MakeMyTrip Limited (MMYT) Q3 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the MakeMyTrip Limited Q3 Fiscal 2018 Earnings 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] And as a reminder, today's conference call is being recorded. I would now like to turn the conference over to Jonathan Huang, Vice President of Investor Relations. Please go ahead.

Hello and welcomed everyone to MakeMyTrip Limited's Fiscal 2018 third quarter earnings call. We wish to remind everyone that certain statements on today’s call are considered forward-looking statements within the meaning of the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance and by their nature are subject to inherent uncertainties. Actual results may differ materially. Any forward-looking information relayed on this call speaks only as of this date and the company undertakes no obligation to update the information to reflect changed circumstances. Additional information concerning these statements are contained in the Risk Factors and Forward-Looking Statements section of the company's Annual Report on Form 20-F filed with the SEC on July 18, 2017, and copies of this filings are available from the SEC or from the company's Investor Relations department. On our call today are Deep Kalra, our Founder, Chairman and Group CEO; Rajesh Magow, Co-Founder and CEO, India; and Mohit Kabra, our Group CFO. And now, let me turn the call over to Deep to start off today's conversation.

Thank you, Jon and welcome to our third quarter earnings call for fiscal year 2018. I'd like to start by highlighting that the IMF has recently forecasted that India will be the fastest growing large economy in the world 2018 and 2019. This positive outlook is reflective of the strong demand for domestic air and hotel bookings across India witnessed this winter season even by the large and growing middle class that's increasing their discretionary spends on both domestic and outbound leisure travels. Recently, our government's annual budget announcement had introduced plans to develop a thriving and all pervasive digital economy for India and wants to double the previous year's spending on broadband development. This will include the rollout of over 500,000 Wi-Fi hotspots in rural India. The budget is also seeking to increase infrastructure spends on tourism and development 10 iconic tourist destinations within the country which should help further drive economic growth. The other regional connectivity program called UDAN, the government is looking to increase annual aviation activity through a billion trips per year which is 10x of what it is today. In fact, the second round of UDAN route allocations were recently granted to participants leading carriers like IndiGo, Jet Airways and SpiceJet. The Ministry of Civil Aviation and Airport Authority of India will also increase the number of new Airports by 80 that are now being serviced by scheduled air carriers. We are also very encouraged to see that the total number of new planes on order and expected to be introduced over the next five years into the country for domestic and international flights exceeds more than 900 planes. In summary, we're excited by the long term business potential that is yet to be realized for leading online companies like ourselves in India with the continued expansion of mobile Internet users in the country. During fiscal Q3 as the fierce industry leader that MakeMyTrip grew and continued to achieve unrivalled scale and reach within India's online travel market. For example, our cumulative app downloads have exceeded 115 million at the end of December across all three brands. We also logged more than 94 million monthly shopping visits and over 70 million monthly active users during the recent quarter. We believe our strong brand recall is driven by the high volume of transactions executed across our platforms, our comprehensive and effective marketing campaigns and more importantly our focus on providing the best and consistent pre and post sales experience to our customers. During Q3 our team continued to drive the off-line to online behavior shift through highly targeted mass media campaigns to address the hesitations customers may have with booking hotels online. We also used these campaigns to increase app downloads in Tier 2 and Tier 3 cities where the smartphone adoption and Internet usage is still relatively low, but is increasingly acceptable and affordable to the masses. Simultaneously, we are aiming to more clearly differentiate the value propositions of both our brands with MakeMyTrip targeting