Earnings Call Transcript - MMYT Q2 2025

Vipul Garg, Vice President, Investor Relations

Hello everyone. I am Vipul Garg, Vice President, Investor Relations at MakeMyTrip Limited. Welcome to our Fiscal 2025 Second 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. And 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 Safe Harbor provisions 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 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 and forward-looking statements section of the company's annual report on Form 20-F filed with the SEC on July 2, 2024. Copies of these filings are available from the SEC or from the company's Investor Relations Department. I would like to now turn the call over to Rajesh. Over to you, Rajesh.

Rajesh Magow, Co-Founder and Group CEO

Thank you, Vipul. Welcome, everyone, to our second quarter call for Fiscal 2025. We are pleased to report another quarter of strong business results with robust growth in both the top line and bottom line. Gross booking value for the quarter stood at $2.3 billion, registering strong year-on-year growth of 24.3% in constant currency terms. Adjusted operating profit at $37.5 million, reflected a year-on-year growth of about 33%. We managed to deliver this strong performance across all our business segments, leveraging our brand and distribution strength, and despite the short-term headwinds due to unusually heavy rainfall that impacted demand momentum a bit in an otherwise traditionally low-season quarter for leisure travel. We have been consistently outpacing the industry's growth on the back of continued supply-side expansion, catering to the variety of travel needs of the Indian consumer, implementing several AI and data science-driven product features, resulting in personalized recommendations to improve customer experience and a high proportion of repeat customers. On the macroeconomic front, India's strong growth trajectory remains a compelling narrative on the back of advancements across sectors. As per IMF estimates, India is expected to become the world's third-largest economy by 2027, after the U.S. and China. The economic rise is fueling a growing consumer class, leading to higher discretionary spending. The travel and tourism industry is one of the biggest beneficiaries of this increased discretionary spending. Furthermore, our younger generation, aged between 25 and 34, is increasingly willing to travel and explore more. A fifth of the population will age into that group soon, helping the travel segment grow further. As per Bernstein estimates, the annual spending on foreign travel by Indians will nearly triple to $89 billion in three years. The number of valid Indian passports has also nearly doubled from 52 million a decade ago to 93 million this year. On the other hand, India's digital economy has been tagged as one of the fastest-growing in the world, and the government's path-breaking Digital India initiatives are playing a critical role in increasing internet and e-commerce penetration. We have been capitalizing on some of these macro trends by constantly improving our product and value proposition for the international outbound travel market. We enhanced the business class funnel experience for international flights and have revamped the premium economy class booking flow as well. The new funnel features rich visuals and detailed amenities, delivering a premium and seamless booking experience that aligns perfectly with the high-end services offered. Similarly, for international hotels, we are enhancing supply and offering options that are relevant to Indian consumers. On the customer journey flow side, we have been dialing our features that cater to the unique needs and preferences of Indian consumers, for example, culinary preferences, family-friendly services, etc., thus offering a more personalized experience. As a result, our international air-ticketing business and international hotel business continue to witness faster growth than the industry. The international air-ticketing business posted year-on-year revenue growth of over 39% in constant currency terms and now accounts for 38% of the adjusted margin in the air-ticketing business compared to 33% in the same quarter last year. Our international hotels outbound business revenue grew 62% year-on-year in constant currency terms and now accounts for about 17% of the adjusted margins from this segment compared to 12.5% in the same quarter last year. We are not only growing in our traditional markets like Thailand, Singapore, the Middle East, and Malaysia, but also in newer destinations like Georgia, Vietnam, Hong Kong, Azerbaijan, Kazakhstan, etc. During the quarter, we sold over 32,000 international hotels across 2,384 cities in 165 countries, which is the highest-ever spread achieved till now. Total air-ticketing business witnessed strong