Earnings Call Transcript - MMYT Q1 2025

Vipul Garg, Vice President, Investor Relations

Hello everyone. I am Vipul Garg, Vice President, Investor Relations at MakeMyTrip Limited, and welcome to our Fiscal '25 First Quarter Earnings Webinar. Today's event will be hosted by 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 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. Copy of these filings is available from the SEC or from the company's Investor Relations department. I would like to now turn the call over to Rajesh for his remarks. Over to you, Rajesh.

Rajesh Magow, Co-Founder and Group CEO

Thank you, Vipul. Welcome everyone to our first quarter call for fiscal 2025. We are pleased to share that we've started the financial year on a strong note with the highest-ever quarterly gross bookings, revenue and adjusted operating profit with robust growth across all our businesses. We delivered these strong numbers despite the late pickup of the season for leisure travel due to general elections in April. Gross booking value for Q1 was more than $2.4 billion, with growth at 22% year-on-year in constant currency terms and the adjusted operating profit was $39.1 million, registering a growth of about 30% year-on-year. Our strategy of catering to various travel use cases and targeting different demand segments on multiple customer touch points is helping us deliver sustained growth. A wide spectrum of travel products is also helping us increase our share of the wallet of Indian travellers' overall travel spend. We now have a lifetime transacted user base of 75 million across all our three brands. To build stronger loyalty, we relaunched our flagship loyalty program, MMT Black, with simplified two tiers and with new benefits, such as guaranteed room upgrades and meal upgrades for participating hotels and homestays, immediate myCash credit post booking and no cap on the number of times one can avail discounts on flight add-ons such as zero cancellation, in-flight meal, free date change, etc. Although it is early days of the new MMT Black program rollout, we have already seen improvement in the operating metrics compared to the earlier version, indicating better value for our Black customers. On the macroeconomic front, India's robust economic growth has boosted the disposable income of its growing upper-middle class, leading to higher disposable income in their hands. As a result, there is a visible increase in spending on discretionary services, including travel and tourism. On the other hand, the lower-middle class is also a growing number, acting as a booster for domestic travel. Besides, the increasing number of households headed by the younger generation is helping drive a cultural shift towards taking more breaks in a year. The rise of flexible working arrangements has also influenced travel behavior. Many people are combining work and leisure through vacations and extended stays in different locations. The shift in work culture allows individuals to travel more frequently without compromising their professional responsibilities. As per a McKinsey report, India is currently the world's sixth-largest domestic travel market by spending with the growing middle-class powering travel spending, growth of roughly 9% per year. India's domestic market could overtake Japan's and Mexico's to become the world's fourth-largest by 2030. Domestic air passenger traffic in India is projected to double by 2030, boosted by government initiatives to build infrastructure and connect underserved domestic airports. Let me now turn to the business segments, starting with our air ticketing business. A positive development in this quarter was international outbound travel. As reported earlier, international outbound travel recovered fully in fiscal year '24, but in this quarter, we witnessed robust growth of 25% year-on-year in international air segments. It now contributes over 37% to our air ticketing revenue. Long-term outlook on outbound travel from India is also very positive with fast-growing pools of first-time tourists. Many short-haul and longer destinations are investing to increase their awareness for Indian tourists, considering India a very important source market. A couple of emerging destinations, like Turkey and Kazakhstan, have significantly grown the number of Indian tourists and touched new highs. For Kazakhstan, India is now the third-largest source market, witnessing a threefold increase in Indian tourists compared to 2021. For Turkey, the number of tourists from India has surged 34% in the first five months of 2024 compared to the same period last year. We continue to invest in this opportunity and aim to increase our share of revenue from this segment over the years. In the domestic air market, the supply situation improved marginally. The total number of domestic departures saw a slight increase in Q1 compared to the previous quarter. We expect the domestic supply situation to improve further from the second half of the financial year. The growth in the domestic air market continues to be muted. On a flown basis, the market grew by 4.5% year-on-year, and we continue to grow faster than the market. To further improve our product experience, we have introduced a GenAI-assisted chatbot named Myra on our international flight booking funnel. Myra assists users with various flight-related queries and actions, such as applying conditional filters, obtaining visa or transit information, understanding baggage policies, learning about cancellation, date change penalties, etc. Additionally, it can suggest the cheapest travel days for a destination and perform searches based on simple chat commands. AI-based feature enhancement is a journey. We plan to make Myra more intelligent using consumer insights in the future. Additionally, we have expanded our integrated e-Visa feature now for five additional destinations, like Singapore, Indonesia, Vietnam, Azerbaijan, and Sri Lanka. To increase affordability and address cash flow issues, we have introduced