a more premium segment of the market and go Goibibo is aiming for a more value conscious customer base. Driving greater loyalty and increasing customer spending within our brands is a key area of focus for us. In line with this focus, I'd like to share an update on our MakeMyTrip BLACK loyalty program or MMTBLACK. Since launch we have seen good traction with over 135,000 members being enrolled. Going forward, we have plans to rapidly scale up this program as initial feedback from enrollees has been very positive. As you may recall, we recently also launched a paid membership program called MMTDoubleBLACK aimed specifically at high-frequency travelers. Today, approximately 20,000 enrollees of MMTDoubleBLACK are enjoying exclusive member benefits which include free cancellations on flights and hotels. We're also encouraged by the 50% plus improvement in NPS scores seen from MMTDoubleBLACK bookings over nonmember bookings and therefore we plan to rollout membership through a wider base of customers this calendar year. The benefits and terms of this innovative royalty program are being continuously enhanced to ensure sustained adoption while improving customer satisfaction and stickiness. For the Goibibo brand, we have adopted a different approach to acquire new customers and drive up retention while leveraging our already established GoContacts and goCash programs. We are further strengthening these programs by adding new product features and a modified approach to the incentivize invites and on programs. In addition, we are leveraging data collected through our GoContacts pink program to display real-time in the booking floor to drive network effects and conversion. In Q3 our redBus business continued to flourish throughout the country as adoption of online booking is gaining traction. In the quarter we witnessed very strong booking growth across virtually every Indian state by travellers and our Bus Hire business has also been seeing strong sequential month-on-month growth, a trend which started since the beginning of 2017. Now let me move on to give an update on the MakeMyTrip MyBusiness app which is our app based approach in the small pockets or SME travel market. I'm pleased to share that the feedback from users has been positive with customer satisfaction scores of around 80%. Going forward, we plan on further scaling up the registered base of our company and driving more usage of this base as we continue to enhance the usability including expanding payment networks on the app. Now I'd like to share some highlights of our mobile development program. Today, more than 80% of our shoppers accept our brands via smartphones and we have logged more than 76% of our India standalone hotel online reservations and 62% of domestic flight bookings and over 60% for intercity bus ticketing via mobile. Our constant goal is to keep making the mobile experience more personalized and highly relevant for customers who search, shop, and receive travel support from us. In the third quarter we launched several new services including the ability to pick seats on domestic flights purchase onboard meals and pay for bags right upon our android or iOS apps. We’ve also enabled the ability to check-in for flights through our apps bypassing the online check-in experience offered directly by airlines. We believe our apps offer a better and more seamless experience for users which should help drive stickiness and user loyalty. During the quarter our Goibibo teams also introduced Go Planner [ph] a unique and innovative social collaborative tool which allows a group of friends or family shortlist, share, collaborate, and even chat within the Goibibo mobile app while planning a holiday together. As you can see, we continue to leverage the latest technologies to deliver highly personalized and differentiated offering. Going forward we plan to increase adoption and usage of AI and machine learning to elevate the experience for users of our brands. We believe these technologies will be greatly involved in optimizing every step of the travel process from backend supply integration to front end customized shopping and booking experience. We also believe in the near future customers will be interacting with our apps beyond tapping on their smartphone screens and their experience of shopping and booking travel will become more natural and indeed conversational. Now I'd like to hand the call over to Rajesh, who will share more details of our business accomplishments during the quarter, followed by a financial overview by Mohit. Over to you Rajesh.

