MakeMyTrip Limited (MMYT) Q3 2023 Earnings Call Transcript

MakeMyTrip Limited  (NASDAQ: MMYT) Q3 2023 earnings call dated Jan. 31, 2023

Corporate Participants:

Vipul Garg — Vice President, Investor Relations

Rajesh Magow — Co-Founder and Group Chief Executive Officer

Mohit Kabra — Group Chief Financial Officer

Analysts:

Sachin Salgaonkar — Bank of America Merrill Lynch — Analyst

Gaurav Rateria — Morgan Stanley — Analyst

Aditya Suresh — Macquarie — Analyst

Hari Vijayendran — Hill Fort Capital — Analyst

Vijit Jain — Citi — Analyst

Aditya Chandrasekar — UBS — Analyst

Tarbir Shahpuri — Nidara Capital — Analyst

Lester Poon — — Analyst

Presentation:

Operator

This meeting is being recorded.

Vipul Garg — Vice President, Investor Relations

Good evening, everyone. We’ll just give a minute for everyone to join and then we’ll start. Hello, everyone. I’m Vipul Garg, Vice President, Investor Relations at MakeMyTrip Limited, and welcome to our Fiscal ’23 — 2023 Third Quarter Earnings Webinar.

Today’s event will be hosted by Deep Kalra, our Company’s Founder and Chairman. Joining him is Rajesh Magow, our Co-Founder and Group Chief Executive Officer; and Mohit Kabra, our Group Chief Financial Officer.

As a reminder, this live event is being recorded by the company and will be made available for relay on our IR website shortly after the conclusion of today’s event. At the end of these prepared remarks, we will also be hosting a Q&A session.

Furthermore, certain statements made during todays event may be considered forward-looking statements within the meaning of safe-harbor provisions of US Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance, are subject to inherent uncertainties and actual results may differ materially. Any forward-looking information relayed during this event speaks only as of this date and the company undertakes no obligation to update the information to reflect changed circumstances. Additional information concerning these statements are contained in the risk factors and rorward-looking statement section of the company’s Annual Report on Form 20 F filed with the SEC on July 12, 2022. Copies of these filings are available from the SEC or from the company’s Investor Relations Department.

I would like to now turn-over the call to Rajesh. Over to you, Rajesh.

Rajesh Magow — Co-Founder and Group Chief Executive Officer

Thank you, Vipul. Happy New Year, and welcome everyone to our third quarter earnings call of fiscal 2023 for the last quarter of 2022. ’22 started with a cautious optimism amid the Omicron third wave. But as the year progressed, we witnessed steady improvement in the COVID situation in India and most countries in the world, which helped demand led by leisure-related travel. Indians increasingly took traveling during the year and the demand recovery trends improved with each successive quarter. The reported quarter is the second high leisure travel season quarter of the year, aided by winter and the festival breaks and long weekends. We leveraged on this demand and executed our business strategies well to get back to full recovery over pre-pandemic levels in gross booking terms, while driving operating leverage from the cost optimization initiatives over the last few years.

As a result, this has been our highest ever quarterly performance both in terms of gross bookings and adjusted operating profit. Gross bookings for Q3 stood at $1.74 billion, witnessing an increase of 64.4% year-on-year and 15.9% quarter-on-quarter in constant currency terms. Adjusted operating profit stood at $19.7 million versus profit of $13.2 million in Q3 fiscal year 2022.

As we enter 2023, consumer sentiment continues to stay positive for travel, while we watch the COVID situation with China opening its borders, global inflation and other macro challenges in the world closely. Trends suggest that travelers are back on all travel segments, with leisure, business, pilgrimage and corporate events and will continue to drive the growth in the coming years as well. While domestic travel led the recovery in 2022, we believe that full restoration of supply, aided by some fare rationalization and easing of visa processes could help international travel recover to pre-pandemic levels soon with improved traveler sentiment.

During this quarter, the industry witnessed strong recovery in domestic aviation traffic, which is good news for the airlines and the other partners. Government is committed to the growth of the sector and it has projected that in the next five years government and other private entities are going to spend up to $12 billion on the infrastructure development of the airports. As per plan, in near future, there will be capacity expansion in many of the existing airports and new greenfield and brownfield airports will be set up.

Recently, a second airport was operationalized in Goa with an annual capacity of 4.4 million passengers. Goa is among the most popular tourist destinations in the country and this will help drive tourism growth. A new terminal in Bangalore is now functional and expansion growth in Delhi airport is underway. India is now the third largest aviation market globally as per government data and initiatives are being taken to drive tourism and air travel to smaller cities. In the last eight years, 72 new airports have come up in the country. In coming years, air travel growth will be driven by addition of new airports, infrastructure growth and increasing disposable income. All Indian airlines have placed record orders of new aircrafts and this will help drive penetration further into smaller cities. Outlook for aviation market is favorable and we expect a prolonged period of sustained growth on the back of these initiatives.

Another important pillar for domestic tourism growth is ground transport and world-class highways are a prerequisite for fast and seamless movement. This has been a focus area of government. The length of national highways has gone up by more than 50% from 91,287 kilometer as on April 2014 to more than 140,000 Kilometer in March 2022. Government has set an ambitious target to develop 200,000 kilometers of national highway network by 2025. Similarly, for accommodations, the outlook continues to be robust. Almost all hotel chains have announced expansion and increasing their footprint in India. In next couple of years, there is an estimated increase of 25% in the number of hotels for these hotel chains.

