Earnings Call Transcript - MMYT Q2 2026

Operator, Operator

Welcome to our fiscal '26 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; Mohit Kabra, our Group Chief Operating Officer; and Dipak Bohra, who has recently joined us as 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 safe harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance, are subject to inherent uncertainties, and actual results may differ materially. Any forward-looking information relayed 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 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 the call over to Rajesh. Over to you, Rajesh.

Rajesh Magow, CEO

Thank you, Vipul. Welcome, everyone, to our second quarter call for fiscal 2026. As you will recall, Q1 was impacted by a series of exceptional external events such as geopolitical tensions post the unfortunate Pahalgam terrorist attack on tourists and the tragic airplane crash at Ahmedabad. These events impacted consumer sentiment for travel, especially for leisure. Additionally, supply side constraints continue to impact the domestic aviation market growth in Q1. I am happy to report, however, that as we entered Q2, the broader travel and tourism demand started to rebound across travel segments despite Q2 being a seasonally slow quarter. And our diversified product portfolio covering all travel customer segments of retail as well as corporate customers helped us deliver strong overall performance in the quarter. Barring the domestic air market's slow recovery due to temporary supply constraints where we continue to maintain our market share of 30% plus levels. All other modes of transport segments like bus, rail, camps, and international air witnessed robust growth. Consequently, we saw robust growth in our hotels and accommodations business, both for domestic and international travel segments as well. Our adjusted operating profit for the quarter was at $44.2 million, witnessing growth of 18% year-on-year. Consumer sentiment towards travel remains positive, supported by high propensity for experiential getaways and short breaks. In the air segment, international outbound travel from India presents a significant growth opportunity. Being an unpenetrated segment from an online perspective, we remain focused on growing this segment. In Q2 fiscal year '26, our international air ticketing revenue grew by over 29.6% year-on-year in constant currency terms, far outpacing industry growth. Similarly, our international hotels revenue grew by over 42% year-on-year. Our international business now contributes 28% to the overall revenue, up from 25% during the same period last year. On the macro front, we welcome the recent fiscal and monetary policy measures to rationalize and reduce GST rates. Income tax cuts announced in the budget and interest rate reductions will further boost consumption. These measures will provide a further boost to the disposable income and discretionary spending, particularly within urban middle-income households. Analysts estimate that the combined fiscal and monetary stimulus from these measures could unlock additional consumer spending of $3 billion to $3.5 billion during the latter part of fiscal year '26. This, along with the increasing desire to travel more among Indians, should help in the growth of the travel market as well. Let me now move on to share the progress on our AI journey. AI continues to be at the center of our core strategy for us to enhance customer experience and improve productivity. We launched the beta version of our AI-powered conversational travel assistant, Myra, in August 2025 and it is currently available in English and Hindi with voice and text features, and plans to expand to more Indian languages soon. The initial response has been encouraging for the collection of consumer insights as travelers begin to interact with this new interface. In a short span of time, the agent has scaled to over 25,000 conversations daily. Myra is poised to redefine and help travelers explore, plan, and book trips all at one place, making it super simple for new users and comprehensive at the same time for complex travel use cases. By simplifying the discovery and booking experience through natural language interaction and personalized recommendations, we plan to transform how travelers plan their journeys, making travel planning faster, easier, and more intuitive. We aim to make our platform the default search engine for the travel needs of Indians. Myra is contributing to this by significantly enhancing user engagement. More than 35% of travelers begin engaging with Myra up to 90 days before their trip, using it as a space for exploration and planning. What also stands out is that nearly 1 in 4 users come back seeking help across multiple categories, from visa queries to flights, Forex, hotels, and local experiences. They are not just asking where to go, but also what to do once there, turning Myra into an end-to-end companion that guides them from inspiration to action. Myra is also helping us penetrate deeper into India with a voice-first engagement strategy, with new user share at about 20%. In Tier 2 and Tier 3 cities, voice adoption is 50% higher than in metros. 