MakeMyTrip Ltd

NASDAQ:MMYT

Earnings Call Analysis

Strong YoY Growth Amidst Robust Demand

This quarter, the company reported $1.8 billion in gross bookings, marking a 23.8% annual increase, with adjusted EBIT growing by 87% to $28.2 million. India, positioned to be the fourth largest travel spender by 2030, is a significant growth driver. Leisure and business travel flourish on the platform, now hosting 77,000 properties and witnessing strong international and domestic room nights growth. In addition, 8,000 homestay properties were added, with innovative holiday packages launched. The bus ticketing business maintained momentum, particularly in North India, and a voice-based bot was introduced. Investments in Savaari Car Rentals and the integration of Quest2Travel illustrate a strategic push into the fragmented intercity cab market and growing corporate travel sector. With a resilient balance sheet possessing over $0.5 billion, the company is set to leverage both organic and inorganic growth opportunities.

Surging Bookings and Profitability Elevate Company's Trajectory

The latest earnings call revealed that the company's gross bookings soared to $1.8 billion, marking a significant 23.8% increase in year-on-year growth, while adjusting operating profit astonishingly rose by 87% to $28.2 million. Investors should be buoyed by such strong performance indicators, emphasizing the company's rapidly scaling operations and the efficiencies gained, which translated to higher profitability.

India's Growing Economy Promises Expanding Travel Market

With India poised to become one of the world's fastest-growing economies, travel expenditures are anticipated to surge from $150 billion in 2019 to an impressive $410 billion by 2030, situating India as the fourth largest global spender on travel. This offers a significant tailwind to the company, as it operates in a sector that benefits directly from consumer discretionary spending in travel and experiences.

A Threefold Opportunity: Aviation, Accommodation, and Domestic Travel

A close look at the industry dynamics shows that aviation, accommodation, and domestic travel in India are all set to experience robust growth. The travel and tourism sector’s contribution to India's GDP is expected to outpace the overall GDP growth in the next decade, abetted by the aviation and accommodation sectors, which are poised for expansion with new properties and flights.

Enhanced Customer Experience and Regulatory Compliance

The company has rolled out a new website homepage, enhancing user experience, and it has also achieved GDPR compliance to cater to European standards, unlocking access to the Indian diaspora across GDPR-regulated regions.

Accommodation and Homestays Register Strong Growth

The accommodation sector, encompassing hotels, homestays, and travel packages, exhibited robust year-on-year growth, with over 77,000 properties listed and an increased footprint across 2,075 cities. Notably, the homestays segment is gaining traction, now with a more significant contribution to the overall bookings.

Bus Ticketing Business Maintains Growth Even Off-Season

Despite facing a seasonally weaker quarter, the bus ticketing segment continued to see growth, fueled by a recovery in demand from corporates and bus markets, particularly in South India, and an expanded inventory that included the integration of UPSRTC's inventory onto the platform.

AI Integration Improves Property Selection Process

Leveraging generative AI, the company has introduced features that synthesize user feedback to streamline the property selection process for customers, thereby enhancing the user experience.

Ground Transport Identified as a Lucrative Avenue for Growth

With significant investments in expanding user base in rail bookings and a recent majority investment in Savaari Car Rentals, the company is strategically targeting the ground transport sector to capitalize on the fragmented and unorganized intercity cab market.

Corporate Initiatives and Accolades

The company's corporate platforms, such as myBiz, are gaining strong industry recognition, with accolades that highlight its prowess in travel and expense management in the APAC region.

Financial Highlights Indicate Strong Year-on-Year Profits and Efficiency

A focus on robust operating performance has yielded impressive gross bookings growth of 23.8% year-on-year and a staggering 87% spike in adjusted operating profit to $28.2 million. Despite an exceptional provision due to Go First Airlines' suspension of operations, the underlying trend indicates healthy growth and increased operational efficiency, as reflected in lower marketing and sales promotion costs compared to the previous year.

Segment-Wise Performance: Air Ticketing and Hotel Bookings

Air ticketing gross bookings reached about $1.2 billion, a 20.8% growth year-on-year, with margins increasing by 10.7%. However, short-term capacity challenges persist due to supply-related issues. The hotels and packages segment witnessed a 34.5% growth in bookings, amounting to approximately $432 million, indicating a strong customer preference towards these offerings.

Bus Ticketing and Cost Efficiency

The bus ticketing segment also showed significant growth, with gross bookings increasing by 21.2% year-on-year, and adjusted margin grew by about 34%, showcasing effective cost management strategies.

Solid Financial Foundation Supports Strategic Initiatives

With over $0.5 billion in cash equivalents, the company's solid financial position enables pursuit of strategic opportunities for both organic and inorganic growth. This stability allows the company to enhance its offerings in foreign exchange services and invest in promising ventures such as Savaari Car Rentals, fortifying its position in the Indian intercity cab market.