Coming to highlights of the reported quarter now. We restarted our brand campaign both on TV and digital media platforms for both MakeMyTrip and Goibibo after a gap of 2.5 years. We launched 360-degree campaign to capture large chunk of festive demand. The campaign focused on relevant value propositions such as enhanced flexibility, book hotels with no upfront payment and numerous choices best suited to varied customer needs. For Goibibo, we then campaign promoting daily steal deals on both hotels and flights, a collection of deals unique to Goibibo. We deployed a digital focus campaign across platforms in order to — in order to target relevant consumer segments to drive efficient conversions.

As for Business segments now, starting with air business, we continue to add value for our customers through our industry-first features, quick book feature for frequent flyers, which was launched last quarter has led to a reduction of 15% in time taken for bookings for these travelers. During the quarter, we strengthened our free cancellation flow within 24 hours of booking. This is again an industry-first initiatives. All these innovations help us remain the first choice of customer.

We continue to maintain our leadership position in our market share in domestic air ticketing this quarter stood at 30.3%. We witnessed a jump in domestic air traffic during this high season quarter. Domestic air ticketing for us has gone beyond pre-pandemic levels, while international air ticketing recovery is still lagging. Traffic to most of the domestic leisure destinations have now surpassed pre-pandemic levels and has started to grow.

For international destinations, we witnessed steady recovery for short-haul to this destinations across Southeast Asia, Maldives and Middle East due to tourism demand. Demand for international long-haul destinations, however, improved in this quarter, but still face high fares and visa backlog headwinds to full recovery. We expect this to normalize during this year as stated earlier.

Our accommodation business which includes Hotels, Packages and Home Stay segment with continued focus on expanding accommodation offering on our platform, our inventory is now comparable to pre-COVID levels. This has also helped us now offer stay options over more than 2,000 cities. Aided with seasonality, this quarter we sold more than 53,000 unique properties, which is at par of pre-COVID levels. The recovery continues to be strong across all price points, barring the Super Budget segment of $20 or lower per room night stay.

Overall gross booking for hotels has recovered to pre-pandemic levels on constant currency basis on the back of strong growth in Premium and Medium Premium segment and partially aided by higher room tariffs. We continue to innovate and invest in our products. Book at INR1 launched last quarter that offered flexibility to the customers, which helped drive growth in longer advanced purchase bookings. GoStays, which is our flagship program for 35 budget hotels in now contributing to over 40% of the overall budget volume with much better customer experience and NPS.

International outbound travel opened in March 22, 2022, and since then we have — we have been witnessing a steady recovery for short-haul destinations. While we saw some slowdown in international travel bookings with COVID scare as China opened at the end of the quarter, but overall we witnessed good traction. And during 2023, we hope to see travel to Europe and long-haul destinations also return fully.

Home stays continue to lead recovery in overall accommodation category. 10,000 plus unique properties across 640 plus unique destinations have been sold during this quarter. During this quarter, we launched the new section of properties called hidden gems, where every property in this set has unique USPs and are away from the center of the city. We also launched our brand campaign specifically for home stays to create more awareness among travelers. The campaign emphasized on the concept of stay for every need and highlighted various stay options, including pet friendly villas, pool villas, and villas best suited for large families.

Moving to packages business, you would recall that last quarter we talked about how we have scaled up this business with the addition of holiday experts and franchisees. We are now reaping the dividends in the high season quarter. Total packages bookings are now more than 150% of pre-pandemic volumes with online channel leading the growth. Domestic packages are now more than twice of the pre-pandemic volume, and for international packages the recovery is now picking up.

Our bus ticketing business revenue recovery was at around 113% as compared to same quarter pre-pandemic on constant currency basis. This quarter saw a growth in inventory compared to pre-COVID with both number of private bus operators and the number of schedules being higher. Recovery in Southern market which has been traditionally strong for bus is slower-than-expected as large IT workforce is still working remotely. This slowness has been made up by non-traditional markets in Central, North and East, which have witnessed growth as an increasing number of bus operators are adopting online channels for their distribution in these regions.

Our initiatives to drive high revenue through value-added inputs to our customers and partners have gathered steam in Q3. Redbus assurance program that protects the customer from bus cancellation has also seen increased traction. Our other ground transport services such intercity caps, rail tickets, etc., continue to scale well and gross booking value touched an all time high. We have now opened up our trip guarantee product for non-bookers, also wherein a user who has a waitlisted train ticket booked from any channel outside of MakeMyTrip can buy a trip guarantee product by paying a small fee. If the ticket remains waitlisted at the time of charting, they use it is eligible for a 3 times refund which you can use to book a alternative mode of transport.

Business travel is now normalizing and both our corporate platforms are growing at a robust pace. Active corporate count for myBiz has crossed 42,000, while on Q2T, which is our platform for large enterprises, active customer count has reached 231 as compared to 114 in December 2021. We have doubled the number of customers in last one year.

On product side, on myBiz, we went live with enhanced workflows to support in-app approval and to support easy re-cancellation, we went live with our reporting module. The new reporting module allows corporate to customize and schedule reports according to the needs of different corporates and their developments.

MyPartner, our travel agent platform added 2,892 agents during the quarter, taking the overall number to 34,600 plus. Quarterly repeat trade for buying travel agents is a healthy 80%. Coming to international businesses, our OTA business in GCC growing slowly and steadily. Gross booking value grew 29.6% quarter-on-quarter. We launched our first radio brand campaign in November to increase MakeMyTrip awareness amongst Emirates, Arab and Western expatriate in the UAE. We released about 780,000 audience with presence across English and Arabic radio stations.

