MakeMyTrip Limited (MMYT) Q4 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to Q4 Full Fiscal Year 2017 MakeMyTrip Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would like to introduce your host for today's conference Mr. Jonathan Huang of Investor Relations. Sir, please begin.

Thank you and welcome to MakeMyTrip fiscal 2017 fourth quarter and full year earnings call. We wish to remind everyone that certain statements made on call today are considered forward-looking statements within the meaning of the Safe Harbor provisions 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. The discussion of the Company’s fiscal 2017 fourth quarter and full year financial and operating results during this call only reflects the acquisition of the ibibo Group results for the two months period beginning February 1, 2017. Actual results may differ materially. Any forward-looking information relayed on this call speaks only as of this date and the Company undertakes no obligation to update the information to reflect changed circumstances. Additional information concerning these statements is contained in the Risk Factors and Forward-Looking Statement sections of the Company's Annual Report on Form 20-F filed with the SEC on June 14, 2016, another filing made since June 14, 2016 including those made in connects with the Company's acquisition of the ibibo Group. Copies of these filings are available from the SEC or from the Company's Investor Relations department. On today's call are Deep Kalra, our Founder, Chairman and Group CEO of MakeMyTrip; Rajesh Magow, Co-Founder & CEO, India; and Mohit Kabra, our Groups CFO. We also have Ashish Kashyap, our Co-Founder and President and Founder of the ibibo Group on hand to take any questions following prepared remarks today. And with that, I would like to turn the call over to Deep to kick off today's discussions.

Thanks John and welcome everyone to our fiscal 2017 fourth quarter and full year earnings call. I would like to start by highlighting our key accomplishments for the past year. As we entered fiscal 2017, the MakeMyTrip team was sharply focused on driving online buying behavior in the hotels market in India. We stayed focused on our strategy of wining customers by delivering a wide range of selection, product innovations and a superior user experience at every touch point. We strategically leveraged our mobile platform to attract new customers by various marketing and promotional initiatives. Our comprehensive approach to the nascent, but rapidly expanding online hotels market as yielded significant market share gains for MakeMyTrip, during the year, we’ve also initiated a foray into the alternative accommodations of home stay segment as we believe this would be an important stay consideration in the future. During the back half of the fiscal year, we also successfully completed the merger transaction of MakeMyTrip and ibibo, both of which have been leading brands in the Indian travel market. Our combined group with highly popular brands like MakeMyTrip, goibibo and redBus has over 63 million monthly shopper visits of which 75% are coming via our top ranked mobile apps and web. Our combined scale and reach positions are well to gain an increasing share of India's large and growing travel market, which excluding rail tickets and cars as expected to exceed an estimated $67 billion in bookings value by 2021. Our reach can potential span across all customer segments including consumers who prefer luxury hotels, to travelers who prefer a budget or home stay experience. It can also span across metros to the interiors of India with different buying preferences including buying over vernacular platforms. While it's only been a few months since we officially closed our merger transaction, I'm pleased to share that we've made good progress on multiple fronts and the entire management team is excited and fully engaged with all aspects of the integration. We continue to operate all three brands, which has allowed us to extract invaluable customer data from each of the websites and apps and leverage these insights to attract and retain customers within the portfolio. To gather pace on the integration efforts, we've also moved both MakeMyTrip and goibibo teams to the same location in Gurgaon, outside New Delhi as well as our technology hub in Bangalore, so they can begin to collaborate and operate more efficiently. On the supply side of the business, we've been able to identify and offer properties that were unique to each of the brands. We've also integrated the redBus inventory onto MakeMyTrip's bus booking engine which has led to spurt in daily business bookings on brand MakeMyTrip. Similarly, we recently integrated MakeMyTrip's international hotel supply with goibibo so that customers now have access to much wider hotel choice and selection across all our brands. With integration efforts well underway, we also plan on rolling out more innovations at an even faster pace than before to help make customers research shopping and on-trip experiences better. We're aiming to deliver greater personalization, enhanced customization and continuously evolving user interfaces. As you'll hear from Rajesh in a moment, we've already begun projects to leverage our official intelligence to automate many common customer service queries to drive operating efficiencies. AI will also help us in pursuing greater social interactions with our customers and suppliers to improve the experience. Recently, we completed up $330 million equity capital raise, which underlines the conviction that both our existing strategic and financial investors have in our team, our vision and also the long runway available in India's online travel market. We believe the growth potential is supported by increasing internet access and improving macro indicators as well as the buoyant business environment. Looking ahead I cannot be more excited for the tremendous growth opportunity in front of us and believe we're now even better positioned in the market post the merger transaction. And now, I'd like to ask Rajesh to share some more details on our accomplishments during the quarter.

