MakeMyTrip Ltd

NASDAQ:MMYT

Earnings Call Transcript 2022-Q3

[Unidentified Company Representative]

Hello, everyone. We're starting the earnings call now. I'd like to now turn the call over to Vipul, please.

[Vipul Garg, Vice President of Investor Relations]

Thank you, Ruchi [ph]. Hello, everyone. I'm Vipul Garg, Vice President, Investor Relations at MakeMyTrip Limited and welcome to our fiscal year 2022 third quarter earnings webinar. Today's event will be hosted by Deep Kalra, our company's Founder and Group Executive 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 and -- recorded by the company and will be made available for replay on our IR website shortly after today's session.

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 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 company undertakes no obligation to update the information to reflect the 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 13, 2021. Copies of these filings are available from the SEC or from the company's Investor Relations department.

With that, I would like to now turn the call over to Deep. Over to you, Deep.

[Deep Kalra, Founder & Group Executive Chairman]

Thank you, Vipul. Welcome everybody to our third quarter earnings call of fiscal 2022. I sincerely hope everyone joining us today is keeping safe and healthy. Let me start by giving a quick update on the COVID situation in the country. India, like other countries in the world, is going through another surge driven by the Omicron variant. This wave started in December 2021 and while the positivity rate continues to remain high, India's vaccination coverage gives hope and assurance that the severity of infections this time around will remain low.

It is definitely reassuring to see that the country's cumulative vaccination coverage has crossed 1.6 billion doses, with over 72% of India's adult population being fully vaccinated. Around 52% of children in the 15 to 18 years old age group have also been inoculated with the first dose of the vaccine. Going by predictions of health experts, India should soon start seeing decline in the number of daily new infections. Travel in India, much like other countries, also slowed down with the onset of the Omicron wave, albeit with relatively lower travel restrictions than the previous waves. As the severity remains low, the country continued to see domestic travel being undertaken in the form of essential travel but with question. Leisure travel has understandably taken a backseat temporarily. That said, overall travel sentiment remains moderately high, with people waiting to hit the road again as the situation begins to ease out in the coming months.

During the reported third quarter of financial year 2022, domestic travel witnessed a strong recovery riding on the back of pent-up demand, further fueled by festival travel and winter holiday season. Unfortunately, as Omicron began to spread in December, we saw demand for leisure travel sliding down towards the end of the quarter, although broad travel sentiment remained considerably high during the quarter. As a result, the good news coming out from the reported quarter is that we recorded our best adjusted operating profit during the pandemic. The past two years have been tough but the silver lining is that, similar to global trends, India has gained momentum in becoming a truly digital economy with significant improvement in online buying behavior. Studies indicate that e-commerce in India has seen tremendous growth across the country during the last two years. It is heartening to note that Tier 2 and 3 cities in the country are now transacting online more than ever.

Enthused by this new base of Internet users and increasing online penetration, we are focusing on growing the penetration of online travel bookings by making the end-to-end process of planning and booking travel simple and convenient for buyers across Tier 1, 2, 3 and the hinterland. This is one area where I believe we have made tremendous progress in the last quarter. From launching the platform in Hindi language, India's largest native language to supporting regional air connectivity by powering Uran or the regional flights on our platform and the government's AirSewa portal to introducing real ticket booking service on redBus with IRCTC and more.

We are committed to bringing more Indians to make their first ever travel booking online. We're also aggressively ramping up our efforts to build travel products that are more inclusive and diverse. I must mention that along the journey of building products for all, we are also focusing on personalizing the experience of each user to make the booking experience more relevant and meaningful across all our platforms.

With the third wave expected to subside soon, we believe 2022 holds better prospects for the entire travel and tourism industry. We have seen strong recovery of demand following the previous waves, giving us adequate optimism for a strong recovery post the Omicron wave as well. We also believe that with our recent investments in new platforms like myBiz, myPartner, host-in-app feature for homestay segment and others, we are well poised to tap into new demand segments. My optimism is further fueled by the latest developments in the U.S., U.K. and other parts of Europe where restrictions have begun to gradually ease. We believe that the recovery in travel demand post the third wave will be led by domestic travel. While resumption of scheduled international flights has been postponed till February 22, we can expect graded opening up of destinations for Indian travelers in the next fiscal year.

In the previous quarter, while only a few international destinations were open for fully vaccinated Indian travelers, we observed a steady increase in bookings to destinations, including the Maldives and Dubai on our platform. I'm pleased to also share that recently, MakeMyTrip was recognized as the only Indian travel company to be honored with the top producer award at Travel Trade in the Maldives.

