MakeMyTrip Ltd Q4 FY2020 Earnings Call

Ladies and gentlemen, thank you for standing by, and welcome to the MakeMyTrip Limited Fiscal 2020 Fourth Quarter and Full Year Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised today’s conference is being recorded. I would now like to hand the conference over to your speaker, Jonathan Huang, Vice President of Investor Relations. Please go ahead.

Thank you, everyone, to MakeMyTrip Limited Fiscal 2020 fourth quarter and full year earnings call. I would like to remind everyone that certain statements made on today’s call are considered forward-looking statements within the meaning of the 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. Any forward-looking information relayed on this call speaks only as of this date, and the company undertakes no obligation to update 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 23, 2019. Copies of these filings are available from the SEC or from the company’s Investor Relations department. I’m joined today by Deep Kalra, MakeMyTrip’s Founder and Group Chairman; Rajesh Magow, Co-Founder and Group CEO; and Mohit Kabra, our Group CFO. I would now like to turn the call over to Deep to begin discussion for today.

Thank you, Jon. Welcome, everyone, to our fourth quarter and full year earnings call for fiscal year 2020. I hope everyone listening is staying safe and healthy. I’d like to begin by sharing my thoughts on the reality we are faced with today and how we, as market leaders, are managing through this crisis. The ongoing global COVID-19 pandemic has severely disrupted the way we live and carry on with our everyday lives. Since the February 25 report published by the WHO, which called for travel restrictions or prohibition as a measure to combat COVID-19, regulatory travel restrictions have impacted most of us across the world. India’s stay-at-home orders have severely disrupted our domestic travel industry since March 25, when the nationwide lockdown was implemented. This order put a complete stop to all travel until the recent gradual lifting of restrictions on domestic flights, buses, and hotels which started on May 25. The disruptions to business have been unprecedented in our company’s history. To say that these are trying times for our team would be an understatement. However, I firmly believe that these are also the times when a company’s values and strengths are tested to the fullest. To emerge stronger at the other end of the crisis, we focused on four key priorities: first and foremost, to ensure our employees’ health and safety; second, to relentlessly support our customers amidst the chaos due to the sudden lockdown and flight cancellations; third, to reduce our fixed expenses to minimize cash burn during the short term; and lastly, to aid the government in handling the pandemic while supporting the vulnerable section of our society. While my colleagues will share greater details on our cost optimization actions, I will elaborate more on the other three priorities. During the earlier parts of the fiscal fourth quarter as news of COVID-19 emerged, we began to equip our entire staff with the tools needed to work from home. To ensure our staff's safety, we quickly implemented all the prescribed safety and hygiene protocols in all of our physical offices, which included fever checks at the gates, social distancing, and more frequent access to our on-site doctors and testing work from home at scale. This helped us embrace lockdown measures swiftly, and we continue to operate from home with high levels of employee engagement, utilizing video conferencing to check in on their well-being, boost morale, and maintain productivity. Naturally, during this crisis, customer concerns were heightened as inbound query volumes spiked manifold due to high cancellations. In order to meet customers’ high expectations of our brands, we rapidly expanded the facilities available for them to reach us for help. This included launching a new online web form where customers can submit urgent travel requests. This allowed us to better manage and prioritize travel changes expeditiously. At the same time, we continued to improve our popular online self-service platform by working closely with supplier partners’ tech teams. The ongoing investments made it easier for customers to bypass our call centers while making frequent changes to their trips. We also rolled out dedicated FAQ support pages to clearly inform customers of each airline’s policies during the pandemic. Concurrently, we leveraged social media and popular messaging systems to directly provide customers with ongoing updates and changes to policies regarding travel refunds and amendments. Prior to the lockdown, we proactively worked with outsourcing partners to ensure a continuity of service to handle the anticipated spike in customer call volumes. As a result of our comprehensive and proactive actions, we were successful in handling and resolving the large volume of customer queries. Of course, none of these efforts would have been possible without our own team and people. I want to specifically take a moment to praise and thank them for going above and beyond the call of duty during this crisis to serve the needs of our customers, which we believe will help our brands bounce back in a much stronger position. During the lockdown period, we heavily leaned into the MakeMyTrip Foundation to care for our community. We launched initiatives to support the testing and treatment costs of our front-line