Thanks, Deep, and hello everyone. As Deep just mentioned, we had a fairly busy and successful year and as we enter into a new fiscal, we're excited to leverage the strengths of our three brands, and strong balance sheet to take the Company to greater heights. As a result of this merger, we've a strong competitive positioning in the online domestic air, hotel, and bus segments and our platform provides us the ability to achieve sustainable high growth rates going forward. We also see headroom for further growth in the under penetrated online segments like domestic and international hotels, alternative accommodations, international flights and intercity bus segments. While the domestic air market is already a well penetrated online segment, we believe this market should also keep expanding as new government initiatives on improving airport infrastructure and regional connectivity known as UDAN gets implemented. As more of India moves online via mobile, our mobile platform will remain a key driver of deeper online penetration in Tier 3 and 4 cities. We will therefore continue to make the mobile experience more personalized, highly relevant and ultimately an indispensible part of customer search, shopping and travel support process. During the quarter for the combined brands, mobile bookings reached nearly 77% for standalone hotel transactions booked online, 57% for domestic flights booked online and nearly 50% for intercity bus transactions. At the same time, the total cumulative apps downloaded to date is now over 71 million, across the three brands, with more than 11 million monthly average active mobile app users by the end of Q4. On the supply side, I'm happy to share that our customers have access to more than 40,000 domestic hotel properties and 240,000 hotels outside of India. Furthermore, our alternative accommodation platform continues to offer the market more choices beyond traditional hotels with over 13,500 properties available to customer, who may prefer alternative accommodation to stay. We believe customers now have ample choice in finding and experience that fits their preferences, desired location and price point when they use our portfolio of brands. Furthermore, our consolidated supply operation is also allowing us to drive further penetration in smaller cities and towns across India. We now have a larger footprint in the market to help us curate the best hotel supply in the market. Similarly, in the fast growing out bond market, we are developing direct relationships with popular hotels booked and searched by customers and willing to travel outside of India, and leveraging our relationships with various key strategic direct and indirect supply partners to enhance our distribution capabilities of international hotels. During the quarter based on consumer insights, we launched the new hotels initiatives call MakeMyTrip Assured Hotels, which aims to eliminate any potential customers' resistance to booking hotels online. With over 5,000 assured property, we are promising an amazing stay experience with awesome rooms, great service and a 24/7 hotline that customer can call, if they have problem after check-in, which our team will try to resolve within 60 minutes. We also further supported the launch of this new customer friendly hotel certification and promise with the nationwide media campaign. In addition to product innovation, we also leverage technology and innovations to drive customer experience to new heights. The common focus was shared by the teams at MakeMyTrip and Goibibo prior to the merger and is now further sharpened to ensure we continue to stay on top up changes in user trends, while offering new and exciting ways for customer to engage with our brands. During the past quarter, we added a one view quick summary in the goibibo app, which allows users to see all relevant information regarding their destination in a single view. This new screen also aggregate to real-time pricing and inventory from airlines, buses, cabs and shared cars to allow user to compare journey times, convenience and costs, thus reducing user friction. Another great example of leveraging technology to ensure customers journey with our brands key to getting better is the use of artificial intelligence in both the MakeMyTrip and goibibo apps to provide travelers with instant answers to common customer support grades, including flight delays and restaurant recommendations all on their handsets. We've also tailored the apps experiences for our customer with the roll and rollout of matchmaker, which allows customers to see the best matches of hotel based on their selective preferences. We're also leveraging crowd-sourcing and big data to find and notifying the customer to upgrade air fare, specific by data and route. Additionally, we have made great headway in getting our customers involved to improve their own travel experiences in journey and the experience for other travelers in the future. For example, we've been able to grow the monthly user generated reviews by over 70% year-over-year to reach more than 158,000 reviews, left by our combined customer base. Furthermore, customers using the goibibo app are able to leave real time picture and reviews of the hotel they are staying in, right within the mobile app. These reviews are automatically routed to the hotelier and give them the opportunity to address any negative reviews or customer dissatisfaction before they receive a negative customer rating. We believe this feedback clue embedded within the booking app benefits both customers and suppliers in real-time and will certainly help him grew travelers experiences overtime. Now, let me share some highlights of the redBus business. We believe we're well posed to drive rapid growth in the largely offline bus bookings market by our innovative and user friendly bookings flow experience and by bringing more supply online. In the quarter, we launched features to personalize trip suggestions for frequent users of the app, which help improve conversions. In addition, the app now also incorporate the travelers friendly wake up alarm feature, which uses locations-based services on their mobile to alert overnight sleeper business customer a few minutes before approaching their destination. Lastly, we're also looking to drive greater cross-sell of hotels to bus customer via seamless shopping experience within the app itself. Now, before I hand it to Mohit, for a deep dive into our financial performance guidance, I would like to share an update of our holiday's business during the fourth quarter, during the typically slow holiday travel quarter, we continued our focus on improving productivity, efficiencies and improved customer experience by leveraging technology in this line of business. In addition to experimenting with the moving curetted packages to be bookable online, as a result we saw material improvements in our NPS core within from this business. Lastly, we believe the outbound travel markets, which includes international flights and overseas hotel space is still a large and fairly untapped opportunity for us, and we will continue to invest behind these businesses on both online and offline channels. Now, let me hand it over to Mohit, who will discuss our financial results.