Thanks Deep, and hello everyone. I would like to begin by highlighting our accomplishments already achieved in the first nine months of the fiscal year. On a year-to-date basis I'm pleased to announce that the group reported gross bookings of over $3.4 billion and nearly $432 million in revenue less service cost or net revenue. Additionally, the contribution of hotels and packages to total net revenue stands at over 56% which is on track to get in the range of 70% to 75% as part of our long-term strategic goal for the company while we also continue to scale up our non- H&P business. We have also achieved over $17 million actual room nights stayed across our entire hotels and packages business since the beginning of the fiscal year. In Q3 our India standalone online hotel room nights stayed increased by over 28% year-on-year on pro forma basis, on a base that is unrivalled in the market today. Additionally, our holiday packages business while becoming increasingly smaller, part of our H&P mix continues to focus on profitable domestic and outbound growth during the peak season. In our air ticketing business more than 24 million flight segments were flown by our customers since the beginning of the fiscal year. In Q3 our air segments grew by over 15% year-on-year on a pro forma basis and we continue to maintain an unrivalled leading domestic air market share position of 24% while driving higher online outbound flights growth. Our bus ticketing business continued to expand rapidly with more than 28 million tickets travelled and increased by over 34% year-on-year in the fiscal Q3 on a pro forma basis. During the peak travel season, the team at MakeMyTrip continued to get better at enhancing shopping and booking experience with new product features. At the same time, our focus on our supplier community has never been stronger and the success of partners is critical to our success as intermediaries, we believe this comprehensive win-win strategy is ultimately what's led the MakeMyTrip Group to be clear leader within our industry and what we believe will continue to be a strong competitive advantage not easily replicated versus staying in the long run by any short-term disrupters. In Q3 our customers' shopping experience was richer and more personalized on our brands and channels leveraging machine learning and the vast repository of history and preferences, customers using our apps now get highly relevant hotels and flight displayed on their individual app home screen. They can also expect to see personalized travel offering and trending destinations. Additionally we have continued to upgrade the overall funnel experience by using our dynamic and algorithmic-based systems to help users discover new hotels. For example, we are now selectively displaying premium hotels to MMT’s and higher spending customers while highlighting the experience that can be had by booking an alternative accommodation for more price and still users. In addition, utilizing the latest technology to customize experience we are also leading the industry in leveraging India’s vast WhatsApp ecosystem of 200 million monthly active users. For example we were the first OTA in the country to use the communications platform to reach our end customers in addition to being able to deliver booking vouchers and process cancelation requests. Customers are now eager to seek their price needs and also they are web checking via our simple conversational blow up [ph]. Most of this is also accomplished using GIA [ph] our proprietary AI based chatbot for these new services and we have plans to significantly ramp up its use in the coming quarters. While we focused on experiences, we also re-launched GoStays Properties across thousand key locations which include guaranteed cleaned rooms, air conditioning, free WiFi and breakfast. These uniquely positioned properties have consistently demonstrated their ability to deliver high NPS scores and user ratings as it represents great value for money from a well established and trusted brand. Furthermore, we've also automated and enhanced the money back guarantee associated with GoStays Properties by immediately returning rail money back to customers account to increase customers' trust in GoStays Properties. On MMT brand we announced the rollout of a service guarantee called MMT promise in Q3 where if a customer has made a flight or hotel cancelation we promise to refund their money by a certain time. I am pleased to share that since rollout, we have witnessed a 10 points improvement in NPS scores for relevant customers covered by this program. We plan to expand the scope of MMT promise to other service requests to ensure best in class service to our customers. During Q3 we made further improvements to our customer payments process by widening the number of bank partnerships to offer low or no cost payment plans for large purchases. We have also been leveraging the UTI [ph] payment option in a big way which helps in acquiring customers from smaller cities and improve payment gateway economics. In the quarter, we introduced one click checkout for credit cards and are also offering an option to buy now pay later for our value users. As we continue to focus on customers experiences we were equally focused on improving the experience on connection with our partners while streamlining the Extranet systems for our 50,000 plus domestic lodging suppliers and made significant upgrades in the direct connection with partners supplying us with over 500,000 properties outside of India today. As a result, both our domestic and international supply are now managed under one common Extranet system across all brands which should further drive operational efficiencies going forward. Now, let me take a moment to comment on continued strength in our domestic air ticketing business where we benefit from a strong domestic air passenger market in fiscal Q3. As mentioned before in the month of December our share of total domestic air ticketing market increased to an all time high of 24%. Additionally, the outbound air ticketing segment witnessed very strong year-on-year growth of over 41% on pro forma basis. During Q3 we focused on penetrating new UDAN flights which serve smaller towns and cities to drive new customer growth and introduced new features that offer greater personalization and new tools to help users discover better prices that match their needs. As for outbound flights our team continued to serve customers with the right deals to key long haul destinations where Indian travelers are interested in exploring which has helped drive high growth in this under penetrated segment. Now, I would like to share some highlights of the Redbus business where we are aiming to expand our leadership in India and expand our presence overseas. In Q3, we saw high growth coming from all geographical regions within India and continue to add new supplies from regional government operated bus companies onto our platform. At the same time, the brand also introduced a zero cancelation fee policy which is helping improving NPS from our customers. We have launched the ability to hire an entire bus through our site to facilitated private group trips and greatly personalized experience on the Redbus hotel home page. Last quarter we also added more payment partners with banks and digital wallet companies to broaden the reach of potential users and promoted the fax my bus [ph] feature which allows waiting customers to see when their bus will arrive and improve the analytic features of the system used by our bus suppliers, allowing them to compare prices and seat quality with other operators and read travelers reviews. Now let me hand it over to Mohit, who will share more details of the quarter’s financial performance.

