this strong performance across all our business segments, leveraging our brand and distribution strength and despite the short term headwinds due to unusual heavy rainfall that impacted demand momentum a bit in an otherwise traditionally low season quarter for leisure travel. We've been consistently outpacing the industry's growth on the back of continued supply side expansion, catering to a variety of travel needs of the Indian consumer implementing several AI and data science driven product features leading to personalized recommendations to improve customer experience and high proportion of repeat customers. On the macroeconomic front, India's strong growth trajectory remains a compelling narrative on the back of advancements across sectors. As per IMF estimates, India is expected to become the world's 3rd largest economy by 2027 after the U.

Speaker 1

S. And China. The economic rise is fueling the growing consumer class leading to higher discretionary spending. Travel and tourism industry is one of the biggest beneficiaries of this increased discretionary spending. Furthermore, our younger generation aged between 2534 are increasingly willing to travel and explore more.

Speaker 1

A 5th of the population will age into that group soon, helping the travel segment to grow further. As per Bernstein estimates, the annual spending on foreign travel by Indians will nearly triple to $89,000,000,000 in 3 years. The number of valid Indian passports has also nearly doubled from 52,000,000 per decade ago to 93,000,000 this year. On the other hand, India's digital economy has been tagged as one of the fastest growing in the world and the government's path breaking digital India initiatives are playing a critical role in increasing Internet and e commerce penetration. We've been capitalizing on some of these macro trends by constantly improving our product and value proposition for the international outbound travel market.

Speaker 1

We enhanced the business class funnel experience for international flights and have revamped the premium economy class booking flow as well. The new funnel features, rich features, rich visuals and detailed amenities delivering a premium and seamless booking experience that aligns perfectly with the high end services offered Similarly for international hotels, we are enhancing supply and offering options that are relevant to Indian consumers On the customer journey flow side, we have been dialing our features that cater to the unique needs and preferences of Indian consumers. For example, culinary preferences, family friendly services, etcetera, thus offering a more personalized experience. As a result, our international air ticketing business and international hotel business continue to witness faster growth than the industry. International air ticketing business posted year on year revenue growth of over 39% in constant currency terms and now accounts for 38% of the adjusted margin in the air ticketing business compared to 33% in the same quarter last year.

Speaker 1

Our international hotels outbound business revenue grew 62% year on year in constant currency terms and now accounts for about 17% of the adjusted margins from this segment compared to 12.5% in the same quarter last year. We are not only growing in our traditional markets like Thailand, Singapore, the Middle East and Malaysia, but also in new destinations like Georgia, Vietnam, Hong Kong, Azerbaijan, Kazakhstan, etcetera. During the quarter, we sold 32,000 plus international hotels across 2,384 cities in 165 countries, which is the highest ever spread achieved till now. Total air ticketing business witnessed strong growth Adjusted margin grew by 21.1% year on year in constant currency despite persistent supply issues in the domestic market Our accommodation business overall, which includes hotels, home stays and packages, continues to grow at a robust pace as well. We recorded 21.4% year on year growth in the adjusted margin on a constant currency basis.

Speaker 1

As mentioned earlier, the prolonged monsoon along with the significant increase in heavy rainfall had impacted demand during parts of this quarter. However, our combined strategy of supply side expansion and sharper targeting of a variety of customer segments with multiple distribution channels has helped us grow in the 20s. In our holiday packages business, growth has led was led by emerging destinations like Australia, Japan, and Egypt. During the quarter, we partnered with LEGOLAND Malaysia Resorts to offer holiday packages with a unique blend of LEGO adventures and rich Malaysian cultural experiences. In our bus business, we continue to see broad based growth across all regions in the country.

Speaker 1

On the product side, our localization push continues with launch of Telugu funnel on Android and extending the Tamil funnel on the mobile web. Bus ticketing in some of the international markets where we are present continues to grow faster with the contribution of revenue from international markets now reaching 12% of the total bus revenue compared to 10% in the same quarter last year. Our investments in other transport services such as intercity cabs and trains helped us to deliver 17.6% quarter on quarter growth in constant currency in a seasonally weaker leisure travel demand quarter. Our corporate travel business via both our platforms that is Mybiz and Quest to Travel is witnessing strong growth. Our active corporate customer count on Mybiz is now over 59,000 plus and for Quest to Travel, the active customer count has reached 462 large corporates.

Speaker 1

We continue to enhance our product capabilities. We completed over 60 integrations with travel and expense management solution partners like My Claims, Davin Box, Zoho and Fast Collab. We also went live with complete self serve HRMS integrations connecting more than 200 organizations through the HRMS connector to enable better management of travel expenses. On Q2T, we introduced the official Q2T mobile application providing greater accessibility and convenience for corporate clients. Overall, we now have a lifetime transacted user base of 77,000,000 customers across all our 3 brands.

Speaker 1

We continue to deepen engagement with our existing customers and add new customers to the platform every quarter. To help consumers make all their bookings on a single platform, we have launched a considerably improved connected trips experience completely built in house on the strength of our data science capability enabling consumers to book other products and services needed for the trip. It is helping us drive cross sell and upsell other services. As part of our retention and loyalty strategy, we revamped our MMT Black program on MakeMyTrip and GoTribe loyalty program for our Goibibo customers last quarter with more relevant inclusions like meal and room upgrades, airport pickup, F and B offers, etcetera for our customers. This quarter, we launched our new co branded credit card in partnership with ICICI Bank, which is one of the leading private banks in the country.