Thank you, Rajesh, and hello everyone. Before we begin, I would like to just remind everyone that all the numbers discussed today in Q2 months of ibibo financials consolidated within out reported results. For the fiscal fourth quarter, MakeMyTrip delivered net revenues of $85.1 million, which represents a constant currency year-over-year growth of 64.5%, the resulting full year net revenue stands at $273.7 million which is growth of 65.4% year-over-year in constant currency terms. Our hotels consecutive business in Q4 recorded nearly $44 million in net revenue, which was an increase of over 57% year-on-year in constant-currency terms. For the full fiscal year, the revenue less service cost in this segment reached $140.3 million, a 65.5% year-on-year growth in constant currency terms, helping to drive this performance is the high growth of 95.4% during Q4 and 164.7% for the full year in India's online standalone hotel transactions, which was a result of our high growth and high decibel marketing and sales promotional strategies aided with the consolidation of the ibibo Group in Q4. I'm glad to share that the share of hotels and packages in the overall revenue for the quarter stands at 51.6% and 51.3% for the full fiscal year. This is in line with our longer term strategy of taking the non-air mix to over 70% in the next few years. During Q4, with the consolidation of the ibibo Group, we've also seen an improvement in overall mix of standalone hotels within our hotels and packages segment, which has also resulted in year-on-year improvement in net revenue margins for this segment. Fiscal 2017, overall has see us gain significantly on margins from our hotel suppliers to performance-linked incentive as we were also helping them drive higher occupancy rates with our high decibel marketing and sales promotional campaigns. I'd now like to share some details on the air ticketing business. In Q4, net revenue increased by 47.2% year-on-year on constant currency terms predominantly driven by 42.4% increase in transactions. Net margin in the air ticketing business improved slightly from 7% to 7.2% on a year-on-year basis. During the reported fiscal year, we've seen robust transaction growth on the back of a strong domestic market coupled with our ability to gain share in the air ticketing market. In Q4, our other business segments reported net revenues of $8.3 million. This performance included the consolidation of the redBus business for the two months of February and March 2017. The full year net revenue from this segment stands at about $15 million. For the fiscal fourth quarter we recorded adjusted operating losses of $35.8 million which was a result of our continued high spends on marketing and sales promotions to acquire new hotel customers under both the MakeMyTrip and ibibo brand. Accordingly, the full year adjusted operating losses stood at $83.7 million, while we had cash and cash equivalents to the tune of $197.4 million as of 31st March, 2017. It could be important for me to call out that we added gross proceeds to the tune of $330 million to the recently completed equity fund-raise. We're therefore well capitalized with over $0.5 billion of cash arsenal on our balance sheet. I would like to reiterate our continued belief in the high growth opportunity that lies ahead of us; India is expected to have the world's fastest GDP growth in the next decade, surpassing the growth rates of other larger and more mature economies. A recent IMF report states that India's medium term growth is expected to rise to about 8% due to the implementation of key reforms and appropriate fiscal and monitory policies. Furthermore, according to a recent NASSCOM report India will remain the world's faster growing internet market as the base of net users will reach 730 million by 2020, up from roughly 392 million at the end of 2016 and this is primarily is being driven by rapid mobile option in the rural parts of the country. Additionally, India's overall travel market which has been growing about 10% to 12% per annum is expected to reach over 67 billion in bookings by 2021, and this is without including the valiant cabs market. Fast trends and forecast suggest that the online travel market is likely to go roughly twice as fast to reach about 23 billion in total online bookings by 2021. In this backdrop and the ability of the Company to invest behind the growth, our focus will be to drive significant market share gains particularly in the domestic hotels market. Additionally, we want to focus on addressing all this travel needs of the Indian traveler whether travelling in India or abroad. We will therefore continue to invest behind high decibel marketing and sales promotion campaigns to attract as well as retain the growing online customer base in India. This would be supported by appropriate investments in technology. As we get into the next fiscal year with the ability to leverage multiple brands post the ibibo merger, we believe we can make Indians travel like never before. And with that, I'd like to open up the call for Q&A. Operator please.

Thank you. [Operator Instructions] Our first question is from Sachin Salgaonkar of Bank of America Merrill Lynch. Your line is open.

I do have three questions. Firstly, Mohit, if you could help us understand any one-offs in this result that would be help us?