Thanks, Rajesh, and hello, everyone. I would once again begin with a quick recap of our strategic and financial goals for the current fiscal year which include driving strong year-over-year growth and at the same time reducing quarterly losses via our improving efficiencies across our operations and particularly in customer acquisition spends. As you will have seen from our results, we have continued to deliver on these key goals during the reported quarter. In Q3, we reported net revenue of $151.4 million representing a reported constant currency growth of nearly 94% on a year-on-year basis. The nine months YTD net revenue at $431.8 million has surpassed the last full fiscal year net revenue of $413.6 million computed on a pro forma basis including the ibibo group. This is reflective of the continued growth momentum that we have been able to sustain over the combined base of businesses. It is heartening that this growth has been achieved while delivering on the other key goal of reducing operating losses by improving efficiencies across our operations particularly in customer acquisition spends. This is reflected in our registered operating loss being at $33.9 million in Q3 which is a substantial reduction over the loss of about $45 million reported in Q2 and the $52 million loss reported in Q1. Our top-line growth and spend efficiencies have been achieved by driving greater brand loyalty by our marketing campaigns and simultaneously optimizing promotional expense particularly in the domestic hotels market aided by rationalization of the competitive environment over the last few quarters. We believe the improvement competitive rationality coupled with our balance sheet strength to counter any potential unwarranted pricing rationality by an existing or new competitor should help maintain or grow our market share across key travel segments. Our multi-brand strategy has helped us reach a wider cross section of customers across varying price points and service offerings. This has allowed the group to generate over 23 million transactions in terms of nearly 8.5 million air segment, 5.6 million stay room nights and nearly 9.2 million traveled bus tickets during the current reported quarter. Let me now share more details by business segments starting with the H&P business. Added by the ibibo Group consolidation of our hotels and packages room nights increased to nearly 5.6 million room nights which is a year-on-year growth of 132%, contributing to the majority of this growth was the 5.4 million standalone hotels booked online room nights stayed which grew year-on-year at over 166% on reported basis during the quarter and by over 28% on a pro forma basis. The net margin of 22.8% for the hotels and packages segment help them reach $83.9 million in net revenues which is 131.5% year-on-year growth in constant currency basis and comparable to the pace of room nights growth. Moving to our air ticketing business, our air segment stood at 8.5 million air tickets in Q3 reflecting a 65% year-on-year growth on reported basis and over 16% growth on a pro forma basis. The net revenue for the reported quarter at nearly $51 million reflects a 30.2% year-on-year growth in constant currency. The net revenue from [indiscernible] air ticketing business in Q3 last year had a one-time incremental revenue of about $9.2 million based on evaluation of the fund- raise exercised by our customers along with the change in the estimates of provisions for cancelled tickets. Excluding this impact or excluding the impact of this one-time incremental revenue, in the last year of Q3 year-on-year growth stands at about 71.6% in constant currency terms. In Q3 our other business segments reported net revenue of $16.6 million majority of which was driven by the net revenue contribution from our bus business and the travel insurance. The growth in our bus business has continued to be robust with ticketing growth of over 34% on a year-on-year on a pro forma basis. Moving on to our marketing and sales promotion expenses, I’m pleased to report that these expenses as a percentage of gross bookings has come down from about 12.5% of gross bookings in the first half of the current fiscal year to about 11.2% during the reported quarter. During the final quarter of the current fiscal year, we plan to keep pursuing key priorities of driving business growth with improved spend efficiency. With this, I would like to thank you for joining this call and open up the call for Q&A. Operator, please?

