Tbo Tek Ltd (NSE: TBOTEK) Q1 2026 Earnings Call dated Aug. 04, 2025
Corporate Participants:
Unidentified Speaker
Aashvi Shah — Account Director, Investor Relations
Gaurav Bhatnagar — Joint Managing Director
Ankush Nijhawan — Joint Managing Director
Vikas Jain — Chief Financial Officer
Akshat Verma — Chief Technology Officer & Whole‐time Director
Analysts:
Unidentified Participant
Manish Adukia — Analyst
Swapnil — Analyst
Mann Maru — Analyst
Moez Chandani — Analyst
Chirag — Analyst
Karan Uppal — Analyst
Prateek Kumar — Analyst
Ravi Purohit — Analyst
Nitin Sharma — Analyst
Mohit Motwani — Analyst
Presentation:
Aashvi Shah — Account Director, Investor Relations
I’m Ashisha from adpactus PR Investor Relations. On behalf of TBO Tech Limited I would like to welcome you all to the earnings conference call for Q1FY26 today. On this call we have with us from the Management Mr. Ankush Nejawan, Co Founder and Joint Managing Director Mr. Gaurav Bhatnagar, Co Founder and Joint Managing Director Mister Akshay Verma, Whole Time Director and Chief Technology Officer Mr. Vikas Jain, Chief Financial Officer Mr. Anil Barrera, President Strategy Mr. Pramendra Tomar, General Counsel Mr. Shresth Mahajan, Associate Director Investor Relations we will begin the call with brief opening remarks from the management followed by a Q and A session.
Please note that certain statements made during this call may be forward looking in nature. Such forward looking statements are subject to certain risks and uncertainties that would cause the actual results of projections to differ materially from those statements. TBO Tech limited will not be in any way responsible for any actions taken based on such statements and undertakes no obligation to publicly update these forward looking statements. I would like to now hand over the call to Mr. Gaurav Patnagar for his opening remarks. Thank you. And over to you Sir.
Gaurav Bhatnagar — Joint Managing Director
Thank you Ashvi and welcome everyone to our Q1 earnings call basis. Past feedback and past experience with these calls, we’ve changed the format a little bit. So what we’ve done this time differently is we’ve created a fairly detailed commentary on our financials and uploaded on our investor relations website a couple of hours before. Those of you who had a chance to review the document you would have seen that we have a lot more disclosure this time specifically around expenses. There was a request from several analysts last time that they wanted to understand the nature of our sgna.
So we have gone ahead and made that disclosure. We have also continued to provide region wise KPIs as well on how various regions are performing and we’ve also included a very detailed faq. So the idea is to use the R that we have with all of you more for Q and A and a little bit more color on question that you may have. So I’ll just spend five minutes talking about the high level numbers and a couple of things that we want to share in a little bit more detail and then we’ll quickly open for questions.
So just to summarize the numbers in case you had not had a chance to look at the financials uploaded. This was a tough quarter and that’s true for the entire industry. We saw several headwinds through the quarter starting with the India Pakistan conflict, then the Iran Israel conflict and then the very unfortunate Air India crash. This caused us repeated disruptions in a very, you know, in a very important quarter. From a. In the travel industry’s perspective this is. Although Q1 is also peak summer season for India. So there was impact. But the good news is that in, in spite of these headwinds, the business has shown resilience and we have continued to grow.
Our monthly transacting buyers grew by 5% to touch more than 29,500. Monthly transacting buy GTV grew by about 2%, the revenue grew by 22% and GP grew by 19%. Now the faster growth in revenue in GP is because the saliency of the hotels and ancillary business continues to grow at a fast clip. And that helped grow our GP and revenue much faster than our gtv. On a like to like basis. The EBITDA was flat. Pat is marginally, there’s some marginal growth in Pat, but EBITDA was largely flat. As you all know, we’ve been investing quite heavily in our international markets for growth and new market expansion.
So if that investment was not there, then probably we would have seen positive ebitda. If the headwinds for the past quarter had not been there, then we would have also seen meaningful growth in ebitda. So having said that, we do want to spend a little bit time just giving you some color on how are the investments panning out. And these are still early days. You may remember it was Jan Feb when we started to accelerate our hiring in international markets. And there are some early numbers that we want to share to give you comfort that these investments are actually playing out well.
So as you may remember, monthly active agent is a North Star metric for our business. Active is definition is that at least one transaction in that month. Now I’m sharing numbers only on the international business because most of the investment is going over there. And you would see starting Feb when we started making these investment, there’s a very sharp uptick in monthly active agents. And year ago in the April, May, June quarter of last year you would see this number was trending between 8.6 8,600 to about 9,000 monthly active agents starting Feb. This number has started to grow very meaningfully and we are touching close to 11,000 monthly active agents in June.