Yes, actually, no real one-offs in this quarter, you would recollect there was a one-off on air in the previous quarter, but nothing as such to call out in this particular quarter.

Okay, got it. Because I did see some M&A related expense of 4.1 million and I think there was some impairment of intangibles of 15 million. So just wanted to check what that impact?

On account of the ibibo merger clearly there is the transaction such as accounting that has happened and therefore there is a goodwill of intangible assets created on the books and also there are certain intangibles which are kind of in return-off during the quarter. The write-offs on intangibles is largely towards acquired businesses of hotel travel and easy to book as we've been calling out Sachin over the last year also. The focus is increasingly towards growing the domestic market or facing to the domestic customer whether travelling in India or abroad. And now it's really focused on customers travelling from anywhere in the world to anywhere. So with that focus in mind and particularly now strengthen with the deep merger and incremental brands that we have that play in the domestic market with kind of reducing our focus on the international businesses.

Okay, that's clear. And my second question is, wanted to know a little bit more on your thought process on the recent private placement. Quite frankly I was a bit surprised because I thought you guys are well positioned from a cash perspective, so any thoughts on that direction and the intentions of proceeds that cash could be helpful?

So, yes, Sachin, I think it's fair to say the balance was -- bank balance was quite healthy at that point of time, but I think at the same point if you just take a look at the environment, it's also quite clear that things will stay a little choppy before they will before more predictable, and we did think it wise to raise dual pipe deal to fund both organic needs as well as have the wherewithal to look at M&A opportunities that would come up. There are a lot of interesting young companies in this sector and in allied sectors to dual travel, which we've been looking at. So that was definitely playing on our mind, but we didn’t want to be in a situation where we were going full throttle in opening up the hotel market, which is taking up investments as you can see and we will continue to do, so actually probably for the next year or two which is again quite clear and therefore we wanted to have the necessary five power to keep going full throttle and not really be a position where we need to kind of look at raising or not be able to do something which is right for the business. So, classic case of shoring up the balance sheet at the right time and therefore we thought that something we should do.

Got it and my last question again to Mohit, as you know when I look at your take rates at hotels, I think they are improved from 19.4 to 20.5, and again I thought that the ibibo take rate was little bit a lower than MakeMyTrip. So, with the combination or a combined entity, I thought the take rate remains down a bit. So, again wanted to understand what really happened and why did you make that?

Yes, sure, Sachin. Actually, two things over there, one the ibibo take rates known kind of unlikely to be on the lower end because actually if you look at it from a mix point of view, we generally have a higher mix of the budget segment under the ibibo brand and the budget segment as we always been calling out has better margins to offer to the intermediary like us. So clearly that’s not the case, secondly the other reason for the increase in the take rate overall for the segment is also the fact that ibibo doesn’t really have a packages business and therefore the entire edition is on the hotel site and therefore with an increasing mix of hotels in this entire segment, that’s helping to grow the overall take rate.

Okay, so does that mean Mohit that the take rate may continue to interrupt because going forward again the same thing is going to happen, which is you know the contribution of standalone hotels is going to increase a bit more?

Practically, the segment broadly kind of comprises effectively over 90% in terms of transactions of hotels and therefore not very sure whether it's going to continue to make a significant difference in the coming years, but clearly in the shorter term, as we kind of keep ramping up on the budget segment, there is an opportunity, but we're also kind of remaining focused on the fact that we don’t want to become an expensive channel for the partners. So therefore we will keep calibrating it, right now we're clearly able to provide a lot of improvement in the occupancy rates to the partners, so it's clearly working and it’s a win-win situation, so we will keep a tight look on this and keep balancing it with overall occupancy rates and the ability of the partners in terms of what they can share and also kind of linked to our ability to high marketing and promotional campaigns.

Thank you. Our next question is from Gaurav Malhotra of Citigroup. Your line is open.

Just two-three questions from my side, first of all on the number of transactions if I look at the hotels and packages segment together. We see that on a Y-o-Y basis grown by almost 78%, 79% which is roughly similar to the third quarter, but the fourth quarter includes two months of ibibo, so just wanted to get a sense of why -- shouldn't the growth have been pumped up because of ibibo? That's the first question please.

Yes, so, two things over there and you would kind of also -- just two things to keep in mind over there. One, seasonally a weaker quarter compared to Q3, which is clearly a high travel season quarter and therefore a ramp up there it sees both in terms of hotel bookings and packages as well. And the other fact that, if you would recollect in the previous year, we had clearly ramped up on growth in the last two quarters of the year and more so in the last exit quarter, so some amount of lapping effect over there as well and kind of largely getting offset with the consolidation of the ibibo result for the last two months.

If -- and can you just try and break it up as to -- in the hotel business on the net revenue out of the $45 million, how much would be the two months of ibibo and MakeMyTrip's standalone?

