Good day, ladies and gentlemen, and welcome to the MakeMyTrip Ltd. Q3 2016 Earnings Conference Call. [Operator Instructions] As a reminder to our audience, this conference is being recorded. Now I would like to turn the conference over to Bill Lennan, Vice President of Investor Relations for MakeMyTrip. Sir, you have the floor. .

Thank you, Brian. Welcome to MakeMyTrip's Fiscal 2016 Third Quarter Earnings Results 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 is 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 9, 2015. Copies of this filing are available from the SEC and from the company's Investor Relations department..

Now I'd like to turn the call over to our Founder and Group CEO, Deep Kalra. Deep, go ahead, please. .

Thank you, Bill. Hello, everyone. It's been a busy quarter for MakeMyTrip, and we have a lot to share today. I'd like to start by telling you about the strategic investment we received from Ctrip. Later, Rajesh will talk about some of the operational benefits that we believe will accrue to us through the relationship.

And finally, Mohit will walk you through the key terms of the transaction..

Earlier this month, we agreed to a $180 million investment from Ctrip via convertible bonds. There are multiple reasons why we chose to take a strategic investment of this size from a leading global OTA. First, there are many similarities between the Chinese and the Indian OTA markets and also several similarities between the 2 companies.

China and India have consistently ranked among the world's fastest-growing economies and most populous nations. In both countries, explosive GDP growth is driving an expanding middle class with the means and the desire to travel more.

The proliferation of mobile devices enables India and China to leapfrog the wireline and desktop technologies that drove best in OTA growth over the past 15 to 20 years.

Smartphone technology allows us to display rich content essential to the hotel OTA segment, whereas the hotel business was transacted predominantly on desktop for Western OTAs for many, many years. .

Because smartphone is increasingly becoming the preferred device and can deliver a convenient booking experience, the hotel segments of the Indian and Chinese OTA markets are delivering the type of transaction growth rarely seen by OTAs elsewhere.

This type of growth, combined with far greater investor understanding of mobile-led OTA models compared to 15 years ago, has opened the spigot of venture funding into developing markets, especially India and China.

The result has been a new breed of aggressive competitors who pressure unit economics in pursuit of rapid growth and market share, a dynamic that the Western OTAs have rarely experienced..

Ctrip understands this. They have thrived in a hypercompetitive market where well-funded competitors pursue share at seemingly any cost. The most impressive thing for us about Ctrip is the company's steady customer focus, discipline and consistency in a very competitive environment.

By continually investing during the heaviest discounting phase in the China market, Ctrip has validated our thesis, that we must continue to invest in our brand, technology, supply and customer service even in a hypercompetitive environment..

When we embarked on our aggressive discounting and pursuit of share earlier this fiscal year, we said we would do so while maintaining our commitment to all areas of the business.

This is perhaps our greatest similarity to Ctrip, our commitment to building a fundamentally great business over the long term even when the competition is luring customers with the unsustainable promise of big discounts all the time. .

We believe MakeMyTrip and Ctrip can help each other to remain leaders in our respective markets by sharing wisdom and perhaps a few battle scars as well on -- along the way. As you may know, the terms of our deal allows Ctrip to designate a director to our board. Therefore, we expect mutually beneficial advice and counsel to flow almost immediately..

The second reason we did the convertible now is that we wanted to leverage our leadership position and fortify our balance sheet even further. We also believe our market share and clear brand leadership enables us to raise money more easily than our smaller competitors, and thus, we are using our size as a competitive advantage. .

Thirdly, we believe a relationship with Ctrip could offer multiple operational synergies, such as expanded international inventory, improved SEM and SEO, mobile app development and supplier technology, to name a few.

Later on, Rajesh will take you through some specifics on how the relationship could be mutually beneficial from an operational perspective..

Finally, and quite simply, our relationship will help partner to understand and do business in an international market that will be too big to ignore. The IMF predicts China and India to be the first and third largest economies in the world 15 years from now..

As our economies and middle-class populations grow, we expect more Indians to travel to China and vice versa. Through our relationship with Ctrip, we hope to get a lot smarter about what could potentially be one of our largest outbound travel markets in the years to come..

one, standalone hotel transactions booked on mobile devices increased by over 756%; two, standalone hotel transactions booked online increased by over 326%; and three, hotel and packages transactions increased by over 148%..

Two quarters ago, we told you that we would accelerate transaction growth at some cost to revenue. However, in Q3, we were able to deliver overall year-on-year growth in revenue terms of nearly 10% in constant currency terms despite an overwhelming shift to mobile standalone hotel transactions where margins are most pressured.