growth. Adjusted margin grew by 21.1% year-on-year in constant currency, despite persistent supply issues in the domestic market. Our accommodation business overall, including hotels, homestays, and packages, continues to grow at a robust pace as well. We recorded 21.4% year-on-year growth in the adjusted margin on a constant currency basis. As mentioned earlier, the prolonged monsoon along with a significant increase in heavy rainfall had impacted demand during parts of this quarter. However, our combined strategy of supply-side expansion and sharper targeting of a variety of customer segments with multiple distribution channels has helped us maintain growth in the 20s. In our Holiday Packages business, growth was led by emerging destinations like Australia, Japan, and Egypt. During the quarter, we partnered with LEGOLAND Malaysia Resorts to offer holiday packages with a unique blend of LEGO adventures and rich Malaysian cultural experiences. In our Bus business, we continue to see broad-based growth across all regions in the country. On the product side, our localization push continues with the launch of the Telugu Funnel on Android and extending the Tamil Funnel on the mobile web. Bus Ticketing in some of the international markets where we are present continues to grow faster with the contribution of revenue from international markets now reaching 12% of the total bus revenue compared to 10% in the same quarter last year. Our investments in other transport services, such as Intercity Cabs and Trains, helped us achieve 17.6% quarter-on-quarter growth in constant currency in a seasonally weaker leisure travel demand quarter. Our Corporate Travel business, via both our platforms such as myBiz and Quest2Travel, is witnessing strong growth. Our active corporate customer count on myBiz is now over 59,000, and for Quest2Travel, the active customer count has reached 462 large corporates. We continue to enhance our product capabilities. We completed over 60 integrations with travel and Expense Management Solution Partners like MyClaims, Darwinbox, Zoho, and FastCollab. We also went live with complete self-serve HRMS integrations connecting more than 200 organizations through the HRMS connector to enable better management of travel expenses. On Q2T, we introduced the official Q2T mobile application, providing greater accessibility and convenience for corporate clients. Overall, we now have a lifetime transacted user base of 77 million customers across all our three brands. We continue to deepen engagement with our existing customers and add new customers to the platform every quarter. To help consumers make all their bookings on a single platform, we have launched a considerably improved connected trips experience completely built in-house on the strength of our data science capability, enabling consumers to book other products and services needed for the trip. It is helping us drive cross-sell and up-sell other services. As part of our retention and loyalty strategy, we revamped our MMT Black Program on MakeMyTrip and GoTribe loyalty program for our Goibibo customers last quarter with more relevant inclusions like meal and room upgrades, airport pickup, F&B offers, etc., for our customers. This quarter, we launched our new co-branded credit card in partnership with ICICI Bank, one of the leading private banks in the country. With its impressive value proposition, this should help us drive both new customer acquisition and repeat transactions on our platforms. Before handing over to Mohit, I want to provide an update on our initiatives regarding the deployment and adoption of GenAI, a core part of our innovation strategy. Last quarter, we introduced our GenAI chatbot Myra on our international flights funnel. The initial response has been encouraging, with Myra successfully handling queries on topics such as date changes, flight details, and ancillaries. This quarter we've launched Myra to enhance the hotel and homestay booking process by offering real-time assistance, leveraging Generative AI and years of proprietary data, including customer reviews. The chatbot delivers accurate and personalized responses to even the most detailed inquiries. We plan to further expand its capabilities to handle pricing and availability queries as well as provide personalized hotel recommendations. This aligns with our strategy of using AI-driven solutions to boost customer satisfaction and drive growth. Similarly, our AI deployment initiatives have been very successful in addressing pre-journey queries on the redBus app via the GenAI-based bot, which has not only resulted in an improvement in customer satisfaction scores but also productivity gains with an almost 45% decrease in the involvement of customer service agents. With this, let me hand over the call to Mohit for the financial highlights of the quarter. Thank you.

