Earnings Call Transcript - MMYT Q1 2026

Vipul Garg, Senior Vice President, Investor Relations

Hello, everyone. I'm Vipul Garg, Senior Vice President, Investor Relations at MakeMyTrip Limited, and welcome to our fiscal 2026 first quarter earnings webinar. Today's event will be hosted by the company's leadership team comprising Rajesh Magow, our Co-Founder and Group Chief Executive Officer; and Mohit Kabra, our Group Chief Financial Officer. As a reminder, this live event is being recorded by the company and will be made available for replay on our IR website shortly after the conclusion of today's event. At the end of these prepared remarks, we will also be hosting a Q&A session. Furthermore, certain statements made during today's event may be considered forward-looking statements within the meaning of the safe harbor provision of 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 during this event speaks only as of this date, and the company undertakes no obligation to update the information to reflect changed circumstances. Additional information concerning these statements is contained in the Risk Factors, Forward-Looking Statements section of the company's annual report on Form 20-F filed with the SEC on June 16, 2025. Copies of these filings are available from the SEC or from the company's Investor Relations department. I would like to now turn over the call to Rajesh. Over to you, Rajesh.

Rajesh Magow, Co-Founder and Group CEO

Thank you, Vipul. Welcome, everyone, to our first quarter call of fiscal 2026. The first quarter of the fiscal year is typically a high season for our leisure travel. And this quarter also started on a similar note, with strong demand momentum and booking growth in mid-20s in the month of April. However, domestic demand was impacted due to the unfortunate incident in Pahalgam, leading to geographical escalations in the month of May, and the tragic crash of a passenger airplane in June. While domestic demand for leisure travel was particularly weak for domestic leisure destinations for air travel and holiday packages, being a one-stop shop on travel allowed us to drive growth from other travel services, other modes of transport as well as ancillary travel services catering to non-leisure travel use cases. We also continue to drive growth in international travel, where online booking is growing and the overall demand was relatively less impacted. And last but not the least, we managed to continue the growth momentum in our corporate offerings. As a result, despite the exceptional macro headwinds during the reported quarter, I'm pleased to report that we delivered very good top line growth in our hotels and packages, bus and ancillary business segments, and also managed to grow market share in the domestic air segment marginally from 30.6% to 30.8%. Our adjusted operating profit for the quarter was also at $47.3 million, witnessing a growth of 21% year-on-year. We believe this impact is short term in nature and doesn't materially alter our view of the travel sector's long-term growth prospects of the Indian travel and tourism market. India's travel sector is poised for strong long-term growth driven by rising disposable income, infrastructure upgrades, and a fundamental shift in consumer behavior to spend more on travel. Indian consumers are increasingly prioritizing experiential travel activities and experiences. There's a clear shift toward taking multiple holidays and short breaks throughout the year, signaling a structural change in travel consumption patterns, which bode well for us. International outbound travel from India presents a significant growth opportunity as well, with more Indians exploring global destinations. Short-haul markets are gaining traction driven by better air connectivity, simplified visa processes, and rising preferences for quick getaways. For Q1 fiscal year '26, our international air ticketing revenue grew by over 27% year-on-year, outpacing industry growth. Similarly, our international hotels revenue grew by over 45% year-on-year. Our international business now contributes about 27% to the overall revenue, up from 24% during the same period last year. Let me now turn to the business segments, starting with the air ticketing business. As mentioned before, this quarter was impacted by operational disruptions, particularly for the domestic market due to uncontrollable factors. However, we delivered above-market growth and gained share in our air business. As part of our ongoing efforts to enhance customer experience, we have launched a new version of our zero cancellation product for domestic flights, designed to boost user confidence and repeat usage for frequent domestic flyers. We've also further streamlined the airport transfer booking process for domestic flights. Travelers can now conveniently reserve a selection of their choice from a wide range of options while booking their flight. For our international travelers, we also expanded our lounge offerings to include access from 131 international airports. Customers can now conveniently purchase airport lounge access while booking their international flights, enhancing their pre-flight experience. Our accommodation business, which includes hotels, home stays, and packages delivered healthy growth despite a lower share of leisure bookings this quarter due to macro disruptions, particularly for our 100% leisure-focused packages business. Several key summer travel destinations were impacted this quarter due to the unfortunate incident in Pahalgam. The gross booking value of the hotel and packages business grew by 15.3% year-on-year in constant currency for Q1 fiscal year '26. Gross bookings for the stand-alone hotels business, however, grew by 19.4% year-on-year on a constant currency basis. While domestic leisure travel faced headwinds this quarter, other segments, including corporate travel and international outbound, delivered strong growth. As we deepen our reach across the country, we see good traction from Tier 3 cities, reflecting rising travel adoption in smaller cities. In line with this trend, we continue to expand our supply base in the domestic market. We now have over 91,000 accommodation options available on the platform covering over 2,000 cities in the country. For the international market, on the other hand, we have been expanding our international hotel supply