workers in the travel industry, including hotel staff, bus drivers, and tour guides. We also crowd-sourced funds, along with employee contributions, to help the most vulnerable wage earners within the industry who may have lost their jobs as a result of this lockdown. By working with our community partners, we were able to distribute food to those greatly affected, with up to 10,000 cooked meals each day in the neighborhood surrounding our office. Lastly, our technology team has also contributed immensely to help the government develop and launch a COVID tracking app called Aarogya Setu. This app is aimed to help track and mitigate the spread of COVID-19 across the country. It helps by gathering micro and macro trends, including location level extent of existing and potential spread, allowing administrative measures to be taken accordingly. It has also become an essential tool in the country’s gradual travel unlocking process. I’m pleased to share that this app has been downloaded over 130 million times, and I’m especially proud that our small team of talented developers and engineers have been able to contribute to the welfare of our society in a very meaningful and direct way. These are very challenging times for everyone. And yet I remain optimistic as our resilient team has successfully weathered disruptions caused by the 9/11 terrorist attacks, the SARS outbreak in 2003, and the 2008 global financial crisis—the company has always emerged stronger competitively. We're fully confident this time around will be no different. What gives me further optimism is that we entered this crisis in a far stronger competitive and financial position than our peers and believe that gap will only widen as we begin our recovery. Leading up to this quarter, we had made great progress in reducing our operating losses as our investments in the standalone hotel segment have come full cycle. However, we realize that this crisis, once again, shifts the paradigm as we need to ensure the business survives through potentially zero travel in lockdown conditions, which could extend for months and possibly quarters. We, therefore, acted swiftly in sharply reducing our fixed costs to give us a runway of about two years, even in such unforeseen lockdowns. Last year, when Trip.com Group increased their stake in the company, they also expressed their support for the company in terms of participating in future fundraising efforts. We believe that we have enough liquidity to tide through this crisis. It’s always comforting to have that continuous support from our key shareholder in such exceptional circumstances. At this point, the good news is that the journey of recovery has begun. As the government has relaxed domestic flight restrictions on May 25, followed by relaxation of other travel-related restrictions since June 8. For example, services like hotels and trains into city bus services are now gradually being restored in non-containment zones. We are encouraged to see the level of interest and demand so far from users, albeit at low levels when compared to pre-COVID days. Looking forward, I believe that domestic travel in India will lead in the industry's own business recovery. The first wave of travelers following the relaxation of this lockdown has largely been folks who were stuck in a destination for work or otherwise when the lockdown was implemented. We also believe essential business, family, and medical travel will be one of the first drivers of the pent-up travel demand. This is likely to be followed by demand for self-drive or road trip holidays to destinations that can offer social distancing and travel deal seekers looking to escape from a long lockdown period in the country. However, with international flights still grounded today, we believe outbound travel is likely to take longer to open up given the multitude of travel restrictions that are in place. Currently, the government of India has indicated that the opening of international travel will be considered in July, along with the creation of travel bubbles with certain countries that would allow access to Indians and vice versa. While we have a long climb ahead, we have no doubt that in the long run, the travel business will rebound. As humans, we are naturally wired to travel and seek in-person connections and new travel experiences. Whether it’s to visit family, friends, or loved ones to establish new business relationships or to seek adventure and experiences, it will inevitably happen. Probably the days of carefree leisure and discretionary travel will gradually return once the virus is adequately controlled or an effective treatment or vaccine gets developed. It’s also worth reminding listeners that India’s travel market still offers multiple compelling segments, which are still largely booked offline. We believe this pandemic will only push the acceleration of digitization and drive online booking adoption even faster. As a result, we continue to invest during these challenging times to make sure our brands, technology, and service platforms are ready to scale and support the rebound in demand. The level of service and experience that will be industry-leading and benchmark to world-class standards; we believe we will continue to gain share within our industry in the long term and strengthen our market leadership position. Now I’d like to turn the call over to Rajesh to share how we are managing through this crisis as a company and our plans to reemerge even stronger competitively.