I would also like to briefly talk about our social -- corporate social responsibility, or CSR initiatives and especially the ones that focus on taking care of those impacted due to the ongoing health crisis. As part of MakeMyTrip Foundation, we have launched a scholarship support program Padhte Raho Badhte Raho, for underprivileged students who unfortunately lost their parents due to COVID. We are also closely working with the Government of India, Ministry of Tourism and other not-for-profit organizations such as Tata Trust to boost community-based tourism and extend support and scaling up travel infrastructure across the country.

With that, I would request Rajesh to share highlights from the last quarter.

[Rajesh Magow, Co-Founder & Group Chief Executive Officer]

Thank you, Deep and hello, everyone. As Deep mentioned, India, like many other countries, is also battling it's way through the third wave. But thankfully, while this virus variant is highly contagious, it is less severe. With high rate of vaccination and less hospitalization, there is hope of this wave subsiding soon. While essential travel is continuing even in the middle of this wave, our growth-oriented performance in the reported quarter is a strong indicator that as the situation eases, India will jump back to traveling for their leisure trips. We continue to stay watchful of the situation on a daily basis and are managing the business accordingly.

Now, let me share some highlights from the previous quarter. I'm happy to share that we reported one of the most profitable quarters over the years, linked to strong business growth coming in from pent-up demand. On gross bookings, we grew 95.1% over the same quarter in previous year and 58.5% over Q2 in constant currency terms. In our air business, we continue to stay on an upward recovery trajectory following the momentum picked up during July to September quarter last year. The good news is that we have managed to recover faster than the market in our domestic air ticketing business, touching 68% year-on-year growth in passengers flown. Festive travel season further propelled demand, with November recording highest daily segments during the pandemic. Huge surge in demand came from domestic leisure destinations that accounted for 94% increase in volume of tickets as compared to the same quarter last year.

On the other hand, international travel demand recovery continued to be slow overall, with the exceptions of Maldives and Dubai, where we saw robust growth. On the product side, we launched MakeMyTrip bundles, a custom fare option that allows customers to bundle various convenience-based offerings such as zero cancellation, travel insurance, airport memes and cabs in one booking.

Moving on to our hotels and packages business now. Our domestic hotel and packages business saw a robust quarter-on-quarter and year-on-year growth during the third quarter. We recorded year-on-year growth of about 125% in constant currency terms in gross bookings. We also recorded highest check-ins during the pandemic for the Christmas weekend, although the bookings had started to dip by the time as the third wave was setting in. While B2C platform showed solid recovery, growth was also partly aided by our corporate platforms, namely myBiz, Quest2Travel and myPartner B2B platform.

As shared earlier, our myPartner platform aims to deliver on it's promise of empowering travel agent partners, with quick and easy access to our wide range of inventory across hotels and flights and more products in future. We have now ramped up to currently about 22,000-plus registered travel agents on myPartner and we are adding around 1,500 agents every month.

On various segments of hotels, while premium hotels continue to lead recovery, glad to share that budget to mid-segment hotels have also started to see pickup in demand, leading to inclusive recoupment of all price segments of hotel this quarter. On our homestay segments, bookings for villas managed to surpass pre-endemic numbers. On the product side, we continue to strengthen our offerings for the hotel segment. We have scaled our packages across 450-plus premium hotels and are beginning to see great traction on both supplier as well as consumer side. We have further refined the user-generated content collection flows, mobile site and post-sales flows. On Goibibo, we introduced daily steal deals to make booking through the platform more value-driven and rewarding.

In Q3, we also introduced assurance driven products to help make travel planning worry-free amid the ongoing uncertainty. These included zero cancellation fee on any last minute cancellations and more. On our homestay product, I'm excited to share that we recently launched the beta version of our in-app host feature called became a host. The feature allows accommodation owners to list their villas, apartments and other independent properties on the platform in just a few clicks. We are already seeing early wins here since it's soft launch.

In parallel, we continue to stay focused on enhancing our products to further improve the booking experience. We've also ramped up homestays inventory further and closed the quarter with about 30,000 properties, recording a 66% increase in supply over pre-pandemic. On the holiday packages side of the business, we saw 2x bookings in domestic packages sold when compared with same quarter in 2019. On the other side, while bookings for international destinations remain muted, Maldives, that was open for vaccinated travelers, registered 300% growth over same quarter during pre-COVID times on our platform.

Now I would like to share updates on our bus ticketing business, led by redBus brand. This business has been -- has seen a significant quarter-on-quarter growth of 77% in gross bookings value. During the quarter, as the festive season added to the travel demand, along with well-timed fuel price reductions, we saw 93% private supply and 102% regional transport corporation operators supply coming back online. Apart from bringing back supply, our focus remained on driving personalization and customization of booking experience on the platform, such as introduction of boarding point, dropping point future. We also introduced customized nudges, persuasion triggers based on parameters such as on-time performance and ratings from similar cohort of travelers to help customers choose the right bus service.