Our Redbus international business is showing robust recovery in Malaysia. Redbus has more than doubled its business in Q3 as compared to the same period pre-pandemic and emerged as the clear market leader with a 25% share of the overall market and running profitably. The same playbook is being replicated in other big bus markets in emerging countries in Southeast Asia and Latin America. With this, the contribution of international to overall bus business has crossed double digits in Q3.

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

Mohit Kabra — Group Chief Financial Officer

Thanks, Rajesh. Hello, everyone, and Happy New Year. With improved travel sentiment, we witnessed good uptake in this seasonally strong quarter and have delivered strong performance both in terms of business growth and profitability. Q3 gross bookings were at $1.74 billion, witnessing a growth of 64.4% year-on-year and a 15.9% growth quarter-on-quarter in constant currency terms. Adjusted operating profit was at $19.7 million as compared to $20.2 million during the same quarter last year, an improvement of 48.6% year-on-year. As stated by Rajesh earlier, this is the highest ever quarterly gross bookings and adjusted operating profit achieved by the company.

For the nine months ended 31st December, ’22, our YTD gross bookings grew by 141% in constant currency terms and came in at $4.9 billion, while our YTD adjusted operating profit came in at about $51.3 million as compared to $11.2 million for the same quarter last year, witnessing a jump of over 4.6 times. Our air ticketing gross bookings for the quarter were at $1.1 billion, witnessing a growth of 7.6% year-on-year and 7.5% quarter-on-quarter on constant currency basis. As this was a high season quarter, on expected lines the take rates normalized to about 6.6% compared to about 7.4% in the previous quarter. As a result, adjusted margin stood at about $70.2 million, registering a strong 45.2% year-on-year growth in constant currency terms. Gross bookings for the Hotels and Packages segment were at $445.7 million, witnessing a strong growth of 55.4% year-on-year and 36.9% quarter-on-quarter on constant currency basis.

Q3 is a seasonally strong quarter for tourism and travel and we recorded a strong growth of over 150% year-on-year in our packages business. Due to the increased mix coming in from the packages business, our margins or take rate from this segment stood at about 16.2% as compared to 17.2% in the previous quarter. Adjusted margin for our hotels nd packages business stood at $72 million in Q3, witnessing a growth of 45.3% year-on-year and a 28.8% growth quarter-on-quarter in constant currency terms.

In our bus ticketing business, gross booking for the quarter were at $227.1 million, growing at about 51.9% year-on-year and 24.1% on a quarter-on-quarter basis on constant currency terms. Take rates were at about 9%, which is in line with the previous quarters. Adjusted margin stood at $20.3 million and extremely strong year-on-year growth of 57.6% and a quarter-on-quarter growth of about 24% in constant currency terms. Our adjusted margin in all the other businesses in Q3 was at $9.6 million, which is a 79.1% growth on a year-on-year basis and 30.6% growth on a quarter-on-quarter basis in constant currency terms.

In terms of operating expenses, the operating leverage in terms of rationalized fixed-cost during the last few years and more efficient customer efficient spends are helping us drive bottom line gains with improving scape. The high season quarter also saw us restart our brand campaigns across the brands after a gap of over 2.5 years. Also the higher brand marketing expenses were more than offset with efficiencies in other marketing and promotional costs. Accordingly, overall marketing and sales promotion costs for the quarter came in at about 5.2% of gross bookings, lower than the 5.4% in the previous quarter and lower than 5.6% in the same quarter last year. This has had helped us achieve the highest ever quarterly gross bookings, surpassing the pre-pandemic date and at the same time, achieve our highest ever quarterly adjusted operating profit of $19.7 million.

With that, I’d like to turn the call back to Vipul for Q&A.

Questions and Answers:

Vipul Garg — Vice President, Investor Relations

Thanks, Mohit. Anyone who wish to ask the questions now can click on the raise hand icon on their application, and we will take the questions. We’ll just wait for a minute for queue to assemble. The first question is from the line of Sachin Salgaonkar of Bank of America. Sachin, your line has been unmuted, you may unmute yourself and ask the question now please.

Sachin Salgaonkar — Bank of America Merrill Lynch — Analyst

Thanks, Vipul. Good evening, everyone. I have three questions. First question, you know, Mohit, more as a follow-up to the comments what you made. Looking at the take rate at both that air ticketing and hotels and packages, clearly looks like this time around as compared to historical 3Q the decline was slightly higher. So, I just wanted to check, apart from seasonality is there anything else which is impacting these margins and how should ideally when look at going ahead? Should we see normalization now that the seasonality gets behind us?

Mohit Kabra — Group Chief Financial Officer

Sure, Sachin. If you — like I was mentioning, particularly if you look at the hotels and packages business, overall due to the high seasonality, packages kind of came in much stronger in terms of the overall mix, and packages as you know is in the lower margin business and that contributed significantly to a little bit of a dropping off of margins for this segment as a whole.

The other thing that we’ve been calling out is, if you would recollect that in the entire recovery process, the mix of the budget segment of hotels has been coming down and therefore to some extent that’s also kind of keeping the overall margins on the hotel side on the lower end of our range. There is a good kind of probability of the overall margins improving on two counts. One, as the mix kind of gets restored more in favor of hotels as we get to kind of, you know, regular seasonality. And the second is, as the mix from budget segment kind of keeps improving. So I would say possibly there remains an upside of about a percentage point or so for the margins to improve in the Hotels and Packages segment overall compared to this particular quarter for the reasons that I’ve just explained.