Thanks, Deep, and greetings everyone. I hope you’re all healthy and well during these unprecedented times. I would like to start by sharing a quick overview of how the fiscal fourth quarter progressed and how we quickly adapted our business as the virus outbreak unfolded. Entering the quarter, we had planned to continue on our path of driving growth and share gains with a focus on minimizing quarterly cash burn. For the month of January, customer demand and bookings were full on plan across all our lines of business. Starting the last week of February, as news of COVID-19 outbreaks in Southeast Asia and Europe increased, we began seeing cancellations and a decline in bookings across our outbound travel products, but domestic demand remained largely intact. However, as we entered March, reports of increased COVID-19 infections in India began to dent the demand across all domestic lines of business. As a result, we quickly pivoted our operations to minimize cash burn by flexing variable and semi-variable costs in line with the reduction of revenue in the month of March. As a result, we still achieved our goal of further narrowing adjusted operating losses down to $10.3 million or $5.5 million adjusted operating cash loss if you add back the precession expenses. We then followed up with a comprehensive review of our total cost structure to take some very difficult decisions on our fixed costs, including salary reductions to ensure we had plenty of liquidity to see us through the crisis. Starting in April, we implemented salary reductions to further preserve cash for our business. We also addressed other fixed costs by working with outsourcing partners to greatly reduce the amount spent. For support services, we repurposed many of our in-house staff to help with the spike in customer queries. During this lockdown period, we also began to focus on automating as many potential post-sales queries as possible so we could reduce reliance on call center support in the future. Recently, we also right-sized our headcount, largely in our packages business, by shifting to variable cost and offline sales channels away from high fixed cost offline channels, and optimizing in some other areas where business recovery seems slower. Collectively, our cost actions will help us reduce fixed costs as we begin to rebuild our business post-lockdown and make us a leaner and more efficient organization going forward. Now, I would like to share some key highlights from our completed fiscal year while Mohit will share details on our quarterly financial results. For fiscal 2020, we achieved gross bookings of nearly $6.1 billion, with constant currency growth of 13.5%. To highlight COVID-19’s impact on our Q4 and full year results, it helps to remind everyone that our constant currency growth achieved was over 21% year-on-year for the first nine months of fiscal 2020. For fiscal year 2020, adjusted revenue also reached a company record of over $723.4 million, representing constant currency growth of nearly 9%. However, for the first nine months of this fiscal year, our adjusted revenue grew in constant currency by 16% year-on-year. We also achieved over 29 million room nights in our standalone online hotels business during the full year, a growth of over 12%. The full year growth was dragged down by the roughly flat unit growth in our standalone hotels business during Q4. Our domestic air market share continued to be robust and grew during the year to touch a peak of almost 30% of all domestic air passengers carried, the highest ever in our company's history. This reflects our continued outperformance relative to market. During the full fiscal year, in line with our stated goals of dramatically lowering operating losses, we managed to reduce total adjusted operating losses by nearly $29 million year-over-year, driven primarily by ongoing optimization and reduction in marketing and sales promotion spending. During Q1, while we were busy optimizing costs on all fronts, we also doubled down our efforts on key tech and product development, which would help make our backend systems even more robust and unified. These integrations will go a long way to drive significant operating and cost efficiencies going forward. These new online-focused product features being developed will help further enhance the booking and post-sale support for our customers and dramatically reduce future reliance on our call centers for post-sale support. As we announced, slowly exiting various travel restrictions, we are also working closely with supply partners to drive the rebound of travel in a post-COVID-19 world. Clearly, the primary concern for all future travelers will be that of hygiene and safety. To address this concern, we launched a comprehensive safety initiative called MySafety. We also partnered with over 30 key travel industry leaders to launch a safety pledge. The goal of which is to reassure customers on safety and instill confidence to travel or stay. Now, let me begin by sharing what we've been doing within our hotels business. As the crisis unfolded in late March, and to drive a superior customer experience, our contracting team worked very closely with suppliers to help change non-refundable bookings into full refundable rates or into free date change bookings. Furthermore, in an effort to support the medical staff combating the