Mohit Kabra, Group CFO

Thanks, Rajesh, and hello everyone. We have achieved another quarter of growth in the 20s, showcasing strong performance across all business segments. Gross bookings for the quarter came in at $2.3 billion compared to $1.8 billion in the same quarter last year, reflecting a 24.3% year-on-year growth in constant currency. Revenue growth as per GAAP came in stronger at 26.5% year-on-year in constant currency. This performance is particularly noteworthy given the ongoing supply challenges in the domestic air market and the impact of unusually high rainfall during this monsoon season in India. Moving on to our segment results, our Air Ticketing gross bookings for the quarter came in at $1.4 billion, witnessing a year-on-year growth of 20.4% in constant currency. Adjusted margin stood at $96 million, registering a growth of 21.1% in constant currency. We continue to expand both our domestic and international outbound business. While Rajesh has updated about the continued outperformance in the international ticketing side, let me share some more color on the domestic Air Ticketing business. In the domestic Air Ticketing market, while supply was broadly at similar levels in the last quarter, the market growth picked up marginally to about 6% year-on-year on a flown basis. We continue to grow faster than the market and our market share stands strong at over 30% in the domestic flight ticketing business. Gross bookings for our quarter in the Hotels and Packages segment came in at about $517.2 million, registering a growth of 21.2% year-on-year on a constant currency basis. Adjusted margin growth was 21.4% year-on-year in constant currency terms, resulting in an adjusted margin of $90.7 million during the quarter. While the last couple of years have seen higher than inflationary increases in room rates, this year we are seeing that the room rates have started stabilizing and price increases have moderated. We continue to drive supply expansion by going deeper and wider in the Indian market and growing directly contracted hotels in key international markets which are of interest to Indian travelers traveling overseas. As a result, we now offer over 84,000 domestic accommodations in 2,100 cities throughout the country. We are scaling our direct contracting for international hotels in line with demand trends and now have directly contracted hotel supplies in over 40 international cities up from about 21 cities last year. In our Bus Ticketing business, gross bookings for the quarter stood at $263 million, growing at 21.5% year-on-year in constant currency terms. Adjusted margin stood at $27.1 million, registering a year-on-year growth of over 25.6% in constant currency terms. The take rates in our business continue to remain stable and in line across all our business segments that is Air Ticketing, Hotels and Packages, as well as Bus Ticketing. Similarly, our customer acquisition costs, which are Marketing and Sales Promotion Expenses, remain efficient and in line with the same quarter last year at 4.6% of gross bookings. This is slightly lower than the 4.8% in the previous quarter linked to a change in seasonality. In addition to driving strong bookings and revenue growth, we remain focused on building operating cost efficiencies and driving operating leverage in our fixed costs, including personnel expenses and general administrative selling expenses. As Rajesh already highlighted, we have made significant deployments of GenAI in some of these areas. Accordingly, our registered operating profit for the quarter came in at $37.5 million, registering a year-on-year growth of 32.9%. Our cash generation continues to be robust and cash and cash equivalents at the end of the quarter have now exceeded the $700 million mark. Besides maintaining a healthy watch list, we will continue to leverage this strong cash position to invest in potential organic and inorganic opportunities. We have communicated our intent to pursue opportunistic share repurchase or buyback programs at the start of this year. While we could not execute any meaningful repurchases during the reported quarter, we remain committed to the program. With that, I would like to turn the call back to Vipul for Q&A.

Vipul Garg, Vice President, Investor Relations

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

Sachin Salgaonkar, Analyst

Thanks, Vipul. Congrats on a good set of numbers. I have three questions. First question, I wanted to understand a bit more on hotel booking growth. It did appear to be slightly slower than previous quarters, but I did also hear the comments from Rajesh early on about unexpected monsoon. Is this a one-off we should look at, and then the growth should normalize going ahead, or is there anything else which has started to impact the growth out here?

Rajesh Magow, Co-Founder and Group CEO

Yeah, hi Sachin. Maybe I can take that. Yes, I guess the way I was alluding to, and if you break the quarter, we actually saw July and August growth which were normal and some temporary headwinds, you know thanks to excessive monsoon in certain areas that we saw sort of causing disruption and hurting the demand momentum a bit. To the best of our understanding, it seems to be temporary because we haven't really seen this continuing. We have seen this bouncing back as well. And also as we get deeper into the specific destinations, for example, and on an overall quarter basis if you compare with the earlier year, same quarter, we also saw, let's say for example, Himachal Pradesh as a territory or all the mountains in general were very badly impacted last year because of floods. In this quarter, we saw a robust recovery coming back into those destinations as well. So if you look at more detailed data, it did not point towards any kind of signal for continued slowdown. It appeared to be temporary in nature for sure.