Earnings Call Transcript 2024-Q2

[Vipul Garg, executive]

Hello, everyone. I'm Vipul Garg, Vice President, Investor Relations at MakeMytrip Limited, and welcome to our fiscal '24 second quarter earnings webinar. Today's event will be hosted by company's leadership team, comprising Deep Kalra, our company's Founder and Chairman. Joining him is 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 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 are 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 12, 2022. Copies of these filings are available from 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, executive]

Thank you, Vipul. Welcome, everyone, to our second quarter call of fiscal 2024. We are pleased to report another quarter of strong operating performance, where we maintained strong momentum, both in terms of top line and bottom line growth year-on-year. Gross bookings for the quarter reached $1.8 billion, growing at 23.8% year-on-year in constant currency terms, while our adjusted operating profit, or adjusted EBIT, grew by 87% year-on-year to $28.2 million as compared to $15.5 million in the same quarter last year.

We delivered this performance despite a short-term supply contraction, challenged during the quarter and the temporary hit on demand due to unprecedented monsoon rains in some parts of the country. As for the macro outlook, India is expected to be one of the fastest-growing large economies in the future, leading to a gradual increase in GDP per capita and a larger allocation towards discretionary spending, of which travel and experiences will garner a major share.

According to the latest report by McKinsey, India is poised to witness one of the most rapid increases in travel expenditures among the world's top 10 countries from a travel spending figure of $150 billion in 2019. Travel expenditures are anticipated to reach [ $410 million ], making India the fourth largest global spender on travel by 2030.

On the other hand, according to WTTC, travel and tourism sector contributed 7.6% to the global GDP in 2022. While in India, it accounted for 4.5% of the GDP, reflecting a huge headroom for growth. The contribution of travel and tourism industry to India's economy is growing steadily, generating substantial revenue and employment opportunities across various sectors, including hospitality, transportation and local businesses. We expect travel and tourism in India to grow faster than the overall GDP during the next decade, which should act as a tailwind for the overall industry.

A large part of this growth will be led by the aviation and accommodation sector. This is corroborated by the fact that all major airlines have placed a record number of orders for new planes and all major hotel chains have announced the addition of new properties, which will help in supply expansion for many years to come. Homestay supply is also growing in the country with people investing in secondary homes to be used as homestays in key leisure destinations in the country.

According to government of India forecast, the current 145 million air passengers in India are projected to rise to 425 million by 2025. That's driving growth for overall travel and tourism sector. While the air industry is facing short-term headwinds on supply due to engine repair issues, supply addition projections looking good, indicating that the supply situation will improve in the coming quarters.

We continue to stay excited about future opportunities and aim to further consolidate our position as a leading travel services company in the country on the back of our innovative travel solutions, brand strength and ability to deliver superior value to our customers and our partners. We've been working towards building a platform for the future. During the quarter, we introduced a fresh version of our homepage to bring out our new design language and iconography to meet the discovery and buying experience more intuitive and delightful. I'm also delighted to share that MakeMyTrip is now GDPR compliant, thus making it accessible from regions where GDPR is applicable. This will help us cater to some of the inbound demand, especially from the Indian diaspora.

As for business segments now, starting with the air business, while domestic air ticketing had recovered a few quarters back and continues to grow well, this quarter, our international air ticketing business surpassed the pre-pandemic levels for the first time, which is encouraging. All short-haul destinations have either grown beyond or recovered to pre-pandemic levels now, and travel to long-haul destination is also recovering rapidly now.

We continue to innovate and add new features to our products to deliver better value to our customers. During the quarter, we went live with our hold booking initiative, wherein on selected international flights, customers can hold their seats until the end of the day giving them time to decide without worrying about prices and availability. We also launched a quick checkout flow on our existing QuickBook feature, enabling customers to see the payment options on the review page itself to make the booking faster for our frequent flyer customers. We also revamped Goibibo's flight search results page, baggage and cancellation rules on the itinerary page to aid faster information, assimilation and flight selection helping us improve conversion.

Our accommodation business, which includes hotels, homestays and packages, witnessed strong year-on-year growth on the back of increased supply, improved discovery and deeper penetration beyond metros and Tier 1 and Tier 2 towns. We continue to expand our supply deeper into the country. We now have 77,000 plus properties listed on our platform, covering 2,075 cities across India, further strengthening our supply moat. Along with the supply, we continue to expand our distribution channels as part of our strategy to drive online penetration further. We went live with our hotel product on IRCTC website during the quarter, and the initial response is encouraging. Through IRCTC and our myBiz platform, we are now getting new users from new smaller cities for leisure and business travel.

International room nights growth picked up strongly this quarter as well, while the domestic accommodation business continued to perform well. With the introduction of new direct flights, we witnessed travel pick up in new destinations like Tashkent, Almaty and Baku, while other key destinations in the Middle East and Southeast Asia continue to be the popular among Indians.

Learning from valuable stay-related feedback and inputs from our customers, we have enhanced our quality checks to highlight alerts for our customers about properties consistently defaulting on service levels on one hand. And on the other, we work closely with the partner and push them to improve the stay experience. We have observed that most of our partners take the feedback seriously and take corrective actions.

Our homestays business continues to grow with increasing coverage of destinations. During the quarter, we expanded our supply across the country, including World Cup venues. During the quarter, we added about 8,000 properties to our homestay inventory, out of which about 1,500 properties were added specifically in World Cup venues. The contribution of homestays to the overall bookings is steadily increasing, and we believe that this category will drive future growth.