a new EMI feature that converts the international flight price into a six months EMI plan, thus addressing affordability concerns. On the domestic flight front, we now have premium airport services such as meet and assist porter and buggy transfer, along with regular flight booking. We plan to expand this feature on our international funnel as well soon, thereby enriching the flight booking experience with additional services. Our accommodation business, which includes hotels, homestays, and packages, continues to witness strong growth. We recorded over 27% year-on-year growth in the adjusted margin on a constant currency basis, contributing 44% to the overall revenue. As we improve our penetration, we continue to add more properties across the country and now offer properties in 2,100-plus cities in India. Our international outbound business for hotels continues to scale as well, contributing 15% of total accommodation business revenue. On the customer experience side, we have introduced the street view feature to enhance the user experience by providing an accurate view of the external surroundings of the properties, ensuring safety and visual appeal. We are the first platform in India to introduce this capability for both domestic and international properties. We're also now giving personalized recommendations for a customer across room types, meals, and amenities, for example, highlighting options for properties in remote locations where meal plans are essential. This intervention not only enhances user convenience but also helps improve conversion. We've also launched 360-degree imagery for virtual tours, initially covering 200 mid and premium properties with plans to expand to over 1,000 hotels. This feature gives users an immersive experience visualizing hotel rooms and amenities, leading to a higher conversion rate among users who interact with it and helping us promote higher ASP properties. Our Homestay business continues to grow with increasing coverage of destinations. During the quarter, we sold over 19,300-plus unique properties across 850-plus unique destinations with strong growth across business and leisure destinations. We endeavor to grow this category by offering unique experiences to our customers. As part of our MoU signed with the Goa government, we launched the Goa Beyond Beaches campaign, promoting homestays near temples and heritage homestays in the city. The collaborative effort aims to further propel tourism in Goa and position it as a vibrant year-round destination, moving beyond its iconic sun, sand, and beaches. MakeMyTrip, in collaboration with NITI Aayog, launched Project Maitri, a women entrepreneurship program aimed to empower female entrepreneurs from Northeast India by leveraging the untapped potential of homestays as a pathway to entrepreneurship, economic empowerment, and independence. 30 hosts attended the inaugural workshop, wherein comprehensive training focusing on key areas such as finance, legal, taxation, hospitality, and OTA management was provided to help them set up and run a successful homestay business. Our Holiday Packages business delivered robust performance as well, achieving highest-ever gross booking numbers, driven by strong growth in international outbound packages with new destinations like CIS Countries, America, and Japan leading the growth. Our packages team added new products like NextGenAdventures, specifically targeting millennials and Gen Z. These are experiential group tours catering to the 18 to 35 years-old age group. Our Bus business continues to grow well, driven by strong demand and expansion of supply. The buoyancy in supply was due to the addition of new buses by many existing operators across the country, as the delivery of new buses gathered pace. However, an increase in supply and a reduction in diesel prices has led to a fall in average seat price in most regions, particularly in South India, which helped in robust volume growth in the segment for us. Keeping women's preferences and safety in mind, we launched a women's special feature that shows info such as buses that are highly rated by women, the number of women traveling along, women-specific red deals, reviews by women, etc. 45% of women bookings are through this funnel with higher conversion rates in NPS than the regular funnel. We also launched a Tamil booking funnel on the Android platform in April '24 in addition to the existing Hindi funnel, helping us cater to new regional users and drive deeper penetration. For our rail customers, we continue to add product features and strengthen our value proposition. As a result, we continue to gain market share in train bookings, leveraging all our brands, including MMT, Goibibo, and redBus. For Intercity Cabs, we integrated supply from Savaari and were able to cater to peak season demand with high availability, fulfillment, and quality of service. We have also scaled up assisted sales where high-value bookings and complex itineraries are routed to agents who help with the conversion. Our Corporate Travel business via both our platforms, myBiz and Quest2Travel, is witnessing strong growth. Our active corporate customer count on myBiz is now over 59,700-plus. And for Quest2Travel, the active customer count has reached 458 large corporates compared to 272 large customers in the same quarter last year. We have increased the personalization quotient on the platform by giving customized property ranking based on user preferences and featuring international hotels popular with Indian travelers and tailored ranking for business trips. As regard to our UAE business, we had a successful marketing campaign, Let's MakeMyTrip in the UAE. In time to capture the travel demand for the Eid season, the focus was to grow our brand awareness with the non-Indian population. Our loyalty program, MMT SELECT, in UAE is continuing to get strong traction as well. We now have close to 473,000 enrollments into the program and approximately 40,000 members are already in Silver and Gold tiers.