60% of voice queries come in English compared to just 20% in text chat. When travelers speak to Myra, they speak naturally, freely, and confidently, with over 70% of conversations now being termed good conversations. Voice-led conversations are richer and longer, with users asking follow-up questions, expressing preferences, and describing context just as they would with a human travel expert in a country where digital literacy and linguistic diversity vary widely. Myra's voice-led discovery is quietly expanding access, unlocking the next wave of online travelers, who are more comfortable speaking than typing. For our cabs business, we also launched our GenAI-powered presales chatbot. The bot acts as an information provider and recommender, offering assurance to customers. We are expanding its coverage. This bot-plus-assist approach drives a high conversion rate compared to traditional agent-led assistance for users who interact with it. We are expanding the bot's capabilities with a new agentic seller persona for advanced search and quick actions while continuously improving accuracy and chat quality. Additionally, as part of our ongoing efforts to enhance customer experience and strengthen our post-sales flow further, we recently launched a GenAI voice agent for our flights and hotels customers, which is designed to handle all customer queries received via calls and offer resolutions during the same call. This agent is successfully integrated with our telephony system, enabling the AI agent to handle calls with background noise, interruptions, and accurately interpret queries, including complex sections like date changes, web check-ins, and cancellations. Let me now turn to our business segment, starting with the air ticketing business. The domestic supply continues to be impacted, thus affecting the overall domestic air passenger growth, which witnessed a decline of 3% year-on-year. The outlook for domestic supply in H2 is improving, with daily departures expected to cross 3,200 plus, similar to Q3 of last year. We believe these issues are short-term in nature, and the long-term outlook for the Indian aviation sector continues to be robust. Our accommodation business, which includes hotels, homestays, and holiday packages, delivered strong 18% volume growth year-on-year in a seasonally weak quarter. Short holidays and weekend getaways continue to define travel behavior and emerge as key themes. We continue to see new demand peaks during long weekends. For the weekend of 15th August, we had an all-time high hotel check-in, which was about 20% higher than the last peak. This was also well supported by robust growth of 38% year-on-year in the hotel segment of our corporate business, helping us deliver strong overall growth. The outlook for India's hospitality sector remains optimistic, supported by sustained demand, an expanding supplier base, and a healthy pipeline of new signings across markets. According to HBS data, domestic and international chain hotels signed over 36,400 rooms by August 2025, a 32% increase over the same period last year. We continue to expand our supply base in the domestic market. We now have over 95,000 accommodation options available on the platform, covering more than 2,000 cities in the country. Events are emerging as a high-intent travel driver across entertainment, sports, and cultural segments. We have built specialized mapping between major events and nearby stays, improving conversion through dynamic packaging. From IPL weekends to music festivals, these moments now form predictable demand peaks. With real-time availability, we are turning spontaneous plans into structured high-yield travel opportunities so that users can book their stay near the venue well in advance. Our international hotel business continues to report strong growth driven by rising air connectivity and the accelerated shift from offline to online travel purchasing behavior. We are witnessing rapid adoption and digitization in Tier 2 and Tier 3 cities as first-time international travelers increasingly use mobile platforms to book stays, flights, and activities together. We continue to increase our hotel inventory