Thank you. [Operator Instructions] And our first question comes from Manish Adukia of Goldman Sachs. Your line is now open.

Yes, hi good evening and thank you for taking my questions. My first question is just on the competitive intensity in the quarter, if you can just comment on the behavior that you saw from some of your competitors like Paytm, booking.com or OYO for that matter, and for the last couple of quarters we've seen a gradual downtick in your selling and marketing and Mohit alluded to it in the opening remarks, if you can just comment on the sustainability of that selling and marketing expenses or the lower selling and marketing expenses? And the second one is just on the room night growth again on the pro forma basis, we continue to see a slowdown there, I think about 20% YOY growth this quarter, so if you can just comment on what is happening on that side of the market? That’s it from my side. Thank you.

Hi this is Deep. I will take the first question and then Mohit will take the second one. So I think it’s fair to say that the market is still fairly competitive and you called out probably the key players who are the strongest competitors. There is also a long tail of other competitors. So I think what we’ve continue to see in air is that there is strong competition coming from Paytm and also from Yatra, they continue to be competitive on the air side and we see from time to time fairly strong signals in terms of cash backs and discounting. So despite that, I think the fact that we’ve been able to hold and indeed grow market share as you would have noticed from overall 23% to 24% margins also in air have held up well, I think this does speak highly of the resilience of both the brands and they continue to do quite well out there. When it comes to outbound air, the competition comes from beyond just the online players. There is a very large offline component in international air and despite that the growth has been pretty strong. We've put a lot of focus. The growth has been about 40% this quarter. When it comes to all important Hotel segment, I think like you rightly called out, there is competition both in the Premium segment and in the Budget segments. So in the premium segment it is largely booking.com, not so much on discounting per se, which is not Bookings playbook, but we do see them get very aggressive and interesting offers through their Genius program, hotels are allowed to participate as well as registered users get the benefit of much better deals et cetera, so we are seeing competition there. And again, the erstwhile competitors, Yatra, Cleartrip, et cetera, also competing on the hotel segment. On the budget segment, OYO has definitely been very competitive. And as you know that they have been growing their supply footprint and have been offering pretty aggressive deals. So we have been - I think the efficiencies that we have achieved are not due to only the lessening of competitive intensity. I think it will be fair to say there has been a far more nuanced approach in how we are going segment by segment and actually at level hotel by hotel to see at which point which brand is going to be competing and till what point. So I think it starts right from the cost of customer acquisition as well as lot of focus on the repeat side. As, you know, repeat plays a really big role. So we do believe at the end of the day customers will come back when they have a good experience when you've recommended a good hotel. So we are seeing now positive growth in NPS and that resulting into repeat, both for GoStays like we called out over a thousand GoStay hotel properties as well as the overall experience both hotel and air. And I think a combination of smarter customer acquisitions, better retention and definitely all one approach, the couponing of the discounting differentiating between existing and new users and then the loyalty programs that we called out has all actually helped to the economic despite the competition. Rajesh, would you like to add?

Yes, so and maybe the second part of your question. Yes and so you called out hotel impact is growth number 20%, so the first point there is that please look at growth for standalone hotel that actually at 28.5%. So it’s not 20% because the 20% is because of the fact it is business which we've been calling out and the focus there is much more just driving profitable growth given the fact that the distribution is entirely offline and we've been quite successful in driving profitable growth obviously not necessarily kind of Internet business rate of growth if you will and that has been the focus there. So that’s first point, but the second point is that as Deep was mentioning earlier, there has been a conscious approach to would just to go deeper and see segment by segment and especially ultra budget segment of hotels where historical because of the historically because of the competition intensity we would be chasing growth and across the segment including the ultra budget itself. We've started to kind of very carefully look at what level that we need to stop to kind of chase that just to bring in some quality metrics in terms of changing growth if you will into the play. So we are actually from our point of view we believe we are actually going quite well in terms of growing the hotel business. As I had highlighted earlier the contributions standard about 56% of our total business and we’ll continue to keep growing. And as the market overall becomes more rationalized just from our competitive dynamic standpoint especially the budget segment, even that growth will also come back and it will come back to the earlier levels. But till that happens I think it makes sense to be a little more cautious and focus on not necessarily only quantitative growth but also qualitative growth. And that's the reason why you probably see little muted growth on hotel room nights overall, but still very close to 30% mark.

Sure, I think that's very helpful.

Thank you. And our next question comes from Gaurav Jain of Citi. Your line is now open.