Furthermore, our Primo program for top-rated sellers is taking shape nicely. We now have close to 1,800 Primo branded buses across the length and breadth of the country and this is already helping build good top-of-the-mind awareness. It is encouraging to note that about 85% of customers who took a Primo service say that their next trip would also be on a Primo bus. We have launched a number of new initiatives to differentiate our Primo experience, including an ongoing Primo lounge pilot at one of the popular bus boarding point in Bangalore.

I'm also happy to share some exciting news coming from overall ground transport business. While MakeMyTrip and Goibibo platforms have been offering rail booking services for a while, we have now launched redRail on our redBus web platform and have plans to have a redRail app soon as well. Through redRail, we aim to leverage the customer overlap between bus travel -- bus travelers on redBus, who also happen to be a part of India's large train passenger base.

Another initiative that also kept our ground transport team busy during this period is the pilot launch of Ride, a network of cab franchisees across the country that operate under Ride's umbrella. With superior technology at the back end, it powers all aspects of booking, fulfillment and travel and will help improve the reliability of supply. Currently, we are running a pilot in Delhi NCR and Bangalore and plan to scale this up in other cities in the future. With these new initiatives, we hope to build on the strong brand and user base of redBus to create leadership positions in ground transport categories other than buses in the future.

Moving on to our corporate and SME travel business. While business travel overall saw a sluggish recovery pattern but for us, the growth was robust this quarter, partially aided by new accounts acquired over the past few quarters. We recorded a 122% recovery in comparison to same period in fiscal year '19, '20. More than 250 key accounts, 340 SMEs were onboarded on myBiz during this quarter. On Quest2Travel also, we celebrated some big wins. We bagged accounts of 11 large groups, including Tata Capital, Nika and K Raheja Corporation and more.

Now sharing updates from some of our recent strategic initiatives. We continue to invest in our fintech initiative called TripMoney. After having launched successful products, including travel loan or book now pay later and insurance offerings, we are ready to launch ForEx card on MakeMyTrip and Goibibo. As international travel picks in the coming months, we are confident that this card will make it's way into wallets of Indian outbound travelers. In GCC, during the last quarter, our focus was on building supply modes and products for best-in-class booking experience for Indian nationals, other experts and local Emirati population. Happy to share that there was a 96% quarter-on-quarter increase in new user acquisition in Q3, albeit at a low base. Our focus will continue to remain on increasing app penetration in the region considering that 93% of UAE population uses the Internet on a daily basis as per research estimates.

Lastly, allow me to give a short update on our loyalty programs. To continue extending value to our loyal customers, we organized the MMT Black Fest, a sale campaign ran in partnership with key hotel and flight partners which has received positive feedback from our customers. Since the launch of the program, about one lakh users have been added to the top two tiers of MMT Black and 72,000 users were able to upgrade their tiers by transacting for more than one lakh gross booking value on the platform.

For Goibibo, loyal consumers under goTribe, we further simplified the flow of Tribe Coin or goCash redemption, helping improve usage by 94% in the quarter. We also launched personalized instant cash back engine on Goibibo to reward consumers with instant goCash to offer more value against a single booking.

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

[Mohit Kabra, Group Chief Financial Officer]

Thanks, Rajesh. Hello, everyone. I hope you are all staying safe and healthy. The reported third quarter of the fiscal year started on a positive note, with customers more confident than ever to step out of their homes and plan a much-needed holiday. Strong supply side recovery across all travel segments further boosted demand side momentum during this high seasonality quarter. Since international travel was still restricted during this quarter, domestic leisure destinations in India saw a major recovery before bookings were slightly hit in December due to the Omicron scare and the beginning of the third wave of the pandemic in India. Over last few updates, we have spoken about our cost rationalization efforts through structural reductions in fixed costs and building efficiencies in variable costs like marketing and sales promotional expenses.

In quarter three, we could see the multiplier effect of these cost efficiencies which aided by demand recovery, led to doubling of the adjusted operating profits compared to the last quarter. Our adjusted operating profit for this quarter stood at $13.2 million which is almost 2x compared to $6.6 million in Q2 and almost 2.6x compared to $5.2 million reported in the same quarter last year. Adjusted further for a noncash depreciation and amortization expenses, the current quarter's adjusted operating cash profit reached nearly $7.6 million, the highest in a quarter achieved by year till date. Our Q3 total gross bookings stood at $1,155.7 million which was the highest since the pandemic, registering a strong growth of 8.5% over the previous quarter and about 95% growth over same quarter last year in constant currency terms.