Speaker 1

With its impressive value proposition, this should help us drive both new customer acquisition as well as repeat transactions on our platforms. Before handing over to Mohit, I want to provide an update on our initiatives regarding the deployment and adoption of GenAI, a core part of our innovation strategy. Last quarter, we introduced our GenAI chatbot, Myra, on our international flights funnel. The initial response has been encouraging with Myra successfully handling queries on topics such as date changes, flight details and ancillaries. This quarter, we have launched Myra to enhance the hotel and homestay booking process by offering real time assistance, leveraging generative AI and years of proprietary data, including customer reviews.

Speaker 1

The chatbot delivers accurate and personalized responses to even the most detailed inquiries. We plan to further expand its capabilities to handle pricing and availability queries as well as provide personalized hotel recommendations. This aligns with our strategy of using AI driven solutions to boost customer satisfaction and drive growth. Similarly, our AI deployment initiatives have been very successful in addressing pre journey queries on the Redbus app via the Gen AI based bot, which has not only resulted in an improvement in customer satisfaction scores, but also productivity gains with an almost 45% decrease in the involvement of customer service agents. With this, let me hand over the call to Mohit for the financial highlights of the quarter.

Speaker 1

Thank you.

Speaker 2

Thanks, Rajesh, and hello, everyone. We have achieved another quarter of growth in the '20s, showcasing strong performance across all business segments. Gross bookings for the quarter came in at $2,300,000,000 compared to $1,800,000,000 in the same quarter last year, reflecting a 24.3% year on year growth in constant currency. Revenue growth as per GAAP came in stronger at 26.5% year on year in constant currency. This performance is particularly noteworthy given the ongoing supply challenges in the domestic air market and the impact of unusually high rainfall during this monsoon season in India.

Speaker 2

Moving on to our segment results, our air ticketing gross bookings for the quarter came in at $1,400,000,000 witnessing an year on year growth of 20.4% in constant currency. Adjusted margin stood at $96,000,000 registering a growth of 21.1% in constant currency. We continue to expand both our domestic and international outbound business. While Rajesh has updated about the continued outperformance in the international ticketing side, let me share some more color on the domestic air ticketing business. In the domestic air ticketing market, while supply was broadly at similar levels in the last quarter, the market growth picked up marginally to about 6% year on year on flown basis.

Speaker 2

We continue to grow faster than the market and our market share stands strong at 30% plus in the domestic flight ticketing business. Gross bookings for our quarter in the hotels and packages segment came in at about $517,200,000 registering a growth of 21.2 percent year on year on constant currency basis. Adjusted margin growth was 21.4% year on year in constant currency terms, resulting in adjusted margin of $90,700,000 during the quarter. While the last couple of years have seen higher than inflationary increases in room rates, this year we are seeing that the room rates have started stabilizing and price increases have moderated. We continue to drive supply expansion by going deeper and wider in the Indian market and growing directly contracted hotels in key international markets which are of interest to Indian travelers traveling overseas.

Speaker 2

As a result, we now offer over 84,000 domestic accommodation in across 2,100 cities, through the length and breadth of the country. We are scaling our direct contracting for international hotels in line with demand trends and now have directly contracted hotel supplies in over 40 international cities up from about 21 cities last year. In our bus ticketing business, gross bookings for the quarter stood at $263,000,000 growing at 21.5% year on year in constant currency terms. Adjusted margin stood at $27,100,000 registering a year on year growth of over 25.6 percent in constant currency terms. The take rates in our business continue to remain stable and in line across all our business segments, that is air ticketing, orders and packages, as well as bus ticketing.

Speaker 2

Similarly, our customer occasion costs that is marketing and sales promotion expenses remain efficient and in line with the same quarter last year at 4.6% of gross bookings. This is slightly lower than the 4.8% in the previous quarter linked to change in seasonality. In addition to driving strong bookings and revenue growth, we remain focused on building operating cost efficiencies and driving operating leverage in our fixed costs, including personal expenses and general or administrative selling expenses. As Rajesh has already highlighted, the significant deployment of JNEI in some of these areas. Accordingly, our adjusted operating profit for the quarter came in at $37,500,000 registering a year on year growth of 32.9%.

Speaker 2

Our cash generation continues to be robust and cash and cash equivalents at the end of the quarter have now gone beyond the $700,000,000 mark. Besides maintaining a healthy watch list, we will continue to leverage this strong cash position to invest in potential organic and inorganic opportunities. We had called out our intent to pursue opportunistic share repurchase or buyback programs at the start of this year. While we could not manage any meaningful repurchases during the reported quarter, we remain committed to the program. With that, I would like to turn the call back to Vipul for Q and A.

Operator

Thanks, Mohit. Any participant who wants to ask a question can click on the raise hand button on their screen and we will take the questions 1 by 1. I already have a couple of questions. So the first question is from the line of Sachin Saldankar of Bank of America. Sachin, you may please unmute and ask your question now.

Speaker 3

Thanks, Vipul. Congrats on a good set of numbers. I have three questions. First question, wanted to understand a bit more on hotel booking growth. It did appear to be slightly slower than previous quarters, but I did also hear the comments from Rajesh earlier on about unexpected monsoon.

Speaker 3

Is this a one off we should look and then the growth should normalize going ahead or anything else which has started to impact the growth out here?

Speaker 1

Yeah. Hi, Sachin. Maybe I can take that. Yes, I guess the way I was alluding to and if you break the quarter, we actually saw July August growth were normal and some temporary headwinds, you know, thanks to the excessive monsoon in certain areas that we saw, you know, sort of causing disruption and hurting the demand momentum a bit. To the best of our understanding, it appears to be temporary because we haven't really seen this continuing.