COVID-19 crisis, we launched special rates for our hotels for heroes and Stays for Saviours programs. As part of our ongoing save travel pledge, we partnered with suppliers to launch a self-certification program for hotel property cleanliness called MySafety and GoSafe. Going forward, these certified properties will also have the option to be independently verified by a large auditing firm to provide further assurances to customers. While branded hotels have also shown keenness to participate in this program, we believe our independent hotels will gain outsized benefits going forward by joining this program. To further ease customers’ hesitation to book, we introduced free cancellations and enhanced Pay Later options to give users complete flexibility and confidence in their future bookings. We are also helping our hotel partners sell vouchers that offer great value to travelers for future travel. On the user experience front, we have launched a new map-based search experience on our app to make it even easier to find a hotel. As for our alternative accommodations, users can now find additional details like food arrangements available, entry procedures, and highly specific directions to find their booked property. During Q4, our team also launched an enhanced desktop experience with UGC videos and pictures for brand Goibibo users. Now let me move onto what we are doing in our air-ticketing business, where we continue to outperform the market. We believe our ability to gain share can only be attributed to our brand and the superior experience it delivers to the bookers. Similar to the actions on safety and hygiene in our hotels business, we've also partnered with airlines to offer touchless check-ins and luggage tag printing, in addition to highlighting all the required safety requirements set forth by the government for air travel. Our team also integrated multiple supply sources onto our booking platform to provide future shoppers with maximum choice in price and selection for air tickets. We also revamped our flight search engine to take advantage of this integration to better empower our shoppers. We started to drive even deeper integration with airline partners to automate more use cases to reduce traffic on all our call centers going forward. Now, turning to our holiday business, which witnessed healthy growth in the first two months of the quarter for domestic travel. However, the momentum was naturally disrupted in March when the virus spread across India. Currently, our team is working on post-sales automation to make future experiences with our packages products more automated and touchless. Similarly, we have been partnering with banks and payment providers to offer the availability of instant refunds to customers without taking on any balance sheet risk. We believe our superior technology has enabled us to offer this customer-friendly feature going forward. In Q4, our redBus team also focused on automating much of our customer support and steering users away from call centers. During this lockdown, we piloted projects with corporate customers to utilize idle buses as a way to safely transport employees. We are also working with public transport companies to offer online seat reservation tools to help with social distancing while onboard. We continue to believe that online bus ticketing remains largely underpenetrated globally, which remains a growth opportunity for us. As a result, we continue to develop our global redbus.com site to make booking of bus tickets any place in the world possible. Now, I would like to share some color on our corporate business, which continued to register very high growth in volumes, albeit from a low base, even as booking patterns mirrored our other domestic witnesses. During the quarter, our myBiz program continued to see strong momentum of sign-ups by more than 175 midsized and over 1000 SMEs. Our online corporate travel platform Q2T also saw very robust growth and notable client wins during the quarter. During the lockdown, we continued to strengthen our product by building in trip tagging, offering multiple fares, and further improving automated spend reporting to help corporates manage expenses more effectively. Similarly, we are also working with suppliers and curating properties that can offer hygiene assurances, which will be top of mind for travelers going forward. As you can see, we have been quite busy during the lockdown to improve our existing platform and innovate new products, safety assurances, and experiences; we believe our investments will help us pull ahead competitively as we now begin our business recovery. We continue to build our technologies to ensure our future looks even better with a clear focus on automation across the customer-facing experience as well as on the backend operations. This should help us lower our structural fixed costs going forward. At the same time, we believe post-crisis, the MakeMyTrip group will emerge stronger than other players in the market, online or offline. We also anticipate that the intense promotional spending-driven environment will only continue to abate, which will further accelerate our path to better unit economics across our business segments and help with our journey to breaking even on a company level. Now, let me hand it over to Mohit, who will share more financial details of the quarter.