Sachin Salgaonkar, Analyst

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

Rajesh Magow, Co-Founder and Group CEO

So, early days in this quarter, given that it's just the beginning of the quarter. But so far in whatever number of days that have passed in October, we haven't really seen a slowdown, at least in our category. So it could be a function of just September, maybe a temporary slowdown backlog catching up in October. And there were some specific periods where people were not necessarily traveling, etc. And sometimes, during that period, other categories of consumption also take a hit. I think we will have to wait and watch this quarter, given that it happens to be a seasonally high quarter for leisure travel. But the way October has started seems like it'll be a good season. That said, we will have to just wait for some more time, getting into the quarter more till say end of October or middle of November, rather for us to be able to jump to any kind of conclusion. But the early signs don't look close to slowing down.

Sachin Salgaonkar, Analyst

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

Rajesh Magow, Co-Founder and Group CEO

Again, early days, Sachin, I would say. But there are two areas broadly that we are working on deploying this technology. One, as you rightly pointed out, is actually the areas where we will see more productivity gains, more efficiency gains. One of the prime areas there is after sales service, on all our contact center customer service use cases, we are deploying one after another. We are mapping the entire journey and deploying this technology, which is definitely giving us efficiency gains. But for it to reflect on the P&L, I think it will be a quarter or two down the line before we see the full impact of that. Just more on the cost efficiency or productivity gains side. The second, more important area where hopefully we will see a larger impact on conversion due to better experience is going to be more on the booking customer journey flows. For example, one or two front-end use cases that we've gone live with are addressing all the open queries, but also helping with trip planning. As we continue to enhance the capabilities of this interface, we believe there will be a better mouth of the funnel experience getting enhanced and therefore we are getting more traffic, hopefully helping conversion to improve. However, it will take a couple of quarters for that to reflect in any meaningful way in the numbers overall. So, we are very encouraged with the early results that we see in some of the metrics we are measuring in terms of either the time spent on this kind of interface or the accuracy of the results it provides or regarding the cost side of the journey, as we called out in the case of redBus. We have seen clear efficiency gains on the reduction of some headcount already there as well. Thus, early results are very, very encouraging, but for it to show any kind of material impact on the numbers overall, it will take a couple of quarters.

Sachin Salgaonkar, Analyst

Thank you, Rajesh. And my last question is on this Indigo direct push. Clearly, this quarter, your numbers both on booking and take rate were not impacted, but some of your peers appear to be impacted. Any general sense of how we should look at the impact of that on MakeMyTrip, if any?

Rajesh Magow, Co-Founder and Group CEO

I would actually say, Sachin, that it revolves around the fact that how consistently you continue working on improving the customer experience, not necessarily on the booking flow, but also after sales flow, and keep adding more new features, differentiated features. Our endeavor has been just to work on that relentlessly and come up with many industry-first features, which are on the back of the rich data we have and building data science models on top of it, whether it is pre-cancellation, date change, fare log, or on categories like Trip Guarantee and so on. Because of these new features and our overall experience focus, we believe we will continue to keep attracting our loyal customers back. If you see our market share overall, despite whatever might be happening in the market, we have only marginally improved, although just maybe decimal points, but on an already high share of the domestic air market, we have only improved. Thus, we will continue to keep our focus on that front, and so far it has worked out quite well.

Sachin Salgaonkar, Analyst

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

Rajesh Magow, Co-Founder and Group CEO

Thank you.

Vipul Garg, Vice President, Investor Relations

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

Manish Adukia, Analyst

Yeah, thanks Vipul, and hi. Good evening, team. Thank you so much for taking my question. So, first question is actually just a follow-up on the previous question about this whole airline direct thing. So Rajesh, I mean, have you seen this trend also play out in the past with, let's say, Indigo or other airlines? Historically, have these been like short-term in nature or have you seen them persist? If so, what have been the offsetting levers? I appreciate the response you gave to the previous question, but just trying to understand it from an economic standpoint; does it make sense for a low-cost carrier to drive traffic directly on their website, given that if the traffic comes through you, you bear part of the cost, payment gateway, after-sales service costs?