Moving on to our business segments; air ticketing adjusted margin stood at $52.9 million, representing 105.9% growth over same quarter a year ago and 38.4% growth over the previous quarter in constant currency terms. We continue to be one of the most preferred air ticketing platforms with a market share of about 30% in the domestic air ticketing business including both the online and off-line modes of booking. The adjusted margin for our hotels and packages businesses increased to $54.1 million during the quarter reported which is an increase of 17.6% over same quarter a year ago and 53.6% increase over the adjusted margin reported in the previous quarter in constant currency terms.

As far as our bus ticketing business, the ingested margin stood at over $14.1 million and represented a 58.4% increase over same quarter last year and a very robust 79.1% quarter-on-quarter improvement, led by supply recovery in the domestic bus business. Our redBus brand continues to lead in the bus ticketing segment in the country. And in future, we'll be expanding the Rivers brand [ph] franchise to intercity cash and rail bookings, as mentioned by Rajesh earlier. Lastly, the adjusted margin in other businesses was $5.9 million, an increase of 44.4% over last year's same quarter and an increase of 33.3% over the previous quarter in constant currency terms. Let me now share some details around the operating costs during the quarter.

During the reported Q3, after a level of almost two years, we finally returned with our Jo Hoga Wo Hoga campaign on the MakeMyTrip brand on the Indian television. The campaign was targeted at boosting confidence while highlighting the convenience and flexibility offered on the MakeMyTrip platform. Goibibo's new marketing theme, Apna Rule to Paisa Wasool, was centered around the brand's promise to always offer best value and value adds on travel bookings. Even with the increased brand spending, our overall marketing and promotional expenses during the quarter stood at 5.6% of gross bookings, marginally higher than the 5.4% reported in the previous quarter.

Adjusted personnel costs and SG&A costs for the quarter stood at about $34.7 million compared to the pre-pandemic run rate of about $45 million per quarter, aided by significant long-term fixed cost rationalization and efficiencies in our customer acquisition spends. Built during the last six quarters under the pandemic, we could witness the impact of scale economics filtering down to adjusted operating profit. During this quarter, we have increased our stake in Quest2Travel as part of the acquisition framework and are excited about the strong future prospects of this business which is directed towards facilitating travel bookings for large corporate customers. Within the corporate segment, we have surpassed pre-COVID levels and it remains one of the key demand segments for our company.

Let me also give some color on a few non-operating P&L elements. During this quarter, we recorded a profit of about $2.5 million from exchange of our shareholding in Inspirock which was acquired by Klarna, a Swedish fintech company. We have also additionally provisioned for $8.4 million to fully provide for all the travel and awards in the ongoing litigation with the founders of the HT Group on a conservative basis, while we'll continue to take all available legal remedies in the matter.

During the ongoing quarter, we continue to focus on tight cost control amid muted demand. However, with the reports that many of the key cities in India have already seen the peak of the third wave, we believe there is a good possibility of a sharp recovery in demand in the coming months. As Indian plans their next summer vacations, soon, we'll be with them with the most trusted brands, MakeMyTrip, Goibibo and redBus to make their travel more corrected and convenient.

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

[Vipul Garg, Vice President of Investor Relations]

Thank you, Mohit. We are now ready for Q&A. [Operator Instructions]

[Unidentified Company Representative]

Vijit wants to ask a question. Vijit you can speak now.

[Vijit Jain, Citigroup]

Yes, sorry. Can you hear me?

[Rajesh Magow, Co-Founder & Group Chief Executive Officer]

Vijit there is echo your side. Now I -- I think it's better now, yes.

[Vijit Jain, Citigroup]

Yes, sorry. My question is just on the business. Now I know that international has barely recovered in Q3 and I know Omicron probably is a dampener for the ongoing quarter. But did the business return to it's pre-COVID levels in Q3 given that you were, I think, approximately 75% to 80% of your pre-COVID peak, if I understand it right for Q3? That is my first question.

[Rajesh Magow, Co-Founder & Group Chief Executive Officer]

Yes, Vijit, this is Rajesh. Good question. Let me just take this. You're right, Vijit. October, November, December quarter, the quarter that we are reporting out, we did see on a run rate basis a few days where actually even for air ticketing business, we had seen recovery up to 90%, 95% on some days as well. In fact, for even hotel bookings, as I mentioned very briefly, just in one line that we had seen during the pandemic, record check-ins during the Christmas weekend as well which was very close to the pre-pandemic peak as well. So, I guess that was a good indication of overall demand sentiment improving across the board and recovery coming very closely as far as domestic travel is concerned. I think with an exception of, I would say, business travel to an extent, leisure segment was definitely back in some visiting friends and relatives but in any case happening. So with an exception of, I would say, business travel which was taking a little bit more time to come back, I mean, for us, it was a good story, given that we had acquired a lot of accounts. But at an overall basis, business travel was lagging behind a little bit but all other segments were coming very close to pre-pandemic level on a run rate basis. I think that will be fair to say.