Mohit Kabra, Group CFO

Thanks Rajesh and hello, everyone. We've started the year on a strong note, posting our highest-ever quarterly gross bookings of $2.4 billion compared to $2 billion in the same quarter last year with a 21.6% year-on-year constant currency growth. Apart from strong growth in bookings, the improvement in the mix of higher margin businesses compared to the same quarter last year has helped us post 31.5% year-on-year constant currency growth in revenue and achieving our highest-ever quarterly revenue of $254.5 million as compared to $196.7 million in the same quarter last year. 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 17% in constant currency. Adjusted margin stood at $89.1 million, registering a year-on-year growth of 21.2% in constant currency. Take rates for the air ticketing business were on expected lines at about 6.4%. Our international air ticketing business posted strong year-on-year revenue growth of over 37% in constant currency and now accounts for over 37% of adjusted margins in the air ticketing business. Gross bookings for the quarter in the Hotels and Packages segment came in at $611.3 million, registering strong growth of 24.7% year-on-year on constant currency terms. Adjusted margin growth came in higher at 29.6% year-on-year, resulting in an adjusted margin of $107.3 million during the quarter. The take rates during the quarter in this segment came in on expected lines at 17.5%. 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 overseas travelers. Our international H&P business grew 88% year-on-year in constant currency and now accounts for about 15% of the adjusted margins from this segment. In the Bus Ticketing business, gross bookings for the quarter came in at $316 million, growing at 15.9% year-on-year in constant currency. Adjusted margin came in at $32.4 million, registering a year-on-year growth of over 20.7% in constant currency. The take rates for the business came in line at about 10.2% for the quarter. Besides driving strong bookings and revenue growth, we continue to remain focused on building strong operating cost efficiencies. As a result, our expenses, which are largely in the nature of fixed costs such as personnel expenses and selling or general administrative expenses, have shown operating leverage on a year-on-year basis. Considering that the reported quarter was a seasonally high leisure travel quarter, coinciding with some softness in the early part of the quarter due to general elections, we have slightly increased the spends on marketing by rolling out brand campaigns, leveraging the cricketing events during the quarter. Accordingly, our marketing and sales promotion expenses on customer addition costs came in at 4.8% of gross bookings, which is slightly higher than the 4.6% in the same quarter last year. As a result of the above, we are pleased to report our highest-ever quarterly adjusted operating profit of $39.1 million and our highest-ever adjusted operating profit margin at 1.64% as a percentage of gross bookings. The comparable adjusted operating profit during the same quarter last year was $30.1 million in absolute terms and 1.52% in percentage terms. Our cash generation continues to be robust. During the quarter, we added net cash from operations to the tune of $42.9 million. We also saw temporary working capital releases as expected in a seasonally strong leisure travel quarter. As a result of this, our cash and cash equivalents at the end of the quarter stand at about $676 million. Besides maintaining a healthy watch-list, we will continue to leverage this strong cash position to invest in potential travel and travel-related organic as well as niche inorganic growth opportunities. Last quarter, we had called out our intent to pursue opportunistic share repurchases or buyback. While no shares were repurchased from the market during the reported quarter, we remain committed to the program if and when the opportunity arises. Before we open up the call for Q&A, I would like to mention that our investments over the years in key strategic areas, such as expansion of travel and travel-related services offered on our platforms, the increasing breadth of such services across large number of cities in the country, sharper targeting of customer cohorts via non-B2C platforms, such as myBiz or Quest2Travel for corporate customers and myPartner and myAffiliate for wider penetration, and the underneath investments in technology have been yielding good results and helping us grow faster than the industry. As we begin fiscal year '25, we look forward to continued investments in these areas and we'll keep sharing progress on any significant milestones achieved. For instance, our corporate business via our myBiz and Quest2Travel platforms crossed the $200 million gross booking milestone during the reported quarter. With that, I'd like to turn the call back to Vipul for Q&A.

