Deep Kalra - Founder, Group Chairman, Group Chief Executive Officer and Chief Product Officer Rajesh Magow - Co-Founder, Chief Executive Officer - India and Director Mohit Kabra - Group Chief Financial Officer Jonathan Huang - Director of Investor Relations.

Manish Hemrajani - Oppenheimer & Co. Inc., Research Division Lloyd Walmsley - Deutsche Bank AG, Research Division Pinku Pappan - Nomura Securities Co. Ltd., Research Division Gaurav A. Malhotra - Citigroup Inc, Research Division Sangmesh Jatti.

Deep Kalra, Rajesh Magow and Mohit Kabra. Please go ahead..

Hi, this is Deep Kalra. Thank you, and welcome, everyone, to our fiscal 2015 third quarter earnings call. I would like to begin today's call by expressing our growing optimism on the improving Indian macroeconomic environment and the largely untapped potential of rising Internet, specifically mobile Internet penetration within our country.

The penetration and adoption of smartphone usage continues to grow in India. IDC is reporting that Indians own more than 120 million smartphones, and IAMAI is estimating that there were more than 173 million mobile Internet users as of December 2014. Both these statistics are expected to grow much further from here on.

We are currently committed to capitalize on these trends and continue to invest behind our mobile experience to accelerate adoption. During this past high season travel quarter, we continued to see strong growth in domestic air passenger traffic as carriers offered attractive fares to stimulate demand and improve load factors.

Even with strong overall growth, we did, however, witness limited service disruption from one of the domestic airlines, SpiceJet, as part of their ongoing restructuring and recapitalization efforts. We are encouraged to see the low-cost carrier's first tranche of recapitalization transpire this last weekend by its new investor.

During the quarter, our domestic Air Ticketing growth far outpaced the market. As a result, we materially improved our air market share to over 15%, up from the 13% reported last quarter, marking a new record in our company's history.

The successful launch of Vistara, the new domestic full-service carrier backed by the Tata Group and Singapore Airlines is a positive development for the sector. This launch, as well as AirAsia India's venture into India's domestic air market gives us increasing confidence in the expansion of the country's under-penetrated aviation market.

Next, I'd like to update you on our mobile development efforts. The MakeMyTrip app downloads accelerated during this quarter, and accumulated downloads stood at 5.5 million customers across all popular operating systems from our last reported number of 4.1 million in Q2.

As a result of this momentum, over 40% of our total monthly unique visitors accessed MakeMyTrip via mobile app and the mobile web during the quarter. Mobile bookings now account for 20% of total online transactions in our domestic sites business.

As for our domestic hotels business, mobile users accounted for more than 34% of total online transactions. In addition, the improving mobile traffic is helping grow the organic traffic to new all-time highs of the company.

In Q3, we also continued our focus to improve conversion rate on mobile by optimizing the booking funnels and enhancing our mobile user experience across all businesses. For example, by working with our air partners, MakeMyTrip became the first Indian OTA to allow customers to select seats for some specific airlines via our mobile site.

Furthermore, the team made improvements to the mobile My Itinerary feature to allow cancellations, check booking summaries, enable mobile check-in for flights and track recent status. In addition, we continue to make the mobile payment process easier by integrating single-click payment solution for our Android users.

Finally, as shared last quarter, we are introducing vernacular support on our mobile site, as we are keen to extend our customer reach to a wider geographic base within India, which can now access the Internet through smartphones.

In fact, we are the first OTA in India to offer flight bookings in Hindi and recently launched rail bookings in Hindi as well.

Going forward, we will work to further accelerate mobile bookings and drive the growing trend of mobile Internet and e-commerce adoption that's changing the way Indians access the web and purchase goods and services, including travel.

Before I hand the call over to Rajesh, I'm excited to announce our first investment from the recently launched MakeMyTrip travel innovation fund. This past quarter, we invested in a company called Simplotel Technologies, Simplotel.

Simplotel, based in Bangalore in India, owns and operates www.simplotel.com and is engaged in the business of helping hotels grow their online business. Simplotel's SaaS platform can provide hotels with responsive and optimized websites and booking engines.