So, Gaurav, as it kind of called out, we clearly want to continue operating through a bouquet of brands and a lot of these caused in terms of the split of revenues or transactions, and how do we kind of operate across the various segments of the market, would largely be kind of at times practical keeping in line with what's kind of prevailing in the market, and also from a longer term strategy point of view, we would be cross leveraging this brand and trying to cross-sell to the customer base that either brands have. So, keeping that in mind we don't really feel the need for kind of splitting out revenues across brands.

Maybe some of maybe I can just add Gaurav just to -- just for the benefit of perhaps as even on the call as well. So, the way we've called that out that that we from a consumer point of view, we're keeping two brands independent. But at the back end, as we have already rolled out unified supply stride or supply team or team that is going out in the market, just kind of representing both the brands at the back end and the supply side, and there're a bunch of other areas that we would be synergizing between the brands whether it is traffic acquisition, looking at collaborating well at the back end to see where the opportunities are in terms of just source of traffics and the -- between different platforms, whether it is mobile app, mobile web or desktop for that matter, and leveraging the different strengths between the two brands that we have, it actually doesn't really make any sense and internally that's the way we're kind of looking at it, so it could effectively be seeing one opportunity on our -- on a particular platform and then pushing the envelope on that, and then maybe a different kind of an opportunity on another platform and pushing the envelope on that, so therefore -- and we've been actually already doing that, since the time that we kind of closed the merger transaction. So, therefore it doesn't actually makes sense to -- from our point of view because that's not the way we are looking at it anymore.

Okay. On the second question, any guidance on the top line growth like you used to give it previously?

Okay, so maybe I can just give some color on that and then and Mohit can chime me, as, Mohit actually was trying to articulate that in part of his script. As we get into the merged combined entity scenario, this is our first quarter with two months with ibibo results same, so we kind of as we have said that we are in a very good position just from a market leadership standpoint on various segments, and we've also have very clearly articulated where the growth opportunities are and we've also very clearly said that, we would continue to ride the momentum of the growths that we have in the underpenetrated segments, just to shift that is happening from offline to online, and we will continue to keep driving that. So I guess from our point of view just from macro perspective, we continue to be very optimistic about the overall continues growth that will continue from not only in the travel market but also on the online penetration side led by mobile pan creation even further to Tier 3 Tier 4 cities. So we decided it probably makes sense to just give directional guidance on the overall market growth as well as qualitative guidance from our point of view calling out the segments that there we would be expecting the growth to continue. We didn’t want to confine ourselves given that there is robust growth, the environment overall is pretty good and our position is pretty strong both the merger as well. We didn’t want to confine ourselves to define any kind of a number or a range for that matter. And that's the approach that we decided to take that probably makes sense for us, and goes it out same that as we along we will continue to kind of keep evaluating it. But for now, we thought it was actually best for us to not necessarily come out with any kind of a definitive range and stuff like that.

Okay, just two quick questions from my side. One is on the employee cost that has more than doubled quarter-on-quarter. So, that I'm presuming is essentially the -- and that includes only two months of ibibo merger. So, is there a largely different employee cost structure between MakeMyTrip and ibibo?

No, Gaurva, I'll take that. And I should have called that as I said with respect to the merger related kind of accounting, there is a certain one-off that is kind of sitting out there particularly in the employee share-based compensation cost. Basically, there is close to about $9 million of one-off which has been charged out in the current quarter, and this likely coming in from what the liability would have been computed basis the prevailing stock price as on date of announcement compared to the date of -- compared to the price, which was prevailing on the data closing because the entire transaction accounting kind of happens on the closing date. So, there is close to $9 million one-time expense sitting out over there.

So, this is essentially the e-source of ibibo converting to MakeMyTrip, is that what it is?

Absolutely, absolutely.

Okay. Just last question while think obviously pretty good, but there as we've seen there are at least some, I won’t call it immediate threats, but it seems to be in the market for fund raising, you've seen that Paytm has raised quite substantial amount of some and it seems to be quite failure basis on the bus ticketing and the air ticketing side. So just wanted to get a sense on how you perceive both these competitive threats or any other threats which may come on the horizon because Paytm, it specially seems to be well funded right now? Thank you.

