Deep Kalra - Founder, Chairman of The Board and Group Chief Executive Officer Rajesh Magow - Co-Founder, Chief Executive Officer- India and Director Jonathan Huang - Director of Investor Relations.

Lloyd Walmsley - Deutsche Bank AG, Research Division Chad Bartley - Pacific Crest Securities, Inc., Research Division.

Welcome to MakeMyTrip's Fiscal 2014 First Quarter Earnings Call. The company wishes to remind you that certain statements made on this call are considered forward-looking statements within the meaning of the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995.

Forward-looking statements are not guarantees of future performance and by their nature are subject to inherent uncertainties. Actual results may differ materially. Any forward-looking information relayed on this call speaks only as of this date, and the company undertakes no obligation to update the information to reflect changed circumstances.

Additional information concerning the statements is contained in the Risk Factors and Forward-Looking Statements section of the company's Annual Report on Form 20-F filed with the SEC on June 30, 2013. Copies of this filing are available from the SEC or from the company's Investor Relations department.

And now, I would like to introduce the speakers from MakeMyTrip, Deep Kalra and Rajesh Magow. Please go ahead..

Thank you, operator, and welcome to MakeMyTrip's fiscal 2014 first quarter earnings call. Before we get to the quarter's results, I would like to share with you an overview of the environment that we are currently operating in.

On the macroeconomic front, India's economic growth has moderated to a level which we believe is far below the country's true potential. This has also weakened the rupee-to-dollar exchange rate while increasing its volatility.

From a supplier standpoint, the domestic airline industry continues to supply through some choppy whether as capacity constraints and a weaker rupee kept airfares higher quarter-on-quarter by about 20% in the reported quarter, which negatively impacted passenger growth potential.

Additionally in June, the flood disaster that took place Uttarakhand, a popular region in Northern India to escape the summer heat, has also weighed heavily on the minds of leisure travelers. On the other hand, we laud the reforms and positive actions being taken by the Indian government and the civil aviation sector.

For example, the pending Jet Airways and Etihad equity partnership shows clear willingness on the government to move towards a liberalized and more market-based economy. Additionally, we believe that AirAsia's announcement to begin domestic services later this year will help stimulate air passenger growth through competitive pricing.

Lastly, we continue to be bullish about mobile, presenting a potentially huge opportunity for us as there are currently 22 million 3G connections in India and expected to double by the end of fiscal 2014. Internet usage on mobile has already surpassed desktop access nearly 1 year ago in India.

That trend shall only continue given the proliferation of sub-$100 Android-based smartphones from Samsung, Micromax and Karbonn and the drastic fee reduction being offered by telecom companies to stimulate 3G data usage.

We believe we are best positioned in the marketplace to ride this mobile Internet wave given our presence on all major mobile platforms and our strong brand following. With that as backdrop, let me share our recent achievements from the past quarter with you.

In the fiscal first quarter, our market leadership was validated once again by Open Skies, which highlighted our leading share of India's online travel space in their recent report.

In addition, our traffic leadership continues as per June comScore data with 8.1 million monthly unique visitors, which was more than twice the size of our next closest competitor. In the same period, our website had over 105 million total page views -- pages viewed, which is more than 3x that of the closest competitor.

We believe our unwavering focus on providing our users with superior bookings and customer service experience when they use MakeMyTrip has led directly to our success and superior brand recognition. Now moving to the business performance for the first fiscal quarter.

I'm pleased to report that our total revenue less service cost achievement in fiscal Q1 was $26 million, which was in line with our internal estimates in light of the difficult operating conditions. Let me first provide details on the Hotel and Packages business, after which I'll do the same for our Air business. Hotel and Packages.

I'm glad to share that we continue to make significant progress in our strategy to grow our Hotel and Packages business as H&P revenue contribution in the reported quarter was over 41% of total revenue less service costs, along with year-on-year transaction growth of 72.2%.

In the quarter, we tactically focused on increasing the sales of higher-end hotels and holidays. This, coupled with the severe flooding situation in Uttarakhand, did, however, moderate the quarter-on-quarter growth in transactions.

We believe the decision to move upscale during the quarter improved our customers' travel experience and helped us expand business relationships with select hotel partners while improving net revenue margin and growth. Hotels.

In the first quarter, as part of our ongoing philosophy of improving customer service, we further enhanced our hotels booking website by adding high-resolution pictures, on-site videos, refreshed content and, lastly, special prices on several hotels, all of which resonated well with our hotel customers.

Furthermore, our ongoing integration with HotelTravel.com is progressing well across multiple departments. We continue to expand hotel supply primarily in Southeast Asia to over 112,000 total properties available to the HotelTravel.com website.

