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spk05: hello everyone i'm vipul garg vice president investor relations at make my trip 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 Magu, 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 20F filed with the SEC on July 12, 2022. Copies of these filings are available from the SEC or from the company's Investor Relations Department. I would like to now turn the call over to Rajesh. Over to you, Rajesh.
spk01: Thank you, Vipul.
spk02: Welcome, everyone, to our second quarter call of fiscal 2024. We are pleased to report another quarter of strong operating performance, where we maintain strong momentum, both in terms of top-line and bottom-line growth here on Yahoo. 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 air supply contraction challenged during the quarter and a 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 billion, 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 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 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 forecasts, the current 145 million air passengers in India are projected to rise to 425 million by 2035, thus 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 make 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 till 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 Quick Book 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 Goiwego'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 one and tier two 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 mode. 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 a first in the industry. We have now started to offer We've now started to also offer charter train packages 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 UPS RTC was integrated into the platform. This makes RedBus the first private ticketing platform ahead of the festival to host UPS RTC'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. These 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 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 Savari. 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 297,000 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.
spk01: Thanks, Rajesh. And hello, everyone. We have delivered robust operating performance this quarter with 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 terms. 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. 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. Existed margin stood at about $80.2 million, registering a year-on-year growth of 10.7% in constant currency. The take rates 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 the 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 n c l t order in may twenty three 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 five and a half months have elapsed and there are ongoing legal challenges to the resumption we have made a one-time 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 booking 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 an 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 above 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 come in 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 half a billion dollars 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 initiatives, 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 SavariKal Rentals Pvt. Ltd., which is a well-run intercity cab services company. We believe that while intra-city 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 two 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.
spk05: Thanks, Mohit. Any participant who wish to ask a question can press the raise hand button on their screen and we will take the questions one by one. I already have a few questions. The first question is from the line of Sachin Salgankar of Bank of America. Sachin, you may please ask your question now.
spk07: Thanks, people. Good day, everyone. I have three 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. Ideally, we should not see any incremental one-offs coming from go-first in coming quarters.
spk01: Yes, Sachin, that's right.
spk07: Got it. Second question, you know, just on this entire, you know, capacity issues at airlines. Again, you know, one is a near term perspective, which you guys said, but you know, there is also a risk about, you know, the Pratt and Whitney Indigo engines, you know, continue to create a bit of an issue going into next year. So just wanted to understand, you know, where do you guys see this resolving and what kind of impact that would have, let's say from a next 12 to 18 month perspective?
spk02: Yeah, and maybe Sachin, I can take that. No, I think it's a valid question. You know, I guess I was trying to sort of highlight that as part of my script speech as well. So if there is, you know, 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, you know, which will give you a sense of the fact that, you know, 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, you know, Air India, including Air Express, Vistara, they've been adding more planes. And projections, and because the orders have been placed for last now, you know, a couple of quarters, the supply on an every month 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 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 you know, 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, you know, projections, if you see it more from a long-term standpoint, multiple sources. And operationally, all these, you know, I'm sure everyone is sort of working hard to find alternatives if there are any blockers that come along the way. So, but, you know, we'll have to obviously watch the situation. But like I said, the next six months projection seem to be giving an indication that it's going to, you know, start improving overall situation. Thanks, Rajesh.
spk07: And, you know, in your opening remarks, you also commented about, you know, a bit of an issue on demand, especially given the harsh monsoon. Wanted to just understand, you know, how has been it progressing in the last few months, given the fact, you know, there is a World Cup, you know, we are heading into the Diwali season. Any general comments on early December bookings? You know, are we still seeing issues associated with demand or that's started to reverse off?
spk02: So such in 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, 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, you know, the season will play out more in November. Historically also, it ends up sort of playing it in 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.
spk07: Thank you. And last question, you know, is on your margins. You know, great job, guys, in terms of, you know, holding up these margins well, despite the negative operational leverage in the seasonally slower quarter. So the question out here is, you know, is this, you know, the low selling and marketing below 5% of GOE is something which you guys see sustainable going ahead. And hence, you know, there could be a bit of upside as to your medium term margins.
spk01: As far as, you know, 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 one and a half percent, you know, of gross bookings level or at about, you know, mid-teens from a... at just a 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, you know, a small expansion in the coming years as well.
spk07: Thanks all and best of luck for future. Thank you, Sachin.
spk05: Thanks, Sachin. Next question is from the line of Vijit Jain of Citi. Vijit, you may please ask your question now.
spk03: Thanks, Whipple. Congratulations, guys, on a great set of numbers. My question is, you know, just staying on the last point you made, 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? Has that moved up since? That's question number one. And I would like to understand 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.