[Vijit Jain, Citigroup]

Correct. Rajesh, my second question is on the advertisement vertical, if you can give updates because I think last time you had mentioned that you're looking to make further investments in that space. So any further update on that side of the business? Also, if I can add an additional question. If you can -- just a housekeeping question. If you can share what your sense is of market share in the aviation business and in the bus ticketing business?

[Rajesh Magow, Co-Founder & Group Chief Executive Officer]

Sure. Okay, let me just take the first one first. Yes; so the platform that we had built which was a third-party advertisement platform, we've been making continuous investments on that. In fact, we've been just improving the product offering also on that. So more recently, we have scaled up the sponsored link sort of ads that any partner can come in and advertise on our platform, further from what it was in the last quarter in terms of just the product enhancements that we've been able to do. And we've been continuously getting good traction from all our partners, especially on the hotel side but also on ground transport, in some cases, even some of the airlines have been very, very interested in participating and advertising on our platform as well. So this is a long-term initiative. We are continuously going to keep making platform far more robust with additional features. We do have plans to add a lot more analytics as times in the coming quarters for our partners and keep making their product far more sort of attractive and robust from people who would come and advertise on our platform standpoint. So it's going to be a continuous sort of investment area from our point of view. And like I said, it is already giving us good traction on the number of advertisers who are increasing quarter-on-quarter.

Now talking about the civil aviation market share, I think Mohit just called out as part of his speech. We continue to be close to about 30% of the total market, both online and off-line put together as far as domestic air ticketing business is concerned. And as far as bus segment is concerned, we continue to be the market leader, I guess, by far from the online booking space standpoint. And we should have -- off the online booking space on bus, we should have close to about 65%, 70% share, I would have thought.

[Vijit Jain, Citigroup]

Got it. Thanks a lot, Rajesh. Rajesh, one final question before I jump back into the queue. With the cab business that you called out on ground transport, that's part, I guess, of the bundled offering. I noticed from the app that it's really a marketplace, right? Where you are showing availability of cars on rain from third-party partners and stuff like that. Can you talk a little bit about monetization on that? What is the commission structure like on that business with your partners? And I'm assuming this will be housed under other revenues, right?

[Rajesh Magow, Co-Founder & Group Chief Executive Officer]

Yes. So let me just tell you a little bit more about this -- the whole car business that we are trying to build. It has two sort of products out there. One is airport transfer which is effectively an attached to a flight customer who would be at the airport and who would like to just come to the airport or go from the airport to the destination. And the other one is the intercity cab product. And I think what you were referring to was more the marketplace or a lot of partners who are already listed out there and the customer has the option to pick and choose from the car option and then it could be fulfilled by various sort of partners or the operators that we have it at the back end which we have aggregated. And we had, if I missed sort of also add here that we had mentioned it in the past that we had made an investment on the supply side software where we were trying to just provide the supply side technology platform for the operators as well or the cab aggregators. So that's one model on the intercity cab. What I was trying to highlight in the script early on was also there is one more initiative that we have launched. We are already pilot testing it out in the two markets, Delhi NCR and Bangalore and that is called Ride which is a slightly different model where we are signing up for partners who already have a pool of cabs. We are sort of branding the cars on the road. We are taking better control of the inventory to improve the overall product experience like the actual ride experience and trying to position it to more like a differentiated experience with the set of partners that we are going to have. I mean we're calling it Ride franchisees who -- the partners who would work with us.

The model for the aggregator model or the right model is going to be either a commission model or a revenue share model. So that's really the monetization plan on that. But it's early days in this market. We are right now, doing some strategic investments in this area but we definitely see this as a very big opportunity and we are going to sort of scale this up in the coming quarter.

[Vijit Jain, Citigroup]

Got it. And thank you so much. I'll just jump back into the queue. Thank you.

[Rajesh Magow, Co-Founder & Group Chief Executive Officer]

Thanks, Vijit.

[Vipul Garg, Vice President of Investor Relations]

Thank you, Vijit. Any other participants who wishes -- who wish to ask a question can you please raise your hand?

[Unidentified Company Representative]

Vikas wants to ask a question. Vikas you can now speak, please.

[Vipul Garg, Vice President of Investor Relations]

Vikas, your line is muted. You will have to unmute and speak.

[Unidentified Company Representative]

Vikas, you have to unmute, please. Ashwin wants to ask a question. We move to Ashwin. Ashwin, you can ask question, please.