Thanks, Rajesh, and hello everyone. I would like to echo the sentiment shared already by Deep and Rajesh that these are clearly unprecedented times for everyone. During the last reported quarter, I talked about the business crossing the $200 million milestone in terms of registered revenue while cutting down adjusted operating loss to about $11 million and the cash loss to about $6.2 million when added back with noncash depreciation and amortization expenses, and therefore getting closer to our breakeven objective. While we entered the reported quarter with the same operating momentum, we had to change gears halfway through the quarter due to the unexpected and unprecedented impact of COVID-19 on travel demand. We quickly shifted from driving growth with improving efficiency in variable costs like marketing and sales promotions to significantly cutting down fixed costs for the next fiscal year in anticipation of increasing travel restrictions by the end of the reported quarter. As we started seeing the impact on demand across our various lines of business during the first half of fiscal fourth quarter, we accelerated the ramp down of our marketing and promotional expenses. As a result, despite the adverse revenue impact in the later part of the quarter with lower marketing and sales promotional expenses at 7.2 percentage points of gross bookings versus about nine percentage points in the previous quarters, we were able to lower our quarterly adjusted operating losses to about $11 million in Q3 from $11 million in Q3 to about $10.3 million in Q4. If we were to add back the noncash depreciation and amortization expenses, our adjusted cash losses for the quarter came down from about $6.2 million in Q3 to about $5.5 million in the reported quarter. More importantly, as India faced a nationwide lockdown that began in late March, we quickly planned and executed significant reductions in our operating costs to minimize cash burn in a scenario of little or negligible revenue in the next fiscal year, particularly for the quarter commencing April onward. First, we quickly stopped all external brand marketing spends and throttled our promotional expenses across all lines of businesses to reduce our variable expenses. Next, we reviewed our semi-fixed costs within general selling and administrative expenses, or SG expenses and quickly took actions to dramatically scale down our outsourced manpower expenses. We also worked on reducing our infrastructure, our IT spends, including web hosting expenses, and have negotiated cost releases from multiple service providers to reduce our office expenses. Finally, as you would have already heard, we also cut our personnel costs significantly, including almost 100% salary reduction for both our Group Chairman and Group CEO, along with approximately 50% salary reduction for members of the senior leadership team and graded cuts going down up to 10% for other management employees. As a result of these quick and necessary cost actions, we anticipate that our fixed costs comprising primarily of personnel and SG expenses would come down from a monthly run rate of about $16 million to a monthly run rate of less than $10 million during the first quarter of the new fiscal year starting April 2020. As shared by Rajesh, we have also recently right-sized some of our businesses in sync with our longer-term growth strategy to transition out of high fixed cost offline sales channels. Pre-COVID, we had already started increasing our franchisee store presence and signed up almost 150 centers, which has allowed us to shut all our company-owned offline retail stores across the country during this crisis. The other area of long-term rightsizing has been the dismantling of our offline teams managing corporate events, as we believe corporates will optimize on non-essential business travel at least for some time from now. While anticipating a higher cash burn in the first quarter in view of minimal travel during the lockdown conditions, we believe that we are past the worst as travel services are gradually being restored over the last few weeks. The gradual revival of travel demand will help build back revenues from the second quarter of the new fiscal year and help offset or prune down the fixed cost to narrow the anticipated quarterly cash burn year onwards. In the unlikely scenario of the worsening of the situation under the pandemic, we have also chalked out alternative plans to further optimize our fixed costs, but we would action this only if instead of easing up travel restrictions are reimposed. We believe our liquidity of nearly $168 million as of March 31, along with the cost optimization initiatives that I've talked about will provide us a runway of almost two years, even if travel demand is not restored due to unforeseen worsening of the current situation, while a zero revenue scenario is unlikely beyond a quarter or two—we feel it is prudent to be geared up for a longer period given the uncertainty of the pandemic and to be able to survive with the available cash. It is also a matter of great comfort that the company has no repayment or interest obligations going into the crisis as it is a zero debt company. Therefore, despite travel demand being non-existent during the last two months, we were still able to line up short-term working capital and guarantee facilities from an Indian bank to the tune of approximately $25 million for the India operations. We believe this severe travel disruption will also shake out the weaker and less capitalized competitors. Furthermore, while there was a perceptible slowdown in the aggressive price-led disruption by various other market players even