through our direct contracting strategy focused on high-demand outbound destinations. In the past year, we have added over 2,000 directly contracted hotels across 50 cities in 20 countries. These lifted cities collectively account for more than half of India's outbound travel. During the quarter, we partnered with Premier Inn, the U.K.'s largest hotel chain. This addition further strengthens our international hotel portfolio with a brand known for its scale, reliability, and value, offering Indian travelers more relevant choices across key cities in the United Kingdom. Our product strategy is built on deep consumer insights and leveraging Gen AI. This is helping us transform the hotel booking experience on our brands through a robust and comprehensive knowledge graph that integrates hotel data, reviews, images, location insights, and user intent. This enables natural language search and contextual recommendations for our users. As the graph evolves, it will unlock more personalized and relevant results for our customers. Recognizing the influence of food and hotel selection by Indian travelers, we have made dining-related content a key product priority. From showcasing on-property dining options like rooftop lounges and specialty cuisines for premium travelers to highlighting the availability of vegetarian options in religious destinations, we have scaled food-related data coverage to over 21,000 properties across India. This allows us to deliver more contextual hotel recommendations based on travelers' culinary preferences. Another emerging trend among Indian travelers is wildlife tourism. We have prioritized this insight by enriching our content and discovery segments. With increasing interest in nature-based experiences among families and small groups, the proximity of hotels to national parks, safari gates, or forest buffer zones has become a key factor in trip planning. For over 2,000 properties, especially near wildlife hotspots, we now prominently display these details, driving higher engagement and conversion. In our holiday packages business, international outbound packages continue to scale well, with Japan leading the growth, followed by Africa. For international packages, we continue to add destinations and options for travelers. We launched packages for Jordan, with the start of direct flights from Mumbai on Royal Jordanian Airlines. Our home stay business continues to scale. We continue to build the category and expand our home stay supply. We added more supply in our top major cities led by an increase in new rooms on the platform versus the same quarter last year. The supply in business cities grew 46% year-on-year with notable growth in new rooms in Mumbai, Delhi, Bangalore, Hyderabad, and Gurgaon. Among international travelers, particularly solo travelers, families, and groups, we have observed a rising preference for alternative accommodations such as hostels and apartments. To cater to this shift, we implemented targeted interventions to surface these property types to relevant customer cohorts in Europe and other key destinations. As a result, we saw an improvement in the share of alternative accommodation in our international business. In our bus business, growth further improved in Q1 fiscal year '26, with all regions growing in double digits. Our growth continues to be broad-based, with all regions growing in double digits, with North and East outpacing traditional bus markets like South and West during the quarter. We are also noticing significantly higher growth from pilgrimage and Tier 3 destinations. Inventory addition remained buoyant throughout Q1 fiscal year '26, with private inventory crossing 44,000 daily schedules by the end of the quarter. This was driven by new bus addition by existing operators, which are predominantly sleeper buses on long routes, including the addition of over 90 premium Volvo buses in the quarter. This trend of investment in new buses is likely to continue in the coming quarters. For RTCs, government business too, we saw a significant increase in inventory with the acquisition of GSRTC, Gujarat State Roadways Transport Corporation. This resulted in a 4x increase in digitalized inventory from UPS RTC. Our international bus business continues to be promising. In Malaysia, which is a significant market and where we are the market leader with a healthy market share in online bus booking, we are adding more adjacent products such as ferries and activities. In other countries, we are in the market-making mode and seeing steady progress. We continue to strengthen the customer proposition within our trains business. This quarter, we launched an industry-first seat availability prediction feature powered by a machine learning-based forecasting model. By integrating real-time seat availability segments within the booking funnel and deploying targeted notifications, we have enabled more confident and timely booking decisions. For our cab business, we continue to scale both airport transfer and intercity cabs. During the quarter, we launched flight track cabs to ensure seamless airport-to-city rides for our customers. By using real-time flight data, we dynamically adjust cab pickup times, guaranteeing timely service whether a flight is delayed or arrives early. This initiative has improved our service reliability and has led to higher NPS. We plan to enhance accuracy using data science and increased supply participation and scale this across all our platforms. Our corporate travel business via both our platforms, that is myBiz and Quest2Travel, is witnessing strong growth. Our active corporate customer count on myBiz is now over 66,500 compared to 59,700 customers during the same quarter last year. For Quest2Travel, active customer count has reached 515 large corporates compared to 458 customers in the same quarter last year. Looking ahead, we remain optimistic about the long-term growth prospects of the Indian travel sector and are firmly committed to delivering sustained value to our customers, partners, and stakeholders. Before I conclude, I want to extend my sincere thanks to all our existing and new shareholders and investors for their trust and support in our recent capital raise, which contributed to making it a very successful offering. With this, let me now hand over the call to Mohit for the financial highlights of the quarter.