[Ashwin Mehta, AMBIT Capital]

Yes. Can you hear me?

[Unidentified Company Representative]

Yes, please.

[Ashwin Mehta, AMBIT Capital]

Hi, thanks for the opportunity. So I had one question in terms of the hotels segment, wherein the ATVs materially went up almost to the extent of 20% sequentially and there was a drop in terms of the take rates this quarter. So was it largely due to the skew towards the premium hotels?

[Mohit Kabra, Group Chief Financial Officer]

Ashwin, I could take that. There are two reasons. Clearly, one, that the skews kind of being more towards the payments at our hotels. And also during this specific quarter, the mix change was also in favor of the holiday packages. So a lot more growth is what we have seen coming through our holiday packages as customers have chosen the comfort of a packaged product instead of doing stand-alone bookings. And since the holiday package product is more like a slightly muted margin business compared to hotels because it's a combination of hotels as well as air tickets, etcetera, therefore, the segment kind of margins have come down a little bit but the hotel margins per se haven't really seen any significant contraction but for the mix change towards premium.

[Ashwin Mehta, AMBIT Capital]

Okay. And just one more in terms of the air side. So domestic passenger growth, if you look at it sequentially, was up, I think, more than 60%. But in terms of our flight segments, there was a lag. So is it more a timing issue? Or what is driving that?

[Mohit Kabra, Group Chief Financial Officer]

Sorry, Ashwin. Could you just repeat that? Sorry, missed that one.

[Ashwin Mehta, AMBIT Capital]

So essentially, if you look at the domestic flight traffic in India, that was up almost 60% sequentially in this quarter, wherein, for us, the flight segment growth was a tad lower. So is it more to do with the timing or…

[Mohit Kabra, Group Chief Financial Officer]

Yes, absolutely. You've got it right. What BGC reports is flown passengers, what we report is booked passengers and therefore, you will see a little bit of a difference across quarters based on the emerging trends on booked versus flown.

[Rajesh Magow, Co-Founder & Group Chief Executive Officer]

I think we have a question on chat as well. Maybe we can take that because I think Saurav's mic is not working so he is not able to speak. So maybe very quickly before we go to Kushagra, I can just quickly respond to that question. And the question for everybody's benefit is, how has your initiatives translated into improvement in client stickiness and LTV over the years in different businesses? Yes, no, it's a great question, Saurav. So I'll tell you one sort of metric where we very closely track. I think the short answer to this question is it has played out quite well, especially for our matured lines of products and the offerings. And we measure it through the repeat rate. And on any given quarter, we would have anywhere between 65% -- depending upon the quarter that you specifically look at anywhere between 65% to 70% of the transactions will actually come from the existing customers. And the rest will come from the new customers in that particular quarter.

So it's a pretty healthy repeat rate. In fact, it's a very sort of good balance between the repeat transactions coming from the existing consumer base but also the new users every quarter, quarter after quarter, that keeps coming our way. So overall, given that we've been in the business for many years, it has been playing out -- all these investments have been really playing out in a manner that sort of helps the overall P&L as well.

I think we can go to Kushagra now. Kushagra, please feel free to ask your questions.

[Unidentified Analyst]

Sure. Thanks for the opportunity. Just one question on -- so if I look at your overall structure -- cost structure. If you can give more sense on which of the segments is sort of taking a higher share in the expenses part like you have been market leaders in air ticketing for a fairly long time. So this segment would be sort of cash generating for you guys. And generally, hotels is one which would be taking a relatively higher share in the overall spends, right? So just a broader sense on if I have to look at on the operating profit line which of the segments probably is taking a higher share in the overall spends, yes?

[Mohit Kabra, Group Chief Financial Officer]

Kushagra, maybe I can take that. While it's kind of difficult to exactly get to kind of segment-wise kind of profitability because guess what, like Rajesh mentioned, we have a lot of repeat and a lot of customers come in and kind of transact across business segments and therefore, it's kind of very difficult to allocate these customer accretion costs by the segment. However, broadly, at a high-level sense, what we have always been calling out that the air ticketing business has been kind of profitable for a fairly long time, almost since the time of our IPO in 2010 and therefore, the overall kind of customer accretion spends in that business are very well optimized. Clearly, we have been calling out that the accommodation space, specifically hotels and within hotels, the budget segment of hotels and has been an area of investment over the last few years 2016 onwards and therefore, a large part of these spends have been directed towards that particular segment. The good part is our kind of pretty much our investment cycle even on this segment or in this space also has pretty much played out now and therefore, the unit economics kind of now start looking much better.