We believe our investment in Simplotel will help promote online distribution of hotel inventory in India, especially in the budget hotel segment. Now I would like to let Rajesh share the operating highlights of the past quarter..

Thank you, Deep, and hello again, everyone. I am pleased to announce another quarter of solid performance, with our focused execution on all fronts of the business and assistance from the improved macro environment and growing mobile Internet penetration.

In Q3, our Hotels and Packages transactions increased by nearly 47% year-on-year and recorded 43.5% growth in revenue less service costs on a constant currency basis. While we continued our focus on driving high-growth or standalone hotel bookings, we managed to expand the margin on the Packages booking in the high-travel season quarter.

The highlight of the quarter was the significant increase in the number of domestic hotels that can be booked online on our website and app.

In Q3, we executed another drive to expand our supply base, which has resulted in a total domestic accommodation count of more than 20,000 properties, including hotels, guesthouses and vacation villas, all of which are fully bookable on our platforms.

This is a quantum increase from the 15,500 domestic accommodation properties we reported in the last quarter.

We were encouraged by the growing mobile Internet penetration and our ability to drive bookings for the existing base, and hence, launched this aggressive sign-up drive to provide additional choice and selection for our increasing customer base.

We plan on leveraging this wide supply of networks to reach out to a broad range of customers while ensuring that we remain the preferred partner for our increased base of hotel suppliers in the times to come. Going forward, our strategic investment will further help bring the independent properties online faster.

On the international hotel supply side, we also remain committed to offering wide range of hotel choices for our outbound customers, with more than 190,000 properties in our group network that are outside of India. For our customers using mobile devices to access our services, transactions growth in standalone hotel mobile bookings were very robust.

We continue to improve the user experience by further driving down latency and embedding new features designed to further enhance the mobile experience that helped drive the adoption as well as improve conversions. The mobile channel now represents nearly 34% of all domestic hotels booked as Deep had shared earlier.

During the past peak holiday travel quarter, due to the brief slight disruptions caused by one of the domestic low-cost carriers in late December, some of our customers chose to cancel their holidays.

In addition, the damage to hotels and infrastructure caused by the severe floods in this summer in Kashmir, which is a popular holiday destination for Indians, also altered travelers' plans. These 2 events did limit the growth within our holiday and packages business due to customer cancellations.

We believe that these were isolated incidents and do not change our view of the market opportunity ahead. Recently, we launched a new online holiday booking engine, which allows customers to customize an existing holiday product or create an entirely personalized holiday package.

We expect this effort will help move our packages to our customers online over time. Moving on to our Air Ticketing business. We continue to expand our domestic air market share lead. As per DGCA data, our share is now over 15%, up from over 13% share reported last quarter.

During the quarter, air net revenue increased by over 10% year-on-year as we grew transactions by over 47% year-on-year. Overall, air transaction growth was driven by a robust year-on-year increase in both domestic and international outbound travel.

The strong growth in domestic air largely was the result of fee contractions, with low fares offered by the domestic carriers, increased adoption from off-line to online bookings, accelerating shift from off-line to mobile bookings and our strong brand recognition.

During this high season period, we were once again able to demonstrate our ability to gain share away from our competitors.

Our international Air Ticketing business continues to see robust transaction growth as the online experience for customers continues to improve, and we benefit from the ongoing shift from off-line retail bookings towards online channel, including mobile online.

In summary, MakeMyTrip's continuous drive to innovate and enhance our mobile offering, unrelenting focus on our customer's experience with better product and customer service and robust technology infrastructure, continues to help us stay ahead in the market and increase our share.

While our team is certainly focused on delivering on our near-term promises, we will invest for the future and not lose sight of our long-term vision. We believe the MakeMyTrip brand is best positioned within our peer group to capitalize on the immense opportunities in travel and mobile Internet growth we see ahead for the industry.

Now let me turn it over to Mohit to share our quarter's financial results in greater detail..

Thanks, Rajesh, and hello, everyone. In the fiscal third quarter, we delivered net revenues of $35.1 million, representing a constant currency growth of 22.9%. This was in line with the guidance issued for the full fiscal year in the last quarter.