Mohit Kabra, Group CFO

Thanks, Rajesh, and hello, everyone. We started the quarter with strong gross booking growth of 25.3% during April, which tapered out during May and June due to multiple macro challenges that Rajesh has already spoken about. What stands out during the quarter is that within the Indian travel market, we were able to leverage our diversified mix to grow faster in other segments. In domestic air ticketing and holiday packages, demand was muted. Secondly, we dialed up our corporate platforms when leisure demand was impacted, and we also pushed international offerings when domestic demand was subdued. Lastly, we drove operating leverage by optimizing cost levers when growth seemed to have muted despite big travel seasonality. This performance underscores the importance of our diversified business portfolio, disciplined financial management, and operational agility. For the reported quarter, revenue, as per IFRS, grew by 7.8% year-on-year in constant currency to $268.8 million from $254.5 million in the same quarter last year. The growth was impacted due to a series of external events. Our profit for the quarter was $25.8 million compared to $21 million during the same quarter last year, registering a 22.6% year-on-year growth. Adjusted operating profit registered a growth of 21% year-on-year and reached $47.3 million compared to $39.1 million in Q1 of last year. Moving on to our segment results. Our air ticketing adjusted margin stood at $97 million, registering a growth of 11.5% year-on-year in constant currency. Take rates for the air ticketing business were in line at 6.8%. In the domestic air market, we maintained our market share despite the macro challenges at over 30%. Our international air ticketing business continues to grow faster than the market, and we gained market share. Volumes in this segment grew by over 21% year-on-year, which was almost 3 times the market growth of 7% during the quarter. The mix of international air ticketing business revenue has now reached an all-time high of 42% compared to 37% during the same quarter last year. In the hotels and packages segment, registered margin growth was 16.3% year-on-year in constant currency, resulting in an adjusted margin of $121.9 million during the quarter. The result was lower than expected as the holiday packages business was largely flat year-on-year because of domestic leisure travel being impacted despite the seasonality. Take rates for the quarter were in line at 17.7% in this segment. As Rajesh has already explained, we have also been increasing directly contracted international accommodation options, particularly in destinations where direct connectivity has been established in select long-haul destinations, which are of great interest to Indians. As a result, the mix of international hotels and packages revenue reached an all-time high of 25.2% during this quarter, up from 21% during the same quarter last year. In our bus ticketing business, the adjusted margin stood at $42.6 million, registering a strong year-on-year growth of over 34.1% in constant currency terms. Take rates for the business were in line at 10.3%. Our ground transport business, which includes rail intercity cabs and is reported under the 'others' category, registered strong growth. Gross bookings for the quarter stood at $71.8 million, witnessing a growth of 31.6% year-on-year in constant currency for the ground transport businesses. Most of the ancillary services reported under the others category, such as travel insurance, forex, etc., also grew well during the quarter. As a result, adjusted margin from the others category came in at $21.5 million, witnessing a strong growth of 47.4% year-on-year in constant currency. We remain focused on building operating cost efficiencies in driving operating leverage in our fixed costs, including personnel, selling and general administrative expenses. Similarly, our customer acquisition costs, i.e., our marketing and sales promotion expenses, continue to remain efficient. Quarter 1 and quarter 3 are generally higher brand marketing expense quarters in line with the seasonality. In this quarter, we were able to partially roll this back through the tepid months of May and June. As a result, our customer acquisition costs came in at 5.1% of gross booking value. All other expenses were in line and helped us expand the overall adjusted operating margin from 1.64% of gross booking value during Q1 of last year to 1.8% of gross booking value during the current reported quarter. We ended the quarter with cash and cash equivalents of $804 million, and we'll continue to look for inorganic investment opportunities during the year. During the quarter, we were also able to significantly ramp up our share repurchase initiatives. We raised additional capital of approximately $3.1 billion through a primary offering of ordinary shares and zero-coupon convertible serial notes. The entire net proceeds from the offerings were used for the repurchase of Class B shares. After the completion of the reported quarter on July 2, 2025, we have completed the repurchase and cancellation of 34.3 million Class B shares. As a result of the repurchase, we have a total of 95.4 million shares outstanding compared to 111.3 million shares outstanding as of March 31, 2025. Trip.com is now the largest minority shareholder, with approximately 16.9% voting shares in the company. We would like to take this opportunity to thank our existing and new incoming investors who have participated in the primary offerings. With that, I'd like to turn the call back to Vipul for Q&A.

Sachin Salgaonkar, Analyst, Bank of America

Congrats on a good set of numbers in what was looking like a very difficult quarter. I have a few questions. First question, I know you as a company were targeting revenue and GMV growth of 20% every year. Given the fact that Q1 is at a 16% growth in revenue, how should we think about the upcoming quarters in the sense that for the full year, are we still aiming at a 20% growth? Or might we see growth lower than 20%? So that's question number one, but let me pause here.