spk01: So, you know, on the recovery side, we continue to be around the 85-90% levels, you know, Vijay, 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, you know, the recovery is slightly lower than all the other price points. and and which is which is kind of you know uh which is fine from an overall mixed point of view uh and and we do believe that you know it's just a matter of time before before even this segment kind of you know gets back to pre-pandemic levels and above uh so just an extended period for for that to play out considering the amount of price sensitivity that kind of you know this segment witnesses On the margin expansion side, like we've said, this year we've already kind of significantly optimized our overall operating costs, including the customer acquisition costs, and have seen a decent amount of uptake 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 customer action costs are likely to go up, this will be in line with any changes that would happen on the mix side. So say, for instance, pre-COVID, we have seen hotels and packages accounting for almost up to 50% of the mix. Right now, we are seeing hotels and packages contributing to about 40% plus 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 an 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, you know, in a regime of, at least for the shorter term or medium term, in a regime of kind of, you know, stable margins as well as stable customer education costs.
spk02: Correct. Sorry, Mohit, if I may just add one more important point, Vijay, if you shift on the budget segment very quickly, you know, just to put things in perspective, I think it's an important one. You know, so like Moit explained that it is effectively the budget segment and slowly and gradually recovery because the price point had changed and then market is taking a little bit more time to sort of adjust to that. But within that, you know, the recovery for any price point more than equivalent to thousand rupees a room night or more than thousand rupees 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, you know, 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 1000 rupees, which is effectively, you know, $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, you know, get that segment going very aggressively on the price points. And so from that perspective, I think just an overall recovery standpoint from our point of view, all segments have recovered very, very well now. Correct. Thanks, Rajiv.
spk03: Next question is just on the air ticketing side. Now, I know there's a little bit of, you know, mismatch in when you recognize these volumes and what we see in the DGCA data. But it looks like, I mean, QOQ DGCA data shows to 3% decline, right? And your numbers are up. So is that international recovery here? Or is this just that mismatch that we were talking about? And a related question, if you can tell me what your market share in domestics is, domestic aviation is this quarter.
spk01: Generally, I mean, it can be a bit of both. In fact, you know, you typically do see bookings kind of, you know, holding strong ahead of getting into the peak seasonality quarter because people tend to kind of, you know, good pricing, which is available on advanced booking windows. So therefore, you know, you could see a little bit of, you know, seasonality tweak happening on the book versus loan kind of, you know, 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've 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.
spk03: Got it. And Mohit, just your market share in the domestic side? Continues to be 30% plus. 30% plus, got it. My last question, if you can just tell me what the total investments in quest to travel and safari were in 2Q and in 3Q. And just on, you know, thoughts on the convertible buyback. Thank you.
spk01: Yeah, see, Q2D, we've already kind of reported the numbers. And as far as Savari 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... The premium actually on the bonds has improved over the quarter. In fact, they are kind of trading at almost like, you know, double digit premium, over 10% kind of a premium. And therefore, we haven't pursued any repurchases of these bonds. We do not expect, you know, any redemptions to come in because or the bonds already trading at a premium and the put option being in February, which is like about, you know, four months away. So that's where we are.
spk03: Got it. Thanks. I think those were my questions. I'll jump back into the queue. Sure, Vijay. Thanks.
spk05: Thanks, Vijay. The next question is from the line of Gaurav Duteri of Morgan Stanley. Gaurav, you may please ask your question now.
spk04: Hi, thanks for taking my question. 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?
spk02: Maybe I can take that, Gaurav. I won't say we've 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 worry or concern around fares going up, etc. We've seen some sort of 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 two, and that is thanks to our book at zero product on the hotel side. and maybe to some extent as people have been sort of experiencing high rate to 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 consumer's mind to plan their travel a little bit more in advance and book their travel more in advance. Book at zero also gives you flexibility, specifically, I mean, this I'm talking about the hotel bookings. It also gives you flexibility on, you know, if you are sort of even on the edge planning for your trip, you can still go ahead and book it and then, you know, cancel it without any sort of hit on your pocket. So, you know, and that is also sort of shaping the consumer behavior to an extent. But, you know, future quarters, at least three or four quarters down the line will tell us whether there is any kind of a permanent shift on just the buying habit of the Indian consumers or not, but not in this quarter. In the reported quarter, we didn't see anything unusual. Got it.
spk04: Very clear. Second question is around your investment thesis in the intercity cabs. If you could highlight some bits of, you know, what's the addressable market here? What's the current online penetration and how you're thinking about this segment?
spk01: Maybe I can share some color and Rajesh can add. So we've been identifying, like we've 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 up over the last, you know, couple of quarters, we have also been dialing up the entire, you know, rail ticket offering and, you know, trip info services as that's another kind of, you know, very good source of customer acquisition. And we believe when it comes to non, you know, flight transport, you know, the customer has a, you know, very easy option to choose between bus tickets or, you know, choosing to kind of, you know, commute by bus or, or kind of, you know, travel by rail or travel through intercity cabs. So, you know, 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 you know, ready report. But our estimate is it would be a close to about $3 billion kind of a market with very low online penetration. Online penetration is likely to be in the high single digit. 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 eyeing for some time. Savari has been an existing area. you know, supplier on the platform. And therefore, we thought it would be a logical kind of, you know, you know, investment to look at. And we are glad that we've been able to kind of, you know, that this transaction has worked out and it should help us, you know, 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.
spk04: Great. Thanks a lot. 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 our early investment on the three factors, one, competition or your competitive mode, second, addressable market, and third, the efficiency that can help to lower your cost structure. Thank you.