During the seasonally high holiday quarter, while continuing to strategically leverage high mobile penetration to drive hotel transaction growth and market share gains in the Air Ticketing business, we also pursued our tactical strategy of expanding net revenue margin in our holiday packages business.

I will now elaborate on the financial performance of our key business segments. Net revenues from the Air Ticketing business grew 10.2% year-on-year in constant currency terms. This growth was driven by strong bounce back of transaction growth of over 50% on a year-on-year basis in our domestic Air Ticketing business.

With industry growth being in the range of 15% level has also resulted in over 2% market share gains for the company in the domestic air segment, which is the largest market share gain posted by the company in any quarter.

While the air net revenue margins have come up sharply from same quarter last year levels of 7.2%, the margin for the second quarter at 6% was in line with our expectations and the trending positive year to date.

Our revenue less service costs in the strategic Hotels and Packages business came in at $15.8 million, which represents a 43.5% growth year-on-year in constant currency terms and was driven by 46.5% growth in transactions, a significant improvement in the overall H&P net revenue margin.

The margin for the quarter was 13.4% compared to 12.4% in the previous quarter and 12.6% in the same quarter last year. This improvement in the Hotels and Packages margin has helped reaffirm our confidence in building up net revenue margins in this strategic segment of our business in the longer run.

As a result of our 3-pronged strategy of transactions growth across businesses, along with margin improvements on the holiday packages business during this particular quarter, we are pleased to report adjusted operating profit of over $1.4 million and adjusted EBITDA of over $2.9 million during the quarter.

While we continue to be in an investment mode to tap the potential of these predominantly client hotels market in India, gradually moving online on the back of an improving mobile Internet penetration, we are pleased to see operating leverage in this high holiday season quarter.

This will help us continue making strategic investments in mobile, marketing and other growth-generating expense to drive growth in our Hotels and Packages business in the coming years. I would now like to talk about our annual revenue growth guidance. As we enter the last quarter of fiscal 2015, we see a seasonally slow travel quarter.

We draw confidence from the results of the past 3 quarters and the demonstrated ability to unwaverably pursue our business strategy even in the face of temporary industry disruptions.

We are therefore encouraged to pursue higher growth in the last quarter and increase the full year net revenue constant currency growth guidance to a range of 30% to 31% or $137 million to $138 million at an estimated average currency rate of INR 61 to $1. We would now like to open the call for Q&A.

Operator, please?.

[Operator Instructions] Your first question comes from Manish Hemrajani, Oppenheimer..

How many points of growth did the SpiceJet disruption in Kashmir cost you guys on air overall?.

Manish, if I can take that, it actually didn't cost us too much on the air side as you would notice on the robust transaction growth that we reported. The impact of SpiceJet disruption actually happened more on the holiday side.

And it qualitatively -- because what happened was there were -- because of these flat sales bookings were done and last-minute cancellations of the flights kind of costs, because there had been a couple of days in the late December month that they were almost grounded.

So that kind of created some kind of panic, which resulted into some cancellations. But that was more on the holiday side, not particularly on the air side..

Okay, got it. And then your take rates in hotels improved to 13.4% this quarter.

Can you highlight what's causing that improvement? Is it a mix shift or better rates or what that may be?.

So essentially, combination of the 2, I would say. This quarter, on one side, when we were looking at standalone a-la-carte hotels transactions growth. So the volumes -- and historically, in the last couple of quarters, we've been having robust growth there as well.

So that definitely has suffered because as you grow volume, you can expand your margin from the supply side whether it is volume length or otherwise.

But also on this quarter, as we kind of just mentioned in our script as well, that on the packages side, given the high season quarter and given the fact that there were other disruptions that were happening, so we shifted our focus to just expand our margin on the packages side in terms of just moving the product mix on the packages side from domestic to overseas.

So that was another reason which kind of helps us expand our margins. So it's a combination of the 2..

Okay, got it. We saw robust growth in the past impacting the volumes this year in India.