Mohit Kabra, Group CFO

Yes, Sachin. Maybe I can just take that. If you really look at it across lines of businesses. If I look at across all lines of businesses, the adjusted margin growth overall stands at close to about 18.8%. So it kind of pretty close to the 20% mark that we were kind of wanting to achieve. This is despite all the macro events that we have already talked about during the quarter. I think the comfort is that we are still on target to be in the high teens to 20s in terms of overall growth for the year as well.

Rajesh Magow, Co-Founder and Group CEO

Sorry, Sachin, if I may just add one important data point here. While what Mohit said about the rest of the segments in our commentary, we covered that on the domestic market was more impacted. I think we should look at the constant currency growth number, and the gap with non-constant currency from a growth perspective is just 1.2%. So 18.8% is actually growth for constant currency overall.

Sachin Salgaonkar, Analyst, Bank of America

The second question, just wanted to gauge the consumer sentiment out here. I know because of the 3 one-off issues, be it the India-Pakistan conflict, Iran-Israel, or an Air India plane going down. Clearly, the near-term consumer sentiment was negative. So just wanted to understand, as we head out of Q1, are you seeing an improvement in the sentiment? I do understand that from a seasonality perspective, Q1 and Q3 was strong. But keeping aside seasonality, do we see the consumer sentiment improving? And a related question perhaps is obviously, for the last couple of years, we have seen a bit of an air supply issue. If anything, that supply issue has again increased, so I would love to get your thoughts in terms of how we should see that also.

Rajesh Magow, Co-Founder and Group CEO

We have noticed an improvement in the segment. Looking at the overall daily load data, initially in the domestic market and then in the international market, you can observe the trends. In April, daily flow numbers were close to the average of the previous quarter, with the impact felt in May and June. However, when analyzing the day-to-day trends, June numbers have begun to recover. This indicates that overall sentiment is improving. We are also seeing data on our platform showing bookings and leisure destinations gradually rebounding. I believe this is a temporary disruption and will not alter the ongoing shift in consumer behavior, where people are increasing their discretionary spending on travel and experiences. The recovery is already underway and will gradually continue. This quarter is typically a non-seasonal travel quarter, yet we perceive a resurgence in sentiment. Our ongoing consumer sentiments survey has also shown a recovery trend week by week. Regarding the supply side, there was a temporary disruption this time due to safety checks on planes, as all partners made sure to reinforce their safety protocols. Consequently, some temporary announcements were required, but we are starting to see planes return, and daily departures are getting back on track. Travel and daily flown traffic were relatively less affected and are also showing signs of recovery. Therefore, I don't believe anything has changed on the supply side from our previous narrative at the start of the fiscal year. The impact was felt in this quarter, but recovery is underway, and we expect supply levels to return to those seen in April. I do not foresee any worsening of the situation compared to the beginning of the fiscal year.

Sachin Salgaonkar, Analyst, Bank of America

And my last question is on a potential IPO in India. And as you know, after selling down stake and coming below 20%, few investors do have some expectations about a potential IPO in India. I know management in the past had reiterated listing in India as a medium-term aspiration. But would love to get an incremental update from you guys? Anything we as analysts and investors need to watch out for us to get a sense that if indeed there is a thought process and there is a clarity about the potential IPO, what are some of the events to watch out from that perspective?

Mohit Kabra, Group CFO

Sachin, maybe I can take that. You're right. And I think I'd just reiterate that it continues to be a midterm opportunity for us to look at. Like we have been calling out in the past, the Indian capital markets is something that we'll definitely look at. The current exercise that we trade was largely more about the repurchase program. The current shareholding pattern that we had, even with the repurchase, wasn't really returning to any kind of capital market activity globally or within India. So I think the eventual listing in India is going to be more linked to fundraise plans as they materialize. And right now, like I called out, we have only added further to the balance sheet through the quarter. And we're currently sitting at about $800 million of cash and cash equivalents. So unless we find a significant reason to deploy a large amount of funds, I think the India plan remains a midterm opportunity rather than a short-term opportunity.

Manish Adukia, Analyst, Goldman Sachs

My first question is on, again, demand. So when I think about your international segment, which again, has done like a really good quarter. Air, you mentioned 27%; in hotel, 45%. And now the overall international segment is more than 1/4 of your revenues. So one, I just want to get a sense of do you think this runway of 30% plus growth on a blended basis is still like a long way to go, and you can continue to deliver on this number for some more time? And is it largely a function of you adding more supply? Or is it also a function of continued shift to online on the international side? And a related question there is you gave the monthly booking data for April, May, and June for your overall segments, air hotel, and bus. Was the trend similar for international as well, where April was very strong and then May and June worsened? Or was the trend in international different? That was my first set of questions.