Vipul Garg, Vice President, Investor Relations

Thank you, Mohit. The first question is from Sachin Salgaonkar of Bank of America. Sachin, please go ahead with your question.

Sachin Salgaonkar, Analyst

Thanks, Vipul. Hi, all. Congratulations on a good set of operational numbers. I have three questions. My first question is on the tax what we saw this quarter. I just wanted to understand, it looks like a full tax, right? Do you guys have tax credits, are they fully utilized? And how should one think about the tax rate going ahead?

Rajesh Magow, Co-Founder and Group CEO

So Sachin, you might remember that when we reported the full fiscal year last quarter, we recognized a deferred tax asset and took that benefit in the profit and loss statement. What you see now is a reversal of that deferred tax asset related to the profits generated during this quarter. This reversal will continue for at least the next couple of years, as we will utilize our carried forward tax losses to reduce our actual tax payments. Essentially, this is an accounting treatment where we create the deferred tax asset early, once we have a clear outlook on realizing these tax losses and reducing our tax obligations. As we achieve profitability in the future periods, we will begin to reverse or expense that deferred tax asset.

Sachin Salgaonkar, Analyst

Okay. So, Mohit, just to get to you clearly, this is accounting change, not actual tax paid, and maybe a couple of years down the line, there will be an actual tax pay, right?

Rajesh Magow, Co-Founder and Group CEO

Absolutely. Absolutely.

Sachin Salgaonkar, Analyst

Got it. Second question, I mean, clearly you guys gave breakup in terms of how much does international contribute in terms of hotel as well as air. Wanted to understand a bit more on the margin side. Are the margins on international air and hotels similar to that what we see domestically? If not, are they higher or lower?

Mohit Kabra, Group CFO

It remains largely similar, more so in air ticketing. And when it comes to hotels, I think the only small difference that comes in is, like Rajesh has also called out, when it comes to international hotels, now the entire inventory doesn't kind of come on contracted basis or directly contracted basis. And we also work with a set of affiliate partners, particularly for the long-tail of hotels. So that is where there is some amount of margin dilution. Otherwise, the margins are largely similar across domestic and international segments.

Sachin Salgaonkar, Analyst

Got it. And last question, Rajesh did mention in his opening remarks that obviously our demand was intact, because of elections people didn't travel. But just want to double-click on that point and understand, are we seeing any signs of slowdown anywhere in the travel or across air and travel, we see robust trends going ahead?

Rajesh Magow, Co-Founder and Group CEO

Yes. Let me address that, Sachin. To add to what Mohit mentioned about international hotels and direct contracting, while we have both directly contracted hotels and partner hotels, the business mix shows that around 65% to 70% of our business comes from directly contracted hotels. This allows us to maintain the benefits of higher margins. Now, regarding demand, if we look at domestic flight numbers, there has been mid-single-digit growth, and we have seen even higher growth. The slowdown we experienced in April was temporary, likely due to general elections and unusually high temperatures in some regions impacting travel. However, we observed strong recovery in May and June. Overall, while the industry's growth was somewhat muted for the quarter, our standalone numbers for May and June did not indicate any concerning signs of reduced demand. We will monitor the situation in this quarter, but aside from April's short-term disruption, everything else appears normal.

Sachin Salgaonkar, Analyst

Got it. And if I could squeeze one more question to your point earlier, Rajesh. You're expecting air recovery. Is this more like a five to six-month thing or it might be well beyond the six months also where we see a full recovery in the air?

Rajesh Magow, Co-Founder and Group CEO

I would say it’s more likely to be six months and beyond. I think we should consider the second half as the general timeline we've discussed. There will be some improvement as the delivery schedules from the airlines improve and more planes start arriving. However, I believe you should plan for at least six months for a meaningful impact.

Sachin Salgaonkar, Analyst

Got it. Thank you and all the best.

Rajesh Magow, Co-Founder and Group CEO

Thank you.

Vipul Garg, Vice President, Investor Relations

And Sachin, the next question is from the line of Aditya Suresh of Macquarie. Aditya, you may please ask your question now.