On the air ticketing side, again, if you look at on a normalized basis, possibly we have been guiding the 6% plus kind of margins is where we see longer-term kind of air ticketing margins are stabilizing. And tactically, kind of based on a quarter-on-quarter basis depending upon how the load factors are and what is the kind of, you know, promotional activity that the airlines want to drive in terms of driving load factors through our platforms, that really kind of marginally tweak the the overall take rates for the domestic air ticketing business. But otherwise, air ticketing business longer-term, I think this is a healthy margin to kind of remain at, and we believe unless there is a significant drop in the load factors, our margins should largely remain in line with this, with a plus or minus kind of 0.5 percentage point range. So very broadly this is how I would predict.

Sachin Salgaonkar — Bank of America Merrill Lynch — Analyst

Thanks, Mohit. Second question, clearly this as you rightly indicated was a seasonally stronger quarter and despite that we did see the air ticketing revenues being down Q-o-Q. I did see the bookings were up. So just wanted to understand what happened and why was air ticketing revenue down?

Mohit Kabra — Group Chief Financial Officer

Yeah, exactly the same thing. They are linked to the previous one. Because the gross margins on the — on the air ticketing business have kind of come down, that’s how you see the revenue kind of on a adjusted margin coming down a little bit, but the growth overall in terms of segments and gross bookings is higher. And similarly you would see, even on the marketing and promotional expenses, they have come lower than even the previous quarter or for that matter despite the marketing investment, where there is a — like I said, some of these promotional expenses as they kind of coming from the airlines can optically look at a — take the margin also higher and take the overall marketing and promotional spends also higher. In this quarter because the incremental kind of promotional incentives provided by the airlines were on the lower end, tat’s how you are seeing that effect coming through both in terms of the adjusted margin coming down and also the promotional and marketing expenses coming down.

Sachin Salgaonkar — Bank of America Merrill Lynch — Analyst

So you know, Mohit, thanks for that. I did look at that, obviously, there is a margin dip which happened last quarter 3Q and so on and so forth. Out there, the airline revenues did not dip despite the take rate going down. So this time around it has more to do with the promotional expenses what you mentioned?

Mohit Kabra — Group Chief Financial Officer

No, no. See, promotional expenses don’t count. When you look at the overall adjusted margin, the promotional expenses don’t make a difference. It is purely the overall delta of you look at it on a quarter-on-quarter basis, it has gone down even compared to the previous quarter. So that’s what is kind of causing the delta change on the margin side.

Rajesh Magow — Co-Founder and Group Chief Executive Officer

And maybe — maybe if I can just add an additional point, Sachin. If you look at the numbers on as Mohit was explaining on gross bookings side and air segments growth, it is positive, it’s not a decline. It’s like on a constant currency basis at 7%, 7.5%. The only additional point that I will make towards Mohit has already said. You know, as I was indicating it earlier as part of my script as well, that while domestic flights have recovered or domestic traffic has recovered, actually more than recovered to the pre-pandemic levels, international is still lagging behind, right?. So international bookings, international — especially long-haul flight bookings have not necessarily fully recovered. And in fact, towards the end-of-the quarter, second half of December because of the China opening up there was a bit of a scare on COVID as well. Thankfully, after one-week it’s sort of died down and things got — started to get back to normal. But all things considered, because of the high fares with the fuel prices going up or the overall focus being on yield by all the airlines and the backlog of operational issues like backlog of visa clearance, etc., continue to sort of play in terms of just putting international bookings under pressure. And that’s really just one more additional factor on just overall air despite being the high season, while the consumer sentiment remained positive and people want to travel, but you know, if you continue to see high fares. On the international side then sort of plans get pushed if they are not necessarily essential travel related and stuff. So I think that’s the additional point you should keep in mind.

Sachin Salgaonkar — Bank of America Merrill Lynch — Analyst

Thanks, Rajesh. And last question is now that you guys got the NCLT approval for make matter Goibibo, looks like the key regulatory hurdles for a potential India listing is behind. So any thoughts in terms of timeline and how you guys are thinking about it?

Mohit Kabra — Group Chief Financial Officer

So, from a regulatory hurdle point of view, I think, yeah, this is one kind of incrementally good step to kind of take in that direction. But like we have been calling out, tapping into the Indian capital market is probably there on the agenda, but not necessarily in the — in the near future. So we remain open to it and we’ll clearly come back and update as and when we kind of are able to crystallize our plans around it.

Sachin Salgaonkar — Bank of America Merrill Lynch — Analyst

Got it. Thank you and all the best.

Mohit Kabra — Group Chief Financial Officer

Thanks. Thanks, Sachin.

Vipul Garg — Vice President, Investor Relations

Thanks, Sachin. The next question is from the line of Gaurav Rateria of Morgan Stanley. Gaurav, you may unmute yourself and ask the question now.

Gaurav Rateria — Morgan Stanley — Analyst

Hi. Thanks, Vipul, for giving me the opportunity. So, I have couple of questions. Firstly, when I look at the volumes in each of the individual segments, they haven’t reached the pre-COVID levels compared to the same quarter during the pre-COVID. So somehow the recovery has been a little slower-than-expected. So is it largely because of international in each of the segments are there is some other phenomenon going on?

Mohit Kabra — Group Chief Financial Officer

Two reasons, Gaurav, If I could call it out. If you look at it overall in terms of the market recovery. So if you look at even domestic air, the overall market recover is at about 90%, whereas our recovery is kind of close to about 100% plus. So therefore while we are kind of growing ahead of the market, but the market recovery itself is at an industry level is lagging in the pre-pandemic kind of segmental volumes. So that’s one reason. And secondly, if we look at it in terms of the overall ticketing kind of base, like Rajesh was calling out. International hasn’t really kind of bounced back as strongly. So that’s the other reason for the — for the lag in the overall recovery for the air ticketing business as a whole.