Rajesh Magow, Co-Founder and Group CEO

Okay. I’ll start with that, and then Mohit, please add your thoughts. Manish, you’re absolutely correct; there are two reasons you mentioned, and it’s a combination of both. Additionally, I want to highlight another reason. Regarding the international trend, the online market is underpenetrated, which is definitely the case. More people are increasingly shifting towards online booking. We are also putting significant efforts into increasing supply in both segments through direct contracts. We are working to gather consumer insights to enhance the product experience as well. Moreover, there is another macro reason for this, which relates to overall country growth. Consistent GDP growth, along with rising and disposable incomes, is contributing to the growth in international travel. This is the third macro reason that is likely to persist in the foreseeable future. All these macro factors suggest there is room for growth. As the country continues to grow and incomes rise, we can expect more members of the urban population, particularly in tier 1 and tier 2 cities, to take advantage of improving air connectivity, increased direct flights, and greater ease of travel. Additionally, short-haul destinations are making the visa process more accessible, and obtaining those visas has become more straightforward. When you consider all of these trends together, they will undoubtedly support the growth of the international travel segment. From our strategic perspective, we are firmly committed to this direction.

Mohit Kabra, Group CFO

Maybe I can just add, Manish, that can go to 2 questions that you had. Yes, while Rajesh already covered the depth of supply, both for domestic and international, I would also say that the overall bit supply because we keep on adding new ancillary services on the platform as well. So that's another source of incremental growth that we'll want to keep dialing upon. And of course, the continued shift from offline to online will be a driver as well. So just on the first question that you had, these would be the kind of drivers for growth. And on the second one, on international, while domestic was very, very tepid growth in May and June, international wasn't as impacted even through May and June. Therefore, we were able to drive much better growth from the international offerings that we have on the platform.

Manish Adukia, Analyst, Goldman Sachs

My second sort of question was on competition. So one, if you can just maybe highlight the general competition landscape, particularly from airline direct, has there been any change? And second, one of the other listed OTAs, which reported results, I think, last week, their growth, at least on headline, looked stronger than your reported growth. Anything that you can talk about in the competition dynamics that may have changed in the market where any of the OTAs may have become slightly more aggressive than they were in the past? Would love to get your thoughts.

Mohit Kabra, Group CFO

I think the second point is about the overall competitive landscape and the market share among various OTAs or intermediaries in the segment, which has been fluctuating with the #3, #4, and #5 positions regularly changing. This could be attributed to several factors. Many of our efforts focus on specific segments. In domestic markets, we hold a strong market share of over 30%. Given this substantial share, we recognize that our growth will likely align with the overall market, rather than outpacing it significantly. Meanwhile, some OTAs with smaller shares may experience shifts due to seasonality and changing competitive dynamics. Our priority is on achieving long-term growth and maintaining market share around the 30% mark. Overall, the competitive dynamics have remained stable, consistent with what we have observed over the past few quarters and years. On the direct side, we see suppliers aiming to maintain or increase their direct share in the face of overall demand, and we intend to secure a meaningful share from most of our suppliers. We don’t strive for 100% from any single supplier; instead, we aim for a fair share while ensuring efficient and effective distribution costs. This approach supports sustained growth with each of our suppliers.

Manish Adukia, Analyst, Goldman Sachs

My last question is more to you, is on just capital allocation. In the March quarter, we saw some buyback from public shareholders in June. Of course, you had that large share repurchase from Trip.com, but outside of that, I don't think we saw any buyback. You obviously have $800 million of cash in the books, and significant cash. Is there like a formal buyback policy that you're looking at, beyond what you've put in the letter that there's a maximum amount that you will allocate towards buyback? And from a buyback strategy perspective, is there like a certain share price number that you have in mind? And if it goes below that, you'd look to intervene and buy back? Or how are you thinking about that? Some color there would be helpful.

Mohit Kabra, Group CFO

Sure. Happy to share some color. If you really look at it, during the primary offerings also, we had called out that we were looking to deploy up to about $200 million from the balance sheet to achieve the objectives of the overall repurchase program of Class B shares. It so happened that we were able to upsize the offerings, and therefore, we didn't have to deploy from the balance sheet. Otherwise, the intent during this quarter was to largely deploy in terms of repurchase of Class B versus Class A because that works better from a company's standpoint and even from the point of view of the minority shareholders. So that's been the objective. That said, I think if you really look at it in terms of the overall size of the repurchase program, we've been able to significantly ramp up for the quarter, within a transition that we have already reported, but we'll remain open to dipping into further buyback even in the rest of the year because we haven't really deployed directly from the balance sheet through the quarter. Now in terms of a program, whether you want to get into a steady program, at least at this stage, we want to keep it more like an opportunistic program. Therefore, we'll deploy it as we believe there's a right opportunity to do so. But in the future years, we'll remain open to looking at a steady program as well.

Aditya Suresh, Analyst, Macquarie

The first one is on hotels. I had 2 questions within hotels. So one is, your stand-alone kind of room night book was up about 18%. I'm just curious to understand, was there any kind of down trading which you all witnessed on our platform through the quarter?