Can you give us your view on the state of the air market today? And how do you see it shaping up given SpiceJet, AirAsia and Vistara in the mix in calendar 2015?.

Yes. Sure, Manish, I'll take that. This is Deep. So Manish, as you've been following the market, the situation has been fairly fluid. I think it's only fair to say, since the last week or so. And as I called out in my script that we -- it's -- -- that SpiceJet is completely out of the woods.

And with the recapitalization, the first stage is actually done, new owners in place, owners who have actually been first-time owners. So we're going to see, I think, quite an aim to build back capacity. As of now, they have significantly taken off capacity down to almost 60% of where they were at peak. So we are going to see that build back.

However from an overall capacity point of view, IndiGo has certainly built -- IndiGo, the market leader, has certainly built capacity through the year, and they have grown low double digits through this year if you look at where they started out. And they've been every month, every other month, actually adding a plane to their fleet.

AirAsia is still a new entrant, 3 planes right now; plans to expand. But as you'd be aware that they have had a solid trouble in other parts of -- in Southeast Asia. Vistara just launched with their first plane. Now their plans are that by March this year, they will actually have 4 planes, full-bodied.

And those are full-service aircraft, wide-bodied planes. And then their plan is, over the next 3 to 4 years, to have 20 planes. So I think we're going to see overall capacity come back through the year.

Hard to put an exact number, but anywhere between low single -- high single digits to low double-digits growth is expected over the course of the calendar year '15 in the domestic market. [indiscernible] on the base where Spice has bottomed out, we feel..

And your next question comes from the line of Lloyd Walmsley..

Just wondering if I could follow up on one of the earlier questions. Looking at the H&P growth in bookings, it looks like it decelerated quite a bit.

Is that all from the situation in Kashmir? And can you put numbers around that? Or perhaps you can give us a sense of where growth rates are outside of regions impacted by that? And then I guess as a follow-up to that, what is the right growth rate as we move through that longer term for this H&P segment? Do you expect it to kind of reaccelerate as we get through this? Or is this kind of a newer level of growth?.

So Lloyd, Rajesh. I'll take that. So a couple of points on this side. This has to be this quarter number of transactions growth overall in H&P. We should look at it along with the overall year growth number. And if you see the ideal growth numbers, so the H&P transaction growth was year-on-year about 72.4%, which is fairly robust.

And so I would not take this quarter low growth because it happened because of the couple of events that happened, as a trend going forward. We certainly see that the -- especially for standalone hotels, there is a lot more -- thanks to mobile Internet penetration growing, lot more adoption that's going from off-line to online channels.

So that will continue to grow. Don't see that slowing down. This quarter specifically, I guess the impact was more on the packages side, as I mentioned earlier. And in terms of -- it's just very hard to quantify what percentage points it would have kind of impacted.

We do have a sense of cancellation because we were also trying to move the customers from one destination to other destination as well. And the good news is actually for those destination -- and that's why I called that as temporary events, the queries started coming back, back on track.

And in the situation in Kashmir was a little bit -- with respect to hotel and accommodation infrastructure has also come back to normal. So the life is really back to normal. And therefore, I don't really see this as a -- I won't take this as a trend going forward.

And given the fact that during an overall year, this is -- we have delivered about 72% odd and 60% revenue growth. It's very robust, and we are quite hopeful and optimistic of the growth trend kind of continues in the coming year as well, especially like I mentioned on the standalone hotel side, thanks to the mobile Internet penetration..

Okay. And then as a follow-up, maybe you can just explain a little bit about how you've been able to gain market share on the air side.

Is that -- are you guys getting a bigger share of some of the new entrants? What are some of the things that have driven those impressive share gains in air?.

Lloyd, this is Deep. I'll take that. So there are a couple of factors. I think the first being pretty aggressive fare sales that have been out in the market, and as we do know that fare sales tend to stimulate the leisure market. Leisure is our strong point and our forte.

And so overall for the medium also, OTAs tend to gain and that definitely was one of the factors. Within the OTA segment before the gain, as you've seen, the market share's moved up appreciably from 13% to 15%, which is pretty impressive by any count in 1 quarter.