I know it’s a fair question and I think it's pretty clear that the OTA segment per se very attractive for, not only the international players, the large MNCs who are also in the market and definitely getting more interested as the hotel markets opens up or the overall market in general opens up, but also new models and new players here I think are clearly quite interested in the sector and everyone is switching their hat in. We do believe some of this part does help in expanding the market. PayTM as you seen has been playing a rather aggressive strategy on cash back, playing to their strengths on wallet and that definitely expands market, but also attracts a different segment of the market typically. This is the bargain hunter. This is a very price sensitive customer, which is probably one of the way's the market starts expanding at the bottom end. And we definitely track that we're watching that and we're also finding the sensitivity, that market and that segment has to discounts and the withdrawal of discounts, so that analysis is quite interesting and educative for us and we're tracking that all the time. OYO is somewhat I guess in a space which is not directly competitive, they are still seem to be more on the supply site, building out a low touch chain of branded hotels, again in a low touch manner, there is a change in model out there. So, again as something we're watching as you know they used to be offered on our platforms, in fact both goibibo and MakeMyTrip platforms are not since a while now. And there are other entrants too in that segment where we have found even these entrants on the newer chains as we call them is actually helping grow the market, standardize the market from a supply point of view and eventually helps growth that. So when we do what Rajesh spoke about MMT Assured is actually responding to the market need. The market need is in the budget segment give me quality and give me standardization, which was not very predictable when you looked at many independents. So, I think there will be various companies which will come forward to provide that. If you look at China, it kind of developed in a very similar manner, you have featured e-launch, et etcetera as classic OTAs, but then you also had companies like Hanting and China Lodging, Home and et cetera, which were developed as budget place and which have actually become interesting elements of the supply ecosystem. So, I think there is a way to kind of figure out, which of these brands we will be working with, which we're doing selectively as well as growing in house operating in the same way whether its MakeMyTrip Assured, earlier it was GoStays and which actually continues to be a fairly large offering as well as we had MVP, which was my value plus et cetera. So, I think, yes, it’s a space which is attractive, it’s a model which is proven globally. The OTA model been proven to be very lucrative in the long run and therefore you'll always find entrants coming in and there's churn again. So, a lot of the local incumbents who were there erstwhile are not so strong any longer. So, I think that constant churn will happen as people clamor to be in the top two or three players in the market.

Also, Gaurav just wanted to add, at least from our experience over the last few years, incremental additional spends coming in from various market participants only kind of helped to open up the market and take it online even faster, which always has a positive implication or an impact on the market leader. And even now with the bouquet of brands behind us our leverage overall industry spends is like higher than never before, so I guess the Company kind of works additionally in our favor as there's more market participation.

Thank you. Our next question is from Lloyd Wamsley of Deutsche Bank. Your line is open.

Couple, first one, can you kind of give us an update on how the integration is going broadly with goibibo? You talked about some of the product cross-pollination, but what have been the biggest surprises so far as you start on the integration path?

Sure, Lloyd. Hi, this is Deep and I'd like to answer that. So, I think most of the work that we've planned out and we've kind of splitted out into immediate our quick win kind of targets and something for the mid-term and then eventually the long-term. I think the quick win and I'd like to give the correct timeframe, it's really 1st February onwards, we got our approval from the Competition Commissioner of India on 17th of Jan really started working together on the 1st of February, so in these last few months what we had put out as quick ones on cross-pollinating, quick integration some of them which I called out for example international hotel supply, which MakeMyTrip at build out is now doing very well on the goibibo deck, and similarly redBus entire bus supply is doing very well for MakeMyTrip as well. We've also done work on the payments as common service and that is actually some of the integration already done and yielding good results but a lot planned on that site. I had also touched upon the rich data that is now available to us from the different brands and what we're watching out is what consumers are doing on one brand when they exit the brand and if they go to the other brand and whether they transact there or they leave there I think that's leading us to some fascinating learning's which are applying back as we do new product innovation and tweaks to what we've got. So, I think most of these have actually been very positive for us, a lot of it has reinforced the value of and the import of the merger and how it can play out. I think if there were to be some surprised, I would like to call out that some of the stuff that's take longer than expected, so maybe a little bit more time to be budgeted, particularly in the deck innovations, these are harder as you know, platforms are obviously different and these things tend to go on for quite long. So, we've kind of set ourselves more realistic targets, we've tweaked some of them; where we're going to integrate like on the supply platform clearly there's work underway and very soon we'll have a common way, a common supply platform that our hotel partners can access. On peoples side too I think the integration is going quite well, but again no merger is easy or a bed of roses, it has its shares of ups and downs and I think we are taking some of them as they come in and we have been quite realistic about the expectations specially when a same model, same business model to same business model, I think there is bound to be some amount of duplicacy et cetera, and we are aware of that and we are very kind of budgeting that going forward.

And another one if I can. If I look at for example marketing as a percent of gross bookings it's continuing to grow on a year-over-year basis, slowing the growth. How should we think about that trend that over this fiscal year and in the next few years and any update on how you kind of see the past back to operating profitability over the next few years?