Our holiday packages business continues to scale on the back of our expanded offerings. During the quarter, we launched holiday packages with homestays as an accommodation option, which is the first in the industry. We have now started to offer -- we've now started to also offer charter train packagings, catering to religious tourism demand. Our footprint in the holiday packages business has now expanded to 555 domestic cities versus a peak of 405 cities in the past. On the international package side, we sold holiday packages to 66 countries during Q2, which is the best number achieved so far.

Our Bus Ticketing business sustained the growth momentum in Q2 despite a seasonally weak quarter as more and more corporates, especially in the IT sector, are mandating work from office, the traditionally large bus markets in South India are witnessing good recovery. This increase in demand along with the improvements in bus operator finances is resulting in the addition of new buses, which bodes well for our business. In Q2, the inventory of UPSRTC was integrated into the platform. This makes redBus the first private ticketing platform ahead of the festival to host UPSRTC's inventory. This will help improve the new customer acquisition rate in North India.

We are making good progress on our journey with generative AI-powered features on our platform. Our user review section now has summary results leveraging generative AI and harnessing our extensive repository of user-generated content. The summary results enable customers to swiftly identify suitable properties and provide instant insights to each property's offerings. This feature has further improved the user experience in the property selection process. Similarly, in our bus business, we've deployed a voice-based bot for solving customer queries before bus departure.

Ground transport business is a parallel growth opportunity for us -- is a potential growth opportunity, I beg your pardon, for us. We are already have a leading position in the bus market. In addition, we've been making organic investments in expanding our user base via rail bookings. We started our cab business with airport transfers and are gradually scaling intercity travel use case by cabs.

Currently, intercity cabs is a highly unorganized and fragmented market and with road infrastructure improving in the country, it presents a good future growth opportunity. So we have decided to strengthen this line of our business further with an inorganic investment in a well-known intercity cab company called Savaari. Mohit will share full details in his section.

For all our product offerings, our direct B2C platform continues to be the leader in India in terms of active users, number of transactions and reach, while our new channels are also gaining traction. MyPartner, which is our B2B2C platform for small travel agents, now has 40,000 plus travel agents and expanding every quarter with a very healthy repeat transaction rate.

Our corporate travel business for both our platforms, myBiz and Quest2Travel is gradually becoming meaningful. Our active customer count on myBiz is now 55,000 plus. And for Q2T, active customer count has reached 297 with strong additions every quarter. Both our corporate platforms are focused on building a holistic tech solution, wherein companies can seamlessly set policies, report without manual hassle and sync with their ERP and HRMS systems, allowing the employees to handle their bookings for themselves without diluting the experience. MyBiz has been getting recognition from the industry forums as well, recently has been ranked at the top in travel and expense management for APAC, marketing G2's fall report 2023. This is the third consecutive category recognition for myBiz.

With this, let me now hand over the call to Mohit for the financial highlights of the quarter.

[Mohit Kabra, executive]

Thanks, Rajesh. We have delivered robust operating performance this quarter, with a strong year-on-year growth in gross bookings, revenue and adjusted operating profit in line with our stated strategy of profitable growth. Demand for travel remained robust on the back of positive consumer sentiment, helping us deliver gross bookings to the tune of $1.8 billion during the second quarter of fiscal year '23, '24, witnessing a year-on-year growth of 23.8% in constant currency norms.

Aided by strong operating leverage, the adjusted operating profit grew by over 87% year-on-year from $15.1 million in same quarter last year to about $28.2 million in this quarter translating to an increase of about $13.1 million in absolute terms. The adjusted operating profit stood at about 1.5% of gross bookings during the quarter, which is in line with the previously reported quarter of the current fiscal year and almost a 50% improvement from the 1% levels reported in the same quarter last year.

Our air ticketing gross bookings for the quarter came in at about $1.2 billion, witnessing a year-on-year growth of 20.8% in constant currency terms. Adjusted margin stood at about $80.2 million, registering a year-on-year growth of 10.7% in constant currency. The take rate for margins for the air ticketing business were in line at about 6.8%. As mentioned by Rajesh, while the long-term outlook for growth in domestic civil aviation market is very strong with large aircraft orders being placed by the leading carriers, there are short-term capacity headwinds in view of issues around supply and servicing of aircraft engines as well as the suspension of operations by Go First Airlines.

Based on the NCLT order in May '23 for the appointment of a resolution professional to operate Go First on a going concern basis, we had been optimistic of restoration of its operations. However, considering that now over 5.5 months have elapsed and there are ongoing legal challenges to the resumption, we have made a onetime provision of all the recoverable amounts towards deposits for ticket issuances, accrued incentives, taxes deducted or collected at source and recoverable from Go First during this quarter.

As a result of this exceptional provision to the tune of about $10 million, the year-on-year increasing in the operating profit as per GAAP is about $2.8 million compared to about $13 million increase in adjusted operating profit, which is not impacted by this exceptional provision. We expect small capacity increases in the second half of the year, followed by normalized growth in the domestic civil aviation industry from the beginning of the next fiscal year.

Gross bookings for the quarter for hotels and packages segment stood at about $432 million, witnessing a strong growth of 34.5% on a year-on-year basis in constant currency terms. Adjusted margin for our hotels and packages business stood at about $75.7 million during the quarter, witnessing a year-on-year growth of about 36% in constant currency terms. Margins for this segment also came in line at about 17.5%.