It's really, I think, we would give a lot of benefit and causality here to product improvements on the mobile site. We now see mobile transactions account for 3% on the -- on domestic air. And a lot of those improvements, which I called out, I think are helping us significantly on mobile.

Just the ability, I think we had to focus a lot more on -- allow customers to get benefits like getting seat selection. Also on the post-sale side, just a lot more comfort booking with the app, the fact that our app downloads grew from 4.1 million to 5.5 million and then we got more usage through the app.

So definitely, I think both internal factors to us as well as external. Just the lower fares were simulated or rather were in that longer advanced purchase times, again, the leisure market playing a role out there.

So yes, we were, I think -- also, I think if I can say so, fairly quick to draw in terms of market being able to sustain very high levels also, when we had other players actually I think not being able to stay robust and maintain that kind of high levels of traffic that they were getting.

Also, I think with the new payers that came onto the market, we were again first off the blocks. We were able to very quickly take bigger shares, albeit off just a couple of planes right now, but establishes ourselves pretty well. And I think we've prepared to that. We planned for that. We had our integrations in place.

And we were very proactive in terms of doing quick market building as well as helping them getting established, so yes. Net-net we've grown on each and every airline individually, so the share is not -- is not just kind of concentrated on a couple of airlines across the board.

And so I think this is -- we are fairly happy with this, and we think we should be able to sustain this going forward..

And your next question comes from Pinku Pappan, Nomura..

You mentioned in your remarks that you're going to focus on the international package segment and away from the domestic package segment.

What is the net revenue margin difference between these 2 segments?.

So -- I mean, just to first clarify, I didn't mention that we are going to focus going forward on international packages over domestic packages. What I said was that given the temporary disruptions that happened in the domestic market, thanks to the SpiceJet canceling flights in the domestic market.

In this quarter, the reported quarter, our focus was look for alternative destinations. So naturally, the focus kind of shifted to the international destinations as well. And that helped us because the transaction value is higher because of the higher transaction value and we also kind of looked at high-value products, et cetera.

From a product mix perspective, we were able to expand our margin so that's what I just wanted to first clarify. But to your second part of the question, the difference -- the percentage point difference between domestic packages and overseas holiday packages is not really there, so the margins are similar.

But obviously, the value -- transaction value is higher on the overseas holiday side. And therefore in absolute terms, if the product mix changes in favor of overseas holiday, we will get a higher margin in absolute terms. But on percentage terms, it is the same..

That is helpful. Secondly on the ATVs, the average transaction values, there was an 8% decline in the quarter.

Was that in part led by the cancellations you had in the holidays? Or there was something else that led to that decline?.

That's largely a factor of the changes in mix for India. It's simply composition. Otherwise, as such, ATVs have improved both for hotels as well as for holidays. But since the mix is kind of shifting more and more towards hotel, for the segment as a whole, the ATV has come down a bit..

When you said decline, what did you mean? Year-on-year growth or quarter-on-quarter?.

No, the year-over-year decline, 8% decline in Hotels and Packages..

Okay, I got it..

Absolutely. Year-on-year, there is a decline of about 8%. But as I was explaining, this is more due to a mix move of about 6% to 7% in favor of hotels from packages, which is more higher ATV. And therefore, even though individually, both Hotels and Packages, the ATV has been going up for the segment as a whole.

Because of the mix change, the ATV looks down by about 7%, 8%..

Okay.

And can you help me with the mix right now between H&P?.

Overall, if you look at it in terms of mix, currently more trending towards a 55%, 60% in favor of hotels. While just to the overall -- while taking number up closer to about 50% for hotels. And therefore because of this shift, you've seen this happen.

But as Rajesh was explaining during the call and on the -- this particular quarter, there has been a bit of an aberration, particularly in terms of our domestic holiday because of the kind of event that we have had.

Whether it was an aftermath of the Kashmir floods, and therefore, a slightly lower number of passengers taking the Kashmir holidays, and also as a result of what was getting paid out due to minor cancellations happening from one of the airlines, particularly in the peak period of second half of December..

Okay.