Yes, hi thank you for the opportunity. I just had couple of questions just following up on the previous chain. First of all this time around the standalone hotel room nights are justified ibibo has been sort of flattish in terms of the growth rate versus the last quarter which was around 29%. So any sense what is the sustainable number which we should be looking at, is it like a 20%, 25% number or is it closer to a 30% kind of a number, what kind of a sustainable number over the next say couple of years one can expect over here? The second is on the employee costs, I see there's almost a $2.5 million, $3 million quarter-on-quarter decline in employee costs, could you just highlight the reasons behind that? These are the two questions.

Hi, Gaurav in terms of growth in the hotels business as Rajesh was just calling it out important to look at both these metrics, not just kind of room night growth but also revenue growth because practically you could kind of choose to pay the actual rate around one a little more versus the other. If you would have looked at it in the last two years I guess, both the brands Go as well as, and MMT had been pursuing much higher growth on a transactional basis which is in terms of room night. And the focus this year as we had called out will kind of shift from merely room night growth to actually revenue growth in the business and therefore room night growth at above 30% kind of, looks good to us because it's also helping us keep moving the skew more than more towards the mid to the premium segment across both the brands put together because as you would know traditionally the Go brand has been fairly skewed on the budget segment of hotels. So this is a conscious call, at least for the current system and we’re kind of largely pursuing that and revenue growth continues to kind of outpace the growth on transactions, so we'll kind of do kind of, be on that strategy at least for this fiscal year. The other question that you had was on personnel cost, right?

Yes.

The result personnel cost kind of going down a bit.

Yes, already 9, yes hello from $29 odd million to around $26 million?

Correct, yes so we had called out last time if you'll recollect that share based compensation will keep coming down with every passing quarter and therefore you will see some of that getting reflected. Also over the last three quarters just wanted to bring that out, some amount of manning deduction close to about 10% reduction in the headcount that we have had since the last call full reported fiscal. These two things combined together are putting some of the savings on the personnel side.

Okay, just a follow up on the growth of the room night, so you've mentioned that it's all of a mix between just running after transactions versus revenue growth. Now you also mentioned that you are facing competition both from or continue to face competition from booking.com, Yatra at the top end and OYO at the bottom. Given this change in strategy are you seeing any shift, or are you confident that whatever changes you have made it's not coming at the cost of market share?

Actually from a market share point of view, at a combined level kind we kind of continue to keep gaining market share on the overall online segment because as Deep was calling it out, it's not that we have got any single competitor who is kind of there across price segments. We have bookings which is kind of more for us on the premium side of the hotel market and others like Yatra, et cetera, more on the budget side. In any case if you really look at it in terms of comparable numbers on room nights that either of these competitors grew they are kind of we have a fairly larger scale versus them. And you know Yatra even at a much lower room night number isn’t kind of growing any faster, so their growth is also kind of around the 30% mark. So that's helping us actually kind of keep growing our market share overall. When it comes to OYO, I think you'll have to start kind of revisiting our approach because it is some whatever they have been calling out, looks like they’re kind of pivoting more and more towards going on to the hospitality side. And in that case might not really kind of be a competitor to look at, but more like a source of supply for the overall hotel segment going forward just in case if they continue to be on that path.

So Gaurav, just to add, just to make sure that we clarify this, just the potential concern on trade off on market share. We are not making any dramatic shift in our strategy. I just wanted to make that’s very clear. It's a limited speak to the extent that and we have, we see a little window of - with respect to competitive dynamics in the market today for us to be able to do it, it's a limited to the extent that how much pedal you want to push, to push the momentum from offline to online, not necessarily kind of not being competitive in the marketplace otherwise because unlike in the past I mean prior to the merger. There was fair amount of challenge in terms of being price disruptor in the market which is the competition in booking.com is normal and that’s actually healthy competition and we are competing, but not necessarily the competition is just kind of going crazy on the unit economics if you will. And similarly as Mohit was alluding to, you know, as we've been tracking OYO as well, so OYO is also slowly and gradually moving on the supply side and that kind of helps the market dynamics a little bit as well. Just to ensure that and just to give us a little bit more elbow room for us to be able to just push qualitative growth if you will. So that’s the limited tweak, it’s not that, and again it's just subject to market dynamics, it's and you know balance is strong and if need to be, we can always round track and change our strategy. So also that way we’ll be like on our feet, but just wanted to make sure that you don't get the message that we have made some kind of a dramatic shift in our strategy.