In our bus ticketing business, gross bookings for the quarter came in at $219.7 million, growing at a year-on-year basis of 21.2% in constant currency terms. Adjusted margin stood at $21.8 million, registering a strong year-on-year growth of about 34% in constant currency terms. Margins for the bus business also came in at line at about 9.9% for the quarter.

We continue to drive efficiency in our expenses and particularly so in our customer acquisition costs. Excellent top of mind recall of our brands has been driving a high mix of organic traffic for us. On top of that, almost 70% of the orders coming from our existing customers, helping us drive further cost efficiencies. Overall, marketing and sales promotion costs for the quarter came in at about 4.6% of gross bookings as compared to about 5.4% in the same quarter last year.

With the COVID-19 pandemic behind us and almost every line of business having recovered to pre-pandemic levels or above, our focus is now on continuing to drive profitable growth. Our strong balance sheet with over $0.5 billion in cash and cash equivalents gives us the flexibility to pursue both organic and inorganic opportunities of driving supply or distribution side expansion.

Across our portfolio of brands, we have built significant businesses in travel services, such as air ticketing, hotels and packages and bus ticketing. We have organically scaled up a variety of other travel service offerings such as airport transfers and rail ticketing for our customers.

As part of our inorganic innovative, we had invested in BookMyForex, which is a well-known ForEx service provider in India. This investment helped us in strengthening the ForEx offerings for our customers, who book overseas travel services with us and opened up another growth opportunity for us.

Along these lines, we are pleased to announce the signing up of a majority investment in Savaari Car Rentals Private Limited, which is a well-run intercity cab services company. We believe that while intracity cabs and local city buses fall under the day-to-day commute services, intercity cab services are akin to intercity bus services and, therefore, are a segment of opportunity for travel service providers like us. This is a segment with low online penetration, fragmented supply and lack of standardization in experience. We believe that there is an opportunity to transform this space with technology and offer a better value proposition, both for our suppliers as well as the customers in the years to come.

The significant focus of the government of India in terms of improving the quality of highways, apart from adding to the highway infrastructure across the length and breadth of the country, can add further impetus to this segment. This investment, which is likely to be closed in the next 2 months, is intended to accelerate our plans of building a meaningful presence in the intercity cabs business or market in India.

During the quarter, we also acquired the last tranche of equity from the founders of Quest2Travel, a company engaged in providing corporate travel services to large-sized corporates. We had acquired an initial majority stake in 2019 and have been increasing our holding over the years. And this final tranche marks the completion of the process with the acquisition of 100% ownership in Quest2Travel. We will continue to look for such inorganic investments to support our future growth initiatives as well.

With that, I'd like to turn the call back to Vipul for Q&A.

[Vipul Garg, executive]

Thanks, Mohit. [Operator Instructions] The first question is from the line of Sachin Salgaonkar from Bank of America.

[Sachin Salgaonkar, analyst]

I have 3 questions. First, Mohit, again, I just wanted to clarify regarding this entire one-off. So basically, all the negative, which could be factored in is factored in, right? Ideally, we should not see any incremental one-offs coming from Go First in coming quarters.

[Mohit Kabra, executive]

Yes, Sachin, that's right.

[Sachin Salgaonkar, analyst]

Got it. Second question, just on this entire capacity issues at airlines, again, one is a near-term perspective, which you guys said. But there is also a risk about the Pratt & Whitney Indigo engines continue to create a bit of an issue going into next year. So just wanted to understand where do you guys see this resolving and what kind of impact that could have, let's say, from a next 12- to 18-month perspective?

[Rajesh Magow, executive]

Yes. And maybe Sachin, I can take that. No, I think it's a valid question. I guess, I was trying to sort of highlight that as a part of my script speech as well. So if there is this whole winter schedule that has been filed recently of any indication, that is actually quite encouraging, where there is a net addition. All factors are considered including the engine issue, there is an overall net addition to the supply of about 7%, 8%, so which will give you a sense of the fact that -- despite the fact that the Go First supply has been out of the market now for a while, and SpiceJet has also not necessarily been operating at 100% capacity, but both Indigo and Air India, including Air Express, Vistara, they've been adding more claims.

And projections -- and because the orders have been placed for last now couple of quarters, the supply on an every month on a net-net -- on a net sort of addition basis is going to flow in every month pretty much. And that's the kind of projection that is already out there that has come from all the airlines together. So that gives you an indication that the things are going to ease out definitely in the coming quarters.

And from a long-term outlook standpoint, to be honest, I don't really see an issue because, ultimately, all these problems are going to get resolved one way or the other. Either it is going to be -- the engine replacement that is going to fall in place slowly and gradually, or there are going to be other alternatives that are going to be available because the demand momentum from a long-term standpoint is clear based on various other sort of projections, if you see it more from a long-term standpoint, multiple sources. And operationally, all these -- I'm sure everyone is sort of working hard to find alternatives if there are any blockers that come along the way. So -- but we'll have to obviously watch the situation. But like I said, the next 6 months projections seem to be giving an indication that it's going to start improving overall situation.

[Sachin Salgaonkar, analyst]

Rajesh, in your opening remarks, you also commented about a bit of an issue on demand, especially given the harsh monsoon. I wanted to just understand how has been it progressing in the last few months given the fact there is a World Cup and we are heading into the Diwali season. Any general comments on early December bookings? Are we still seeing issues associated with demand or that started to reverse off?