This underscores the breadth and resilience of our model. We still generate solid business from air tickets and packages, and that business helps us to be more aggressive by subsidizing market share gains in standalone hotels..

Lastly, I'd like to say a few words about the mobile business. We currently have approximately 15 million mobile app downloads to date, up from 5.5 million a year ago. The team continues to innovate, improve our apps and create attractive promotions like app-fest.

Our quarterly repeat rate on the mobile has improved by about 30% over last year and is about 1.5x the repeat rate on desktop. Put simply, there are more people using our apps for the first time, and more of those people are coming back for subsequent transactions than ever before.

This is reflected in the exceptional mobile transaction growth I called out earlier..

In summary, I'm very encouraged by the results of our team delivered in Q3. The underlying mobile metrics are exceeding the expectations we set just a few quarters ago, and we think the best is yet to come..

And now I'd like to turn the call over to Rajesh. .

Thanks, Deep. My comments will cover the mutual benefit we anticipate in the Ctrip relationship, updates on key business initiatives and mobile..

Regarding Ctrip, as Deep discussed, the similarities between Ctrip and MakeMyTrip and between the China and India OTA markets are numerous. A key difference, of course, is size. Ctrip is a much larger company with more than a million hotel partners worldwide and more than a billion lifetime mobile app downloads. .

Another key point is the projected economy growth rate for both India and China. According to PricewaterhouseCoopers, India's GDP will increase by nearly 9% annually through 2030, far ahead of China, the next fastest-growing BRIC country at 6.5% expected annual growth rate.

PwC also predicts that India will pass France, the U.K., Germany and Japan to become the world's third largest GDP country by 2030. .

While Ctrip is an undisputed market leader in the China OTA market, a recent study by Millward Brown, one of the world's most recognized brand research organizations, stated that MakeMyTrip has the leading hotel market share among India OTAs at about 25%. The report also said that we lead across all hotel star categories.

The same study cited MakeMyTrip as a brand with the strongest association among India hoteliers. Also as I highlighted in the past, MakeMyTrip also has undisputed market leadership in the domestic market with over 15% market share of total domestic end market..

Given the above similarities, we expect to work together in a number of ways in the years ahead. First, we think Ctrip has tremendous experience in reaching a large population via mobile. The company's mobile app download exceeds 1 billion versus our life-to-date downloads of approximately 15 million.

On the way to more than 1 billion app downloads, Ctrip has encountered serious competition, yet has continuously improved its user experience to stay ahead of the market. We believe we can leverage Ctrip's experience in delivering great mobile user experience at scale to our benefit..

Second, Ctrip has a network of more than 1 million hotels worldwide, more than triple our base. We think sharing of inventory could be a natural extension of our relationship. As the Indian and Chinese trade relationship expands, there will be more Indians visiting China and vice versa.

So to start with, tapping into the potential of India-China travel will be a win-win. We also believe Ctrip's experience in developing services and technology for its hotel suppliers will be helpful to us. One of our current priorities is to enhance our communication with our hoteliers via extranet and mobile technologies.

Ctrip has been down this road, and we will look forward to their advice on this topic as well..

We are also keen on incubating India's budget hotel market through our value plus product, which helps small hotels and guesthouses get up to speed on the services and technologies even young budget travelers have come to expect.

In a recent earnings conference call, Ctrip said it considers money spent now to acquire budget customers to be a long-term investment in brand loyalty. We agree, and we look forward to sharing ideas on how supply side investment can drive share gains in the budget hotel category..

Third, we like the fact that Ctrip is active in travel packages. The worldwide rush among OTAs to drive ala carte hotel and air bookings sometimes gives the impression that the packages business is not worthwhile. We believe Ctrip, like MakeMyTrip, sees value in the packaged leisure travel business.

We also believe we can learn a lot from Ctrip with regards to scaling the packages business profitably. These are just few examples of how we can work with and learn from Ctrip. We think, over time, we can share ideas on many more aspects of building the best OTA business in a competitive emerging market..

Now I would like to share some thoughts on key initiatives during the quarter. During the quarter, we officially launched our value plus budget hotels product, which was in detail when we discussed it during our last earnings conference call. Through value plus, we help small hotels to leverage our brand, scale and technology to attract new customers.

We work with such hotels to bring them to the minimum level of service and features demanded by today's budget traveler, such as air conditioning, satellite TV, free breakfast and Wi-Fi. .

Perhaps our biggest differentiator to other aggregators of budget properties is how we approach branding. The hotelier is a small business owner who values his brand, and we respect that. Unlike other aggregators, our Value+ service will not obscure the hotel's brand. Value+ retains the hotelier's brand, but adds MakeMyTrip-certified hotel designation.