I'll take that, Mohit here. If we would have seen through the year we did kind of demonstrated as we can kind of it can build efficiencies on the marketing spends and we kind of keep doing it tactically and depending upon how the quarter is. So, if you really look at it compared to in the earlier quarter. Q3 which was a seasonally high travel quarter for us, we had kind of baked in much stronger efficiencies on the marketing and sales promotion expenses and it was kind of down to closer about 8% of overall 8 percentage points on gross booking. It's kind of again gone-up closer to 11.5% to 12% in the current reported fiscal and then again this is also up because of multiple things. One, we clearly have now multiple brands that they are investing behind and trying to promote and significantly by driving cross sale as well. So, we do believe at least in the initial stages as we kind of get into building cross sales as using opportunities across the brand, there is going to be incrementality that would come in, in terms of promotional expense. Secondly, the market also has kind of off-laid to target things on more competitive aggression coming in from some of the other market players. So that's been another factor. I think as we did into this is really high quarter in April, May, June we will again try and see if we can build in some synergy or efficiencies on these expenses. But overall I think the focus clearly at least in the next year to two remains in terms of in favor of growth versus trying to cut down significantly on the promotional spend, so that the growth in or the significant run on market share gains continues to be robust. We have also kind of from a slightly longer term planning point of view have been calling out that going out, and we do believe this whole promotional expense and kind of its start tapering down over a 3 to 4 year period. So, I think going down in the next maybe 8 to 12 quarters we do believe we should be in a position to kind of bringing these expense down significantly from where they are currently and if you kind of gradually look at aiming towards a breakeven over the next few years.

And I guess last one if I can just on the M&A front with all the new capital you've raised. How should we think about what you would be looking most closely at? Is it consolidation in core markets? Is it expanding product? Is it geographic focus where what can you share on your M&A philosophy as it stands today?

Lloyd, I think we can just talk about it at a high level and philosophically the way we look at it. Then we would be looking for interesting product and take place in the travel space, which can give us feed to market, it's tough we obviously don’t have or will take pretty long to build, so I think that’s something which we're keenly looking out as you are aware we've have tech innovation fund for travel, which we've had made a few investments, we've seen them, some of them are actually growing quite well. But there are very interesting model that are coming up now powered by some of the new technologies available. For example AI was just talked about and now is been used and people are doing some keen innovative stuff, which can in some sort of way be bolted on, so we're looking at that more keenly. We would I guess probably similar model is not really where it would be a quick fit. I mentioned about on the hotel side, I think some of the way people are expanding on the hotel side through low touch but smarter way to grow that could be interesting for us as well. So I guess within these spaces we will keep looking and anything so it's we're open to see stuff which can help us accelerate growth effectively and typically in the hotel market. So I think we definitely will have a bias on the accommodation side out there. As you know in aviation on the air side, we have a really strong position and large market share in the domestic air, and there it’s a question of really growing organically and improving the operational efficiencies there as well as customer service. On the international air side, I think we know what to do and we have been now been training out there, so you will see strong results come organically. But on accommodations both, which can help us penetrate for their into the domestic market and also I think the near international market other short hall international market where Indians tend to travel a lot and that growth has been actually quite base, I think there are also areas where we will look how we kind get a more sticky customer base provide a better experience for our customer so and these are the broad areas.

Thank you. Your next question is from Kevin Kopelman of Cowen & Co. Your line is open.

Sorry, I missed it, but could you give us growth in revenues, less service cost in FQ4 on a pro forma basis for their combined company? And then as a follow-up after that, thanks.

Kevin, we still do not have the pro forma financials, as I've called out these are consolidated financials for the last two months but haven’t kind of really been able to put our per forma financials but except for putting our historical financials of ibibo as of 31st March 2016 with our funding numbers of 31st March 2015. But going forward, hopefully in the next couple of months, we should be coming out with additional historical financials or the ibibo Group as well as pro forma our financials shortly.

Okay that’s great thanks for that. And then I guess just a follow-up, I know you're giving guidance and I understand completely. Can you give us any color just what you've seen so far in the June quarter? Just any additional color especially now that you started kind of pretty some of your integration work in place and I know it's early? Thanks a lot.

Yes, I know, we would appreciate, difficult for us to kind of share any color on the current ongoing quarter. I did try and kind of try and cover how overall the market growth is looking like and how the overall macros are looking like. Overall, business sentiment also seems to be good. But as you know for us -- in our business considering there's kind of seasonality involved for this kind of good to look at, at least three to four quarter stand, rather than look at one quarter in particular. So, we would want to kind of avoid making a comment on a quarter in particular.

Thank you. Our next question is from Shaleen Kumar of UBS. Your line is open.

Just a couple of questions from my side, one on the hotel side, right. So, we know that we've 40,000 hotels on MakeMyTrip, but I would like to know how much -- how many hotels do we have in total, like ibibo plus MakeMyTrip, if we exclude the common hotels, so now what's the bouquet we have in total?