[Rajesh Magow, executive]

So Sachin, July, August, September, that specific monsoon-related issue was temporary and was confined to certain cities of the country, not necessarily across. And the demand overall sentiment remained positive. In fact, it was at its peak around August, September. In September, it was like all-time high. And for the current quarter, and as we know from the historical trends that October, November, December, again, is a high season quarter. But it's early days right now because it's just end of October. Of course, because of the World Cup, wherever specific where India was featuring as part of the games, in specific cities, we've seen bookings and actual transactions growing both for hotels and flights.

But on an overall basis, the season will play out more in November. Historically, also it ends up sort of playing it and starting with third week of October, end of November and then goes into -- well into middle of December, which is yet to come. And so I guess it's overall early days for the quarter, but I don't see any reason why it will be any different.

[Sachin Salgaonkar, analyst]

Got it. And last question is on your margins. Great job guys in terms of holding up these margins well despite the negative operational leverage in the seasonally slower quarter. So the question out here is, is this the low selling and marketing below 5% of [ GOV ] is something which you guys see sustainable going ahead? And hence, there could be a bit of upside as to your medium-term margins?

[Mohit Kabra, executive]

As far as the medium-term margins or the margins for this year are concerned, Sachin, like we had called out during the last call as well, we would like to kind of consolidate around the 1.5% of gross bookings level or at about mid-teens from an adjusted margin point of view. So this is where we would like to consolidate for the year. And on an annual basis, we'll continue to look at a small expansion in the coming years as well.

[Vipul Garg, executive]

Next question in the line of Vijit Jain of Citi.

[Vijit Jain, analyst]

Congratulations, guys, on the great set of numbers. My question is just staying on the last point you made, Mohit, where are we in terms of budget hotel recovery in this quarter? I recall last quarter, you had mentioned 80%, 85% recovery. Where are we have -- has that moved up since? That's question number one. And I would like to understand if you have a -- if the reason why you believe these marketing costs can stay at these lower levels is because you can see the budget hotel segment completely recovering, and this is a new normal there as well.

[Mohit Kabra, executive]

So on the recovery side, we continue to be around the 85%, 90% levels, Vijit, on the budget segment. And like we've been explaining, this is a segment which has seen a significant amount of pricing reset and, therefore, is kind of the recovery is slightly lower than all the other price points. And -- which is kind of -- which is fine from an overall mix point of view, and we do believe that it's just a matter of time before even this segment kind of gets back to pre-pandemic levels and above. So just an extended period for that to play out, considering the amount of price sensitivity, that kind of the segment witnesses.

On the margin expansion side, like we've said this year, we have already kind of significantly optimized our overall operating cost, including the customer acquisition costs and have seen a decent amount of uptick compared to the last year. And therefore, like I said, we would like to consolidate around these levels. The reason we believe if at all, the margin -- the customer acquisition costs are likely to go up, this will be in line with our -- any changes that would happen on the mix side. So say, for instance, pre-COVID, we have seen hotels and packages kind of contributing for almost like up to 50% of the mix. Right now, we are seeing hotels and packages contributing to about 40% of the mix.

And therefore, if the mix kind of moves more and more in favor of hotels and packages over a period of time, where it is likely to, in that case, we could see a improvement coming through in the blended take rates and also a little bit of increase coming in, in the overall customer acquisition costs. But other than that, we do believe we are kind of in a regime of at least for the shorter term or medium term in a regime of kind of stable margins as well as stable customer acquisition costs.

[Rajesh Magow, executive]

Sorry, Mohit, if I may just add one more important point, Vijit, a [ few tips ] on the budget segment very quickly. Just to put things in perspective, I think it's an important one. So like Mohit explained that it is effectively the budget segment and solely in gradual recovery because the price point had changed and then the market is taking a little bit more time to sort of adjust to that. But within that, the recovery for any price point more than equivalent to INR 1,000 a room night or more than INR 1,000 a room night, the recovery is already there at the pre-pandemic level. In fact, the year-on-year growth numbers are also robust at about 115%, like about 15% growth rate, achievement is about 115% as compared to pre-pandemic.

So the only segment that might be a little bit behind is less than INR 1,000, which is effectively $14 a room night. Now that was because of the historical reason. It has nothing to do with now demand not coming back. It is only because it was exceptionally lower price historically during pre-pandemic because of higher sort of aggressive push to sort of get that segment going very aggressively on the price points. So from that perspective, I think just on the overall recovery standpoint, from our point of view, all segments have recovered very, very well now.

[Vijit Jain, analyst]

Correct. Next question is just on the air ticketing side now. I know there's a little bit of mismatch in when you recognize these volumes and what we see in the DGCA data. But it looks like -- I mean, Q-o-Q DGCA data shows 2%, 3% decline, right, and your numbers are up. So is that international recovery here? Or is this just that mismatch that you were talking about? And a related question, if you can tell me what your market share in domestics is -- domestic air aviation is this quarter?

[Mohit Kabra, executive]

Generally, I mean, it can be a bit of both. In fact, you typically do see bookings kind of holding strong, ahead of getting into the peak seasonality quarter because people tend to kind of [indiscernible] good pricing, which is available on advanced booking windows. So therefore, you could see a little bit of seasonality [ tweak ] happening on the book versus [ flown ] kind of reporting.