Through this approach, the small business owner retains his brand by leveraging our brand. We now have almost 2,000 MMT-certified hotels in approximately 60 cities, bookable both on mobile and desktop. We look forward to providing you a regular update on this segment..

Speaking of hotels, we have received questions from a number of you over the past year or so about how we communicate with our hotels regarding inventory availability and other day-to-day issues.

During the quarter, we launched the Android version of our supplier app, which offers hoteliers a convenient mobile option to update rates and inventory and manage bookings. Our desktop extranet for hotels now includes payment capabilities, and we have a long list of enhancements we expect in the year term -- in the near term.

These include improved tools to manage photo and location content, multi-language video tutorials and enhanced promotions and management features..

Finally, I will elaborate on some of the mobile growth mentioned earlier. The moment of the Indian -- the movement of the Indian market towards mobile is in full swing and moving faster than even we anticipated when we articulated our mobile-centric strategy earlier this year.

As Deep mentioned, our lifetime mobile downloads reached nearly 15 million in the quarter and almost tripled over Q3 last year. Mobile transactions represented approximately 61% of all online standalone hotel transactions in Q3, almost double from approximately 31% a year earlier and up from 54% in Q2.

Air transactions in Q3 '16 on mobile increased by more than 150% over Q3 last year. .

Perhaps the most impressive mobile stat is the superior repeat rate by our app users versus the repeat rate by our desktop users. During the quarter, the repeat from customers acquired a quarter ago was about 30% higher on the app versus the desktop. This underscores what we said earlier about the budget category.

It is important to capture the loyalty of budget travelers early. They tend to book on mobile and generate better repeat business than desktop users, either because of loyalty or a propensity to download only 1 or 2 travel apps.

Whatever may be the reason, we think superior repeat rates underscore the importance of becoming the travel brand of choice for budget travelers booking on mobile devices..

On the last conference call, I told you about our plans for The Great Indian Getaway, which we informally called app-fest internally. It was an app-only promotion we ran in late October.

We ran this promotion for a week on mobile devices and featured travel deals available through a number of partners, including Citibank, Air France, KLM Royal Dutch Airlines and Trident Hotels. The purpose of the promotion was to incentivize mobile adoption.

The result of The Great Indian Getaway were quite strong with close to a million downloads of the MakeMyTrip app and record transactions during that week. .

Also during the event, domestic hotel bookings increased by 8x compared to the same period a year earlier. Almost 90% of hotel bookings were completed with mobile apps, up from 24% during the same period last year and 50% during the week prior to the sale. International hotel bookings across all devices increased by nearly 11x annually..

And with that, I will turn the call over to Mohit, who will take you through the details of convertible bond deal with Ctrip and our financial performance in Q3. .

Thanks, Rajesh, and hello, everyone. My remarks will cover terms of the convertible bond investment from Ctrip, financial highlights of the quarter and our outlook for the remainder of fiscal 2016 in that order.

My remarks on the convertible bond investment on Ctrip are intended to be generally descriptive and not a substitute for information contained in the 6-K we filed with the SEC earlier this week..

MakeMyTrip has taken an investment of $180 million from Ctrip through issuance of convertible bonds. The bonds have a 5-year term. The bonds carry interest at 4.25% annually with semiannual payments.

The conversion price of $21.45 per share represents a premium of over 30% on the closing price of $16.42 for MakeMyTrip shares on January 6, which was the last trading day prior to the announcement of the convertible bond investment. .

Through the underlying shares in the convertible bonds, Ctrip would own 16.6% of beneficial ownership in MakeMyTrip. MakeMyTrip has agreed to allow Ctrip to purchase up to an additional 10% stake in MakeMyTrip, including purchases through open market transactions.

As such, Ctrip would need MMT's consent, or MakeMyTrip's consent, to increase its actual or beneficial stake beyond 26.6%..

Ctrip is entitled to designate a director to MakeMyTrip's Board of Directors as long as they hold approximately 5.1 million in MakeMyTrip shares or underlying shares through the bond. In the recently concluded board meeting, James J. Liang, CEO and Co-Founder of Ctrip, has been appointed as a director on MakeMyTrip's Board of Directors..

Now I'll move on to present highlights of our Q3 results. I'll refer to our results in constant currency terms. In the quarter, the Indian rupee depreciated by approximately 6% year-on-year versus the U.S. dollar..

In Q3, MakeMyTrip delivered net revenues of $36.3 million, which represents a constant currency growth of 9.7%. It was also a quarter where net revenues from our hotels and packages business at $17.7 million exceeded the net revenues from our air ticketing business at $17 million.