pre-COVID, that trend is likely to accelerate in the post-COVID environment. Globally, there has been an accelerating adoption of online buying during the pandemic. Furthermore, during this lockdown, our team has been tasked to automate as much of the customer experience with our branch as possible. Our goal to accelerate online adoption is not just limited to the booking process but also to the post-sales process. We believe this focus will make future experiences even better, drive faster digital adoption, and help us structurally keep our fixed costs lower. Post-COVID, while the path and scale of rebuilding the business is still unclear, we believe MakeMyTrip is very well positioned to lead in the recovery of travel in the coming years. Let me now share more details on the reported quarter. To begin with, I'd like to remind everyone that during the last reported quarter ending December 2019, we had significantly reduced the adjusted operating losses to about $11 million and the cash burn after riding back of non-cash depreciation and amortization expenses to $6.2 million and brought it within the range of about $10 million that we are set out to achieve during the year. I'm pleased to report that we continued with our desire cost optimization trend, even in the reported quarter, where, as per management estimates, the business achieved full adjusted operating cash profit or loss breakeven in the periods of January and February before the impact of COVID-19 hit us in March, which led to the quarterly adjusted operating loss being about $10.3 million. For the fiscal fourth quarter, which was partly impacted by COVID, our hotels and packages room night volumes declined year-on-year by 0.6% due to a year-on-year decline of 0.2% in our standalone hotel bookings, while domestic bookings were slightly up. The decline was driven more by outbound bookings dropping faster. During the quarter, we witnessed a decline of 15.4% year-on-year in air ticketing segments, driven by the material year-on-year decline in outbound air ticketing segments as COVID-19 impacted inbound and outbound travel far earlier in the quarter than domestic travel. While domestic air travel was fine in January and February, we did witness a 33% decline in the domestic air market in the month of March due to COVID-19. While volumes declined, we were still able to grow our market share to almost 30% in the month of March. Our bus ticketing business also saw severe disruption during the quarter due to the concerns about the virus and the lockdown that ensued. We believe our improving market share would have helped us achieve slower but healthy year-on-year volume growth of about 9%. Our total adjusted revenue declined by about one-third from the previously reported seasonally strong third quarter. We were able to offset the impact of this reduction with an even larger cost reduction to bring down the adjusted operating loss to about $10.9 million. Lastly, I would also like to talk about the one-time exceptional matters recorded during the quarter. As the impact from the COVID-19 pandemic worsened towards the end of the reported quarter, the Indian Government imposed a lockdown across the country. As travel came to a standstill under the lockdown, we also observed significant declines in our stock price and market capitalization. In the fourth quarter of fiscal year 2020, we performed a quantitative assessment of goodwill, and following that assessment, we recorded an impairment charge of goodwill amounting to $272.2 million primarily related to our Goibibo business, which we had acquired in fiscal year 2017. There has been no change in the way that the management reviews or reports the business at the segment level across our multiple brands. This non-cash charge also does not affect our longer-term operating plans for the Ibibo brand or the way we view our operating performance during the reported quarter. We plan to continue driving synergies across our portfolio of multiple brands on the path of disciplined and financially sustainable growth while making appropriate investments to drive online penetration in various travel segments to support the long-term growth of our company, including the Goibibo brand. The other one-time exceptional matter is the provision of approximately over $30 million concerning potential liabilities that could result from one of our acquisitions in the past. The provision has been created due to certain adverse awards passed by the tribunal adjudicating the matter. The awards are being strongly contested by the company in the appropriate courts. We believe we have justifiable grounds to contest the matter and will continue to do so going forward. Given that the litigation is still ongoing with further proceedings contemplated, we do not anticipate an impact on our cash flow, if any, in the immediate future. I'd also like to confirm that these matters are not related to any routine currently operating businesses. Accordingly, both these exceptional items have been excluded in arriving at our adjusted operating losses for the reported quarter. Before I turn over the call for Q&A, I'd like to call out that over the last few weeks; we have seen domestic flight demand being restored to about 15% to 20% of pre-COVID levels as restrictions are being gradually eased on other forms of travel. We believe the gradual restoration of travel demand, improving online penetration, our focus on cost optimization particularly in the short term, along with our improving competitive position will help us not only recover but emerge much stronger from this crisis. With that, I'd like to turn the call to the operator for Q&A.