Rajesh Magow, Co-Founder and Group CEO

Yeah, no, no, happy to give more color on this, Manish. I would say actually two aspects. And I'll come to the specific thing that you mentioned, the economics part of it. But before that, I think what is also important to sort of keep in mind is that from a consumer point of view, typically even if there are relatively speaking fewer options, and since the same consumer would be traveling domestically, and also looking to travel internationally, they would always look to explore more options. So the selection before you end up making the choice should always be kept in mind. From that perspective, there will always be exploration on the platforms to look for more options before making a choice. That's point number one. And that’s always long term; that will be across categories, not necessarily in a particular category or product. So, coming to the economics, the way the current model and overall market dynamics regarding cost of customer acquisition in the online world today in India, where the search engine has the lion’s share of the total market, it's obviously very competitive. It's not necessarily cheaper or less expensive for anyone to acquire and compete in the marketplace. So from that standpoint, there will always be a challenge, and given that not only us, but all the other digital players across categories have built those capabilities quite deep for them to optimize and sharply target customers, there is also the brand built over time. And then the other cost, which is important, is the cost of servicing. The post-sales cost in the aviation world is non-trivial, because every now and then something happens more from a macro disruption standpoint, whether it is weather related or something else going on in part of the world, disruptions are always seen. In that situation, you need the capabilities to service customers, which comes with a cost. Over the years, our experience has streamlined processes significantly. Now having said that, if you have to look at the full pie, out of 100%, it’s not that there is one channel that would meet all the needs since this is a massive growing market. There’s so much supply coming. The future outlook for travel and tourism is robust. Therefore, if the market is expanding, there is room for all channels to grow. There is definitely room for us to grow, and there may also be some room for direct to grow if the economics work out for any direct channels. Thus, we don’t necessarily see it in an overly obsessed manner, but rather we focus on delivering value to the consumer and partners, working closely with them to take the lion's share of the consumers in the market. The rest will fall in place. So, that really has been our approach over the years and it has worked so far, and we would like to continue it that way.

Manish Adukia, Analyst

Thank you, Rajesh. I really appreciate that detailed insight. My second question may be directed to Mohit. Mohit, you mentioned north of $700 million of cash, and now maybe generating more than $150 million of annual cash EBITDA. You talked about opportunistic buyback and perhaps some organic or inorganic initiatives. So, trying to understand this $60 million cap you have on the buyback program; how are you thinking about that? Is that set in stone? What will make that number of $60 million move higher? Does that mean that the remaining $100 million of surplus cash you are generating annually will be deployed towards inorganic opportunities? Are these inorganic opportunities likely to be mostly in international markets or could there also be domestic opportunities? Thank you.

Mohit Kabra, Group CFO

Let me begin with the repurchase program, Manish, and just wanted to clarify that the current plan we have in place was started with about $150 million and still has about $135 million available for deployment in the repurchase program, so it's larger than $60 million. Secondly, as we had called out, this is an existing plan and since we haven't really utilized it fully yet, we have only deployed about 10% of it. This is why we haven’t made any change to the overall plan numbers for deployment. However, once we are closer to fully utilizing the plan, we would be happy to add more amounts to the larger plan program. This will be a continued effort, and I don't think we'll be constrained by the size of the current plan.

Manish Adukia, Analyst

Great. Thank you. No, I was just referring to the $60 million number, which is the annual limit for share buyback, which I thought I saw in your 6K.

Mohit Kabra, Group CFO

No.

Manish Adukia, Analyst

Okay. Sure, maybe I'll take it over again.

Mohit Kabra, Group CFO

We don't necessarily need to restrict anything to an annual number. Our intent was to pursue and we haven't really been able to deploy significantly yet, thus we would like to at least try to wrap up to that extent to begin with.

Manish Adukia, Analyst

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

Mohit Kabra, Group CFO

Actually both. Our focus remains on the domestic Indian customer, whether traveling for domestic purposes or overseas. We believe a large part of our organic or inorganic investments will continue in the domestic space from a servicing perspective for the Indian customer. Additionally, we've also made moves, as we've established an OT operation in the UAE and set up bus ticketing operations in multiple countries in Southeast Asia. There are new customer segments, both on the corporate side and the small travel agent side, that we have entered. While we've focused on domestic customer targeting, there exist opportunities to enter international markets as well.