The adjusted operating loss of $13.5 million compares to a gain of $1.5 million posted a year earlier, similar quarter. This loss is in line with our expectations, was largely on account of increased marketing expenses to push mobile adoption and to grow our market share in the hotel segment. .

We are pleased with our ability to drive leverage through our marketing expense to drive a two-pronged strategy of driving online penetration in the domestic hotels market as well as customer acquisition and transactions on the mobile platform and mobile apps in particular.

This has helped us over-deliver on our transaction growth guidance while reporting revenue growth in line with our guidance..

I would now elaborate on the financial performance across our key business segments. For the quarter, net revenue from the air ticketing business was $17 million and constant currency revenue was flat despite the year-on-year transaction growth of 34.6% due to anticipated weakness in the air ticketing margins.

As expected, net margins in the air ticketing business were 5.5%, down from 6% in Q3 of last year and 5.8% in Q2 of this fiscal year. We will continue to target high-transaction growth in the air ticketing business to offset margin compression, if any, during the rest of the fiscal year..

Now I would like to present the financial highlights of our hotels and packages business. The highlight of the quarter was 326.3% transaction growth in the India standalone hotels booked online, which was well above the guidance range of 175% to 200%. Standalone hotel transaction growth on mobile was an astonishing 756% on a year-on-year basis. .

strong app downloads, improving mobile app repeat rates, increasing domestic and international hotel supply and, most importantly, our marketing efforts, including app-fest and various other brand promotions.

The geographic breadth of our domestic hotel supply and customer base continues to improve with hotel room nights now being sold in more than 640 distinct cities across the country compared to about 380 distinct cities in quarter 3 of last year..

Let me move on to present high-level trends in the packages business. In line with our expectations and market reality of increased promotional offers on air tickets and hotel bookings, the domestic packages business continues to experience modest decline.

We are encouraged by transaction growth of more than 20% in our outbound packages business during this peak holiday quarter. While the growth in domestic packages is pressured by industry trends, the revenue contribution from the packages business blends very well with rapid growth in standalone hotel transactions. .

As a result of exceptional growth in standalone hotel transactions booked online in India, our overall transaction growth in the hotels and packages segment, excluding Easytobook, was more than 185% in Q3, well above the high end of our previous guidance range of 100% to 110%.

Revenue less service costs from the H&P business increased to $17.7 million, which was 18.3% year-on-year growth in constant currency terms, largely driven by transaction growth and in line with our expectations. .

The margin in our hotels and packages segment was 12.3% during the quarter, down from 13.4% in quarter 3 of last year, all the better from the 11.6% reported in the earlier quarter of this fiscal.

This was in line with our expectation that accelerating transaction growth, driven partly by discounting, will impact hotels and packages segment's margin in full fiscal of 2016. Consistent with our remarks from last quarter's conference call, we anticipate that accelerated customer acquisition may put further pressure on margins in the near term.

While this could result in increasing losses for the next few quarters, we believe this is an important long-term investment to make for driving significant online penetration and gaining more market share in the strategic India standalone hotels business..

India standalone hotel transactions growth of 325% to 375%, up from previously guided range of 175% to 200%; hotels and packages transaction growth, excluding the ETB business, of a range of 175% to 200%, up from the previously guided range of 100% to 110%.

With this, we are also narrowing our full year 2016 constant currency revenue growth guidance to 10% to 12%..

With this, I would like to hand the call back to the operator for Q&A. .

[Operator Instructions] Our first question comes from Gaurav M. with Citigroup. .

Just wanted to check when is the money from the Ctrip transaction expected to come or it's already come in?.

Gaurav, the investment has already come in. .

Our next question comes from Arya Sen with Jefferies. .

Two questions.

First is -- so how much was the impact of The Great Indian Getaway on the kind of transaction growth we saw in standalone hotels in this quarter? And given that you've sort of maintained that sort of growth rate guidance, would you expect more such sales in this quarter as well, in the current quarter as well?.

Yes, this is Rajesh. I'll take this. So I actually called out the impact in that week, the impact in that week as compared to the general week rate as well as the same period last year for that particular week. It was actually phenomenal. And I actually called out some of those numbers, and I can repeat that.

So it was actually an 8x growth and just for that particular week compared to the same period last year, domestic hotel bookings -- on domestic hotel bookings, and 90% of them were mobile apps because it was actually an app-fest.

It was app-only promotion and -- which was effectively -- I mean -- so we had 90% of the hotel bookings, which were completed on mobile apps, which was up from 24% during the same period last year. So it -- there were 24% of the booking that happened on mobile. In that week we had 90% of the booking that happened on mobile.