Certainly. Our first question comes from an unidentified analyst. Your line is open.

Thank you. And thank you for taking the questions. Can you elaborate a bit about the $30.8 million litigation set aside?

Yes. We can hear you. Sorry. Mohit, are you going to answer that? Are you on mute?

Hi. Hello. Yes. Sorry, I kind of kept it on mute. I'll take the question. Like I mentioned, this is pertaining to one of our earlier acquisitions which we have also reported earlier as part of our 20-F for the last fiscal year. This is a matter which has been under litigation for a fairly long time now. We had received some adverse awards from the tribunal which was arbitrating on the matter and those awards have gone against us. However, we’ve kind of taken those awards to the appropriate court for appealing against them. And we believe we have good grounds to be able to get the awards reversed. The matter is still with the courts, and these are multiple awards, and therefore, we believe there will be potentially multiple levels of appeal available to us to appeal on these orders and to resist any enforcement that might ensue. The matter currently is under litigation, and therefore, it would not be possible to call out how this goes, but we have taken a provision because we have a number on the award, and the tribunal has closed these proceedings. So we are awaiting a final judgment from the courts in the matter, but have provided for the amount in the meanwhile. So it’s more one-time exceptional amount.

Thank you. And I have one last question. These are extraordinary times, we all realize, but does management have any goal for when MakeMyTrip will become a profitable enterprise?

Like I called out—if you see the last fiscal year that we have reported, the objective was to get within a range of about $10 million in terms of losses per quarter. The company was able to get there. In the third quarter of the fiscal year, our adjusted cash losses were down to about $6.2 million. In fact, even in Q4, if you see, despite part of the quarter being significantly impacted by COVID, we were able to keep the cash losses at about $5.5 million. And within that, I've called out, as per our management estimate, the months of January and February were pretty much breakeven months until the impact of COVID hit us very sharply in March. I think from a point of view of getting the business to turn a full cycle, we were able to achieve that during the pre-COVID period; however, with COVID coming in now, at least for the next quarter or two, there's almost like a reset of the business because pretty much all travel services have been shut for the first two months of the fiscal which we have already underway starting April. We do believe Q1 will probably see the worst impact on the business because revenues are going to be very meager or negligible. Therefore, we have taken significant steps to cut down fixed costs in a big way. The quarterly run rate on fixed costs has been brought down from almost $45 million to less than $30 million. We do expect that we will be able to keep the burn into the 20s, if at all, during the first highly impacted quarter. But thereafter, we should be able to improve with each passing quarter as the business recovers. Our expectation is that we should be able to get back to that range of $10 million, hopefully, over the next few quarters, and thereafter, target breakeven. Again, it's a little too early because our businesses, like I said, travel services is just about started – restarted in a manner of sort, just like two to three weeks back. I think over the next quarter or so, we should have a clear color of how the trajectory is looking and how soon we can get there.

Thank you.

Thank you. And our next question comes from the line of Rishit Parikh with Nomura. Your line is open.

Hi. Thanks for taking my question. Am I audible?

Yes. Yes. You are.

Okay. Thanks for taking my question and then congrats on navigating through adversity. But I just wanted to understand couple of things; one, from an inventory perspective, what are the trends you're seeing in terms of hotel business? Are we seeing a lot of fallout because some of these guys will be at the margin and will not be able to survive this pandemic? So that's one. And then how will that sort of impact the take rates going into the next couple of quarters because there could be likely compression from airlines and from H&P? How should we think about it going in the next couple of quarters?