Rajesh Magow, Co-Founder and Group CEO

I understand your question, and it's indeed an interesting one, highlighting a notable trend we've observed this quarter. This period is traditionally a peak season for leisure travel, yet it was somewhat subdued. The overall sentiment seemed lower than expected. There were concerns that this might lead to a significant decrease in average daily rates, but that wasn't the case. We only saw a minor decline of around one or two percentage points in specific segments, which is not substantial or material.

Aditya Suresh, Analyst, Macquarie

That's really interesting. And then within hotels again, can you clarify what proportion of activity is MICE related? And was that a bit of a growth tailwind here for you this quarter?

Rajesh Magow, Co-Founder and Group CEO

Actually, overall corporate, because it was non-leisure travel use case, right? So it was nondiscretionary, if you will. Overall corporate and MICE is part of that corporate. Actually, it has been growing very, very well for us and continues to keep growing even in the quarter that we are reporting out. And MICE was no real exception, but pretty healthy growth there as well.

Aditya Suresh, Analyst, Macquarie

Okay. And then with ancillary services and bus, you've clearly demonstrated really strong growth in this quarter. But just on ancillary services and kind of what you all speak about outside of ground transportation because there, I guess your margin is a full drop down. Growth here is strong. What sort of headroom do you all think about in terms of growth and the growth potential? Could we kind of think about this 30% kind of pace in growth sustaining, say, for the next 3, 4, 5 years? Or how do you all think about that opportunity?

Mohit Kabra, Group CFO

So yes, Aditya, we are kind of actually rolling out, like I said, we're increasing the number of ancillary services that we are putting on the platform, and that is also another driver for growth, particularly in the other segment because all of these largely get clubbed under others. Therefore, not just the depth of supply with the bit of supply in terms of new sales that we are putting in the platform, we continue to see a big opportunity. In fact, we have called out that this year, we also want to kind of dial up activities and experience as we can where as part of others to the extent that they gain traction on a stand-alone basis. So we kind of feel confident that with all the initiatives that we have taken in the last few years and are continuing to take, this will be a segment which will continue to grow faster and possibly in the 30s, even in the years to come.

Aditya Suresh, Analyst, Macquarie

And if I may, Rajesh, can you just clarify, so there will be changes in the Board with Trip's shareholding coming down. Could you call out any key changes that have happened from a Board composition perspective?

Mohit Kabra, Group CFO

Sure. So essentially, the number of nominees from Trip.com has gone down by 3. They now have only 2 nominees on the Board. Therefore, we've brought in independence on the Board, apart from myself. So we've got 2 independents on the Board, and I have also joined the Board once again. So this has been the broad change, nothing exceptional to call out. The other 2 changes that we have made is we've also now constituted a Nomination Committee. We didn't have that earlier. Now that we have quite a few independent directors on the Board, we thought it would be appropriate to set up a nomination committee as well. We're also increasing the size of the Audit Committee from 2 independent members to 3 independent members.

Vijit Jain, Analyst, Citi

So congratulations on the successful transaction last month. And also, I guess, in a challenging quarter, I see that your adjusted EBIT margins are now at the lower end of your guidance despite the growth headwinds you saw in the quarter. So my first question is how should one look at your margin guidance from here, growth in the subsequent quarters, as you mentioned earlier, is going to pick up to achieve greater than 20% and you have all these cost measures that you've implemented. So that's my first question. How should one look at that guidance in that context.

Mohit Kabra, Group CFO

You see the overall guidance remains of wanting to get into that 1.8% to 2% range as a percentage of gross bookings on the adjusted operating margin. Now of course, within quarters, we'll remain tactical. While Q1 was a good year, growth by, therefore, we were going to normal course. But including May and June, we realized that growth was being tepid. Therefore, we've dialed up on better operating margins at the net level. I think we'll continue to keep doing tactical moves in line with how the market is behaving. Very broadly, I think we kind of want to settle down in that range of 1.8% to 2% on a full-year basis before we kind of revisit the longer-term outlook.

Vijit Jain, Analyst, Citi

Got it, Mohit. My second question is just on the A&P spend, right? I know you've spoken about how you calibrated them. But when I look at the split of it, I would have normally thought that the customer incentive bucket is where you would have more immediate flexibility. And I do see that air ticketing customer inducements kind of went up in the quarter, right? So I'm just trying to understand, is that more to do with closer to the end of the quarter where you were looking to also support growth? Or if I'm looking at it a bit differently? So that's the question.