Not necessarily all of that was share shift. There was lot of the new customers that we acquired as well. Because the previous week before the app-fest, the rate was about 50%. So normally in a week, you will have 50% of the bookings happening on app in that particular week. When the fest was on, we had 90% of the bookings that happened.

So that gives you some color. And -- but the second part of your question, yes, we would like to actually continue with similar promotional activities during this quarter as well. .

Right, Rajesh.

But -- I mean, if I look at 8x growth, but that was only for a period of 6 days, right?.

Yes. .

So given the kind of growth you've computed -- you've shown, it looks like, to the quarter, I mean, even on other days, there has -- the growth has been pretty good. So -- I mean, because of... .

Yes, yes, of course. .

You've done promotions through the quarter, and that is something which you feel you need to continue with even in 4Q. That's -- I mean, I just wanted to get a sense of how much is -- how much of the growth is promotion-driven. .

Well, quite a bit of it is actually promotion-driven as well, so -- because app-fest was one like weeklong activity, which got us the momentum going in terms of just, relatively speaking, much higher rate of growth. But during the quarter, one promotion or the other was on.

I mean, this was like a massive promotion where the partners also came in, and we ran it with a media campaign, et cetera. But there are other promotions, which are ongoing in the quarter was also running. So that would have -- that would impact our regular growth in the quarter.

So I guess the way you should look at it is -- and we factored all of this in overall, the fundamental point actually here is that we -- the tailwinds are strong in terms of shift from off-line to online.

So during the quarter, we would be very creatively coming up with various types of promotions and marketing activity just to keep the momentum going. And including, let's say, app-fest every now and then as well.

So app-fest just kind of gives us a little bit more momentum than the regular promotions, but also helps us, which is one of the objectives of this kind of a promotional activity, get more downloads as well during that week. So we had about 1 million downloads during that week itself. So it's kind of multiple purpose kind of promotional activity.

And I'm not saying that we will just simply repeat that, but we can be -- we will be more creative coming up with the variance of these types of promotions. .

Arya, just to add to what Rajesh has mentioned.

While we kind of are always gearing up for a significant growth in the month of December, which coincides with the peak holiday season, the thought of kind of starting the quarter in October with the app-fest was to kind of ramp up the growth right from the first month of the quarter, knowing that the quarter end, in any case, has the peak period coming through at a later stage.

.

Yes. And Arya, sorry, just one more point that I -- yes. I'd just like to add one more point, Arya. This is -- also, with -- as I've shared earlier in the call, that it's now very clear that the cohorts on mobile, particularly on app, are behaving far more favorably, up 30% of their behavior for repeat.

So that 1 million incremental download that Rajesh mentioned has a longer-lasting impact, and this is obviously far more valuable to customer on the average and worth acquiring. So such promos are going to give us higher peak rates going forward.

And therefore, the whole idea is to migrate people from whether they are desktop or mobile web to an app presence as that has been validated, just like in many other markets of the world. An app customer is far more likely to repeat more, to be more frequent and eventually, I think, will be more valuable too.

Right now, I think we are finding them to be more -- or, rather, will spend more, too, on each transaction. Right now, they tend to probably skew their purchases a little towards the last minute. But over time, we are confident that behavior is going to actually be beneficial across. .

Understood. And I mean, I also noticed that your other expenses has gone up, and one of the reasons you mentioned is discount.

So I mean, how do you decide what part of the discount gets -- hits the net revenue margin or the peak rate and what part comes in other expenditure? I mean, how is that -- how do we look at that?.

So Arya, what the increase in other expenses is, you should read it as more increase in marketing expense.

So as Rajesh called out, all marketing promotions, including promotions on the app-fest and other app-related brand promotions that we have done during the quarter, that is the increase that you see coming out of marketing expenses in the others category. Discount contributed -- reduced from the revenues as we have reported on -- from the top line. .

So for instance, if on the app you give something like a cash back or something credited to the account, are those counted as discount? Or are they counted as within the other operating expenses? I mean, if you could give an example of what sort of promotion comes in other operating expenses versus direct hit on the net revenue?.

Some customers -- online customer requisition expense, irrespective of the nature, would come in, in the marketing category. Whereas any specific straight discounts, which are available to the customers offering across platforms, they would come under the -- come in as discount and get reduced from revenues. .

Okay, okay.

And what would have been the average ticket sales of Indian hotel transactions in the quarter? I mean, given that there's been such a strong growth in transaction, what would be now the ticket sales of hotel transactions in India?.

The average transaction value on online hotels hasn't changed over the previous quarter. So there hasn't been any dilution in the overall average transaction values when it comes to the India online hotel.