Speaker 1

We have seen this bouncing back as well. And also as you go deeper, as we see some of the specific destinations, for example, and on an overall quarter basis, if you compare with the earlier year same quarter, we also saw, let's say, for example, in Arjuna Pradesh as a territory, or all the mountains in general, were very badly impacted last year because of floods. And this quarter, same, this quarter, this year, we saw robust recovery coming back into those destinations as well. So, so if you look at more detailed data, it did not point towards, you know, sort of, that any kind of signal for continued slowdown. It appeared to be temporary in nature for sure.

Speaker 3

Thanks Rajesh. Pretty clear. Just a quick follow-up out here. Multiple companies across different subsectors are talking about consumption slow down, not only just Tier 2, Tier 3 cities, but also impacting consumers in urban areas. Any sense in terms of how you guys are looking, especially as we go into holiday season booking?

Speaker 3

Any signs of consumption slowdown you are seeing?

Speaker 1

So early days in this quarter, given that it's just the beginning of the quarter. But so far in the in whatever number of days that have passed in October, we haven't really seen that, at least in our category. And so it could be a function of, just sort of, you know, September, maybe a temporary slowdown backlog catching up in October. And there were some specific period where people were not necessarily traveling, etcetera. And sometimes, you know, that period, the other category consumption also takes a takes a hit.

Speaker 1

I think we will have to wait and watch for this quarter, just because it has it happens to be, you know, seasonally high quarter for at least the leisure travel. But the way October has started, seems like it'll be a good season. But like I said, you know, we will have to it's early days. We will have to just wait for, you know, some more time, getting into the into the quarter, more till, you know, say end of October, middle of October or middle of November, rather for us to be able to, you know, jump to any kind of conclusion, but the early signs don't look, anywhere close to slowing down.

Speaker 3

Thanks. Second question, as you scale, your Gen AI, Myra, what kind of revenue benefits and cost savings we should see? I hear you comment of 45% decrease in customer service agents. Yeah. Any any sense in terms of positive impact on numbers?

Speaker 1

Again, early days, Sachin, I would say, but there are 2 areas broadly that we are, you know, sort of working on deploying this technology. 1, as you rightly pointed out, and as we called out as well is actually the areas where we will see more productivity gains, more efficiency gains. And one of the prime areas there is after sales service. You know, all our contact center you know, sort of customer service use cases, we are deploying one after another. We are just mapping the entire journey, and we're deploying, and picking up areas and deploying this technology, which is definitely giving us efficiency gains.

Speaker 1

But for it to sort of, you know, reflect completely on, P and L, I think it will be a quarter or 2 down the line. We will see the full impact of that. And that is one area. Just more on the cost efficiency or productivity gain side. The other more important area where there is hopefully potentially there will be a larger impact on the better conversion on the back or better experience is going to be more on the, you know, booking customer journey, of flows where, you know, this, whether, you know, on the, like, for example, 1 or 2, you know, front end use cases that we've gone live with.

Speaker 1

It's addressing all the open queries, but also helping doing the trip planning. And as we sort of continue to enhance the capabilities of this interface, we believe that the, you know, there will be a, you know, better mouth of the funnel, like absolutely top mouth or top of the funnel, you know, experience getting enhanced. And therefore, we are getting more and more traffic and hopefully helping the conversion to get better. But again, for that also, it'll be for the impact to sort of reflect on numbers, in any meaningful way, because it's going to be journey because as you solve the problems, you get more insights and you keep refining the product. It will be a couple of quarters down the line.

Speaker 1

So we'll see how it goes, but we are very, actually encouraged with the early results that we see in some of the metrics that we are measuring in terms of either the time spent on this kind of an interface more and more or the accuracy of the results that the interface is throwing or on the cost side, you know, part of the journey, as we called out in case of red burst that we've seen, you know, clear sort of efficiency gains on the reduction of some headcount already there as well. So early, early results are very, very encouraging. But I would say for it to show any kind of material impact on the numbers overall, it'll take a couple of quarters.

Speaker 3

Thank you, Rajesh. And my last question is on the SyndiGo direct

Speaker 1

push.

Speaker 3

Clearly, this quarter, your numbers both on booking and take rate were not impacted, but, some of your peers appear to be impacted. Any general sense in how we should look at, the impact of that on MakeMyTrip, if any?

Speaker 1

You know, I would actually say, Sachin, that, you know, it again revolves around the fact that, you know, how consistently you are, you you continue to keep working on improving the customer experience, not necessarily on the booking flow, but also the after sales flow and keep adding more new features, differentiated features. So our endeavor has been just to keep working on that relentlessly and keep coming up with, you know, we've recently come up with many industry first features, which is, you know, on the back of the rich data that we have and building data science models on top of it, whether it is free cancellation or date change or fare lock or even on the other categories like trip guarantee and so on. And because of, you know, all these new features and overall experience, you know, focus from our side, we believe that we will continue to keep getting, you know, our sort of customers or loyal customers back. I mean, if you see our market share, overall, despite, you know, whatever might be happening in the market, we would have only marginally improved only. Although, you know, just maybe in decimal points, but, you know, on a very on an already pretty high share, of the of the domestic air market, we would have only improved.

Speaker 1

So so I, you know, I guess we will we will we will continue to keep our focus on on that front. And, and and so far, it has worked out quite well.