Mohit Kabra, Group CFO

No, probably not in those lines. Actually, a large part of the sales promotion numbers which are put out on the bridge between the GAAP revenue and the adjusted margin that we report is based on large distribution, right? Probably may not be most representative, particularly if you look at it in a snapshot basis, right? If you look at it only for one quarter or over a longer period of time, it is still more reflective. It is much better to look at the overall customer acquisition costs, including marketing and sales promotion put together. I believe we've come in at about 5.5%, like you have been saying. We'll be fine anywhere being closer to the 5% range. We have generally been kind of below the 5% mark. This quarter being an exceptional one in terms of what has played out in May and June, we have been slightly higher. It has also to do with the fact that it's also linked to our adjusted margin also coming in very strong compared to the earlier quarters and years. Therefore, to that extent, it comes with improvement in the blend of business and in the improvement in the blended adjusted margin, it is a good expense to incur. This is largely going in tandem with that. Largely in line with how we wanted to play out from a longer-term perspective. But yes, tactically, we'll keep revisiting the overall customer acquisition expense, particularly the longer-term impact in brand marketing spends based on any specific one-off macro situations that may play out for certain weeks or months.

Vijit Jain, Analyst, Citi

Got it. When I review the monthly spread you've provided and appreciate the additional insights in the filing, along with your comments about growth, you indicated that international performance was strong and helped counterbalance some of the domestic leisure travel downturn. In looking at the hotel sector, for instance, the night bookings are quite robust. You mentioned international has performed well, but the gross booking value for hotels is lower compared to the nights that have been booked. I’m trying to grasp why I would expect higher international numbers in terms of tickets or nights to also increase the gross booking value. Additionally, regarding the events in May and June, wouldn’t international outbound have faced more pressure than domestic leisure?

Mohit Kabra, Group CFO

Great questions, Vijit. The decrease in gross booking and growth percentage is mainly due to poor performance in packages, specifically domestic year and domestic holiday packages. Holiday packages typically have a higher average selling price than hotel bookings, which is why you see that effect on gross bookings. However, when you examine revenue or adjusted margin, the growth is much stronger because room night growth has remained solid. This decline is primarily attributed to the reduced presence of holiday packages in the mix, not anything else. Regarding your other question on outbound travel, yes, there has been some pressure due to issues like certain airspaces being closed at times. Nevertheless, the overall sentiment for international travel has not been as negatively impacted as domestic travel. We have experienced muted growth domestically, while we achieved good growth internationally. This performance is particular to our company; while international growth was around 21%, the market only grew about 7%. Our historical focus on driving international growth has continued to pay off, even during this reported quarter.

Vijit Jain, Analyst, Citi

Got it. Understood. And yes, so I think those were my questions. Sorry, if I can, one last question though.

Vipul Garg, Senior Vice President, Investor Relations

Just to be in interest of time, I would request you to come back in the queue.

Rajesh Magow, Co-Founder and Group CEO

Sorry, Vijit. We'll take it offline.

Manik Taneja, Analyst, Axis Capital

I hope I'm audible. So while my question related to the customer acquisition cost has been answered, just a couple of bookkeeping questions regarding the ESOP charge that we saw this current quarter and also on the ETR. If you could help us understand as to how should we be thinking about both these elements on a go-forward basis?

Mohit Kabra, Group CFO

Yes. On ESOP costs, like we've been saying, our endeavor is to kind of keep this within the $35 million to $40 million bracket for the full fiscal year. Depending on how the exercises pan out, how the grants are made, there could be tweaks between quarters, and you would have seen that in the previous years as well. So I think much more to read out on the ESOP cost per se. On the ETR side, like we have said, we have already recognized the deferred tax asset. Therefore, there is a full reversal of that happening in line with profitability for the respective quarters. Going forward in another 2 years' time, I think we'll get to full flexibility as well.

Manik Taneja, Analyst, Axis Capital

Mohit, regarding the impact we observed in May and June, and your mention of a day-to-day recovery, if you had to estimate, which segment do you think will recover faster and return to normal: our hotels and packages business or the air business?

Mohit Kabra, Group CFO

If I just look back in the quarter that has already been reported, we saw a bit of disruption in May and June. Hotels have done much better, as you can see from the reported numbers. So I think the trending is there to look at.

Rajesh Magow, Co-Founder and Group CEO

Additionally, I want to emphasize that it's important to consider the customer use case rather than focusing solely on a specific travel service, such as our booking platform, hotels, or other transportation modes. The affected segment was primarily leisure, and this was expected to be a peak season quarter. However, the current quarter is not anticipated to be a peak season, as there are no summer vacations, school holidays, or other holidays to boost travel. Given the seasonal context, we should see an increase in all segments, and we've already observed this rise due to the ongoing non-leisure travel activities during this quarter.

Mohit Kabra, Group CFO

Historically, we've seen that, from a product point of view, compared to stand-alone bookings, package bookings generally take a little longer to recover post any macro disruption. So I won't be surprised if by the next seasonality, peak seasonality of Q3, packages would come back strongly as well.