Although when you look at the overall hotels and packages as a segment, there would be a dilution in the average take rates because the mix of India online hotels has increased compared to packages and international hotels. .

Okay. And if you could share a number. I mean, what was it last quarter? And... .

We haven't put out transactional data at this line of business level, Arya. .

Okay. And the air ticketing growth seems to have tapered down a little. Any reason for that? Because the traffic growth in India seems to have been strong. .

Air ticketing growth has been pretty strong. And if you have heard on the call, I mentioned that transaction was robust for the quarter, although our margins have come down. And that's the reason that the revenue growth is muted. .

Arya, the transaction growth is [indiscernible]. Yes, so the gross booking growth in air is about 10%. The transaction growth in air is 34.6%. It's the margin, which is down from 6% to 5.5%. .

So the gross booking growth will be down because of lower -- so ticket price is coming up?.

Yes, yes, yes. It's down almost- more than 10, almost teens, are down from last year mid-teens. .

Okay, understood. And lastly, I just wanted to check the value plus number of hotels you said is 360? I missed that part. .

No, 2,000 light [ph]. .

In 60 cities. .

Okay, okay, sorry. 60 cities, okay, understood. .

[Operator Instructions] Our next question comes from Ashwin Mehta with Nomura. .

I had one question for Mohit.

Mohit, where would you essentially deploy the money that you get from Ctrip till it is utilized? And what's the kind of arbitrage that's possible on that, given that you pay 4.25% semiannually on it?.

So Ashwin, as far as the deployment is concerned, it continues to be for general corporate purposes, including the investments that we're doing in the India hotels space, plus any -- and we have been, in the past, kind of been active on the M&A side, including investments in niche spaces.

So this will going to do -- fund our appetite on that count as well. But is there any specific investment lined up? Not really.

The thought was and -- like in earlier years, we always kept fundraising a bit independent of deployment and independent upon market conditions and the right time to kind of shore up the balance sheet in terms of funds, we thought it was a good opportunity to go ahead and do this irrespective of the immediate requirement per se. .

Okay.

Secondly, in terms of the 4.25% interest that's payable, is it payable? Or is it just accrued?.

Yes. That's payable. .

Okay.

And it's payable in dollars, right?.

Yes. .

So are we doing anything to hedge our payables, especially given -- or protect us from rupee depreciation that we are seeing?.

Ashwin, most of our funds continue to kind of remain in dollar-denominated deposits. Don't really be concerned in terms of hedge over there. .

Okay, okay.

So from an interest, on those, that would still be lower than the 4.25% that you pay out?.

Clearly. .

Okay. The second thing is in terms of H&P commissions, you had earlier indicated that you could possibly see that coming off to closer to the 10% mark.

So given the promotion that you're planning for the next quarter, does that fit?.

Yes. So when we kind of talk about H&P margins, our margins even on the other business, which is in the air ticketing business, again, as we've been calling it out, we should take it directionally, more of a combination of, at least, 3 to 4 quarters because you could have seasonal variations coming through.

Again, volumes do help us in terms of shoring up our year-ended incentives. So that does help, particularly in any quarter like the one that we have reported, where volumes have shored up significantly and well ahead of our expectations. So the take rates have been slightly better than what we had anticipated.

But directionally, we do see them kind of going lower than what we've reported in the previous fiscal, and there could be quarterly variations around it. .

Okay.

And lastly, if you can just comment in terms of computer activity both -- from the other OTAs as well as from the budget aggregators? What are you seeing on the ground? Has there been a reduction in terms of intensity there?.

Ashwin, this is Deep. Ashwin, I think as of now, we have been seeing continued, I'd say, pretty aggressive discounting, and that's exactly what we have spoken about, at least in my part of the earnings call. We were really talking about continued aggressive discounting coming from a couple of players, namely Goibibo as well as hotel aggregator, OYO.

They've been very aggressive. I think the rest of the players definitely we are seeing come down in terms of aggressive pricing or not being consistent or sustained. But here, there is sustained competitive pricing in the hotel segment. So I think in the air segment and the packages segment, different set of competitors in the package segment.

In the air segment, as you know, largely price parity rules because of the airlines, and so it's largely stable out there. .

And just one last thing. In terms of the Milford Browns (sic) [Millward Brown] earlier that you talked about, booking.com seems to be among the top 3 players in categories even like 3 stars.

So do you think the Ctrip arrangement helps you in terms of some kind of arrangement with booking? Or what are you seeing from them?.