Yes, Rishit. Hi, Rajesh here. Maybe I can just take both; they’re both good questions. On the supply side, from the hotel business standpoint, as you know, it has been a very fragmented supply ecosystem that we have. Our understanding and belief right now is—and this is based on all our engagement that we've kept going with our partners across the board—all segments during the lockdown as well is that, yes, there could be a possibility where very small low-budget kind of properties may feel some kind of stress, and may not be able to make it or may not be able to sustain the long-term kind of weak revenue or slow recovery as the business comes back. But a large part of the industry should still be able to manage. The fact is that for quite a number of them, this is not necessarily their only business; they actually have multiple other businesses in travel etc., as well. So there could be a bit of a temporary setback with no business happening. But overall, we don't believe that there is going to be material impact on supply. Yes, a small fraction or percentage of the supply might not be available. The overall supply is huge; there's no dearth of hotels or number of rooms, especially with the fact that there are alternative accommodations that have also opened up. So from an overall standpoint, we don't believe that there's going to be any significant impact on the supply breadth or depth on the hotel business side. On the air side, there could be some kind of consolidation. Again, there are a small number of players, and we'll have to wait and watch for the domestic air market. International air market, as you know, all global carriers have been potentially impacted. But again, the flagship carriers, we don't believe that there is going to be any of them going bankrupt, and some of the carriers might, unfortunately, have that kind of challenge. As we've already seen, some of them have filed for it. But all in all, again, on the air side, given that the long-term outlook continues to be very, very strong, even for the domestic air market. And for whatever it's worth, airlines and the carriers have already seen this cycle down from various crises in the past as well. So we'll wait and see how it happens. As regards to the take rates, yes, there could be a temporary focus more on distribution costs from the hotel side, and we've been in conversation with all of them as well. From our take rate standpoint, on an overall basis, it continues to be healthy, as you know, and as we've reported, it's close to about 22%. That was also hand-in-hand with the sales promotions that we were passing on to the customer. So on a net-net basis, it continues to be healthy. There could be a temporary small reduction during the crisis. But at the same time, there is also going to be a focus on bringing the business back. From our point of view, our focus is to work with the partners to ensure we work on a structure that helps support their objectives to bring back the business for them, the volumes back for them, but also to address any specific concerns on the cost side that can be addressed based on various take rate structures—incentive-based, volume based, etc. We've done it in the past. So overall, we don't see any big concern in take rates. We had been talking, and we had shared that in a steady-state, we have some headroom, and it might settle anywhere between 17% to 19% or 20%. We have that kind of room available with us. So let's see how it goes. We're totally engaged with departments, and we'll continue to keep addressing their concerns.

Okay. Okay, fair enough. Second, I just want to understand, I think there is a fair bit of business area that you mentioned that you're confident of gaining share. So just wanted to understand what are you seeing in terms of competition? I would assume on the air side, the weaknesses in competitors should give us some run rate, but on the H&P side, what are we seeing essentially from a competition standpoint?

Again, Rishit, if you look at the competition overall, we have OTAs, the other OTAs, a couple of them that you already mentioned, and then there are global OTAs, specifically in the hotels and packages side. There has been competition from the offline world as well, all the tour operators, traditional travel agents, etc., as well. Whether it is historically Cox & Kings and some others, they went out of business even pre-COVID. So on an overall basis, across both offline and online competition, our belief is that this is based on past experience as well: whenever there has been a crisis, we've been able to emerge stronger given the brand strength and the three distribution platform strength we have and the overall market position that we have in consumers' minds for brand perception for all three brands. We believe we would be relatively speaking in a better position. Given that the challenges are very big right now, and some of those numbers are out there in the public, whether it is cash position for some of the public players, that's quite apparent. Even for the offline world, specifically for tour operators, given that international travel will take longer to come back, there's going to be a lot more focus on domestic. I think, actually, recovery of travel will be led by domestic travel. We're kind of very strong on that front as well. In fact, for the last quarter, we've been making significant investments in our online platform to ensure that we bridge any gap we have, whether it be on the supply side or on our platform from a customer experience standpoint. So all things considered, that's our belief, and like I said, it's derived from our experience in the past whenever there has been a down cycle.

Thank you. And I’m not showing any further questions at this time. I'd like to thank everybody for joining the conference today. This concludes the call. Thank you for your participation.

Thanks everybody.

Thank you everyone.

Thanks everyone.