Aditya Chandrasekar, Analyst, UBS

Just a quick question related to what was already asked on competition. I think you clearly stated that in air, in fact, you have gained a little bit of market share. But can you just give some color on hotels and especially buses as well because I see iXiGO has been stating that AbhiBus has also gained market share within the online segment itself. So just wanted to understand how we should think about our market share in both hotels as well as buses?

Rajesh Magow, Co-Founder and Group CEO

Maybe take the bus segment first, Aditya. If you really look at the growth numbers that we've reported out on top of the scale and size that we already have, I think it's a testament of the fact that even at a very high base, we've been able to deliver a very robust growth rate. This effectively means that we are getting disproportionate or continue to get a disproportionate share of the market. Whether it is AbhiBus or any other player for that matter, because of the base, there's always a possibility that they may be gaining share, but that share will also happen from the offline market to online market will continue to keep growing. The second one going on a low base, you'll get share with aggressive promotions and so on. We need to just look at this whole comparison, keeping all these factors in mind and try to look at it more on a like-to-like basis. As far as hotels are concerned, we have said in the past as well, Aditya, that I think it will be fair to say that the Indian OTA segment, there is no real other OTA player that has any meaningful share. We continue to, on our high grade, keep growing. Our brand for hotel booking continues to become stronger by the quarter. Therefore, the competition in that domain for us is international players, whether it is Booking or Agoda. They have global business models. Our strategy to drive the hotel business is very different, focusing on Indian travelers and the Indian market. We've also gone to the Middle East now. Therefore, they will definitely spend to attract inbound travel into India. But as far as domestic and international are concerned, we continue to lead the show.

Vipul Garg, Senior Vice President, Investor Relations

In the interest of time, now we will take the last question from Gaurav Rateria of Morgan Stanley.

Gaurav Rateria, Analyst, Morgan Stanley

Congrats on great execution. I have 2 questions, one for Rajesh and one for Mohit. So for Rajesh, just want to check on how do you see AI-led search and bookings for travel as an opportunity or as a threat? Can you highlight some initiatives which future-proof our business or even make it a standout winner given competition may not have the depth and the bandwidth to invest in such kind of offerings? And question from Mohit is that if you look at the last 3 years as a trend on Q1, the advertisement and promotion spend as a percentage of gross booking has gone up from Q1 '24 to Q1 '25 and Q1 '25 to Q1 '26. So I'm just trying to correlate this to 2 or 3 factors. One is competition, which has largely been stable to benign. Second is the share of repeat business, which I understand has been going up. And third could be the incremental investments in the new offering. So could you try and help me understand what could be the factor that is driving this up on a 3-year basis?

Rajesh Magow, Co-Founder and Group CEO

Sure, Gaurav. Like you rightly called out, one, of course, and we've called out for the last several quarters now that our strategy on product and technology has always been evolving around on one side, deep consumer insights; two, cutting-edge technology, whichever might be the new technology that might be emerging. With that same theme, we've seen a lot of promise coming out of Gen AI, and we've been investing significantly behind that, and we will continue to keep investing. We see it more as us leading the innovation through Gen AI, rather than getting paranoid about potential disruption. Now theoretically, potential disruption can happen. But why would we not be in a position to, given that we have massive data over the years? We now have 83 million consumers who have transacted with us live to date on all our brands and we have a huge amount of traffic coming every day on our platform and transaction-related data, many other input signals from the supply side, etc. All of that repository is only going to add more strength to our initiatives for us to come up with cutting-edge innovation on enhancing the consumer experience, which is one of the main areas we are investing behind leveraging Gen AI. The second area is, of course, productivity, which is also a consistent theme across the board when people are looking at where there are productivity gain opportunities that we should leverage using technology. We are releasing features every quarter that follow this strategy. This is an evolving space, and we will continue to keep learning because here, models are changing literally by the week. The space is evolving and we will learn along the way. We will continue to keep investing behind it. We believe we are in a better position given all the strengths that I called out for us to enhance consumer experience, more than getting worried about potential disruption.

Mohit Kabra, Group CFO

Surely. Gaurav, this is a good question again. I see what happens is, over the years, if you look at our mix of businesses, it has been changing a bit as well, with more and more of the increasing share coming in from non-domestic air businesses. Therefore, I would say that apart from looking at the customer action cost as a percentage of gross bookings, where you could see a slight changes coming in, in line with the change in the blended margin. If you look at it as a percentage of the adjusted margin that we report, it has largely remained around 47% across the last 3 years in Q1. I would also urge you to look at this as a percentage of the overall adjusted margin, because based on the mix improvement, our ability to spend a little more will be there.

Rajesh Magow, Co-Founder and Group CEO

Thank you. Thank you, Vipul. And thank you, everyone, for your patience and for your time to listen in to us and for all the good questions that you had, and see you in the next quarter. Thank you.

Vipul Garg, Senior Vice President, Investor Relations

Thank you, everyone. This brings us to the end of the call. You may please disconnect.