Aditya Suresh, Analyst

Thanks, Vipul. Congratulations, Rajesh and team. Two questions. The first is just the hotels business. And I think Rajesh, you briefly touched on this as well, but I think your commission rates have gone up in this quarter. Can you just speak about what's happening here? I do appreciate that with the more premium supply just kind of being onboarded, but perhaps the take rates there are lower. But could you just help us put in perspective what happened this quarter on take rates specific to hotels?

Rajesh Magow, Co-Founder and Group CEO

Yes, thank you. Maybe I can take that very quickly as well. Aditya, thank you firstly appreciating the results. If you ask me, it's actually not necessarily significant improvement. Of course, year-on-year, it is showing some improvement. But if you see quarter-on-quarter, it's in the ballpark. If you would perhaps recall our general sort of broad guidance on hotel take rate range has been between 17% to 18% in any case. So I wouldn't read too much into it. Some part of it is within the quarter, it can be because of mix changing or some other small variables here and there. But directionally, there is no fundamental change here.

Mohit Kabra, Group CFO

And if I may add, Aditya, if you look at it, while it's a small increase compared to 17.2% in the same quarter last year, if you look at it on a quarter-on-quarter basis, it's like 17.5% versus 17.9%. So those small changes across quarters based on seasonality will continue to be there.

Aditya Suresh, Analyst

I was examining this from the perspective of IFRS revenue in relation to gross bookings. On that front, it appears somewhat concerning, and I was seeking clarity on that. I appreciate your comments. Rajesh, my second question pertains to ancillary services. I've noticed that your revenue has nearly doubled, although starting from a low base. Based on your new gross bookings disclosures, it seems the take rate is also quite high, around the mid-30s. My specific question relates to the dropdown aspect. Beyond just revenue, what are the costs associated with generating this revenue? Specifically, of the $21 million reported as revenue in other and ancillary services, is the dropdown nearly reaching your profit line? Thank you.

Mohit Kabra, Group CFO

The Other segment includes a variety of travel and related services we provide, such as insurance services, foreign exchange services, and advertising revenues. Additionally, it encompasses other transportation services like the cab services and rail ticketing we offer. Starting this fiscal year, we began reporting the gross bookings from our transportation services, like our cab and rail ticketing services, to give more insight into the gross bookings from those areas, which are reflected in the Other segment. It is challenging to pinpoint a direct impact on the bottom line from this segment. However, as I mentioned, it consists of a mix of services with low operating costs and others, such as transportation services, that have net margins comparable to other transport lines.

Aditya Suresh, Analyst

Yes. Can you elaborate on that? Is there a significant amount of fixed costs being added to grow these businesses? When I look at your headcount, it hasn't increased much. I'm trying to understand if these are new revenue streams coming from an existing base of expenses. That's what I'm trying to grasp here.

Rajesh Magow, Co-Founder and Group CEO

Some amount of fixed-cost increases will be there, like say, for instance, we had called out kind of investments in the cab kind of services that we are going to offer, including an investment in a third-party called Savaari that we had called out last year. So yes, there are some small bit of increases. But like I said, in terms of overall headcount increases or personnel expenses, we'll continue to see good operating leverage coming through on a year-on-year basis despite all of these investments.

Aditya Suresh, Analyst

And if I may, just one last question was, any impact you can quantify or speak about related to this CrowdStrike issue?

Mohit Kabra, Group CFO

Nothing at our end actually. No real kind of impact coming in on our business per se.

Rajesh Magow, Co-Founder and Group CEO

It was mainly an operational disruption due to canceled flights, and the customer service team was extremely busy that day. However, the teams quickly collaborated with our airline partners to manage the situation as effectively and swiftly as possible. During that disruption, we did see a decrease in bookings because some of our desktops and PCs were not operational, making it difficult for customers to access our platforms. Nevertheless, the following day, even though it was a Saturday, our volumes rebounded, and we compensated for the losses. Overall, there was no significant impact on our business.

Aditya Suresh, Analyst

Thank you so much.

Vipul Garg, Vice President, Investor Relations

Thanks, Aditya. The next question is from the line of Manik Taneja of Axis Capital. Manik, you may please ask your question now.

Manik Taneja, Analyst

Hi, thank you for the opportunity. My question was with regards to customer acquisition costs. You did allude to the fact that you stepped up some of this marketing activity in the second half of the quarter. But how should we be thinking about these costs, given that after the revenge travel and the strong growth that the industry witnessed through '22 and '23, one is hearing of some slowdown in terms of travel across certain parts of the world as well as including India?