Gaurav Rateria — Morgan Stanley — Analyst

All right. Second question, how should one look at the lower customer inducement charge as percentage of the gross booking? Is it that the competition or the competitive activity has subsided in the market and hence there is no need for that high customer inducement charge? Is it more tactical like a shift between branding versus customer inducement charge? How should one think about like overall ad and promotion spend? You have always been saying 5% to 6%, but it’s kind of come out the lower end. So how should one think about it on a sustainable basis?

Mohit Kabra — Group Chief Financial Officer

No, I think on a sustained basis, like we have been saying in a possibly — the range would be more like 5% to 6% and couple of things going into over there. One clearly is the extent of competitive activity that we’re seeing in the market. And as you have seen that kind of makes a difference. Secondly and more importantly I think it is also about building a certain amount of base of volumes in each of the relevant or important segments, particularly including the the hotels and kind of packages segment or overall accommodation segment. There if you see over the last almost like six-seven years, we have gradually built robustly build volumes over there. And as you know is kind of inherent in the e-commerce models or the online models, as you build volumes, you customer efficient cost is start kind of panning out much better. So, I think it is about getting to a threshold base and therefore you see why there has consistently been a decline in the marketing expenses over the last I would say six-seven years. That reduction has become sharper over the last few years as we have crossed that threshold, pretty much almost pre-COVID is what I would put it around. So that’s another factor apart from the fact that there is much lower competitive intensity particularly in the Hotel segment.

Gaurav Rateria — Morgan Stanley — Analyst

All right, last question. The cash balance if I compare versus last quarter I think has come down from 466 [Phonetic] to 449 [Phonetic] is there something missing? You have generated a lot of the, like large EBIT during the quarter, our cash balance should have gone up. So how should one read the decline in cash balance?

Mohit Kabra — Group Chief Financial Officer

No, you are right. And this being a seasonally high quarter, usually we do see deployment in working capital during peak seasonality. And then you also see releases happening as we kind of move into the the lower seasonality part of quarters. So it’s kind of largely linked to seasonality per se. Nothing else over there.

Gaurav Rateria — Morgan Stanley — Analyst

All right. Thank you so much.

Mohit Kabra — Group Chief Financial Officer

Sure. Thanks, Gaurav.

Vipul Garg — Vice President, Investor Relations

Thanks, Gaurav. Just to remind the participants, anyone who wish to ask the question can click on the raise hand option. Next question is from the line of Aditya Suresh from Macquarie. Aditya, you can please unmute your line and ask the question now.

Aditya Suresh — Macquarie — Analyst

Yeah. Thank you, Vipul. Just had a few questions. First question was just on the competitive dynamics that you mentioned. Can you elaborate a bit about kind of what’s happening in the Air segment, in particular with Cleartrip? Any kind of a new lease of life perhaps. So maybe speak about that a little bit. And I do kind of. Note that your customer inducing cost and marketing spend that has kind of come down, but in absolute terms is still a fairly chunky number, in particularly in an environment where some of your competitors maybe kind of challenged for funding, at least the conditions are a bit tighter. So, can you speak a little bit that? One is the competitive intensity in air and Cleartrip, etc. And two is, I think for fiscal ’24, fiscal ’25, are you sticking with this 5%, 6% of gross booking as a guide or is there any kind of absolute kind of numbers I think you might as well.

Mohit Kabra — Group Chief Financial Officer

Aditya, maybe I’ll take the second part and I’ll invite Rajesh to share more color on the first one. But on the second one, it may not be kind of growth situation that we are. It may not be relevant to kind of look at absolute number per se, and therefore looking at it in terms of a percentage of spend might be — might be a better way to kind of look at it. And yes, we do kind of expect this to remain in the 5% to 6% range going forward as well. I just invite Rajesh for the first one.

Rajesh Magow — Co-Founder and Group Chief Executive Officer

Yeah, sure, happy to, happy to, Mohit. Aditya, to your first question, I think couple of first important points I just wanted to remind you and everyone. I think you should always keep in mind that our market share on domestic flights as we have been sort of reporting out is pretty healthy, we are at about 30% market share of the total market. And also the fact that the — for whatever its worth, the flight product for us has been fairly matured and we continue to keep innovating as I was also trying to highlight some of those unique features that pretty much every quarter we will end up sort of launching and that helps the customer confidence, that helps us becoming the first choice in the market and has been the case for a while. And that’s precisely the reason no matter what the competitive dynamics might be in the market, we’ve been either gaining share or has been able to stabilize at around 30%.

I think these are important points because I think they get lost in the noise often. From our point-of-view, we have seen they actually work — we would fully well when it comes to the repeat trade over a period of time. The stickiness really come to your platform if you continue to keep delivering the the promise on the project side. Now as far as specific dynamics on every quarter of who’s doing what and all that, or frankly I’m not sure that sort of — we watch the competition. We obviously look at the competition very closely, etc. But we’re not necessarily obsessed by of what’s happening, specifically for a particular, on a particular day of what kind of discounting that is happening and so on.

I think our strategy has been very clear that we have to continuously keep improving our product experience and and eventually that sort of helps get more and more customers and more and more market share and keep managing your P&L or the unit economics accordingly, basis whatever might be the dynamics in the marketplace. So, and if you see the history for last few quarters going into specifically, on let’s say, domestic air market, there might be volatility, there maybe on specialty quarters you will see some more competitive action, etc. But over a period of time, it sort of stabilizes because never is that sort of deep discounting, etc., is never a stable or never sustainable, rather. And, so you have to just sort of deal with that on a quarter-to-quarter basis, but from a long-term standpoint we haven’t really been shifting or moving out or even have plans to shift or move our strategy in the domestic flights market or for that matter any of the product and services that we offer.