Speaker 3

Thank you. Very clear and all the best for future.

Speaker 1

Thank you.

Operator

Thank you, Sachin. The next question is from the line of Manish Anukhia of Goldman Sachs. Manish, you may unmute your line and please ask the question.

Speaker 4

Yeah. Thanks, Vipul, and hi. Good evening, team. Thank you so much for taking my question. So first question is actually just a follow-up on the previous question, right, about this whole airline directing.

Speaker 4

So, Rajesh, I mean, have you seen this trend also play out in the past with, let's say, either Indigo or other airlines? And historically, have these been, like, short term in nature or, you know, have you seen them persist? And if so, you know, what have been the offsetting viewers? And I I appreciate the response you gave to the previous question. But just trying to understand it from an economic standpoint, does it make sense for low cost carrier to drive traffic directly on their website given if the traffic comes through you, you bear part of the cost payment gateway after sales cost of service.

Speaker 4

So just trying to make sense of the economics of direct push by low cost carriers versus that getting booked through you and, like, any past precedence there.

Speaker 1

Yeah. No. No. Happy to happy to give more color on this, Manish. I would say actually 2 aspects.

Speaker 1

And I'll come to the specific thing that you mentioned, the economics part of it. But before that, I think what is also important to sort of keep in mind is that from a consumer point of view, typically, even if there are relatively speaking fewer options and now the same consumer would be traveling domestically, you know, and also looking to travel internationally, would always look to, you know, explore more options. Right? You know, so it's a selection before you end up sort of making, the choice. So I think we should always keep that thing in mind.

Speaker 1

And from that perspective, there will always be exploration on the platforms to look for more options before you end up making your choice. That's point number 1. And that's always long term. That is and that will be, I would say, across categories, not necessarily in a particular category or in a particular product. And then coming to economics, you know, the way the current model and the overall sort of, you know, market dynamics in terms of, you know, let's say, cost of customer acquisition in the online world today, in India where the search engine has, you know, the the lion's share of the total market, it's obviously very competitive.

Speaker 1

It's, it's not necessarily, no, cheaper or or less expensive for anyone to to be able to sort of acquire and compete in the marketplace and acquire traffic. So So from that point of view, there will always be a challenge. You know, and given that, not only us, but all the other digital players across categories over the years have built that, you know, those capabilities quite deep for them to be able to optimize and sharply target the customers, etcetera, thereby optimizing the cost of customer acquisition. Not only that, and also the brand built over a period of time also sort of helps. And then on the other, you know, cost, which is an important cost attached to this is also cost of servicing.

Speaker 1

And so, you know, the post sales cost in the aviation world is non trivial to my mind. Because every now and then there is something or the other that happens more from a macro disruption standpoint. You know, whether it is weather related or it is, you know, something else going on in some part of the world. Every now and then there will be disruptions as we have seen. And in that situation, you know, the you have to have those capabilities for you to be able to service the customers.

Speaker 1

And that comes with the cost. And over the years, because of our volume, because of our, you know, effort to sort of streamline the process, etcetera. You know, we've come a long way in terms of just the majority of all those processes and all of that. Now having said all of this, you know, I we also believe that, you know, if you have to look at the full pie, you know, so out of the 100%, if there and it's not that there is one channel who would be able to meet all the needs given that this is a massive growing market. There is so much of supply that is coming.

Speaker 1

The future outlook is so robust for travel and tourism. So if the market is going to expand, there is room for all channels to grow. You know, there is definitely room for us to grow. There may be some room for direct to grow if the economics work out for any of the, you know, direct channels. And therefore, you know, we don't necessarily sort of see it, you know, like in an overtly obsessed manner.

Speaker 1

Rather focus on just, you know, delivering value to the consumer, delivering value to the partners, work closely with the partners, and see how can we sort of maybe take the lion's share of, you know, whatever, you know, number of consumers that are out there in the market and the rest will fall in place. So I guess that's that's really has been our approach, you know, in, you know, over the years and and and and it has worked so far, and and we would like to continue it that way.

Speaker 4

Thank you, Rajesh. Really appreciate that detailed insight. My second question may be directed to Mohit. I mean, Mohit, you mentioned north of $700,000,000 of cash now maybe generating more than $150,000,000 of annual cash EBITDA, and and you talked about, opportunistic buyback and maybe some organic, inorganic initiatives. So, I mean, one, trying to understand this 60,000,000 cap that you have on buyback program, like, how are you thinking about that?

Speaker 4

Is that, like, cast in stone and, you know, what will make that number of 60,000,000 move higher? And if that number right now, that 60,000,000, does that mean the remaining 100,000,000 surplus cash that you're generating annually, you are, at this point, I'm looking at deploying that kind of capital towards, you know, inorganic opportunities. And are these inorganic opportunities likely to be largely in international markets, or could there also be domestic opportunities?

Speaker 2

You. Let me begin with the repurchase program, Manish, and, you know, probably wanted to just clarify that the current kind of, you know, plan that we have in place already. It was a plan that was started with about $150,000,000 and still has about $135,000,000 or so, available for deployment in the repurchase program. So it's much larger than $60,000,000 And secondly, like we had called out, this is an existing plan. And since we haven't really utilized the plan fully as yet, in fact, we've kind of just about, you know, dipped about 10% of it has been utilized out of the 100 and 50,000,000 that we had count out initially.