And secondly, our international has been improving. In fact, actually, the mix of international has been kind of improving quarter-by-quarter. In fact, now we are pretty much back to pre-COVID kind of mix coming in from the international side, like we have been mentioning the recovery on international had been slower, but now pretty much kind of back to full recovery and the domestic versus international mix is pretty much restored now.

[Vijit Jain, analyst]

Got it. And Mohit, just your market share in the domestic side?

[Mohit Kabra, executive]

Continues to be 30% plus.

[Vijit Jain, analyst]

30% plus. Got it. My last question. If you can just tell me what the total investments in Quest2Travel and Savaari were in 2Q and in 3Q? And just on -- thoughts on the convertible buyback.

[Mohit Kabra, executive]

Yes. See, Q2T, we've already kind of reported the numbers. And as far as Savaari is concerned, this again is going to be a small ticket kind of investment more in the less than $10 million kind of a range. And coming to kind of use of proceeds from a repurchase point of view, I mean, we haven't still been able to kind of get into any repurchases, particularly on the convertible bonds. They tend to be kind of there. The premium actually on the bonds has improved over the quarter. In fact, they are kind of trading at almost like double-digit premium, over 10% kind of a premium. And therefore, we haven't pursued any repurchases of these bonds. We do not expect any redemptions to come in because of the bonds already trading at a premium and the put option being in February, which is like about 4 months away. So that's where we are.

[Vipul Garg, executive]

The next question is from the line of Gaurav Rateria of Morgan Stanley.

[Gaurav Rateria, analyst]

So the first question is just trying to understand typically, in September quarter, what is the likely advanced bookings that you see for December quarter? And is this year something different because of the event of Cricket World Cup around? Has the advanced booking been stronger than the usual September quarter that you see for the December quarter?

[Rajesh Magow, executive]

Maybe I can take that, Gaurav. I won't say it is -- we have seen anything dramatically unusual, Gaurav, to be honest, only for certain pockets for certain dates for certain cities, thanks to this whole World Cup thing because of the sort of worry or concern around fares going up, et cetera. We've seen some sort of consumer -- different consumer behavior on advanced purchase side. But on an overall basis, nothing unusual.

The only other thing that I would like, which is very interesting that we've been sort of noticing over the last, I would say, quarter or 2, and that is thanks to our Book at 0 product on the hotel side is -- and maybe to some extent as people have been sort of experiencing high rate, high fares now for some time because of the peak of demand, especially in the premium segment of hotels, there is some more awareness that is getting created in the marketplace in consumers' mind to plan their travel a little bit more in advance and book their travel more in advance.

Book at 0 also gives you flexibility, specifically, I mean, this I'm talking about the hotel bookings. It also gives you flexibility on -- if you are sort of even on the edge planning for your trip, you can still go ahead and book it and then cancel it without any sort of hit on your pocket. So -- and that is also sort of shaping the consumer behavior to an extent. But future quarters, at least 3 or 4 quarters down the line will tell us whether there is any kind of a permanent shift on just the buying a bit of the Indian consumers or not, but not in this quarter. In the reported quarter, we didn't see anything unusual.

[Gaurav Rateria, analyst]

Got it. Very clear. Second question is around your investment thesis in the intercity cabs. If you could highlight some bits of what's the addressable market share? What's the current online penetration? And how you're thinking about this segment?

[Mohit Kabra, executive]

Maybe I can share some color and Rajesh can add. So we've been identifying, like we have been calling out, ground transport overall has been an area of focus for the company. And as you know, we kind of have a leader in the bus ticketing space in terms of redBus, that brand kind of has a significant amount of leadership in the online bus ticketing space. And we have also dialed over the last couple of quarters. We have also been dialing up the entire rail ticket offering, trip info services, as that's another kind of very good source of customer acquisition.

And we believe when it comes to non-flight transport, the customer has a very easy option to choose between bus tickets or choosing to kind of commute by bus or kind of travel by rail or travel through intercity cabs. So as a result, we've kind of been trying to dial up the service offerings on the rail ticket side as well as on the intercity cabs. Intercity cabs overall from a market sizing point of view, while there is no ready report, but our estimate is it would be close to about $3 billion kind of a market with very low online penetration. Online penetration is likely to be in the high single digits. So it's a pretty good opportunity to get into and a meaningful opportunity to get into.

And more importantly, like we have been calling out with this entire focus that the government has been having on infrastructure building now, while the civil aviation market has been seeing the benefit of the significant expansion on the airport side, and also we've been seeing new kind of supply coming in, particularly on the private bus side with the significant amount of highways that are getting laid and kind of created across the length and breadth of the country. We believe intercity cabs market could also grow very significantly in view of this significant growth in the highway infrastructure. So that's been an area that we've been kind of eying for some time.

Savaari has been an existing supplier on the platform. And therefore, we thought it would be a logical kind of investment to look at. And we are glad that we've been able to kind of that this transaction has worked out, and it will help us accelerate our plans on the intercity offering side. This is clearly a space where there is a significant amount of scope for creating a much better kind of aggregation of the supply side and also creating a much better kind of shopping experience for the customers as well. So we believe with our expertise on the various kind of travel services and the online dispensation, we should be able to create a meaningful kind of impact in the intercity cabs market as well.