Aditya Suresh — Macquarie — Analyst

Thanks, Rajesh. That’s clear. I guess the second question was me trying to think about incremental EBITDA margins or incremental profit. You did kind of mention quite a few growth levers across different products. Now over-time I think your employee expenses has been fairly not partly, of at least as a proportion of revenue. Can you maybe touch on two things. One is in terms of incrementally how are you thinking about kind of staff expenses? That’s one. And two is, therefore, do you have any guide in terms of incremental EBITDA margin, let’s say, you had $100 million next year incrementally. I think it should be much more than that, but let’s say you did at $100 million, how much of that do you think you can keep as EBITDA?

Mohit Kabra — Group Chief Financial Officer

All right. Aditya, Maybe I’ll take that. If you really look at in terms of fixed cost overall, including kind of people costs, in particular, the kind of now — despite like almost three rounds of inflationary increases going through, there is still kind of be not below the pre-pandemic levels in that manner of sorts and almost getting closer to that, but is still kind of slightly behind the same quarter numbers for pre-pandemic. So that way I think we’ve kind of done a significant amount of rationalization on the fixed costs. Clearly, it’s not that’ll remain completely constant. They’ll kind of possibly increase at a lower proportion than the growth in the volumes of the business. And secondly, large part of the increase is going to come in more in terms of inflationary increases because we are not really kind of planning any significant headcount increases per se in the business in the quarters or years to come. So that’s one part of the of the question that you asked.

The other is what is the margin expansion opportunity. Again, would kind of refrain from getting into shorter-term kind of margin opportunities. But the longer-term opportunity, clearly there will be kind of looking at is, you know, this is clearly an opportunity to take this business to at least possibly getting to about 1.5 percentage points of in just the operating margin on a gross bookings basis. Whether that happens in a few quarters or in a couple of years and clearly you know it will be dependent on multiple — on multiple factors. But you can see there is kind of as in terms of the volume change that you’ll see even on a year-on year basis in terms of fiscal year ’23 versus fiscal year ’22 and then the kind of corresponding changes that you see playing out through an operating leverage on the bottom line, that would be kind of indicative trend. I mean, I wouldn’t necessarily say the same trend would continue. Well, it could be indicative in nature.

Aditya Suresh — Macquarie — Analyst

That’s clear, Mohit. Thank you. Thanks for the explanation.

Mohit Kabra — Group Chief Financial Officer

Thanks, welcome, Aditya.

Vipul Garg — Vice President, Investor Relations

Thanks, Aditya. Next question is from the line of Puneet Saraogi of Hill Fort Capital. Puneet, you can unmute yourself and ask the question now.

Hari Vijayendran — Hill Fort Capital — Analyst

Hi. This is Hari from Hill Fort Capital. I had a couple of questions. My first question is on the working capital. Can you just double-click on the working capital and why its higher in this quarter seasonally? And how do we generally think about OCF in relation to EBITDA on an annual basis? And my second question is whether an India listing is on the anvil at all or not?

Mohit Kabra — Group Chief Financial Officer

Puneet, maybe I’ll take both and probably you missed some of the earlier questions on this. But on the working capital side, like I said, there is seasonality involved in the business and generally we do see kind of deployment happening in working capital during high season quarters and generally releases kind of coming through in the off seasonality. So, I think it’s better to kind of look at it on a on kind of a — more like a annual basis on a full-quarter basis. On an annualized basis, I would just kind of suggest that you need to bake in some amount of deployment on the working capital linked to volumes. So that’s on the overall kind of working capital and the trend lines over there.

And when it comes to your second question. Yes, I mean, the India capital markets kind of opened to e-commerce platforms clearly and we have seen some of the e-commerce kind of — companies go and tap into the Indian capital markets. From our point-of-view, one of the key things is that we are not necessarily looking at any fund raising in the short-term, we are kind of sitting at good amount of cash and cash equivalents on the balance sheet, including free cash — even if were to kind of potentially look at — setting aside certain amounts for the convertible bonds that we had kind of raised two years back, even setting — after setting that aside, we are kind of sitting on a healthy cash balance of close to about $250 million. So from that point-of-view, tapping into the capital markets on an immediate basis doesn’t seem like a requirement, but from an overall kind of investor value creation and from kind of leveraging the brand and multiple other things, we would kind of keep an eye on kind of tapping into the Indian capital market at some point in time. But like I said, probably there is no immediately to it, but in the longer run from an opportunity kind of tapping the capital markets, I think India will be a more preferred market than Caribbean or tapping it or going into the US market once again. So that’s how I would put it.

Hari Vijayendran — Hill Fort Capital — Analyst

Understood. Thank you so much.

Vipul Garg — Vice President, Investor Relations

Thanks, Hari. The next question is from the line of Vijit Jain of Citi. Vijit, you may please unmute yourself and ask your question now.

Vijit Jain — Citi — Analyst

Thank you, Vipul. Yeah, hi. Congrats on a great set of numbers. I have three questions. First is, within the Hotel segment would you say that barring that super budget category, you called out sub $20 a night, every other category, perhaps with the exception of international is now back to pre-pandemic levels? That’s my first question.

Mohit Kabra — Group Chief Financial Officer

Yes, Vijit. yes, yes, yes, Vijit.

Vijit Jain — Citi — Analyst

Okay, got it. And what would be international now as a percentage of your GPV? I know last quarter you guys had mentioned something early double-digits. How has that moved in this quarter?