Speaker 2

And therefore, we haven't kind of made any change to the overall plan numbers in terms of development that we can do. But once we kind of fully or get closer to fully utilizing the plan, I'm sure we'll be happy to kind of, you know, add more, you know, kind of amounts to the to the larger plan program. So this is more gonna be a continued effort, and I don't think we'll get constrained by the by the size of the plan that is out there currently.

Speaker 4

Great. Thank you. No. I was just referring to the 16 year number, I think, which is the annual number maximum for share buyback. I thought I saw that in your 6 k.

Speaker 4

No. No. Okay. Okay. Sure.

Speaker 4

Maybe I'll take it away.

Speaker 2

We don't necessarily kind of need to restrict anything to, you know, an annual number. I think our targeting was that, you know, we haven't really been able to deploy significantly. So let's at least kind of, you know, try and wrap up, at least to that extent to begin with.

Speaker 4

Understood. And just on the organic or inorganic opportunities, where do you see them, if at all, in international or domestic markets?

Speaker 2

So actually, both. I mean, you know, as you know, our focus kind of remains, on the domestic Indian customer, you know, whether traveling for domestic purposes or overseas. And therefore, we do believe that a large part of our organic or inorganic investments will continue to happen in the domestic space, you know, our target from a point of view of servicing the Indian customer. But like they have called out, we have also kind of made some moves. We have set up an OT operation in UAE.

Speaker 2

We have also kind of set up, post ticketing operations in in multiple countries in Southeast Asia. And therefore, these are areas where we'll kind of keep expanding. Also, if you really look at it, there are, there are new customer segments, whether on the, you know, corporate side or on the on the small travel agent side, you know, the B2B kind of segments that we have kind of gotten into. Right now, like we have said, we've only gotten into it from a domestic kind of, you know, customer targeting point of view. But there is always opportunity for us to kind of, you know, go into international markets also, you know, on these customer bases.

Speaker 2

So all of these would remain as potential opportunities for us to look at, in terms of future investments. Thank

Speaker 4

you, Mohit. Thank you for taking my questions. All the best.

Operator

Thank you, Manish. The next question is from the line of Gaurav Dhataria of Morgan Stanley. Gaurav, you may please unmute your line and ask your question.

Speaker 5

Hi, thanks for taking my question and congratulations on very solid performance, amidst this industry backdrop. My first question is on getting some sense on repeat behavior versus a new customer driving how much of growth? And to that extent, is it possible to 5 bucket the total advertising and promotion spend between the new customers and the existing repeat customers?

Speaker 2

I could take that, Gaurav. You know, like we have said, we've been trending at about 70% of our transactions, you know, coming from existing customers. So that's the key metric that we kind of keep calling out because we believe that's kind of very indicative of, you know, how well are we able to kind of, you know, target our existing customers in terms of, you know, repeat buying behavior. So that continues. That hasn't kind of, you know, really changed.

Speaker 2

And therefore, the repeat metric in that manner has remained consistent and strong, over the years. In terms of, you know, bifurcation of the spends, like I said, you know, see, there are there is there are multiple kind of, you know, ways that we kind of trying to target, you know, our customer equation. This includes both, brand marketing, you know, just to kind of keep going the organic traffic. As you know, we have a very high share of organic traffic coming onto our platforms and which keeps our overall, you know, customer action costs very efficient. But these are slightly longer term, rewarding kind of programs because the, the, the effect immediately is not necessarily entirely kind of, you know, received in a, in a quarter or 2.

Speaker 2

These are, these are more for driving continued brand recall and, and keeping the brand alive in the, in the customer's mindset. Plus doing a variety of programs, both in terms of tactical, you know, customer recognition via online platforms or kind of, you know, doing promotions on our own platforms in terms of direct engagement with the customers through our apps. Now, again, here, since we don't necessarily are in a single segment per se, there's a lot of, you know, overlap in terms of, you know, customer buying behavior across the segments. And therefore, while the customer may not be new to the platform, he might be new in terms of, you know, certain transactions that he might be doing, which might be for the first time on the platform in terms of the services that the customer is availing. So I think we would kind of therefore recommend looking at the overall blended customer issue cost as the most appropriate metric because we've always called out that as far as in in the manner that we believe, you know, the best way to look at overall expenses is at a platform level rather than, you know, by segment, whether in terms of business segments or in terms of customer segments.

Speaker 6

Absolutely.

Speaker 5

Got it. Thank you for the detailed answer. My second question is on trajectory of margins. Last year, if you see despite seasonality, you were able to hold on to the margins, very stable, consistent throughout the quarters. This year also, first half has seen very consistent margin performance.

Speaker 5

Should one expect some bit of seasonality to play out not just in revenues in second half because of a strong season, but also, flow through effect on the margins and assume that second half margin could be a tad better than the first half?

Speaker 2

Actually, if you look at it on the on the margin side, you know, we've been calling out for the last few quarters that we do believe that we are likely to remain in a stable, you know, kind of range, you know, across businesses, you know, across business segments, actually, honestly, while we could see some some kind of, you know, impacts coming on a quarter on quarter basis. But broader term speaking, we do believe that these margins will largely remain in range. And therefore, if you look at it, I've called out specifically that across business segments, margins have continued to keep coming in line with our estimates, and we expect that to continue. Luckily, if you look at it from a seasonality point of view, both H1 and H2 have one better seasonality quarter and 1 slightly lower seasonality quarter. And therefore, I don't really see too much of a change on the margin structure, at least as of today, you know, whether in the second half as well.

Speaker 5

Got it. And last question, any metric on cross sell that we can share that helps us to understand your strategy of going after the other segments like, you know, train and all has helped to acquire not just acquire customers, but also to cross sell them, your existing offerings? Thank you.