across international destinations, which are of interest for Indian travelers. Recognizing the influence of food on hotel selection by Indian travelers, we enhanced our restaurant section to highlight user-generated insights on breakfast, calling out Indian vegetarian options and familiar menu items, further strengthening relevance for Indian travelers. Our holiday package business grew in line with seasonality. We continue to enhance our product proposition. We have launched curated packages to Vietnam with exclusive direct flights starting December 9, 2025. We have scheduled multiple flights for the upcoming winter season, as Fokko currently has no direct connectivity from India. The direct service will cut travel time from around 8 hours by connecting routes to just about 5 hours, making our airline far more accessible for Indian holidaymakers. Indian travelers today are looking for destinations that offer unique experiences, easy access, and great value. For cockpits, the bill has remained relatively unexplored due to the lack of direct connectivity. We are making this unique destination directly accessible for Indians planning their international holidays this winter. Our homestay business continues to scale well and we will continue to build the category and expand our homestay supply. We added over 49,000 rooms to the overall supply during the quarter, resulting in a cumulative supply growth of about 35% year-on-year. Our aim is to build a category and solve for consumer pain points. Food availability remains one of the most frequent customer queries for alternative accommodation stays, with a clear guest preference for properties offering ready meals over self-cooking options. To address this, we revamped the food and dining module across both supply and consumer products. The new flow enables us to provide rich details on availability, pricing, cuisines, variety, and timings, along with cook availability and associated charges for customized meals. In our bus ticketing business, we witnessed strong growth in Q2, led by strong inventory addition, with all regions growing over 20% year-on-year. Inventory addition remained robust throughout Q2 fiscal year '26. This trend of investment in new buses among private operators is likely to continue in the upcoming quarter due to increased festive demand. We expect further buoyancy in new bus additions with the reduction of GST for procurement of buses announced in September. During the quarter, we onboarded Gujarat and Odisha State Transport Corporation, leading to the addition of over 5,700 services. Our growth continues to be broad-based, with all regions growing in double digits, particularly North and Gujarat, Rajasthan, which grew at 40% or more in Q2. We have also launched bus booking options within our Red Rail standalone Android and iOS applications. We continue to strengthen our customer proposition within our trains business during the quarter. We launched the food on train feature in partnership with Zomato, which is expanding on our customer convenience initiatives within the trains category. The service is now live across 130 stations and is accessible to both transacting and non-transacting users. Early results have been promising with strong conversion in our engagement funnel. Notably, a significant share of users are placing orders up to 2 hours prior to station arrival, spanning a wide range of cuisine types, indicating both the flexibility and variety of selections available to customers. Our corporate travel business via both our platforms, that is, myBiz and Quest2Travel, is witnessing strong growth on the back of new customer acquisitions. Our active corporate customer count on myBiz is now over 75,500, compared to 59,000 customers during the same quarter last year. And for Quest2Travel, the active customer count has reached 527 corporates compared to 462 customers in the same quarter last year. Before I conclude, there is a quick reminder of key leadership role changes announced recently. After a successful stint of 14 years as group CFO, Mohit has taken on a larger role leading the business and has been elevated as Group Chief Operating Officer. In his current role, Mohit will work closely with business heads and will drive the future growth agenda of the company. We also welcome Dipak Bohra, who joins us as Group CFO. Dipak is a chartered accountant with 30 years of rich experience in the field of finance. He joins us from Wipro, where he handled large teams and led a variety of roles within the finance function. I wish them all the best in their new roles. With this, let me now hand over the call to Mohit for the financial highlights of the quarter.