This includes nearly 10,000 Indian hotel fees directly from MakeMyTrip.com that are now also available for booking our customers in that region.

Our ongoing investment in technology development has also enabled hotel travel assistance to offer travel products through a number of high-volume marketing channels, which helped contribute to transactions growth.

We believe Southeast Asia presents a large opportunity for us, and we are well positioned with the acquisition to leverage the increasing trend of Indians looking to travel overseas for their holiday. Coming to Packages. In this past high season travel quarter, our packaged holiday business also registered good demand from customers.

We offer a variety of appealing domestic holiday packages for customers to escape the summer heat, and based on customer feedback, also offered luxury holiday packages, which included 4- and 5-star accommodations.

As per our outbound holiday business, Packages business, we continue to experience good demand for travel to Southeast Asian, Middle Eastern and European destinations during the summer holidays despite the weakening rupee exchange rate.

In fact, similar to domestic holidays, we offered premium overseas packages, which were very well received as customers recognized the inherent good value in these packages. Lastly, I'm excited to mention the news we released 2 weeks ago that we have signed a 3-year exclusive partnership with Air India.

We will be working with Air India to follow their online holidays as they leverage our market-leading supply of domestic and international hotels to offer a wide range of packages for their customers. We're excited that India's national carrier chose to work exclusively with MakeMyTrip, and we believe the partnership will be mutually beneficial.

Moving on to our Air business. We grew total Air transactions by 15.5% year-on-year despite a relatively flat domestic air market and continue to lead the online B2C air market with domestic share over 12% as per the government's B2C air data.

We believe focus on superior customer experience has allowed MakeMyTrip to maintain growth and market share without diluting net revenue margin for the quarter.

For example, when India's aviation regulator granted airlines the option to unbundle airfares, we simply adapted our booking engine to allow bookings of ancillary services like meals and baggage checks. Furthermore, we made significant further improvements in our Air Ticketing search logic.

Now we are providing even more targeted and highly relevant search results for improved customer decision making, reduced website latency and increased customer delight. In the quarter, we made great progress on our next-generation user interface and software infrastructure technology.

We stayed true to our promise of delivering a superior customer experience by rolling out a new homepage, which can now be seen by a majority of our visitors. The reaction from our customers to date has been very positive as it has helped them more easily discover travel products, some of which were harder to find on our old website.

Furthermore, the new site has an improved layout, which allows us to promote holiday and hotel deals in a more optimal manner. With these geotargeting capabilities, we can customize our customer experience incorporate local languages into online promotions. Lastly, it is tablet-friendly and -responsive.

For example, it automatically adjusts screen resolution to ensure uniform user experience across various form factors. We are confident that our investments will continue to elevate customer search and shopping experience to a new level altogether. Coming to mobile.

While ongoing enhancements of user experience on the desktop remains a focus, we are increasingly dedicating more resources to our mobile development team so they can build apps that help customers research, book and shop travel products through their smartphones and tablets.

Today, we have made great progress on the mobile channel as we logged more than 1.4 million MakeMyTrip app downloads combined across all mobile platforms. Our apps have been featured as a must-have local app. And in the most recent quarter, we were ranked as the top free travel app in Apple's India app store.

While we believe we're just at the very beginning of mobile Internet usage in India, we are encouraged by mobile conversion rates in our online hotels business, which has contributed more than 10% of all online hotel bookings in the quarter.

Going forward, we will be investing to further enhance the mobile experience, and we'll also look to add more of our travel products, making it even easier for our customers to search and book travel, while on the move. Now let me hand the call over to Rajesh..

Thanks, Deep, and hello, everyone. The team at MakeMyTrip remain bullish of our long-term business prospects even as India continues to face headwinds in economic growth while developing the rupee-to-dollar exchange rate, capacity constraints in the domestic airline industry and lower year-on-year airline fees.

In the face of these difficult operating conditions, we continue to focus on growing our Hotel and Packages business and further strengthened our leadership in the OTA market in India.

As Deep mentioned, it is our relentless focus on delivering a superior end-to-end customer experience that has built MakeMyTrip as the brand of choice for online travel in India.

As we had stated earlier, 2014 will remain an investment year for us at MakeMyTrip as we focus on widening our lead in the marketplace and drive the online adoption of hotel and holiday bookings in India. Furthermore, we continue to invest in HotelTravel.com to scale up its online hotel business in Southeast Asia [ph].

While this decision will impact our ability to achieve adjusted operating profits in this fiscal year, we believe the near-term investments will only make our business and brand stronger and more sustainable in the long term.