And overall, therefore, if we see our marketing and promotional expense, have trended down very well over the last five or six years. They used to always be at a peak, they used to be almost close to about 15-odd percentage points of gross booking and we are now closer to about 5-6 percentage points of gross bookings. So we've seen that significant efficiency coming in as the entire accommodation business has got built so much so that if you see on a normative basis, pre-pandemic, the hotels business now accounts for almost like half of the business mix. It used to be a very small contribution until about seven years back. So that's broadly how it is kind of playing out right now.

[Unidentified Analyst]

Sure. No, that's helpful. So again, last one from my side. Like how do you see the commissions in the hotel space overall? The reason I ask this -- commission is moving over the medium term for the hotel segment. And the reason I asked this question is, so -- and you're largely dependent on -- I mean, you have a fairly -- you have [indiscernible] in the premium hotels. So one point, all these hotels and all will also more and more digitized. Second, a lot of these new models which are coming up, so there is a trend or there is an indication towards more capital coming in this part of the hotel segment, right? So where do you see the commissions overall heading over the medium term for the hotel segment for you guys?

[Mohit Kabra, Group Chief Financial Officer]

If you look at the entire hotel space, you need to keep in mind that overall occupancy in India, even in kind of normal times, pre-pandemic, it used to be more in the 60s for the industry as a whole. And when it comes to this particular business, any room night which goes unoccupied is actually kind of a wasted room night or it's almost like a perishable room night, right? And therefore -- and also the incremental costs on an added room night compared to the incremental margins coming in for the hotel are very disproportionate. So the hotel is extremely incentivized in terms of taking the occupancy levels as high as possible. But like I said, overall, at an industry level also, the occupancy rates used to be kind of in the 60s. Therefore, compared to a lot of the other global markets or the mature markets where the occupancy rates are much higher and the fact that the hotel industry is extremely fragmented in India with more and more of independent mom-and-pop kind of properties rather than chains of hotels, the landscape per se does offer slightly better margins compared to the mature markets. However, from our own kind of point of view, we've always kind of looked at creating long-term sustainable economics with all our suppliers, irrespective of the line of business and therefore, over the last few years, we've actually brought down our overall margins in the hotels business from being in the early 20s to kind of being more in the high teens now. And that, we believe, is kind of sustainable both in the short term to the longer-term period for the reasons that I called out.

[Unidentified Analyst]

Yes, got it. Thanks.

[Unidentified Company Representative]

Arya wants to ask a question. Arya, you are unmute now, please.

[Unidentified Analyst]

Thanks. Am I audible?

[Rajesh Magow, Co-Founder & Group Chief Executive Officer]

Yes, you are.

[Unidentified Analyst]

Yes, hi, thanks. Thanks a lot. So I mean, firstly, you mentioned that this deeper Internet penetration outside of the metros and Tier 1 cities. So how has the share of transactions, traffic, etcetera, move for you on outside of metros and Tier 1 cities. Do you track that? And can you share any numbers on that and maybe across the segments of overall?

[Rajesh Magow, Co-Founder & Group Chief Executive Officer]

No, happy to, happy to just give you a directional sense of this, Arya and it's obviously a good question given the fact that the next level of growth has already been sort of coming in from the smaller cities now and more and more in future, it's going to come in from there. As we all know, as Deep also mentioned as part of his speech, that, thanks to pandemic, the penetration on the adaptability of Internet and even e-commerce sort of accelerated in these cities as well. So we are taking a bunch of initiatives, some of them we have already called out. But I think it will be fair to say that the new user acquisition, for instance, for our rail bookers or for that matter, even bus bookers, we've been getting out of the new users, as I called out, about 30% of the transactions in the quarter come from new users. Our overall -- and the contribution coming in from smaller cities through the rail bookers or the bus bookers of that new user base is about 25%, 30%.

So about 25%, 30% of the new users are coming through the smaller cities, doing rail bookings or bus bookings and sort of budget hotel bookings, etcetera, as well. And the other sort of product that -- and the area that we've seen a lot of traction coming in is the -- on the air ticketing side is the Uran side. So all the regional small sectors, all those bookings at Uran sectors are effectively Tier 2, Tier 3 cities, in fact, even beyond and in future also, the expansion of the airports are also going to be like that. And we've been actually more than line share of all those sectors even on the air ticketing business. So all in all, we -- good traction coming in from [indiscernible] I think, the background is noisy, Arya. I don't know if it is from your side or somebody else's.

[Unidentified Analyst]

Sure. So the 25% to 30% of the 30% new users you mentioned is on the entire base of new users or only for rail and bus users?

[Rajesh Magow, Co-Founder & Group Chief Executive Officer]

No entire base of new users, yes.