Mohit Kabra, CFO

Thanks, Rajesh. Welcome onboard, Dipak, and hello, everyone. The last 2 months of the previous quarter, i.e., May and June, were impacted by a series of external events, and the weak sentiment for domestic air travel spilled over into the reported quarter due to continued supply constraints, leading to a market degrowth of about 3% year-on-year in the domestic air market. Quarter 2, which is generally a low-season quarter, was also impacted by excessive rainfall, particularly in some of the North Indian states and union territories like Jammu & Kashmir, Laddakh, Himachal Pradesh, etc., which led to a degrowth in the 20s in these regions on a year-on-year basis during the quarter. Despite these macro conditions, we leveraged our one-stop shop approach across travel services to drive growth through accommodations and other transport segments like bus ticketing to make the most of the overall bounce back travel demand during the quarter. As a result, the highlights of the quarter were hotels and packages' adjusted margin growth, which accelerated from 16.3% year-on-year in Q1 to 21.6% year-on-year in constant currency during the reported quarter. Within this segment, the stand-alone hotels' adjusted margin growth accelerated from 18.5% in the previous quarter to 23.1%. In the non-flight transport business, bus ticketing's adjusted margin growth increased from 34.1% year-on-year in the previous quarter to 44.1% year-on-year in constant currency during this quarter. Before I get into the financial details, I would also like to call out a couple of accounting items in this quarter for a better understanding of the results that we are discussing right now. You would recall that last quarter, we had raised additional capital of approximately $3.1 billion through a mix of primary offerings of ordinary shares as well as convertible senior notes maturing in 2030. The entire net proceeds from the offerings were used for repurchasing large shares. On the second slide, 2025, we completed the repurchase and cancellation of 34.4 million Class B shares. Out of the $3.1 billion raised, about $1.4 billion were raised through 2030 zero-coupon convertible notes. While these notes have no interest costs associated with them, as per IFRS, about $1.1 billion has been recognized as debt on the balance sheet, and the balance of about $319 million will be recognized as an interest cost in the P&L every quarter over the next 3 years until July 2028. As a result, $24.3 million has been recognized as interest costs during the current quarter related to the 2030 convertible notes in addition to about $4 million of finance costs recognized every quarter for the 2028 notes issued earlier in 2021. Please note that this active interest cost of $28.3 million will not have any bearing on the operating profitability of the company as there is no actual interest outgo, whether in cash or otherwise, as these are zero-coupon convertible notes. Secondly, while our operations are predominantly in INR, our reporting currency is dollars. As a result, there are usually translation-related forex gains or losses. As a consequence of the sharp weakness in INR versus the USD during the current quarter, we recognized a foreign currency loss of $14.3 million during the quarter. Both these items, that is, interest and forex cost of approximately $28.2 million and $14.3 million, have been recorded in the finance cost line in the P&L. Consequently, we reported a loss for the quarter of $5.7 million compared to a profit of $17.9 million during the same quarter last year. However, our adjusted operating profit has registered strong growth and reached $44.2 million during this quarter compared to $37.5 million in the same quarter last year. Moving on to our segment results, our air ticketing adjusted margin stood at $102.8 million, registering a year-on-year growth of 10.6% year-on-year in constant currency. In the domestic air market, we maintained our market share of about 30%. Our international air ticketing business continues to grow faster than the market in market share. Volumes in this segment grew by over 16% year-on-year, which is almost 2.5 times the market growth of about 6% during the period. In the quarter, the mix of international air ticketing business reached an all-time high of 43% compared to 37% during the same quarter last year. In the hotels and packages segment, adjusted margin growth stood at about 21.6% year-on-year in constant currency terms, resulting in an adjusted margin of $105.8 million during the quarter. We witnessed strong growth despite Q2 being a seasonally slow quarter for leisure travel. The growth for stand-alone hotels was even better at 23.1% year-on-year. The mix of international hotels and packaging revenue reached 23.4% during the quarter, up from 21.4% in the same quarter last year. Now, in the bus ticketing business, adjusted margin stood at $37.7 million, registering a strong year-on-year growth of 44.1% in constant currency terms. Most of our internal services such as travel insurance, foreign exchange, etc., as well as other transport services such as cabs and rails have also shown good growth during the quarter. As a result, adjusted margin from the others category came in at $20.5 million, a strong growth of 29.7% year-on-year in constant currency. Moving on to the expense side, most expenses have come in line during the quarter. Marketing and sales promotion expenses for the quarter stood at 5.2% of gross bookings compared to 5.1% in the previous quarter and 4.6% during the same quarter last year. This has been in line with our segment margins being better than both the previous quarter as well as the same quarter last year. As a result, our adjusted operating margin has actually improved from 1.66% of gross booking value during the same quarter last year to 1.8% of gross booking value during the current reported quarter. We ended the quarter with cash and cash equivalents of $835 million, translating to an increase of $31 million over the previous quarter. We will continue to look for organic and inorganic investment opportunities throughout the year. Looking ahead, while the growth in domestic air ticketing is marked by short-term supply side challenges, we believe the GST benefits have come at a very appropriate time. The reduction in rates for procurement of new buses, as well as the reduction in GST for hotel stays up to a price point of 47,500, will help reform the demand for travel services after a muted first quarter. These measures are expected to boost demand, particularly in the value-sensitive segments, supporting volume growth and market penetration in key regions, including Tier 2 and Tier 3 cities. With our omni-channel platform strategy across retail, B2B, and corporates and the increasing supply of services being contracted across the length and breadth of the country, we remain focused on driving growth ahead of the industry. To conclude, our diversified portfolio, execution capabilities, and optional discipline continue to push for sustained long-term growth and value creation. With that, I'd like to turn the call back to Vipul for Q&A.

Operator, Operator

Thanks, Mohit. The first question comes from Sachin Salgaonkar of Bank of America.