Earnings Call Transcript - MMYT Q3 2024

Vipul Garg, Vice President, Investor Relations

Hello everyone. I'm Vipul Garg, Vice President of Investor Relations at MakeMyTrip Limited, and welcome to our fiscal 2024 Third Quarter earnings webinar. Today’s event will feature our leadership team, including Deep Kalra, our Founder and Chairman, Rajesh Magow, our Co-Founder and Group Chief Executive Officer, and Mohit Kabra, our Group Chief Financial Officer. Please note that this live event is being recorded and will be available for replay on our Investor Relations website shortly after the event concludes. At the end of these prepared remarks, we will hold a Q&A session. Additionally, some statements made during this event may be viewed as forward-looking statements as defined by the Safe Harbor provision of the US Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve inherent uncertainties; actual results may vary significantly. Any forward-looking information shared during this event is only relevant to this date, and the company has no obligation to update this information as circumstances change. Information about these statements can be found in the risk factors and forward-looking statements section of our annual report on Form 20-F filed with the SEC on July 25, 2023. Copies of these filings are available from the SEC or our Investor Relations department. I will now hand the call over to Rajesh. Over to you, Rajesh.

Rajesh Magow, Co-Founder and Group Chief Executive Officer

Thank you, Vipul. Welcome everyone to our third quarter call for fiscal 2024. We are pleased to report another quarter of strong operating performance during this high season quarter for leisure travel. We witnessed robust demand for leisure travel for domestic as well as outbound travel and are pleased to report our highest ever quarterly gross bookings, revenue and profit to date. Gross bookings for the quarter reached $2.5 billion, growing at 21.7% year-on-year in constant currency terms, while our adjusted operating profit or adjusted EBIT grew by 70% year-on-year to $33.4 million as compared to $19.7 million in the same quarter last year. As per government estimates, domestic aviation traffic is expected to double from current levels by 2030. To cater to this increasing traffic, there is continued investment across all categories of travel infrastructure, resulting in significant upgrades in transportation, including airports, highways, and railways. This bodes well for the travel and tourism industry. India has been gaining share of the global travel market, now representing 2% of tourism receipts globally, up from 0.7% in 2000. Domestic travel in India is expected to become the third largest by 2027. Outbound travel from India is fully recovered and is expected to grow significantly in the coming quarters. We are excited about these opportunities and remain committed to meeting and hopefully exceeding the diverse travel aspirations of Indian travelers. Regarding our air ticketing business, we faced near-term supply challenges due to the insolvency of Go First and grounding of airplanes. But we are hopeful that the supply situation will start improving from the next financial year. We have consolidated our market share in the domestic air market at 30% plus levels. Our international air ticketing business has fully recovered, and demand for premium economy tickets has grown, leading to enhancements in our booking experience. Our accommodation business also witnessed strong growth during the seasonally strong quarter, and our homestay business continues to grow. Our bus ticketing business has shown robust growth, and we expect a steady increase in private bus supply. We will continue to innovate and enhance our offerings. Finally, we expect our corporate travel business to scale steadily with innovations based on customer feedback.

Mohit Kabra, Group Chief Financial Officer

Thanks Rajesh, and hello everyone. During the first quarter of this fiscal year 2024, I had called out that while the pandemic is behind us, the business is well positioned to leverage the investments made during the pandemic years. Gross bookings for the quarter grew by 21.7% year-on-year in constant currency terms to an all-time quarterly high of $2.1 billion compared to $1.7 billion in the same quarter last year. Revenue, as per IFRS, grew by 26.9% year-on-year in constant currency terms to $14.2 million from $170.5 million in the same quarter last year. EBITDA has more than doubled to $29.4 million compared to $14.3 million last year. Adjusted Operating Profit reached $33.4 million, a growth of about 70% year-on-year. Our air ticketing gross bookings reached $1.3 billion, growing 19.8% year-on-year in constant currency. We expect that these headwinds will start easing by the next financial year. Our hotels and packages segment grew strongly, and we are working on sharper targeting of various demand segments. Our bus ticketing business continues to thrive, with significant growth, and we've invested in brand campaigns to drive awareness. We have also announced the signing of the agreement to take a majority position in Savaari Car Rentals, which we expect to help drive efficiencies in our intercity cab business. We shall update on the tender process for our 2028 note holders in due course.

Rajesh Magow, Co-Founder and Group Chief Executive Officer

Yes, maybe I can take that Vijit and thank you. Hotel and packages growth benefited from high demand momentum, especially after the World Cup. Our overall mix of revenue contributing to the hotel and packages business has improved from 40% to 45%. Various factors, including a rise in demand across all segments and the emerging trend of homestays, are contributing to this growth. If you look at the past couple of quarters, prices in the premium and mid segments have been robust. We've seen a cumulative price increase of about 10%. While there will always be fluctuations in pricing due to demand and supply gaps during peak periods, there is a certain degree of stability in pricing in the market that is sustainable. Additionally, non-leisure travel events and corporate activities are driving more demand for premium space. For international travel, we've seen strong momentum on our packages side. The growth is coming from various channels, particularly our holiday packages business. We also see contributions coming from our B2B channel. The momentum is back, and we are excited about the outlook. Two factors impact the strong growth outlook: increased frequency of travel breaks among consumers and the introduction of new travel use cases. Infrastructure improvements will also facilitate smoother travel experiences. The growth outlook for the travel and tourism industry appears strong going forward.

Mohit Kabra, Group Chief Financial Officer

We've largely remained within the 5% marketing guidance. During peak season, we tend to spend a little more, but overall, we aim to maintain that 5% range for marketing costs.

Rajesh Magow, Co-Founder and Group Chief Executive Officer

Operationally, we feel confident and are poised for growth. However, we need to remain vigilant against macroeconomic uncertainties that can affect the industry. My concern is largely on the macro side, such as new variants of COVID, which we cannot control. If we can have a smooth run, the industry is definitely poised for better times. The competitive landscape has changed, and companies are now more focused on profitability rather than aggressive growth at any cost. This change enhances the overall stability of the travel sector.

Mohit Kabra, Group Chief Financial Officer

Looking forward, we believe we should strive for an adjusted operating margin improvement towards 1.8% to 2% of gross bookings over the next 2 to 3 years.

Rajesh Magow, Co-Founder and Group Chief Executive Officer

Enhancing customer experience is a core part of our strategy, and our advantage comes from our data-driven innovations. This continuous improvement will help maintain a competitive edge in the market.

Gaurav Rateria, Analyst

If you can elaborate on the short-term impact on air business that you talked about in the near term? Is it likely to ease out in the second half?

Rajesh Magow, Co-Founder and Group Chief Executive Officer

We expect to see ongoing improvements in the supply situation from next quarter onward. There is significant headroom for growth in our hotel and accommodation business, and we're focusing on enhancing the overall online penetration. Continuous improvements in customer journey and experience, leveraging our data, will provide us a competitive advantage in the market.

Vipul Garg, Vice President, Investor Relations

As we are out of time already, we'll not be able to take any more questions. Anyone whose questions are unanswered can take them offline. That will bring us to the end of the call. Over to you, Rajesh, for your closing remarks.

Rajesh Magow, Co-Founder and Group Chief Executive Officer

Thank you, everyone, for your time. We look forward to seeing you next quarter.