So, this is the number that we reported already actually the total number -- total number of 40,000, and this -- basically after doing the exercise of just common hotel, if you'd remember, MakeMyTrip had reported about 30,000 hotels in the past. So, you could -- our guest potentially see that they would be in the range of 8,000 to 10,000 hotels unique that we would have added post the merger. So, this is the combined number, 40,000.

Rajesh, so I just want to understand like are all these hotels online or like are they like integrating into our system or like part of them are kind of offline and -- so what is the proportion?

Hi, this is Ashish here, I'll take this. So, these are active hotels, they're pretty much hooked up to our live system or rather the -- there's a system called ingo goibibo, and there's a system called MakeMyTrip Extranet, and new hotels are pretty much hooked up to that system and as a result these hotels also have an access to their performance just like -- think of it just like mini version of Google Analytics for hotels.

So, are you guys planned to have a like one common system now, replacing the two systems? How's going to happen?

Yes, we're working in that direction.

So, should one conclude like given that the take rates are a bit driven by volume, would you able to get better margins from budget hotels or do you see -- or are you in talks with the budget hotels where you -- where both MakeMyTrip and ibibo have a strong inflows in terms of the customers, are you seeing any kind of that signs?

Shaleen, as we've been calling out our kind of overall philosophy is to be more in the 15% to 17% range on the hotel side in terms of margins, we've actually been kind of been able to get much ahead of our targeted margin percentages particularly in this business segment, and this, we've done largely on account of -- the significant amount of promotional campaigns that we're running for the various hotels and they are therefore kind of willingly participating in terms of incremental margins through performance incentive products. Slightly, longer term I mean clearly while in the shorter-term there is a potential to kind of slightly improve the margin rates or the take rates with more and more mix coming from the budget segment where the ability to share higher margins is better. But as I said philosophically we would want to kind of not really kind of try and kind of take the margins up, but keep it more tactical depending upon what our overall marketing and salesman was in new strategy is. Directionally, longer term, we would actually want to kind of go back to a range of about 15% to 17% over a 4 to 5 year period.

Got you, Mohit, but I know this point has already being discuss about the competition, but just want to understand from you about booking given that booking is also your strategic partner like how do you see it as a threat that because I was really somewhere that they already have more than 22,000 hotels now in India. So, do you see that as a threat somewhere?

Yes, I think to put into the perspective we do use booking.com inventory internationally in some markets where we obviously have not done direct integration or direct supply because these are long tail for us so for long tail we are working with both booking.com as well as some other partners also large partners who can provide us the best inventory and best rates at that point of time. However, in India booking.com like you've rightfully pointed out is definitely looking at the market more faithfully and growing in this market, which is actually I think testimony to the fact that it is really attractive market and it is finely opened up on the hotel side as well till the few years of go as it was largely in a driven market. And so there is no strategic partnership with booking strategic investor is, here is Ctrip and with whom we work closely. But in this case, booking is -- when it comes to the domestic market, we are definitely competing.

Also Shaleen just to add while our inventory, the 40,000 active hotels as Ashish was point out are largely direct contracted in hotels. A lot of the other global change would typically tend to kind of leverage inventory coming in from aggregators or channel managers, so there could be differences in terms of the nature of contracting that plays out in this case.

Got you, Mohit I'm not sure whether just want in case you answer this question because I like I think you've point out. So when there is a third party involved in between, can you provide a sense like what kind of market take rates were available for an OTA when this kind of thing happen?

See, as I think we don’t really kind of take it through intermediaries and therefore it's slightly difficult for us to comment on that. But and then philosophically if you look at it this would typically be split more in favor of the one who has direct inventory access versus the one who is kind of leveraging it.

Just to add, if you have basically a platform which enables the hotels to get enabled then they are also able to participate in delivering promotions last minute deals offers etcetera which makes the platform more valuable.

Got you. Thanks guys. Just last one question like what will be the outstanding number of shares after closing this capital raise, fully diluted and right now?

The fully diluted capital base you're asking Shaleen?

Outstanding number of shares, yes, Mohit?

Yes, so, the outstanding number of share is…

[Indiscernible] 96 million so we can put in June EPS and after that.

Hello, sorry I couldn’t hear that. Can you please repeat the number?

Yes, so, for June quarter, we expect about 96 million shares that you can use for your EPS calculation.

Okay.

But on a fully diluted basis since equity financing, the share count up about 107 million, it also includes all the stock and…

Just keep in mind Shaleen, this is close to about 6.5 million which is in terms of some RSUs, which is not necessarily kind of you know out there as outstanding shares. So, therefore you know arriving at the outstanding share please make sure that you kind of making that adjustment.

Got it, thanks Mohit that's what I needed actually Mohit. Thank you so much for that.

Thank you. At this time I see no other questions in queue. I’ll turn it back to management for closing remarks.

Thank you everyone for joining our earnings call today. We certainly look forward to speaking with all you very soon. Have a good evening.