Those are 2 independent things really. Absolutely, they have grown, and they have grown quite fast in 5 and 4 stars. Their aggression is there in terms of bidding for keywords, so SEM and bidding for keywords on other kind of meta-platforms. They're fairly aggressive. But no, our relationship is with Ctrip directly.

Yes, of course, as you know and most of us on the call were aware, that Priceline owns about 15% in Ctrip, but our relationship is with the company, Ctrip. And we are pretty sure booking, with their brands, will continue to be fairly aggressive.

I think what we should also note is a lot of that share is coming from the inbound business where they're very strong. So traditionally, whether it's the Western markets, Europe and U.S., as well as other markets, a lot of the -- what you see in the numbers coming out in the MB study, they're pretty high because of inbound also. .

Our next question comes from Shaleen Kumar with UBS. .

So I just wanted to check on one thing. This convertible bond comes under FCCB.

Will there be any restriction on the usage?.

No. There are no restrictions on the usage. .

Okay, okay. And second thing, just -- I was going through the agreement. So these are like structured convertible bonds, right? And where -- and shareholding... .

Shaleen, one point. The investment is in the holdco, in the Mauritian company, so they won't be covered in FCCB at all. And then the holdco in India, as you know, is still on subsidy. So it doesn't even impact that. .

Okay, okay. So that clarifies -- yes, great. Okay. And the other thing, just want to go and understand again the structure of this. So I think there is a kind of a covenant.

There is -- if the conversion happens before 2021, then there will be issuance of additional shares, right?.

The conversion happens before 2021. .

Which one are you reading? Can you just please clarify? I mean, can you just point us to the specific clause? Or I -- this is your question is on -- it's not very clear, Shaleen. .

Shaleen, typically, most convertible bonds would have a make-whole adjustment, and I don't know whether you're kind of referring to the make-whole table over there. .

Yes, make-whole table. I'm referring to the make-whole table. .

Yes, that's a very common adjustment that happens in the convertible bond transactions. .

So Mohit, in that stance, shareholding of Ctrip will go up, right?.

So you'll have to take it in terms of the various scenarios. As the stock price pays out over the next 5 years, it is kind of in a manner linked to that. So there are multiple factors the way this is linked. It will be difficult to kind of call out saying what will lead to an increase in shareholding and all.

Right now, the right way to look at it would be too assume that the beneficial ownership underlying the bond is at about 15.6%. .

Okay. So this make-whole fundamental change will not trigger -- so it basically even trigger or it can be done by Ctrip, and that's before 2021. .

This is dependent on the conditions with this kind of put out on the terms of the bond, not that one party or the other could kind of trigger it. .

And I guess just to add -- Shaleen, just to add to what Mohit said, the way we are looking at it is, that the conditions that are already there for make whole, in a normal circumstances, we don't believe that any of those conditions would happen, and therefore, it will would trigger the make whole. .

Our next question comes from Rishi Jhunjhunwala with Goldman Sachs. .

So a couple of questions. One is on -- just, again, trying to understand the net revenue margin better, especially in the hotel and packages. You mentioned that those -- that discounting goes into the revenue margins.

And I get -- I mean, we've clearly seen significant growth and -- the campaign that we had done in the December quarter, but that hasn't seemed to be impacting the net revenue margins as such. I'm just trying to understand.

Is it because we are doing more domestic standalone hotels, which come at higher margins, which is offsetting the discounting that we are giving? How do we look at that?.

Quite right, Rishi, actually. A combination of factors. So as the mix keeps going in favor of hotels, standalone hotels, as we have been calling out, that's a segment which has higher margins compared to the packages business. So the more we see the mix swing towards hotels for the segment as a whole, that will kind of continue to drive margins up.

Secondly, even within the entire mix of hotels that we're selling now, the mix from independents or small budget properties is going up. And there, there's always the possibility of higher margins compared to the 4, 5 star or the chain property.

So as the volumes keep increasing in the independent properties, budget properties, all the low-value accommodation spaces, clearly the opportunity for incremental margins does exist. And if you have a significantly good amount of volumes going through, there is also the opportunity of some rear-ended incentives kicking in as well.

So those are largely the key factors for some amount of margin improvement. .

So in case -- I mean, so unless your discounting goes up significantly, why shouldn't your net revenue margins on a sequential basis continue to trend up considering the domestic hotel business will continue to grow at a much, much faster rate?.

Correct, quite true. So it would also kind of largely be linked to what the discounting continues to be on a quarter-upon-quarter basis.

Now clearly, when it comes to peak quarter, where demand is reasonably high in keeping with high holiday season, the need for discounting perhaps may not be as high as it might be in the lower seasons or the off seasons. So we should just keep factoring that kind of seasonality when we look at quarterly set of margins.