[Unidentified Analyst]

Secondly, can you talk a little bit about your sort of how you expect the margins to move next year? Assuming it's a more normalized year but then some of your investments, some of your ad spend, etcetera, is also going to come back. So can we expect you to be profitable on a full year basis? And what sort of a range of margin are you looking at?

[Mohit Kabra, Group Chief Financial Officer]

Sure, Arya. I can take that. Like I just called out on the hotels business, we do expect margins to kind of largely remain stable in the high teens. So is the case with the best ticketing business with the margins kind of largely remaining probably stable, closer to the 8.5% to 9.5% kind of a range. And on the air ticketing business, also, we do expect margins to remain around 6% to 7% range at least. Now with that kind of margin structure by line of business, we do believe, with the kind of efficiencies that we have seen on the customer acquisition expense side which I've just talked about, we do expect that while there might be small increases in the overall kind of marketing and promotional spend, it is unlikely to kind of go beyond, say, the 7-odd percent kind of percentage point of gross bookings level compared to the 9 to 10 percentage points of gross booking that it used to be pre-pandemic and therefore, that kind of gives us confidence that we kind of should kind of remain on a profitable path.

I mean just to kind of give a little bit color on how we've kind of failed at least over the last two years. If you see last year which was a high pandemic hit kind of an year, we were kind of almost cash breakeven. And this year, we expect to be kind of optionally have a profitable year and therefore, that gives us even more confidence. And if you see in this particular quarter also, with volumes kind of recovering and with kind of a good recovery in the couple of months of the quarter coming through, we've actually been able to scale up profitability pretty nicely and therefore, we believe if the recovery kind of comes back and normal travel recovery is kind of back in place as the pandemic ends, we should be in a good space on the profitability side.

[Unidentified Analyst]

Sure. And lastly, any update on India listing plans and what could be the timeline?

[Mohit Kabra, Group Chief Financial Officer]

I just request those on the call who are not on the -- not speaking, to kindly put it on mute because there's a lot of background voice.

[Unidentified Analyst]

Sure. So can you give me -- did you get my question, Mohit, or do you want me to repeat?

[Mohit Kabra, Group Chief Financial Officer]

Please go ahead.

[Unidentified Analyst]

Yes. So any update on the India listing plans? Would it happen next year? What are the sort of -- how are you thinking about that? Or are they not on the agenda?

[Mohit Kabra, Group Chief Financial Officer]

We didn't really call out any listing plans as such but we'll keep our options open on that. No plans as yet but yes, we remain open. And like I had called out, the focus is to kind of -- if you look at it from a cash position point of view, we kind of have -- we're very comfortable on the cash position. We've got over $450 million of free cash and cash equivalents on the balance sheet. And I also just kind of mentioned it that we should probably be cash accretive and not be kind of deploying cash for operations. We also don't believe there is any large investment opportunity requiring a significant amount of capital infusion. And so, therefore, keeping all of that in mind, I think the focus right now is in terms of making sure that the recoveries on the travel side kind of comes through. We see through the end of the pandemic and kind of have a much better kind of cost structure and continue to be on the path to profitability. As that happens, we will kind of take an appropriate view if you're going to kind of look at an alternative capital raised models.

[Rajesh Magow, Co-Founder & Group Chief Executive Officer]

Mohit, maybe we can take that and, Vipul, there is -- I can see one more question from Vikas on the chat and then there's an anonymous a very similar question. And I guess the question on profitability. Vikas, we are already profitable, we actually called out that it's the best ever profitable quarter that we just reported out. And as we've been sort of recovering out of a wave, whenever there has been recovery on the quarter based on all the measures that we have taken, historically, just to restructure our cost base, we've been profitable and profitable at scale.

[Mohit Kabra, Group Chief Financial Officer]

I guess, Rajesh, that also answers the anonymous question that we have on as attendee.

[Rajesh Magow, Co-Founder & Group Chief Executive Officer]

Yes, yes.

[Mohit Kabra, Group Chief Financial Officer]

Sounds great. I mean if you have any last questions, we could take that now. I'll -- we'll kind of look at wrapping up the call.

[Vipul Garg, Vice President of Investor Relations]

I think, Mohit, we can end the call for now. And any further questions, I will request the participants to mail us and we get back to you guys. Our email ID is updated on the 6Ks and their disclosures and on the website so please feel free to reach out to us.

[Mohit Kabra, Group Chief Financial Officer]

Thank you, everyone.

[Vipul Garg, Vice President of Investor Relations]

Thank you. Thank you, everyone.

[Rajesh Magow, Co-Founder & Group Chief Executive Officer]

Thank you. Thanks.

[Deep Kalra, Founder & Group Executive Chairman]

Thank you, everyone.