Yes, and just instead of looking merely at growth in terms of room nights what I was trying to call out was important to look at both metrics and including market shares and market share while it's one to kind of build it on room night, the other way to look at it is also in terms of market share on a gross booking basis. So if you really look at it on in terms of gross booking basis, we continue to grow in this country [ph] well at over 50% in the 50s and actually in terms of net revenues this is even more important, we are continuing to grow in the 60s in terms of standalone hotels business. So, that I think is kind of equally important and between these three, you can always kind of as I said press the accelerator on one versus the other, depending upon the tactical choice that you make during any particular period.

Okay, just one last question as a follow up, in terms of Paytm you did mention that they are aggressive in the air site, but what about hotels and bus ticketing, how are they sort of focusing on those two segments?

Yes, I know, I think Gaurav I should have mentioned. I think if you think across the board, so air, bus, rail and in fact movie which is obviously not our business, but in all of the ticketing places we do see Paytm as a team competitor share has gone up. See most of the time ticket bookings are what I like to call two dimensional in nature, it's mostly price and schedule or time which matters unlike the hotel booking which of a budget hotel or for a chain that you don’t know, brand that you don’t know there are many, many more aspects and reviews that play a big part. So ticketing we see Paytm. On the hotel side I think it’s been a bit of on and off strategy. They do compete on hotel as well. They have inventory from some of the larger aggregators, but it's an on and off. They are definitely competitive there too, but not as much as we see them on ticketing.

And they are not building to own inventory in hotels and they're continuing with the strategy of going through some of that?

Yes, that's what we are aware off. That’s true.

Okay, thank you so much.

Thank you. Operator Thank you. And our next question comes from Viju George of J.P. Morgan. Your line is now open.

Yes, thank you for the opportunity. What do you estimate is your market share on the online hotel segment? And if we have to draw a line as to how fast you think both this market is growing in three to four years and what do you think your market share can evolve to over this period?

Yes, Viju, our current market share and obviously it’s estimated and triangulated with probably our own estimates and one or two other interest sources as well from time to time, so it’s close to about, a little over 50% I would say you know between 52%, 53% right now off the OTA. If you look at the overall buy on the OTA, but that's more on transaction basis like Mohit was highlighting earlier, if you start measuring it by gross booking value it probably will be even higher another five percentage points. And as we see, as we go along given the fact that we also see; one, that market leadership is of paramount importance to us; two, we do believe that we'll be able to continuously keep growing as the online penetration improves from currently whatever 15% to 18% depending upon on the source that you look at to let's say 30% by 2020. We believe that we should be able to further increase our market share to anywhere about 60%, 65% at least potentially. That's how we look at it and which is kind of in line with what I said in the script earlier that the growth rate on hotel definitely standalone hotels category we do expect this to be far higher than given below and lower penetration higher than the other segments in our business. And therefore the mix would also further skew in terms of, in favor of hotels and packages business close to anywhere close to anywhere in the range of 70% to 75%. So that’s how are thinking about this and we believe that we have all what it takes to be able to get there.

Sure and as a follow up to this Rajesh, if I have to okay, let’s say you keep improving your market share, you'll become a much larger player in the ecosystem, but there are still the smaller players well funded who try to continue to disturb you on price, does being bigger make you less any less vulnerable or do you think that the price transmission if any or the sales and marketing costs if any will have to be translated to the entire base? I'm just trying to understand it making, if you become bigger does it necessarily mean you become less sensitive or less affected by what competition does?