Rajesh Magow — Co-Founder and Group Chief Executive Officer

Same, similar, similar, Vijit. I mean, its not substantial change from what we had shared earlier.

Vijit Jain — Citi — Analyst

Got it. And my last question is just on — staying on this international theme, now in the last two to three years you’ve launched these programs like MyAffiliate and MyPartner, etc. You’re working with a lot of offline agents as well some. I guess my question is, how are you thinking about ramping up your international business in the next one to two years? What would be the focus areas there? And if you can shed more light on how you’re going to use even [Indecipherable] partnership, etc., to kind of ramp that business up. If you can talk a little bit more about that?

Rajesh Magow — Co-Founder and Group Chief Executive Officer

Yeah, sure, Vijit I think it’s a good question, given that the recovery is lagging behind. But are we really prepared for when the business comes back and future growth on-top of it. And the answer is, Vijit, it’s absolutely all set from our side. So when you look at the levers that you could use potentially to grow international business, given the fact that it is an under-penetrated — online under-penetrated sort of segment, even pre-pandemic we — our growth rate was much higher both for international flights and hotels. We are almost sort of restless and waiting for that to sort of open up. And you know from supply side — multiple sources of supply on our platform, on the customer side whatever new features and innovation that we could sort of unlock in the international flights, for example, or for that matter for international hotel bookings, they are all ready, they all have been actually rolled-out on the domestic side and we are expanding that to the international side.

In terms of customer acquisitions, like you rightly pointed out, we made investment in some of the other channels also besides our own core B2C platforms and they would definitely be sort of helping us grow our incremental demand on the International segment because International segment — International travel market, like I mentioned, it is under penetrated, which effectively means that there is more market offline available as well. So we do have a channel, which is you know, MyPartner, which is through the travel agency can reach-out to B2B2C sort of demand coming our way as well. So whether it is distribution channels or it is on the supply side, including leveraging the international supplier of trip.com, multiple sources of supply and the product experience on our platform. So, on all fronts we have absolutely invested in, and like I said, we are all set waiting for market to open up.

Vijit Jain — Citi — Analyst

Great. Thanks, Rajesh. I guess just my final question to Mohit. The brand campaign spends that you mentioned in this quarter for both Goibibo and MakeMyTrip, how should we think about that on a going-forward basis? I know you have mentioned in the past that some of these expenses are fungible between here and the customer incentive spending, etc. But just trying to get a handle on how to think about it on a quarter-to-quarter basis. And secondly, the fixed-cost overall which you mentioned is still below pre-pandemic levels or almost there. I think last we have is an approximate $14 million, $15 million a quarter, sorry, a month type of a figure in terms of your fixed cost base. Is that now closer to $17 million, $18 million?

Mohit Kabra — Group Chief Financial Officer

Hi, Vijt, yeah, yeah. So of you look at it — the first question was maybe more on given the brand marketing expense. Generally, if you see historically, we have kind usually have kind of had higherkind of expenses on the brand marketing side, particularly in the high season quarters, where that’s typically Q1 and Q3 from a fiscal year point-of-view, which is April, March. So generally that is the — those are the quarters where you kind of typically would see higher spends on this particular side.

But overall, like I’ve always been calling out — you know — overall customer efficient cost is what is relevant. Some of it kind of possibly paced out with a shorter duration time timeframe and some possibly have a longer kind of weak time as well as the lag effect, but I think it’s relevant to look at it more in terms of a blended number. Therefore, I would just say that’s the reason that we kind of call out the marketing and sales promotion expenses together because that gives you a better kind of overall understanding of how customer efficient costs are trending. So, kind of looking at it in isolation may not be a great idea, but yes you can kind of budget for a slightly higher mix coming in from brand marketing expenses, particularly in the seasonal quarters.

Vijit Jain — Citi — Analyst

Got it. Thanks, Mohit. And my second question was just on the fixed cost base. Where are they in terms of run rate?

Mohit Kabra — Group Chief Financial Officer

Yeah, so if you look at it in terms of the run rate pre- COVID, used to be almost like in about $15 million to $16 million. There is still just shade below $15 million in the reported quarter. That’s what I was calling out that despite almost three inflationary increases going through, there is slightly kind of below that run rate, so reasonably good on that.

Vijit Jain — Citi — Analyst

Got it. Great. Thanks, Mohit. Those were my questions.

Mohit Kabra — Group Chief Financial Officer

Thank you, Vijit.

Vipul Garg — Vice President, Investor Relations

Thanks, Vijit. The next question is from the line of Aditya Chandrasekar of UBS. Aditya, you may please ask your question. Unmute yourself and ask your question now.

Aditya Chandrasekar — UBS — Analyst

Yeah, hi. Thanks, Vipul. I have a question on the ad side. So this has been seasonally strong quarter, right? And we also saw the passenger data, etc., from DGCA, I mean being quite healthy with record highs, etc. Just wanted to understand like was there a potential of better growth on the ad side? I mean, even ignoring international because we saw 4% kind of Q-o-Q growth in air gross bookings. So could that have been higher considering the large ad volumes? Have we lost — I mean I don’t think we’ve lost any market share, but jut wanted to get a sense of could the growth be better or should it have been better in Q3 concerning the volumes as well as it being seasonally strong and how should we look at that going forward?

Mohit Kabra — Group Chief Financial Officer

Sure, Aitya. Like I had called out. If you really look at it in terms of recovery during the reported quarte, the other domestic air recovery, the industry recovery was more about 95%, whereas our recovery was close to about 100%. So that way if you look at it, possibly are kind of, you know, market share kind of gains continue to kind of help us and we are kind of growing ahead of the market. Could the overall industry growth been higher, yeah. I mean, clearly the potential is therefore the overall domestic industry numbers to keep increasing, but quite a few challenges there in terms of the prevailing kind of inflationary pressures, etc., and the overall capacity and some amount of challenges being faced by the airlines also on the maintenance and space availability as a result of which some of the kind of planes are also kind of right now grounded. So as all of this capacity comes back, hopefully in the coming quarter we should see in the industry expanding faster as well.