Mohit Kabra, Group CFO

Hi, Manik, I can address that. Generally, there’s some variation in customer acquisition costs from quarter to quarter due to seasonality, which I previously mentioned. In this quarter, as in previous years, we are steadily increasing our spending on brand marketing. During the COVID period, it didn’t make much sense to invest in brand campaigns, but we've been progressively reintroducing them over the last couple of years while keeping overall customer acquisition costs within the 5% range we've discussed. We expect to maintain customer acquisition costs between 4.5% and 5%.

Manik Taneja, Analyst

Sure. The second question was about our myBiz or the assisted-travel business. While you mentioned the corporate business reaching nearly $200 million in gross transaction volume this quarter, could you clarify the corporate travel and travel agent gross transaction volume separately? Additionally, could you provide some insights into the air and hotel mix or the air and non-air mix, as well as some information on the profitability of that segment?

Mohit Kabra, Group CFO

So when it comes to reporting the revenue as well as margins, we do it by the segment, not necessarily by the channel of distribution. However, we keep sharing additional color as might be kind of relevant. And, therefore, on one of the channels of kind of distribution, which is on the corporate side, if you would recollect, we had called out that we have been making investments in terms of adding more and more platforms to kind of target the non-B2C segment. Some kind of channels like myBiz and Quest2Travel, which were more kind of targeting the corporate customers, as well as kind of other channels like myPartner or myAffiliate for an indirect kind of targeting of the retail customers, particularly in the Tier-3 and beyond kind of cities. When it comes to the corporate business, the overall gross bookings from this business has now crossed a certain milestone, and therefore, we wanted to kind of call out, so that people have an appreciation of the scaling of some of these channels over the years. So it's more in that regard. The reporting still continues to be by the line of segment per se.

Manik Taneja, Analyst

Sure. Thank you and all the best, Mohit.

Rajesh Magow, Co-Founder and Group CEO

Thank you. Thank you, Manik.

Mohit Kabra, Group CFO

Thanks, Manik.

Vipul Garg, Vice President, Investor Relations

Thanks, Manik. The next question is from the line of Gaurav Rateria of Morgan Stanley. Gaurav, you may please ask your question now.

Gaurav Rateria, Analyst

Maybe congratulations on a good set of numbers. My first question, just wanted to get a sense of the comparative activity on the ground. Has there been any change, if at all, especially in segments like air and hotels?

Rajesh Magow, Co-Founder and Group CEO

Thank you for your question, Gaurav. There is nothing unusual in this quarter, and there has been no real change. It remains consistent with what we have discussed in the past. Each segment faces a different competitive landscape in the market. Based on our performance this quarter, we believe we have been gaining market share across all segments. Our growth rate is higher than the industry average, and we have other data points that suggest we are gaining share in nearly every business segment. Therefore, it is fair to say that we are effectively competing in the market and continuing to gain share.

Gaurav Rateria, Analyst

Got it. Second question with respect to margins, it's a good start to the year with nice margin expansion, both on a sequential and a YoY basis. How should we think about FY '25? Is this something that becomes a base and remains consistent, or there would be incremental levers as and when the volume for the industry as a whole recovers as per your expectations in the second half?

Mohit Kabra, Group CFO

Gaurav, I can address that. As you know, our margins tend to be stronger during the seasonally peak leisure quarters like Q1 and Q3. Therefore, we expect the overall margins for the full year to remain close to this figure. While I cannot specify if it will stay around 1.6%, I anticipate it will be in that range. There may be minor fluctuations due to seasonality, but this aligns with our goal to gradually increase margins to about 1.8% to 2% over the next three to five years. We're focused on driving operating leverage and achieving small margin improvements on a year-over-year basis.

Gaurav Rateria, Analyst

Got it. Last question, just a bookkeeping one. If you could share the data point that you always share around your market share in the domestic side. And do we have a similar number for the international outbound segment also? Thank you.

Mohit Kabra, Group CFO

So we do not have an international outbound exactly because that's not kind of reported in that manner on the outbound side, but yes, on domestic, we continue to kind of retain 30%-plus market share. In fact, Rajesh had called out, while the industry has grown at about 4%-plus, we've actually grown about 5%-plus in domestic air.