spk02: It's a great question, Gaurav. In all three, 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 three aspects. I think the first two will get reflected in either the overall online penetration increasing, you know, because the overall experience... 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. There are use cases that we are already working on. We've done soft launch as well. 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, you know, the smaller cities beyond the, let's say, top 20, 25 cities of the country. And all of that would mean effectively that one, 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 you know, also resolve the language issue beyond English. Now, this is 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, you know, at our end. And one of them is the post sales experience that we're already looking at further, you know, right now, or the 1.0 or maybe the 2.0 journey for post-sales experience from 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 a button, etc., which we achieved, which we have achieved quite significantly because 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, you know, sort of get some more productivity gains for the agents, for the call center agents, for the really, you know, sort of complex cases by providing a lot of the information or filtering a lot of the information using this technology, Or, you know, we sort of look at, again, introduction of bot at some level in the journey, which can filter the generic queries that come our way on the post sales, you know, the service queues. So that's one area that there's work on, which is clearly give us more efficiencies. And, you know, and of course, we'll also enhance the customer experience for the post sales queries, etc. 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, you know, there is this technology again can be leveraged to to look at the basic, the first level of sort 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.
spk04: Thank you for the detailed answer, Rajesh. Just a clarification here in terms of what's our dependence on the paid traffic and do you think that dependence also can come down with this use of this technology? Thank you.
spk02: Right, that's an interesting one. Actually, we are already, Gaurav, you know, a lot of our traffic is direct. So our dependence on paid traffic is relatively speaking low and, you know, on the back of brand that has been established, All our brands actually make one trip, 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 there 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 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, you know, 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 you know, like I said, the dependence is already relatively quite low and it's an under-penetrated 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. Thank you so much. All the best. Thank you, thank you, Gaurav.
spk05: Thanks, Gaurav. The next question is from the line of Ashwin Mehta of Ambit Capital. Ashwin, you may please ask your question now.
spk06: Yeah, Vipul, can you hear me? Yes, we can. Yeah, congrats on good set of numbers. I had a question on the take rates. 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?
spk01: Ashwin, actually, you know, the... 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, you know, the suppliers are trying to kind of, you know, 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, you know, 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 reasonable kind of stability in the take rates by the business segment.
spk06: So, Mohit, in terms of the stability that you are seeing on or the recovery that you're 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.
spk01: very marginally, if at all, Swain, and likely to kind of, you know, remain around this range, you know, half a percentage point plus or minus, but no significant changes are expected on the overall take rate.
spk06: And the second question was in terms of, in terms of, 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 or 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?
spk02: Largely seasonality. No, it is seasonality only, Ashwin. And, you know, 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.
spk06: Okay. Fair enough. Congratulations and all the best.
spk02: Thank you, Ashwin.
spk05: Thank you, Ashwin. We'll take the last question now from the line of Aditya Chandrasekhar of UBS. Aditya, you may please ask your question now.
spk00: Yeah, hi. 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 YOY basis, I think we're seeing growth kind of stabilize 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? Are penetrations kind of saturated in this segment and how we should look at this going ahead? Thank you.
spk02: All right. And maybe, maybe I can take, I can start with this and, you know, Mohit, please feel free to add. Listen, Aditya, as far as SpiceJet is concerned, again, you know, everything which is there, SpiceJet is a listed company and, you know, whatever is there in the public domain is, is known to, to all of us, you know, and we've been operating just from a, day-to-day operation standpoint, you know, we have only seen in the last, especially in the last few weeks or couple of months, that the immediate, you know, 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, you know, basis the court orders and stuff like that. They've 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 six 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've been so far able to sort of navigate the situation, I would say, you know, reasonably well, you know, not to say that they're in a, you know, they're in a very good shape because they're 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 how the schedules are being projected and then accordingly sort of, you know, you know, sort of operate from a from a day to day business standpoint with them. I don't think there is any sort of as at any particular day, it will be fair for us to be able to start estimating the exposure at this point in time, because, you know, from our point of view, we 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, you know, 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 is likely to come from two counts. 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 of buying online. You know, the South and the West, for example, have penetrated well and, you know, have grown and continue to keep growing. But on the North side, it is still under-penetrated. And that is where, you know, where our focus is. We are trying to sort of add more inventory, you know, 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, you know, sort of area from where we expect the growth to come in is the non-private sector supply. Now, that is completely underpenetrated and a huge amount of opportunity equal the size of opportunity that the private sector, you know, bus space offer. And the beginning of that journey has started already coming out of pandemic. We started to get a lot of RTCs 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've been traveling through RTC buses also buy online. I think that is where our focus is, you know, both these areas to drive the next level of growth. But I don't think, you know, I think it'll be early to conclude to say that this 17 or 17, 18% would be the sort of steady state growth. I think, you know, we do see potential to get it to, mid-20s at some point in time as well.
spk05: Thank you. Thank you, Aditya. This was the last question. I would request Rajesh for his closing remarks.
spk02: Yeah, thanks, Vipul. And thank you, everyone. Thanks for your patience. And, you know, I wish you all the best. See you next quarter.
spk05: Thank you, Rajesh. You may now please disconnect the call. Thank you.
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