Yes, no so necessarily only bigger, but you have to see all aspects of that and I mean the share size per se may not mean anything, but what it means because of what we have done to reach to that side is very important, which effectively revolves around the comprehensive offering that we do whether it is on the supply side or it is on the customer experience side, not necessarily on the booking experience side, but also potentially on the post sales customer experience side. So differentiated approach as well as a couple of brands that we have so our distribution stands with more now both the brands we are able to take differential approach between the brands et cetera as well. So you know and hotel being an involved category as Deep was mentioning earlier, it's not necessarily a uni-dimensional kind of a product. It’s far more involved category and we believe that it takes a lot for anyone to just only come and disrupt it because of the pricing. Pricing only price disruption in this category would only mean that the investment from our point of view would be more in terms of all the plans might get pushed further in terms of path to profitability et cetera. But it doesn't necessarily mean that there could be a sustained disruption unless you cover all other aspects of the business really thoroughly and execute it really well on the ground. It's definitely not and by the time that when we reach there, I mean the moats that we would have build in terms of our in-depth, very deep penetration on the supply chain and also very deep relationship and strong relationship with the partners and the amount of volume that we would be delivering from them and not necessarily only domestic but also outbound hotels potentially. I don't think it's going to be easier for anyone to be able to just come in and disrupt just by pricing. I mean actually and just to add, if you really see air business as an example, it's actually a good example today. I mean, there's sites disruption happening, but that doesn't mean that we are getting disrupted. We are actually increasing share, but it does mean that some part of the technical investments go back and has to be ploughed back into the business, but it doesn't mean that you're completely kind of getting disrupted in terms of people not coming and visiting and growth not happening, et cetera. And so, we do believe that end-to-end experience and to providing it, it does become pretty good moat overall as you scale up your business.

Yes and if I could just add to that one more point, I think you know it was I think a really good question. I think the scale definitely helps, but like you said does matching of pricing I mean across the board disrupting, not at all. Like Rajesh said [indiscernible] approach we are now able to actually go not only by price bands but actually the cross-section of price band and hyper location. So you need to, if you are let's say discounting to stay competitive and out of the let’s say 10,000 hyper locations across the country you find that in about 500 of them you’re being priced on competitive then you can pinpoint into those 500 and then you can actually run a coupon or a discount just very specifically for a price band in those, but you don't have to touch the rest of the 9,500. So you can be highly targeted in the approach, so definitely that’s what we're doing.

Okay and you think that intelligence to get that targeted exists in the organization?

Absolutely, yes. Absolutely.

Okay and one last question is really when you look at your promotion expenses, sales and marketing expenses, how would you manage it? You’re going to mange it as an absolute amount for an absolute amount going forward or would you look at it as a percentage of your bookings? Just to give us a glide path on how you see that over the next maybe couple of years, thanks.

Yes, Viju I think best would be to kind of think as a percentage of booking because as the booking mix changes or the revenue mix changes compared to the mix coming in from hotels, going through as you know the ticketing business it's important to kind of see it in that context because if you see over the last few years the margin [Technical Difficulty].

Thank you. [Operator Instructions] And our next question comes from Kevin Kopelman of Cowen & Company. Your line is open.

Oh hi, thanks a lot. Thanks for taking my question. I just had Rajesh a quick follow up on the last question on marketing and sales promotion. Just given that you've seen, you saw a reduction this quarter and you talked about being more cautious or careful in how you approach that to some extent, can you give us a sense of what you are seeing in the fourth quarter to-date? Are you kind of implying that it will stay around the same levels you saw in the third quarter as a percentage of bookings and revenue or do you anticipate that going down further or could it even go back up just given seasonal factors and other things like that? Thanks.

Yes, sure. I mean I’ll take that. You know marketing and sales promotion actually right at the beginning of the year we had called out we've been looking at efficiencies in these expenses on a percentage to gross booking basis. So actually, the first out that I called out at about 12.5% was at the first level and improvement over what we were kind of, improvement at the level that we were in the previous fiscal and again now in the second half of the year we would actually want to kind of look at much better than what it has been in the first half of the fiscal. So while it’s difficult to call out - give a guiding range for the remainder quarter, all I can say is we would like this trend of reducing marketing spends on a percentage to gross booking basis to continue.

Great, thank you very much.

Thank you. And that concludes our question-and-answer session for today. I’d like to turn the conference back over to Jonathan Huang for any closing remarks.

Thank you everyone for joining our call today and we certainly do hope to speak to you very soon.