Manish Adukia, Analyst

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

Mohit Kabra, Group CFO

Thank you so much.

Rajesh Magow, Co-Founder and Group CEO

Thank you.

Vipul Garg, Vice President, Investor Relations

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

Gaurav Rateria, Analyst

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

Mohit Kabra, Group CFO

I can take that, Gaurav. We've been trending at about 70% of our transactions coming from existing customers. That is a key metric we keep calling out because we believe that’s indicative of how well we are targeting our existing customers in terms of repeat buying behavior. So that continues and hasn't really changed, thus the repeat metric has remained consistent and strong over the years. In terms of bifurcation of expenses, we target our customer acquisition in multiple ways, including brand marketing to drive organic traffic. We have a high share of organic traffic on our platforms, which keeps our overall customer acquisition cost efficient. However, these programs are longer-term rewards because the immediate effects may not be fully realized in a quarter or two. They are more so for driving ongoing brand recall and keeping the brand alive in customers' minds along with various programs for tactical customer acquisition through online platforms or direct engagement with customers via our apps. We don’t exactly segregate by single segment. Thus, there’s overlap in customer buying behavior across segments. Hence, while a customer may not be new to the platform, they might be new in terms of certain transactions, making it best to view the overall blended customer acquisition cost as the proper metric. Overall, we believe it’s most fitting to look at all expenses at a platform level rather than by segment.

Gaurav Rateria, Analyst

Alright. Thank you for the detailed answer. My second question is on the trajectory of margins. Last year, despite seasonality, you were able to hold on to the margins, consistent throughout the quarters. This year also, the first half has seen very stable margin performance. Should we expect some seasonality not just in revenues in the second half due to a strong season, but also to affect margins, expecting that second half margin could be a tad better than the first half?

Mohit Kabra, Group CFO

Actually, if you look at it from the margin side, we've been forecasting that we will remain in a stable range across businesses. While we could see some impacts on a quarter-on-quarter basis, we believe these margins will largely remain in range. If you specifically look at it, as I called out, across business segments, margins have continued to come in line with our estimates, and we expect that to continue. Luckily, from a seasonality perspective, both H1 and H2 have one better seasonality quarter and one slightly lower seasonality quarter. Therefore, I don’t foresee much change in the margin structure, at least as of today, whether in the second half as well.

Gaurav Rateria, Analyst

Got it. And lastly, any metric on cross-sell that we can share that helps us understand your strategy of pursuing other segments, like the train and others, to acquire not just customers but also cross-sell them your existing offerings?

Mohit Kabra, Group CFO

If you look at it, Gaurav, we have started sharing gross bookings in our other segment, which primarily represents the gross bookings coming in from rail or car transactions. Growth in that area is indicative of how well those categories are performing. Additionally, the fact that despite the increase in the overall transacted base of customers, we still manage to achieve close to 70% of transactions from our existing customer base suggests that repeat behavior and cross-sell behavior continue to remain strong.

Gaurav Rateria, Analyst

Thank you.

Vipul Garg, Vice President, Investor Relations

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

Aditya Suresh, Analyst

Yes, thank you for the opportunity. Two questions: So one is, can you help unpack the share of international and cross bookings for air and hotels separately?

Mohit Kabra, Group CFO

The impact of air and hotels in the international mix is largely given for our registered margin, Aditya, and that we’ve been sharing. If you look at it, the mix from international air has now improved to about 38%. When it comes to hotels, the mix now stands at close to 18%.

Aditya Suresh, Analyst

Okay. And just as a follow-up on this, could you clarify the context regarding ancillary services? As you book more international, my understanding is that we will see data sales of maybe insurance and FX on these things. Can you help us understand the attach rates here which you are seeing? Therefore, we can make some sense on potential growth in ancillary services. Thank you.

Mohit Kabra, Group CFO

We don't see significant change in attached rates. They remain in line with historical trends. A significant part of the increase you’re seeing in other segments growing faster comes from adding new services under other segments. Previously, this included mainly insurance and tech services. Now we have car rentals and ForEx out there, and as we continue to enhance our non-B2C platforms, the improvements in offerings for our corporate or trade partners are also helping drive up the other segments faster.