And lastly, what was the growth in the standalone hotel segment transaction growth?.

With those kind of report standalone as such, separately, but this -- I'd like -- I could kind of directionally tell you that it was in the range of about 55% to 60%..

And your next question comes from Gaurav Malhotra..

Just had a couple of questions.

So if I'm -- if I get it correct, your Hotels and Packages margin essentially went up because since the volumes were not really coming and unlike the previous high seasons, you did not necessarily go all out in trying to encourage lower transaction volume, is that correct? Is that a correct way of looking at it?.

Not really. Actually, when it came to -- between the H&P on the standalone hotel side, our focus continued to be on growing the transaction. So that part is much more focused on the growth side. In margins, surely, came on the packages side and that was because of the change in the mix.

Like I mentioned earlier -- and the change of mix happened because -- in favor of overseas packages this time around than domestic packages because of the temporary disruption that we had. But it is not -- also, we should see this in light of what happened last year same quarter and the transaction growth was only about 22%.

So if you see from that comparison standpoint, so last year, H&P transaction in this December quarter was about 22%. This year, we have done over 45%. There's a significant improvement on that. So -- and that improvement is because of the hotel side of transaction growth. The margin expansion came more from the packages side..

And now that situation in terms of SpiceJet, has it settled? Or are you still seeing cancellations, et cetera?.

No, it has actually largely settled now. And the normal cancellations have been -- in fact, only yesterday there was [indiscernible] announced and consumers are back on buying them significantly and we saw a spike kind of coming back.

And if they would -- I am not sure if we were tracking the DGCA or the regulators kind of also giving them reliefs, where they had earlier blocked their future bookings intents. It's supposed to go up to 31st of March and then they relaxed that.

And now they have opened it up even further because of the fact that the new promoter, who's bought a few stakes from us has been able to actually file the plan to the DGCA, which they have found it satisfactory. And also there is one installment of money that is coming into the company as well. So it seems like things are back to normal.

Obviously, it's on a -- just adding the capacity back standpoint, it will take some time for them to just add their capacity back..

Your next question comes from the line of Sangmesh Jatti..

Congrats for gaining market share on the air side. Just had one question regarding that. We've seen that a number of airlines have started again introducing these flash sales or bulk discounts in January.

What sort of impact has that had on transactions if you can share any idea? Also, given that SpiceJet has sort of cut capacity, but have you seen a pickup in utilization? Because they were trying to do route management and they sort of removed the routes which weren't very popular.

So has that -- what sort of impact is that having on the leisure air side?.

So Sangmesh, maybe I'll take that. From a -- if you look at it over the last couple of quarters, the flash sales clearly have helped players like us, but as well as the OTAs, and in particular market leaders like us in terms of gaining market share.

We had kind of reported market share gains even in the previous quarter, moving up from about 12%-plus to over 20%-plus. And we have seen that these flash sales sustaining and continuing in the previous quarter have again resulted in market share gains for us in Q3 as well.

We also seen in SpiceJet, as you said, kind of seems to becoming more stable now in January; have recently again launched fare sales again in January. And hopefully, we should also continue to gain with such kind of offers coming in from the players.

And clearly, considering that the industry growth for domestic air segment was in the range of about 15% to 15.5% that our passenger traffic growth was upwards of 45%, clearly shows that we have been outpacing industry growth in a big way..

Also would just wanted to ask one more thing on the hotels and especially the packages side.

Given that we have a number of long weekends in the first quarter or the first half, have you seen any trend where you've seen a pickup in prepackaged bookings?.

So far, typically, we have some of these long holiday weekends practically across the quarters. And it's slightly early in the day to say whether we are kind of seeing a complete change in trend from what we saw in December.

But needless to say, with the airline industry being a lot more stable and the flights schedules remaining more stable and not kind of seeing the kind of cancellations as we have seen in the second half of December. The situation should only get better for us in this quarter actually from what you see in the first month..

And there are no further questions waiting. So I'd like to turn the call over to Jonathan for closing remarks. Thank you..

Thank you, everybody, for joining our call today. We look forward to speaking with you on the next call..

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day..