Gaurav Rateria, Analyst

Thank you very much.

Vipul Garg, Vice President, Investor Relations

Thanks, Gaurav. 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, and congratulations on the strong performance. Focusing on the hotels business, can you provide insights into the growth of the five segments: premium, budget, alternative, B2B, and international? Specifically, which sub-segments outperformed the overall growth? I assume that the alternative and budget segments have a significantly higher take rate compared to the others. I would like to understand how these segments are performing. Thank you.

Mohit Kabra, Group CFO

Vijit, maybe I can take that. While there is no significant change in terms of mix by price points, we did kind of share color in terms of the overall growth as well as the growth kind of being stronger coming in from the international hotel segment. So international hotels, like we had called out, grew much faster compared to, say, domestic because the base is also smaller and we're kind of adding a lot more supply over there. That's probably the best color. So the international business on H&P side, Hotels and Packages, grew at about 88%, while the overall growth in this segment, including both domestic as international, came in at about 29.6%.

Rajesh Magow, Co-Founder and Group CEO

And within that, maybe just one additional comment, Vijit. Within the segments, I mean, if your reference is to the past commentary specifically to the budget segment and all, now there is no segment which is not necessarily in the growth mode. That is thing of the past. All segments within the small, medium, premium, super-premium, of course, all of them are sort of growing now directionally. Of course, there will be base effects, some will grow higher and some will grow at a relatively lower growth rate. But overall all segments are growing now.

Vijit Jain, Analyst

Thanks, Rajesh. Just one follow-up on that one. In general, the take rate across these various segments, right, my understanding would be, in general, premium hotels could be closer to the international benchmark, which is maybe mid-teens. Budget segment has been traditionally higher, you've highlighted it's closer to 20%. So for alternate and for B2B, what is a broad range of take rate that you get, if you can just give a broad sense on that, that would be helpful. And my second question, I may just ask that right away. Looking at your employee cost overall, it's up maybe 12%, 13% YoY now. Bookings in a pretty tough macro-environment is up 20%. So it does look like operating leverage is playing out nicely here. So just trying to understand, are you basically being a bit cautious on the overall EBIT margin front?

Mohit Kabra, Group CFO

Vijit, I can probably take both. I think when it comes to personnel expenses, I think like we've been calling out, we do believe in our personnel expenses, we'll continue to show operating leverage, like in, say, the last few years. And therefore, that is something that we've kind of continued with even in this particular year. The only area where we have seen slightly more investment being made is in terms of longer impact brand marketing expenses during the quarter. Sorry, on your previous one, could you just repeat the question on -

Vijit Jain, Analyst

The take rate on the B2B and the alternative accommodation side?

Mohit Kabra, Group CFO

Sure. I mentioned earlier that the take rates are quite similar between international and domestic markets. Approximately 25% to 30% of our international inventory comes from affiliate partnerships, which leads to some dilution. This is more relevant to the B2B segment on the supply side. Overall, the take rates remain largely comparable to those in the domestic market. You're also correct that take rates are generally lower for higher average selling price hotels, while slightly higher margins are seen in lower average selling price hotels. This makes sense because many budget or mid-segment properties are standalone and find it challenging to market themselves effectively, so they tend to rely more on platforms like ours, which allows them to achieve slightly better margins.

Vijit Jain, Analyst

Got it. Thanks, Mohit. Those were my questions. Thank you so much.

Rajesh Magow, Co-Founder and Group CEO

Thank you, Vijit.

Vipul Garg, Vice President, Investor Relations

Thanks, Vijit. The next question is from the line of Aditya Chandrasekar of UBS. Aditya, you may please ask your question now.

Aditya Chandrasekar, Analyst

Yes, congratulations on the strong results. I have a couple of questions. Regarding the expected recovery in the second half as airline deliveries begin, do you see any risks? I've heard that Airbus has mentioned some challenges in meeting its production targets, and Boeing is also facing its own difficulties. Do you think there is a chance that some deliveries might be delayed until next year, which could lead to demand constraints this year? I'm interested in your thoughts on what you're hearing from the airlines and how we should consider this potential risk.