But other than that, quite right. .

Understood.

So something like March, which is seasonally a weak quarter from a holiday perspective, should see higher discounting, right?.

Potentially, it could. Again, it's not just kind of linked to travel demand, but also the competitive forces. But I would assume so. .

Okay. And second question is on Ctrip and -- just trying to understand.

Have we, in any which way, formalized any kind of potential collaboration we may end up doing with them, either technology or business or any other part of that? You mentioned about the potential benefits that we can derive from the transaction, apart from the capital that is coming, in the beginning of the call.

But just trying to understand, has there been anything that is formalized? And is there any kind of time horizon over which you would see that playing out?.

Yes. So nothing formally has been agreed and put together, just from a commercial arrangement standpoint at this point in time. I mean, it's early days. We've just signed the deal. We just got into the relationship. And what we called out are the potential areas, potential areas that we will definitely see some collaboration happening in future.

And we've already started working on it. But idea was to just keep that thing open. Idea was to actually get into a relationship and then do a lot of brainstorming, meeting, discussions, get to know each other more and more in detail before you identify the areas and then you start kind of formalizing some kind of arrangements from area to area.

So that was the approach that we have taken. And so we -- I mean, there's no real time horizon, and so we are moving like fast on this in any case. I mean, picking up an area and just kind of starting our discussions. And so as and when we have any formal arrangement, we will obviously come back and share with you all.

But at the time of the deal, we didn't sign anything formal. .

Our next question comes from Sangmesh Jatti with QVT. .

Just had a couple of questions. The first one was on your packages segment. I was just interested in understanding what sort of growth have we seen in the domestic packages space, given last year, same quarter, we had some issues with a couple of leisure destinations and also SpiceJet being grounded.

And how is the outbound packages segment shipping up? And the second question was on your -- given that the company is targeting much higher growth rate now in the standalone hotel segment and the operating losses sort of inched up this quarter, what sort of cash burn did we witness? And what is the sort of guidance, if any, on cash burn going forward?.

Sangmesh, so let me start off with the questions on the packages side, and then maybe I'll come back to the cash burn after that.

So while we had certain one-offs in the same quarter last year, but what is more important is that -- and what we've been calling out is, over the last few quarters, that from a trend perspective, we are seeing the market move more and more towards ala carte bookings of air tickets as well as hotels because of the significant availability of promotional fares on the airline side as well as competitive hotel pricing being available on a ala carte basis or standalone basis, particularly the domestic segment.

And right now, I'm talking about the domestic segment that you have specifically asked about. So on the domestic segment, as we've been calling out, we expect that there might be a small amount of de-growth that will continue. And even in the reported quarter, we have seen slight de-growth in transactions compared to year-on-year basis.

So the expectation continues to be that we did see softening of demand on domestic packages going forward so long as this market trend of promotional airfares and attractive hotel prices continues to be there.

Moving on to the other part, which was your -- the question on the cash burn, right?.

Yes. .

Yes. So if you look at it in terms of the numbers that we have posted, the overall cash operating loss for the quarter was close to about $11 million. .

Right.

And any direction, given that you had this big sale in this quarter? Which, if not repeated, what sort of trend should one be looking at going forward, if any indication you could give there?.

So the best indication kind of comes in from the growth guidance that we have given on the transaction side and the color that we have given, that is we'll continue to significantly ramp up our marketing investments to make sure that transaction growth continues to be stronger than what it has been in the past few quarters. .

Mohit, also, if you could just touch upon the international packages. These -- what sort of growth are we seeing there? And what kind of destinations are picking up or for destinations that are coming down in terms of... .

Sure. So when it comes to the outbound business, that's a business that kind of continues to do well, and we believe that there is significant amount of market potential out over there. In terms of transaction growth also, we are seeing robust transaction growth in the -- in close to the 30s in terms of percentage growth. So that business does well.

And traditionally, we have been doing well when it comes to some of the key holiday destinations in Southeast Asia as well as in Europe. So these destinations continue to be the -- continue to kind of be forming the large part of the outbound holidays business for us. .

This concludes our question-and-answer session. I would now like to turn the call back to MakeMyTrip's group Founder and CEO, Deep Kalra, for closing remarks. .

No, I think we're actually pretty much out of time. But I'd like to thank everyone for listening in. It's been a very exciting quarter, landmark quarter for us after -- over the last few years. And like I said, that we think the best is yet to come. So talk to you guys soon in a quarter's time. Thanks very much. .

Ladies and gentlemen, this does conclude today's program, and you may all disconnect. Everybody, have a wonderful day..