[Gaurav Rateria, analyst]

Mohit, last question on the comments that you made around generative AI. So if I just look at how to think about the eventual outcome of early investment on the 3 factors: one, competition or your competitive moat; second, addressable market; and third, the efficiency that can help to lower your cost structure.

[Rajesh Magow, executive]

It's a great question, Gaurav. In all 3, the sort of separate variables that we should look to see how this new technology is going to impact. See, it's going to be a long journey, by the way. And we've started, and we started looking at, in fact, looking at all 3 aspects. I think the first 2 will get reflected in either the overall online penetration increasing because the overall experience.

See, ultimately, this technology is going to help us improve the customer experience on the platform, making it far more intuitive, making it far more easier, discovery can be a lot better, we can -- there are use cases that we are already working on. We've done soft launch as well. We can -- the intelligent bots can come up with an innovative vernacular based, voice-based interface as well, which would mean that it will sort of expand our reach to the smaller cities beyond the, let's say, top 20, 25 cities of the country.

And all of that would mean effectively that on one side, the customer experience will continuously improve and people will feel more and more comfortable to come and buy online. And two, it will go beyond 25 cities as well, more and more and trying to obviously also resolve the language issue beyond English. Now this is the -- specifically the language issue to crack commerce on vernacular language is going to be a long journey. It is not necessarily going to be an overnight solution. But on the other side, on the experience side, we've already started getting some good feedback from customers that this feature is helping and that feature is helping. But I think this overall -- this new technology is definitely looking more promising.

Now on the third side, on the efficiencies also, there are use cases identified already for at our end. And one of them is the post-sales experience that we are already looking at further right now or the 1.0 or maybe the 2.0 journey for post-sales experience customer -- from a customer journey perspective, was how do we sort of automate and make the transition from, let's say, contact center servicing to doing the self-service or self-help, most of the use cases that can be done on phone on a click of button, et cetera, which we achieved -- which we have achieved quite significantly with a lot of the share is now self-service.

And I think the 3.0 is going to be now further in that journey. How could we, on one hand, either the sort of get some more productivity gains for the agents -- for the call center agents for the really sort of complex cases by providing a lot of the information or filtering a lot of the information using this technology, or we sort of look at gain introduction of bot at some level in the journey, which can filter the generic queries that come our way on the post-sales service queues. So that's one area that is work on, which will clearly give us more efficiencies. And of course, we'll also enhance the customer experience for the post-sales queries, et cetera.

And on the other hand, I think there's going to be some low-hanging fruits also on the software development side, on the programming side for the engineers, where this technology, again, can be leveraged to look at the basic, the first level of programming queries, just to make life easier and efficient for the engineers at the sort of first level, which would help us get some productivity gains on that front as well.

I would just say that the work on our side is actually on, on all fronts, but it is going to be a journey, and we will keep sort of working on use cases on one side, which will impact the customer. And on the other side, we will continue to keep focusing on wherever we can get some productivity gains internally.

[Gaurav Rateria, analyst]

Rajesh, just a clarification here in terms of what's our dependence on paid traffic? And do you think that dependence also can come down with this use of this technology?

[Rajesh Magow, executive]

Right, that's an interesting one. Actually, we are already, Gaurav -- lot of our traffic is direct. So our dependence on paid traffic is relatively speaking low and on the back of brand that has been established, all our brands actually MakeMyTrip, redBus and Goibibo even from an OTA overall brand standpoint as compared to the rest of the market. And dependence is already low.

There are areas that they're also -- specifically on search engine optimization, we've already seen some gains that we have -- I should have actually mentioned about that as well that we have a -- we have leveraged -- we have started to leverage this technology there as well. And that would help more conversion because SEO traffic is not necessarily a paid traffic. And we'll keep sort of learning more and keep looking at it and exploring more areas to see if there are any further gains even on this side can come from here, from leveraging this technology.

But like I said, the dependence is already relative quite low, and it's an underpenetrated market overall, and we still need to have a healthy mix of new users coming in. And so therefore, do I really see immediate, immediate gains that -- material immediate gains that will come from this area? Perhaps not. Maybe it'll get balanced out because we will also continue to keep investing in getting some new users in.

[Vipul Garg, executive]

The next question is from the line of Ashwin Mehta of AMBIT Capital.

[Ashwin Mehta, analyst]

Yes, Vipul, can you hear me?

[Vipul Garg, executive]

Yes, we can.

[Ashwin Mehta, analyst]

Yes. Congrats on a good set of numbers. I had a question on the take rate. So we've seen bump-ups in terms of take rates in both air as well as hotels. And also in bus ticketing, we've seen stability on take rates at elevated levels versus historical. So what are the drivers for these take rate improvements? And how sustainable near term do you see these take rates to be?

[Mohit Kabra, executive]

Ashwin, actually, the take rates across segments have been reasonably stable for us. I mean there is generally a little bit of variation linked to seasonality. So slightly lower seasonality quarters, like Q2 and Q4, you would possibly find the take rates to be slightly better compared to peak seasonality quarters of Q1 and Q3. I mean it comes in both from the fact that the suppliers are trying to kind of more and more promote to build load factors. And secondly, also the ASPs tend to be slightly lower compared to peak seasonality quarters and therefore optically also, the margins look slightly better in the weaker seasonality quarters. That possibly is the only reason. Otherwise, kind of like I called out, we're kind of seeing [ feasible ] kind of stability in the take rates by the business segment.