Aditya Chandrasekar — UBS — Analyst

And…

Rajesh Magow — Co-Founder and Group Chief Executive Officer

Sorry, Aditya, I was just going to add one more.

Aditya Chandrasekar — UBS — Analyst

Yeah, sure.

Rajesh Magow — Co-Founder and Group Chief Executive Officer

I think the important point is — given what we all sort of get excited about the a time including us, is the peak numbers for certain days. But I think the important point will be just to look at the full-quarter numbers even for sort of overall the domestic market traffic and you will realize that sort of up-and-down and overall as Mohit pointed out, the traffic recovery was for the the market, it was about 95%. And if I can just give you additional data point on departures — flight departures and given the fact that we just literally have every flight and we sort of monitor that very, very closely as compared to what it used to be pre-pandemic was actually 92%. And the reason for that is that the load factors have been high. The airlines have been very-very careful in deploying more traffic because they’ve all been, and rightly so, coming out of the tough period of pandemic focused on high load factors, more yield per passenger and thereby reducing the losses for them. As we get into the steady-state market and all the sort of the financial health of the airlines start to improve with some of these results and we are getting some news from Air India that they might turn profitable, etc., some of these things that happen, it will further stabilize, we’ll get more capacity for sure. And then because of that, the demand and the growth will also come back.

Aditya Chandrasekar — UBS — Analyst

Thanks, thanks, Rajesh. That was helpful. And just a very quick question on the marketing side again. So amidst quarter it came at 5.2% even though we did TV campaigns, etc., after a while. I mean, you’ve mentioned multiple times that it probably stays in that 5% to 6% range. Do you think that also a potential for it to come down also from these levels because going forward if we kind of don’t know some of these TV or ad campaigns, which we probably won’t in quarter, right? And we are seeing efficiencies in the other side of other marketing costs. So you think it could head toward that 5% or the 4.8%, 4.9% or do you think largely 5% to 6% is where we should aim for?

Mohit Kabra — Group Chief Financial Officer

Like I was calling out, Aditya, we should be kind of currently estimated to remain in the 5% to 6% range. I think it’s good that at least in the peak seasonality in the reported quarter we were able to kind of keep it more closer to the lower-end of the range while reviving the brand campaign. So let’s see, as we kind of keep making progress we keep sharing color, but our current estimate remains 5% to 6%.

Aditya Chandrasekar — UBS — Analyst

Okay, thanks a lot. That’s it from my side.

Vipul Garg — Vice President, Investor Relations

Thanks, Aditya. The next question is from the line of Tarbir Shahpuri of Nidara Capital. Tarbir, you may please unmute yourself and ask the question now.

Tarbir Shahpuri — Nidara Capital — Analyst

Thanks, Vipul. Actually my question is for you, Vipul. When are you going to organize an Investor Day for us?

Vipul Garg — Vice President, Investor Relations

We we are working on it. Give us some time. We are getting the structure ready. So hopefully, hopefully, soon we will come back with the detailed.

Tarbir Shahpuri — Nidara Capital — Analyst

[Foreign Speech] Anyway, congratulations, guys. Good luck for for next year.

Vipul Garg — Vice President, Investor Relations

Thank you. Thanks, Tarbir. The next question is from the line, and it will be the last question, we are out of time. It’s with Lester Poon [Phonetic] from Hong Kong. Lester, you please unmute yourself and ask the question.

Lester Poon — — Analyst

All right. In the past, the management give a guidance that the adjusted operating margins will not be lower than 1% of the gross booking revenue. And for Q3, I did a quick calculation. It’s about 1%, 2%, and Q3 already is a peak season. So, assuming that in other non-peak seasons the percentage may fall below 1%, or you are confident that you can maintain the 1% in the future? Thank you.

Mohit Kabra — Group Chief Financial Officer

Lester, let me take that. We’ve have guided for this full fiscal year, we would kind of look at close to about 1%. And if you look at on a YTD basis, we are kind of a slightly better than the 1% that we had guided for. And therefore, we do believe that for the full year also as a whole we should be able to maintain that 1% run rate or be be slightly above that. And we should know in about a quarters time. We’ll share more color about the — about the subsequent years as we kind of get into the new fiscal year.

Lester Poon — — Analyst

Okay. Thank you very much. So see you soon in-person in conference.

Mohit Kabra — Group Chief Financial Officer

Sure. Look forward.

Vipul Garg — Vice President, Investor Relations

Thank you, Lester. That was our last question. I’ll just now hand over to Rajesh for his closing comments.

Rajesh Magow — Co-Founder and Group Chief Executive Officer

Yeah. Thank you, Vipul, and thank you everyone. Thank you everyone for your patience, your time, and all the interesting questions and then look forward to come back to you next quarter. Thanks a lot.

Mohit Kabra — Group Chief Financial Officer

I would just add that in case we have not been able to take questions from any of the participants due to paucity of time, please feel free to write into Vipul, and we’ll try and get back to you as soon as we can.

Vipul Garg — Vice President, Investor Relations

Thank you, Rajesh. Thank you, Mohit.

Rajesh Magow — Co-Founder and Group Chief Executive Officer

Thank you.

Mohit Kabra — Group Chief Financial Officer

Thank you.