Speaker 2

So if you look at it, Gaurav, we've started kind of now sharing gross bookings in our other segment, you know, which is largely representing the gross bookings coming in from rail or kind of, you know, cab transactions. And the growth in that kind of, you know, is indicative of how how well kind of, you know, those categories are growing. And also the fact that overall repeat, you know, despite the continued increase in terms of overall transacted base of customers, which has kind of kept increasing, now kind of standard about 77,000,000, despite the continued increase in the transaction customer base, we are still able to manage close to about 70% transactions coming in from our existing increasing base. So I think that kind of goes to suggest that, you know, irrespective of which segment that we are targeting based on, you know, market dynamics at any given point in time, the repeat behavior or the cross sell behavior continues to remain strong.

Speaker 5

Thank you.

Operator

Thanks, Gaurav. The next question is from the line of Aditya Suresh of Macquarie. Aditya, you may please unmute your line. I'll ask the question now.

Speaker 7

Thank you for the opportunity. Two questions. One is, can you help unpack the share of international in gross bookings for air and hotels separately? The

Speaker 2

impact of air and then, hotels in international mix, I mean, we've largely given it for our adjusted margin, Aditya, and and that we have been sharing that, you know, if you really look at it on the the mix from international area has now improved to about 38%. And when it comes to hotels, the mix now stands at close to about 18%.

Speaker 7

Okay. And just as a follow-up on this was on the ancillary services. Right? Can you help kind of clarify and contextualize, as you kind of book more international, my understanding is that you will see later sales of maybe insurance and FX on these things. Can you help us understand the attach rate here, which you all are seeing?

Speaker 7

And therefore, we can then make some sense on potential growth in ancillary services. Thank you.

Speaker 2

We don't really see any kind of, you know, significant change in terms of attach rates. The kind of I don't need to be in line with how they have kind of trended in the past. A large part of the increase that you're seeing on the on the other segments growing much faster comes in for the fact that we now have a lot of kind of, you know, news new services, being clubbed under the other segment. Like we had called out, as the earlier, this would largely be comprising of of insurance and and, and say our tech services. Now we have got, car rentals out there.

Speaker 2

We have got forex out there. Plus, as we kind of, you know, keep dialing up the the non b to c platforms, all the kind of, you know, continued improvements in the book your services that we are adding, you know, for our corporate or for our trade partners, those are also helping drive up the, you know, the the other segment, at a much faster pace. So that's that's that's the reason that others is kind of has been growing much faster for us.

Speaker 7

Thanks, Mohit. Maybe just one final piece, sir. For the hotel segment in this quarter, it seems that the value per booking has come off, right, and this is despite you seeing more international in the mix. Can you help us understand that?

Speaker 2

I'd actually call that out that, you know, if you really see, the the price increases are moderated. So, you know, if you and and we used to call this out. We have been calling this out for the last quarter or 2 that we do believe that we'll kind of get into more, stable kind of, you know, price regime in this particular year compared to say the last 2 years. The last 2 years actually also saw an overall catch up, in terms of prices because, you know, prices haven't kind of, you know, seen an increase since pre pandemic. Right?

Speaker 2

So it was almost like 4 years of increases coming through in in like, you know, 2 years. Whereas now it's going to be more moderate. And that is what is what, we're kind of seeing prices are largely holding or seeing, slight kind of, you know, increase. No no significant kind of, you know, hyperinflation in the room prices, currently. But the mix, you know, the slight improvement that we kind of continue to see on an on a on a year on year basis will continue because the mix is improving in favor of international.

Speaker 2

But within the respective segments, prices aren't really kind of seeing any significant increase.

Speaker 7

Thanks, Will. Thank you.

Operator

Thanks, Aditi. The next question is from the line of Vijit Jain of Citi. Vijit, you may please ask your question now.

Speaker 8

Thanks, Gopal. Congratulations on a great set of numbers. My first question is on the international outbound hotel business. Does this have lower share of package trips versus your overall hotels and package business? Because I'm just looking at the service cost you charge to hotels and packages and that seems to be a bit more flattish.

Speaker 8

Just wondering if that's the case here.

Speaker 2

No, Vijit. Maybe I can take that. Actually, you know, q 2 from a seasonality point of view is a low season quarter for holiday packages and more so international packages. And therefore, you know, this is more in line with seasonality than anything else.

Speaker 1

Absolutely.

Speaker 8

Okay. But but I actually was look just looking at the YOY number only in in there, and it seems like, you know, your hotel business, obviously, the overall hotels and packages is up about 20%. This number seems to be up maybe 10%. Correct. Despite international doing well, and I would have thought international would have higher share of packages.

Speaker 2

So basically, the international that we have called out, I think, is international hotels, not hotels and packages.

Speaker 4

Okay. Okay.

Speaker 8

Got it. Got it. The second question I had was, you know, so in your mix in hotels, right, is sticking to the international rate. What to what extent do you have direct bookings versus, you know, agent bookings?

Speaker 2

So, you know, it's it's generally if you see for any OTA, you know, the you'd kind of have much larger share of, you know, direct contracting when it comes to your home markets. But on the international markets, you tend to have a mix of your own directly contracted inventory as well as inventory view that you're taking from, you know, your partners. We believe, you know, our endeavor has been that as volumes for any particular city, you know, keep increasing, we keep dialing up the direct contracting effort. In many cases where the particularly say for instance, in the long tail of cities where demand is kind of, you know, much lower, it is often kind of, you know, more rewarding to have affiliated inventory rather than kind of, you know, putting your own resourcing in terms of directly contacted, you know, agreements over there. But we have been scaling that up.