In the fiscal first quarter, on a constant currency basis, we grew gross bookings by 26.5% year-on-year to over $335 million, while revenue less service costs grew -- rose to over $26 million, representing an increase of over 11% year-on-year.

We recorded a $2 million adjusted operating loss as we continued to make investments in the key areas of technology and marketing while recognizing other expenses during the quarter. As we've been sharing all along, our strategy is to expand our Hotels and Packages business and improve our net revenue mix.

As you can see in our results, we are well along our way towards achieving this goal. In the fiscal first quarter, more than 45% of our total net revenue was derived from our non-Air businesses. Net revenue for H&P grew by nearly 55.3% on a constant currency basis while transactions were up 72.2% year-on-year.

In addition, we have improved our net revenue margins in H&P to 12.9%, while increasing our business relationships with key hotel partners through unfavorable economics, enhanced our markup capabilities and reduced reliance on discounts in order to gain share. Now moving to our Air business.

We saw transaction growth return this quarter and recorded 15.5% year-on-year increase in our total air transactions, which was far greater than the 1.2% growth in Indian domestic air markets during the same time period.

We believe that the continuous enhancement to our customers' shopping and booking experience has allowed us to keep gaining B2C share from both our online and offline competitors. Our net -- our Internet [ph] margin was also better than Q4 last fiscal at 5.7%.

On a year-over-year basis, our revenue less service costs declined modestly as we continue to face a difficult comparison with last year's same quarter, when the full-service carriers have not reduced their upfront fee commissions to the travel agents.

However, if you look at our gross bookings, you will see we achieved about 19.9% year-on-year growth in constant currency terms, highlighting our ability to grow despite the ongoing capacity challenges in the industry. For the peak travel quarter, we incurred adjusted operating losses of $2 million.

As planned, we continued to invest in the areas of technology and marketing, while we witnessed some benefits of cost rationalization as -- that we are taking and [indiscernible] in other operating expenses.

For the remaining quarters of fiscal 2014, we plan on maintaining similar levels of spend and expenses with more emphasis on marketing as we continue to grab share in the marketplace and invest to enhance our customers' experience and drive online booking adoption.

We believe with our strong balance sheet, we are very well positioned to continue to invest for growth, while weathering the current operating challenges.

Lastly, on our revenue guidance, in light of the macro headwinds shared by Deep, we would like to maintain our full year fiscal 2014 net revenue guidance with 15% to 20% constant currency growth, but adjust the dollar guidance to $95 million to $100 million solely to account for the translation impact of the rupee to dollar exchange rate at 58.79.

While we continue to face external headwinds that are not within our control, we are pleased with our growth and market share -- the market share progress and are optimistic about what lies ahead. Now I would like to turn the call back over to Deep for his concluding comments..

Thanks, Rajesh. Lastly, before we get into Q&A, I would like to take this opportunity to share some organizational changes in our leadership team approved by the board yesterday that will set the stage for the next stage of growth for MakeMyTrip.

Over the last few years, the company has been growing organically and via acquisitions into new markets and geographies. In order to provide the required focus on each of the key strategic growth areas players of the company, we've been working on growing and augmenting our senior leadership structure over the past few years.

We have invested strongly in our leadership team. And as a result, the company has senior executives who are now ready to take on larger roles. Going forward, I would like to give more personal focus on international businesses, strategy, certain specific projects and overall execution excellence.

At the same time, our core business needs continued focus on execution, along with product and service enhancements.

In order to enable the above, I'm delighted to announce the very well-deserved promotion of my colleagues, Rajesh Magow, to CEO-India from this current role as CFO and COO; and Mohit Kabra to CFO from his current role as Senior Vice President, Finance.

As Chairman and Group CEO, I will continue to lead the group's strategy, drive M&A and ensure the common vision of delivering the best experience for customers across different lines of businesses and geographies.

I'm confident that the changes will further help achieve our company's long-term vision here in our Indian and recently acquired business [ph] in Southeast Asia. I congratulate Rajesh and Mohit on their achievements and promotion. And with that, we'd like to open the floor for Q&A..

[Operator Instructions] Your first question comes from the line of Lloyd Walmsley with Deutsche Bank..

I'm wondering if you guys can comment on the net revenue margins. They seem to be pretty strong in both segments with Air actually ticking up slightly. So wondering what we should be expecting there going forward. And then a couple others, if I may.

The H&P segment seems to be showing significant transaction growth, but it seems like that's coming in at lower prices. I was wondering if that's just faster growth in stand-alone hotels versus packages. If you could comment there.

And then lastly, on the balance sheet, just curious if you can talk about the working capital outflow in the quarter as well as the cash flow from financing inflow and what's moving those line items..