Aditya Suresh, Analyst

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

Mohit Kabra, Group CFO

I had actually called that out that if you really see price increases have moderated. We have been communicating that we expect to get into a more stable pricing regime this year compared to the last two. The prior two years saw significant increases since pre-pandemic, leading to years of inflationary price catch-up coming through quickly. This year, the current situation denotes more moderation, though the mix should continue to gradually improve in favor of international bookings. Still, within the respective segments, we aren't seeing notable increases.

Vipul Garg, Vice President, Investor Relations

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

Vijit Jain, Analyst

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

Mohit Kabra, Group CFO

Vijit, maybe I can take that. Actually Q2, from a seasonality point of view, is typically a low season quarter for our holiday packages and more so international packages. Therefore, this is consistent with our seasonal pattern rather than anything else.

Vijit Jain, Analyst

Okay. I was just looking at the year-on-year number only, and it seems like your hotel business overall, while hotels and packages is up about 20%, this number seems to be up maybe 10%, despite international doing well, and I would have thought international would have a higher share of packages.

Mohit Kabra, Group CFO

The international that we have called out is international hotels, not hotels and packages as a combined figure.

Vijit Jain, Analyst

I see. Okay. Got it. The second question I had was, in your mix in hotels right, sticking to the international portion, to what extent do you have direct bookings versus agent bookings?

Mohit Kabra, Group CFO

For any OTA, you typically have a larger share of direct contracting in home markets. But in international markets, you have a mix of your own directly contracted inventory, as well as inventory taken from partners. Our endeavor is to dial up direct contracting as volumes for any particular city increase. However, in many instances, mainly in the long tail of cities, where demand is lower, it is often more rewarding to use affiliated inventory rather than put your own resources towards direct contracting there. We have been scaling that up; as I noted, we now have directly contracted hotels in over 40 international cities compared to about 31 last year, and this effort will continue. In terms of percentage of room nights from directly contracted hotels, this generally tends to hover around the 50% to 60% mark. We believe even in the longer run, at least a third of the business will tend to come from partnered programs rather than direct contracting. Thus, in the medium term, we aim to keep it within the 50% to 65% range.

Rajesh Magow, Co-Founder and Group CEO

Vijit, sorry, maybe if I could just add one more comment on what Mohit said. The 50% to 60% is an overall number, but in cities where we've been giving a large throughput historically and continue to grow, in Southeast Asia, specific examples like Thailand, Malaysia, Singapore, etc., this number goes as high as 75%. So, anywhere between 70% to 75% of business will come from directly contracted hotels.

Vijit Jain, Analyst

Got it. And my next question is, in general for the hotels, for your hotel business right, or rather the hotels that you work with, what do you think is the B2B, B2C mix? I'm trying to understand the steady-state online penetration in your B2C part of the business; it would definitely not be at 60% or 70%, right, realistically speaking.

Mohit Kabra, Group CFO

Vijit, all the numbers we’re calling out are for the business as a whole, and we’re going to stick to that.

Vijit Jain, Analyst

I meant in general, say online penetration within the hotel segment.

Rajesh Magow, Co-Founder and Group CEO

I’d be happy to give you a directional sense on online penetration for hotels. Relative to flights, domestic flights is much lower and therefore has more headroom. Within hotel segments, international hotels is even lower. But compared to pre-COVID levels, online hotel bookings are growing significantly, particularly for international hotels, where penetration is around 10% to 15%, thus showing significant headroom. Within domestic hotels, including homestays and alternative accommodations, the range would again be about 15% to 20%. But certain segments, especially premium hotels, may be 20% to 25%.

Vijit Jain, Analyst

Got it. And with the premium hotels, would it be harder to go above 15% to 20%?

Rajesh Magow, Co-Founder and Group CEO

No, not at all. When you look at some benchmark countries, there are many where penetration has touched 40% to 50%.

Vipul Garg, Vice President, Investor Relations

Thank you, Vijit. The next question is from the line of Ankur Rudra of JPMorgan. Ankur, you may please ask your question now.