Speaker 2

Like I've called out almost we now have directly contacted hotels in over 40 cities, international cities, compared to say about 31 cities during last year. And this effort will continue in terms of percentage of, you know, room nights, which come in from directly contacted hotels. This generally tends to hover around the 50, 60% mark. And and we believe even in the longer run, irrespective of the number of cities that we kind of dial up, at least a third of the business will tend to keep coming in from, say partnered programs rather than necessarily directly contracted programs. So at least in the medium term, say over the next 2 to 3 years, we do believe our our endeavor would be to try and see if we can keep it within the 50 to 65% range.

Speaker 8

Correct. Martin.

Speaker 1

Maybe, Vijit, sorry. Maybe if I can just add one more comment on what Mohit said. Yeah. You know, 50% to 60% is an overall number. But in the in the cities where we've been, you know, giving huge amount of throughput historically, and it's only growing.

Speaker 1

Like, there's, you know, Southeast Asia, few examples like Thailand, Malaysia, Singapore and all. This number goes as high as 75%. So anywhere between 70% to 75% business will come from directly contracted hotels.

Speaker 8

Got it. And my next question is, in general, for the hotels, for your hotel business, right, or rather the hotels that you work with, what do you think is the, you know, b to b, b to c kind of a mix? I'm just trying to get a sense of, you know, in your b to c part of the business, you know, what could be the steady state online penetration? It would definitely not be 60 or 70%, right, realistically speaking?

Speaker 2

With all the numbers that we're calling out are for the for the business as a whole, And I think we'd like to stick to that.

Speaker 8

Okay. No. I mean, I mean, in general, online, say online penetration within

Speaker 1

the hotel segment. For international hotels or for domestic?

Speaker 8

Both, in fact. I was just trying to get a general

Speaker 1

sense of where the online

Operator

penetration is.

Speaker 1

Happy happy to give you a directional sense on the online penetration for hotels, you know, relative to, by the way, flights, domestic flights is much lower and therefore more headroom. And within the hotel segment, international hotels is even lower. So international hotels and, you know, I guess that is the point that you were alluding to earlier as well that maybe your outbound packages share is higher. That used to be the case historically. But off late, given the digitization drive in the country and consumer behavior changing rapidly, the online hotels a la carte bookings have been growing significantly and therefore penetration is improving.

Speaker 1

But just to give you the numbers that the international hotels penetration would be anywhere between, you know, 15, around 10 to 15%, if that. And therefore, a lot of headroom. So a lot of it will be offline, you know, through the packages, etcetera, historically and also very fragmented. On the domestic hotels, if you include home stays, alternative accommodations, etcetera, again, it'll be between 15 to 20. But if you look at certain segments of the hotels, especially premium hotels, it might be between 20 to 25.

Speaker 8

Got it. And, I mean, with the premium hotels, it's harder for it to go up above 15 to 20%?

Speaker 1

Not no, no, no, absolutely not. See, if you look at some of the international, you know, countries benchmark, overall, there are many countries where it has touched and I'm talking about Western world, Europe and US, anywhere between 40% to 50%.

Speaker 8

Okay. Got it. Perfect. Thanks, Rajesh. Those were my 2 questions.

Speaker 2

Yeah.

Operator

Thanks, Vijit. The next question is from the line of Ankur Rudra of JP Morgan. Ankur, you may please ask your question now.

Speaker 6

Hi, everyone. Thank you and good quarter. Maybe the first question, you shared the salience of the international business both in air and hotel. Just as a reminder, is that volume or value?

Speaker 2

That's value.

Speaker 1

Value. The revenue line, adjusted margin line.

Speaker 6

Okay. Excellent. Thank you. So just a very basic question again, just to remind us, why is the salience of international by value so much lower in hotel versus head? Is this more of a supply issue or is this more about, you know, what the average price of room nights comparison between international and domestic is different from what is in the air segments?

Speaker 2

I could I could take that and go and, you know, largely stemming from the fact that if you really look at it, we have been trying to kind of, you know, get into the international a ticketing market for a for a for many, many more years than the kind of, you know, curation of the international hotel business, which has happened only over the last, I would say, possibly like 5 to 6 years. And therefore, it's more recency of kind of getting into that particular segment, just like, you know, the the the buying behavior, even on hotel side, if you really look at it overall, even domestic hotels, you know, the online penetration is much lesser compared to, say, domestic flights. And that same buying behavior kind of, you know, reflects on the international segments as well.

Speaker 6

Okay. So I mean so then one would still say it's more of a, partnership supply. So is it more consumer perception of value from your platform, or is it more of the supply you have just to sort of differentiate between those 2 val?

Speaker 2

Yeah. Combination of, I would say, customer buying behavior and therefore, how the kind of, you know, platforms have responded to it over a period of time.

Speaker 6

Okay. Understood. Secondly, if I just want to dig a bit deeper on the strength in air you've been seeing, beyond the mix where international is growing more, is there anything more that you're doing which is helping your volume and GOV growth?

Speaker 2

On the air ticketing side?

Speaker 6

Air ticketing side, yeah. I mean, your volume versus market and the GOV growth versus market.