Rajesh Magow, Co-Founder and Group CEO

Aditya, based on what we're currently observing, the expectation is for things to start improving. That's why, in my earlier response, I mentioned considering a margin over a six-month timeframe rather than three months. From six months out, we may begin to see some significant improvement. The only downside risk, if I had to make an educated guess, would be related to timing. It might be delayed by a quarter, but I doubt it will happen any sooner. However, we should examine this a bit differently. If the demand outlook remains consistent with what was presented today and if there's a supply constraint in the domestic flight market, there are alternative transportation options that are expanding rapidly, which could lead to a shift in market share. Historically, when prices were high, we witnessed a shift toward higher quality trains or intercity private buses, depending on the route. Therefore, I don't believe demand will diminish solely due to supply-side constraints in the domestic air market. People have other reliable options to turn to. This means that if supply issues arise, the impact may be partially alleviated. We need to monitor how timely the deliveries are and how quickly they can improve the supply side, but current discussions suggest we should start seeing improvements around six months from now.

Aditya Chandrasekar, Analyst

Got it. That makes sense. The second question I have is on the margins. So you've said that probably this year will remain at this 1.6%-odd number and probably head towards the 1.8% to 2% range in the next three to four years. Just wanted to understand, so if your airline recovery happens as expected, say, within six to eight months or even with a quarter's lag, your hotel business continues to grow at a healthy level. Your costs are pretty much stable, marketing expenses are within that 5% range. And there is a lot of operating leverage flowing through, right? If all of these numbers kind of pan out as expected, we should be hitting that 1.8% to 2% range much earlier, right? Just wanted to understand if we need to kind of factor in, some kind of leverage starts slowing down going ahead, or how we should look at it because it just seems that 1.8% to 2%, three to four years out, seems a bit conservative from your end in terms of guidance?

Mohit Kabra, Group CFO

Hi, Aditya, I can address that. There are factors to consider, like the previous question you mentioned, regarding how quickly the domestic air industry recovers and achieves strong growth. I anticipate we'll continue to provide updates on our estimates in our quarterly reports. If there's anything more to discuss, we will keep providing additional insights each quarter.

Aditya Chandrasekar, Analyst

Sure. That makes sense. Thanks a lot.

Vipul Garg, Vice President, Investor Relations

Thanks, Aditya. The next question is from the line of Prashant Kothari of Pictet. Prashant, you may please ask your question now.

Prashant Kothari, Analyst

Hi. Thank you for the opportunity. I have a question regarding the growth of international air travel compared to domestic. I noticed that the average transaction size has only increased by about 4% year-over-year. Could you clarify this? I would have expected that the shift towards international travel would lead to a larger increase in transaction size, or was there a decrease in overall ticket prices that might explain this outcome?

Mohit Kabra, Group CFO

No, I think the overall kind of pricing, say, within the international segments or say, for instance, within the domestic segments hasn't really seen any significant change. I think what's happened is the overall price increases that used to happen in the past used to be probably slightly more stronger. This quarter, we haven't really seen very significant increase in terms of ASPs per se. But otherwise, there is no real change in the average ASP, I would say, by domestic or by international segment as such.

Rajesh Magow, Co-Founder and Group CEO

I believe, Prashant, you are pointing out that while there hasn't been a significant change in the average selling price, the mix is shifting, and the stronger growth in the international segment will be more evident in the overall gross bookings for air travel. When you compare total gross bookings to segment growth, you'll notice that the growth driven by this mix change is becoming apparent.

Prashant Kothari, Analyst

Okay. Thanks. And one of the questions that we frequently ask Vipul, any update on the India listing front?

Mohit Kabra, Group CFO

I think there's nothing more to add over there. Like we had said, we are not really kind of looking at raising any funds right now and therefore not looking at any capital market activity per se. But should there be a kind of a thought of doing so, I'm sure we will share color in the quarters to come.

Prashant Kothari, Analyst

Alright, perfect. Thank you very much.

Vipul Garg, Vice President, Investor Relations

Thank you, Prashant. At this time, we have no further questions. And any last questions, any attendee wants to ask, otherwise, we can end the call. So Rajesh, we have no further questions. Over to you for your closing remarks.

Rajesh Magow, Co-Founder and Group CEO

Thank you, Vipul, and thank you, everyone. Thank you for all asking all the right set of questions. They were all relevant. And thank you for your patience. Look forward to see you next quarter.

Mohit Kabra, Group CFO

Thanks, everyone.

Vipul Garg, Vice President, Investor Relations

Thank you, everyone. You may please disconnect the call. Thank you.