Sure. So let me just start with the net revenue margin first. So as you would have noticed, Hotel and Packages margins improved from 12.5% to 12.9%. So starting with Hotel and Packages first and I'll come to Air after that.

So in this quarter, what we are focused was, and it was a really kind of part 2 move in terms of just focusing on and not necessarily the entire 10,000 or 10,000-plus hotels that we had.

Because it was high season, we focused on just growing volumes for a subset of those hotels, and that has just grown volumes in those hotels and which helped us get the incremental margin from those hotels. So it was a part 2 move.

The idea was to just provide more throughput to those hotels as we get into demand from the marketplace and get better margins from that. As we go along, we will continue to kind of just quarter-by-quarter think of different strategies to attack the hotel market as we keep growing our transactions.

That, as you mentioned, the transaction growth was very robust year-on-year, about 22%. So that was the reason why Hotel and Packages margin improved.

Now in terms of long-term outlook, we continue to maintain that this margin will incrementally improve, and we should probably handle it more from a full year perspective the incremental improvement that will happen on the margin front. And so viewed from a long-term perspective, as we've been highlighting, it probably has potential to go up to 15%.

On -- but it'll be very slow and incremental movement year-on-year. So that's as far as the Hotel and Packages is concerned. As far as Air margin is concerned, as we've been talking about, our estimated range of between 5%, 5.5%. Last quarter, we were at 5.3%. This quarter, we did better than the range that we have been estimating.

But I won't detail -- this happened in this particular quarter only because of some specialties that we were able to get from a particular airline. But I won't count this as more of a sustainable margin going forward. In some quarters, we can get some -- this kind of a windfall.

I think the best estimate at this point in time from a long-term sustainable margin is -- continues to be within 5%, 5.5%. So I think that is all we should think about it in that range and not necessarily kind of real hopes on the Air margin from a long-term perspective.

So now, coming to your second question on H&P transactions growth, yes, you're right, this coming -- our stand-alone hotels have been growing faster for sure. In fact, stand-alone hotels grew about 100% year-on-year, and it does have some bearing on the overall transaction value.

But transaction value needs to be seen for this segment versus -- and comparable with, I guess, the last year same season. And that's how we should look at it.

But given the product mix is changing from a relatively higher growth area, which is the online stand-alone hotel given the headroom that is available out there, our transaction -- overall transaction value for H&P will be relatively lower, as we've seen in the previous years and previous quarters, keeping seasonality in mind, of course.

So that -- as far as the Hotel and Packages transaction growth is concerned, as far as balance sheet questions -- for your balance sheet question, the movements on the cash flow front is concerned, so we've had -- the total -- overall cash flow movement, if you would see, including the term deposits, is roughly about $10 million.

And if you think about that, it was about $5 million went into working capital, and we also had a translation difference of the balances that are lying in India because of the rupee depreciation to the tune of about $3 million. And $1 million -- $1.2 million was the capital expenditure. So these are 2 or 3 big items.

So there, the cash flow movement happened.

I guess that's -- that was it, right? That was your last question, right?.

Yes, I think that's helpful..

Your next question comes from the line of Chad Bartley with Pacific Crest..

One question. So I understand the adjusted operating income will be negative this fiscal year. But I was hoping you could share your perspective on fiscal 2015 and your thoughts on how you're going to balance in continuing to invest for growth versus potentially returning to profitability and what that might look like..

At this point in time, I would like to just tell you that right now, we are just kind of looking at indefinitely, the focus is on growth, and we have our estimate for the next few quarters and the complete -- and this full fiscal year.

We would definitely want to see how the macro improves in the next few quarters, and then in the following quarters kind of just get to the then estimating how would it look like in the next year. I would not like to comment at this point in time for what is going to be our strategy largely because we have to just keep watching the macro environment.

As we mentioned on our call, there's a lot of macro headwinds that are there in the difficult times.

We have performed well in this quarter, but we have -- we are -- we continue to watch and expect some improvement happening, especially in the intermediation [ph] sector, the supply constraints going away probably later this year with AirAsia coming in, et cetera.

So just to answer your question, at this point in time, I would kind of reserve my comment on how would it look like in the next year. But this year, what we have talked about and kind of just given our guidance on that. And that -- after that, we are -- that's sort of our current estimates [indiscernible].

And this -- let's just wait for another quarter or 2 for us to be able to just -- able to give a better insight and better educated kind of estimate for the next year..

[Operator Instructions] At this time, we have no more questions..

Well, thank you, everybody, for joining in our call. We look forward to speaking with you all in the next quarter's call. Thank you so much..

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect, and have a great day..