Ankur Rudra, Analyst

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

Mohit Kabra, Group CFO

That's value.

Rajesh Magow, Co-Founder and Group CEO

Value, value; the revenue line and adjusted margin line.

Ankur Rudra, Analyst

Okay, excellent. Thank you. Just a basic question; why is the salience of international by value so much lower in hotel versus air? Is this more of a supply issue, or is this about the average price of room nights compared to what is in the air segments?

Mohit Kabra, Group CFO

This is primarily a result of our focus on building the international air ticketing market over the years, as opposed to our curation of the international hotel business, which has only developed recently, over the last five to six years. Thus, the receptiveness of customer buying behavior reflects across segments.

Ankur Rudra, Analyst

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

Mohit Kabra, Group CFO

On the air-ticketing side?

Ankur Rudra, Analyst

Yes, your volume versus market and the GOV growth versus market.

Rajesh Magow, Co-Founder and Group CEO

Ankur, many new differentiated consumer experience-related features are helping us gain market share. In addition, as we've shared in the past, we started to build and grow corporate segments and targeting different consumer segments, which are also performing well. It’s a mix of distribution channels and improved customer experiences that are fueling our growth.

Ankur Rudra, Analyst

Understood. This will be my last question. Given the different product offerings—air, hotel, or ground transportation—what is the level of tech integration at the back end between the products? For example, if someone is looking at a trip via MakeMyTrip with separate air tickets, separate hotel tickets, and transportation, do these products communicate with each other at the backend?

Rajesh Magow, Co-Founder and Group CEO

Absolutely, they do, Ankur. That's a great question. This is what I was alluding to as part of the script when talking about the connected trip feature, which only happens when the backend technology is unified. There are obviously independent funnels based on consumer buying behavior. For example, if you're on our platform and buying a flight, there are various ways we can connect that purchase with further services you might need like hotels or transportation, and that connectivity is ensured by integrated backend technology. The idea is to present the customer with a view of a complete trip based on their choices, and all this is possible due to our unified backend systems.

Vipul Garg, Vice President, Investor Relations

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

Manik Taneja, Analyst

Hi, thank you for the opportunity. Just wanted to get your thoughts regarding the comment that you made around pricing normalization playing out in certain parts of your portfolio, more prominently on the hotel side. Do you think this can be a headwind, especially to your international portfolio from a near-term standpoint? Also, I understand that a bulk of your business essentially consists of domestic Indian travelers, whether traveling within India or even outside of India, but with the geopolitics and war situation spreading to various locations, do you think there might be some near-term headwinds for certain parts of your international portfolio?

Rajesh Magow, Co-Founder and Group CEO

Sorry, I was just going to make one quick comment, Mohit, and then you can come in. Manik, the bigger point I wanted to make on pricing, as I think Mohit was also trying to share earlier is that we shouldn’t read too much into the pricing or ASPs for flights and hotels being either flat or having just marginal increases. That was expected due to past trends being too one-directional for several quarters. It had to come to a steady state. That’s exactly what is happening. Also, this current season is typically a high season quarter, during peak dates when demand exceeds supply, you will see prices increase again, enabling seasonality and cyclical patterns to play into pricing. So, I wouldn't read too negatively into current pricing not increasing as much yet. Regarding the potential impact of geopolitical tensions on certain destinations, that naturally impacts travel to those areas, but a general momentum in discretionary spending still exists. In case of disruptions at certain destinations, customers will generally opt to travel to other regions with many new destinations opening up, indicating a shift rather than a complete loss in demand. The escalation of war can also have broader macro impacts, especially on oil and fuel costs. However, from a consumer behavior standpoint, that indicates shifts in travel preference rather than total declines.

Manik Taneja, Analyst

Thank you. That helps.

Vipul Garg, Vice President, Investor Relations

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

Rajesh Magow, Co-Founder and Group CEO

Thank you, Vipul, and thank you everyone. Thank you for all the good set of questions. Thank you for your patience, and we will see you in the next quarter. Thank you.

Mohit Kabra, Group CFO

Thank you everyone.

Vipul Garg, Vice President, Investor Relations

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