[Ashwin Mehta, analyst]

So Mohit, in terms of the stability that you are seeing on -- or the recovery that you are seeing on the budget hotel side, do you think the take rates have scope to go up from here because typically budget hotels are higher take rate properties?

[Mohit Kabra, executive]

Pretty marginally, if at all, Ashwin, and likely to kind of remain around this range, 0.5 percentage point, plus or minus, but no significant changes are expected on the overall take rates.

[Ashwin Mehta, analyst]

And the second question was in terms of fees, we saw sequentially a reduction in terms of hotel and bus ticketing transactions. Now part of it is seasonality. But were there impacts of, say, floods, which were more accentuated in hotels or bus ticketing compared to air for us or would you say it was largely in line with expectations in terms of seasonality?

[Mohit Kabra, executive]

Largely seasonality.

[Rajesh Magow, executive]

No, it is seasonality only, Ashwin. And if you go back in history, you will see similar trends between air and hotels. The air has all the use cases. The seasonality is only about leisure segment and which is more sort of reflected always on the hotel business than the air business.

[Ashwin Mehta, analyst]

Okay. Got it. Fair enough. Congratulations and all the best.

[Vipul Garg, executive]

We'll take the last question now from the line of Aditya Chandrasekar of UBS.

[Aditya Chandrasekar, analyst]

A couple of questions from my side. Firstly, I just wanted to understand your kind of risk assessment of SpiceJet. What are you seeing on the ground? And if it's possible, could you quantify your overall exposure to SpiceJet also similar to the -- I mean, equivalent to the $10 million provision you made for GoAir? That's the first question. And second question on the bus side. On a Y-o-Y basis, I think we are seeing growth kind of stabilized at around 17% in the last couple of quarters. Just wanted to understand your overall kind of outlook on this segment? Is it kind of stabilizing at these levels or penetrations kind of saturated in this segment and how we should look at this going ahead?

[Rajesh Magow, executive]

And maybe I can take -- I can start with this and, Mohit, please feel free to add. Listen, Aditya, as far as SpiceJet is concerned, again, everything which is there, SpiceJet is a listed company, and whatever is there in the public domain is known to all of us and that we have been [ rating ]. Just from a day-to-day operations standpoint, we have only seen in the last -- especially in the last few weeks or a couple of months that the immediate -- the situation in terms of pressure on the cash flow, in terms of a couple of payments that they were supposed to be made, they were supposed to be doing basis the court orders and stuff like that. They have been honored actually already, a couple of them, which is a good sign.

And in terms of actual departures also, contrary to what we might be thinking or generally building a perception, they're adding more planes, at least about 6 more planes that they are adding during this season quarter. So I guess we will have to just wait and watch how they operate. They have been so far able to sort of navigate the situation. I would say reasonably well, not to say that they're in a very good share because they are obviously not operating at 100% capacity today.

From our point of view, we are keeping a close watch and continue to keep sort of monitoring day-to-day operations, seeing the -- how the schedules are being projected and then accordingly sort of operate from a day-to-day business standpoint with them. I don't think there is any sort of -- at any particular day, it will be fair for us to be able to start estimating the exposure at this point in time because from our point of view, we're just monitoring it and keeping it business as usual based on their volume of business with them. So I don't think that would be fair to sort of estimate at this point in time because there's no real indication of that sort at this point in time.

I guess your second question was on the bus side. No, I don't think that it has reached a saturation level. I don't think the penetration has reached a saturation level yet. In fact, we've been talking about as part of our sort of quarterly commentary in the past as well. The next wave of growth in bus segment could -- is likely to come from 2 accounts. One, there are still underpenetrated regions, where even the private sector bus market is not necessarily very well penetrated in terms of supply coming online and the adoption from the consumers are buying online.

The South and the West, for example, are -- have penetrated well and have grown and continue to keep growing. But on the north side, it is still underpenetrated and that is where our focus is. We are trying to sort of add more inventory, create more awareness and trying to see if we can just get some more next level of growth from those regions, including that is the second sort of area from where we expect the growth to come in is the nonprivate sector supply. Now that is completely underpenetrated and a huge amount of opportunity, equal the size of opportunity that the private sector bus space offer.

And the beginning of that journey has started already coming out of pandemic. We started to get a lot of RTC's supply on digitized and on our platform. And we are making good progress on that. Now the question is to create more and more awareness and also expand our reach to get those consumers who have been traveling through RTC buses also buy online. I think that is where our focus is, both these areas for -- to drive the next level of growth. But I don't think -- I think it will be early to conclude to say that this 17% or 17%, 18% would be the sort of steady-state growth. I think we do see potential to get it to mid-20s at some point in time as well.

[Vipul Garg, executive]

Thank you, Aditya. This was the last question. I now request Rajesh for his closing remarks.

[Rajesh Magow, executive]

Yes. Thanks, Vipul, and thank you, everyone. Thanks for your patience, and I wish you all the best. See you next quarter.

[Vipul Garg, executive]

Thank you, Rajesh. You may now please disconnect the call. Thank you.

[Mohit Kabra, executive]

Thank you.