Speaker 1

Ankur, as I was mentioning earlier, you know, many, many new differentiated consumer experience related features that we keep coming up with that would typically, you know, help us gain some share from the market. But also, you know, as we've been also sharing in the past, there are other segments that we started to build and grow. Right? You know, the corporate segment is one other big segment where the completely different consumer segment that they started to building and growing. And that's growing, quite well as well.

Speaker 1

So I think it's a combination of more distribution channels, more consumer segments that we are focusing on, and the fact that we keep, you know, sort of improving the customer experience, you know, with innovative features as well.

Speaker 6

Okay. Understood. Just a last question, I know now that you, you know, across if you look at the different product offerings, whether it's air or hotel or ground transportation, what is the level of tech integration at the back end between the products? So for example, if somebody is looking a trip, why I make my trip with separate air tickets, separate hotel tickets and transportation, do these talk to each other at the background?

Speaker 1

Well, absolutely they do, Ankur. That's a great question. And that is the one that I was alluding to as part of the script in the connected trip feature, you know, and which only happens when the back end technology is unified. And there are obviously independent funnels because that's the consumer buying behavior that you will let's say, if you are on our platform and you're buying the flight, but there are various ways that we make the connection once you have bought the flight on on the on the app in the same session or of the app subsequently because that is, you know, typically the consumer behavior that I would want to buy and book flight first and then maybe buy a hotel, then think about, let's say, airport transfer. If I'm going international, maybe I want to buy a forex later or insurance later and so on and so forth.

Speaker 1

That is one type of sort of consumer behavior and therefore accordingly we make the connection. All of that is obviously because of the back end technologies unified. And the other one is the connected trip, which is we are actually giving a view of a particular trip for the consumer that if you bought a flight and there are and if you're going, let's say, for international destination or even for domestic destination for leisure, given that we have the data, and there are, you know, the trip might be just, in terms of just booking or buying the services might just be 25% complete. And therefore, and here are the other products that you could possibly buy to complete your trip. And we keep, there's a feature that sort of, you know, gives that view to the consumer of a fully connected trip and with the percentage completion of the trip, etcetera.

Speaker 1

Now all of that happens only, with, you know, very, technology, various funnels at the back end, well connected or well unified, if you will.

Speaker 6

No. Thank you. The reason for asking is many of these products have been bought like Redbus or Savari, etcetera. I was just curious if there's been tech integration since. No, it's super helpful.

Speaker 6

Thank you so much, Anandasil Narbeh. Yeah.

Speaker 2

Yeah. Yeah.

Operator

Thank you, Ankur. We are almost out of time. We'll take the last question from Manik Taneja of Access Capital. Manik, you may please ask your question now.

Speaker 9

Hi. Thank you for the opportunity. Just wanted to get your thoughts with regards to the comment that you made around pricing normalization that you're seeing play out in certain parts of the portfolio more so on the hotel side. Do you think this can be a headwind, especially to our international portfolio from a near term standpoint? And also any impact on this part of the portfolio?

Speaker 9

While I do understand, for us, bulk of the business essentially is still largely domestic Indian travelers traveling within India or possibly even outside of India. But with the way some of the geopolitics and the and the war situation spread into more places, do you think in certain parts of our international portfolio, we start to see some near term headwinds?

Speaker 1

Sorry. I was just going to to just make one quick comment, Mohit, and then you can come later. Yeah. Monica, the bigger point I wanted to make on the pricing is I think Mohit was, you know, also trying to share earlier, and then we can come to the whole world situation potentially, etcetera. You know, I don't think we should read too much into the pricing that or the ASPs or the the both for.

Speaker 1

Actually, it's not it's even true for flights as well as hotels being either flattish or, you know just marginal 1%, 2% increase because that was bound to happen because of the history, because of several quarters the prices have been just going up in one direction only And it had to reach a point where it had to get into a situation where it will get steadier. And that's exactly what has happened, point number 1. Point number 2, we should also you would also see that this current season, which is, you know, high season quarter, and typically when, you know, part of the quarter where and the peak dates when you will, have, gap in demand and supply, you will see prices going up again. So there is a seasonality aspect to it and there is an overall sort of cyclical aspect to it that we should keep in mind. So I won't read too much into the price not going up right now.

Speaker 1

Now coming to the potential impact because of any, like, you know, sort of war situation developing or macro for for certain destinations. Yeah. Of course, there's, you know, goes without saying if there is any escalation intention in certain regions or certain destinations, Definitely, that those particular destination travel to those particular destination around the region, around the areas, you know, get impacted. But the given that there is general momentum on spending the discretionary income in the country, people will just normally will move from one destination to the other destination. So it is not necessarily there is a complete loss in the demand.

Speaker 1

It is effectively change of destination that happened because there are plenty of new destinations that are developing. And there is interest in the Indian consumers to explore newer and newer destinations as well. So, I mean, the overall escalation of war can have macro, you know, bigger macro sort of impacts on, let's say, oil and fuel costs, etcetera. Now those those those aspects notwithstanding, just from a consumer behavior standpoint, in a specific region, if there is any disturbance, people just tend to move to the other regions, and that's not necessarily a total loss.

Speaker 9

Thank you. That helps.

Operator

Thanks, Manik. This was the last question. We are out of time. Over to you, Rajesh, for your last comments.

Speaker 1

No. Thank you, Vipul, and thank you, everyone. And thank you for all good set of questions. Thank you for your patience. And I guess we'll see you in the next quarter.

Speaker 1

Thank you.

Speaker 6

Thank you

Operator

very much. Thank you so much. You may please disconnect. Thank you.

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Earnings Conference Call
MakeMyTrip Q2 2025
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