Now this is a very leading metric because these are the travel agents who over a course of time become meaningfully productive. So the way we are measuring growth of our active agents is by three important milestones. That a new travel agent has to pass to become what we think of as a sticky customer. For us, the first one is T1, which is when when how many travel agents are doing their first transaction in a month. The second milestone is T5, which is when they get to a fifth transaction and then a T10 is a is when they have done 10 transactions on the platform.
Our data shows that a Travel agent achieving 10 transactions on the platform becomes fairly sticky and churn drops quite drastically at that point in time. As you will see in the graph that we shared here, our T1s were trending at about 300 between 300 and 340 in Jan. This number has more than doubled and we have hit nearly 750 T1s in June. That similarly the T5 number has been growing and the T10 number has also been growing in a similar manner. Now the T10 will always have a lag on T1 because travel agents will take these are new travel agents trying out a platform for the first time.
So they will take some time before they try start becoming comfortable with the platform. So you will see that the T10 numbers will start to accelerate over a period of time as these T1s slowly convert to T5s and T10s. So what we wanted to highlight here was that there is a very marked uptick in our T1, T5, T10 numbers in Q1 compared to the previous quarter, which is largely driven by driving sales efficiency initiatives and adding new cams or key account managers in different geographies, which is where most of the investment has been going. Now looking at the same data with another lens of saying that how much new business has come in this year.
So how much of business is growth organic growth of the travel agents who were already active on the platform last year and how much business has been contributed by new travel agents added in the same financial year. So if we look at the numbers for Q1 of last year and Q1 of this year, you would see roughly 2.2% of the business in Q1 last year was contributed by the travel agents added in Q1 itself. So just to be clear, out of the $361 million of GTV that we did in our international business organic last year, 7.8 million came from travel agents, which were also added in April, May and June of 2024.
Now looking at April, May, June 2025, out of the $435 million of GTV that we have done, 18 million or 4.2% of the GTV is actually being contributed by new travel agents added in the same year. This is very significant for us because if you remember our cohort analysis and you remember how our, you know how the stickiness grows with time. Typically travel agents will take time to become fully productive on the platform. And if the, if the 4% of our business in Q1 itself is being contributed by travel agents added within the same quarter, by the time we start to get to Q3 and Q4, these travel agents will start to add significantly more volume to the business.
So while you can see that the old cohort, which is the cohort which has been active on the platform till last year, that is also growing at a fast clip. If the cohort that we are adding this year adds meaningfully more business into in the same financial year, then you will see significant operating leverage play out in the latter half of the year and probably toward the end of the year. Finally, some some data to give you color on how are we measuring CAM effectiveness and efficiency of new CAMs. So several initiatives have been taken up.
An investment has been made in making our existing cams more effective and effectiveness here is really how many new travel agents are they onboarding on the platform at this point in time? So our data is showing that existing camps, I.e. camps that were hired before Q4 of last year, right? So until December of last year in this, in the, in Q1, they have shown 22% higher efficiency in just net new travel agent addition. So if they were adding say you know, as an example, one travel agent in a quarter, they are now adding 1.22. These are not actual numbers just to show you the increase, the increase in efficienc efficiency.
Interestingly, the efficiency of the newer cams is higher than the efficiency of older camps, which does make sense because the newer cams are being added in markets where we are under penetrated. So I showed you numbers on T1s and how many new T1s are happening every month. 41% of those T1s are being contributed by the new CAMs which have been added since February onwards. Right. So the fact that within three or four months of start adding new key account managers, they are starting to meaningfully move the needle for the organization is very heartening for us.
So what is what this is leading to is on a year on year basis There is a 69% growth in new customer addition. So just to be clear, it is not that total number of customers have grown by 69% but the rate at which we are adding new customers has grown by 69% and 21% of the business is now being handled by the new key account managers. The caveat here is that this is not necessarily new business because we showed that the new business is about 4%. But we have also been able to shift some of the existing accounts to these new Q account managers, which frees up the bandwidth of existing key account managers to farm their large accounts.
So these are some of the numbers that we want to share with you to give you confidence that the investment that we’ve been doing are being very carefully monitored. We are building a strong view and conviction that as the year progresses, we will start to see more efficiency come through both from our existing camps and from new customer addition by our new camps. Our hope also is that we continue to believe in the previous hypothesis that by Q4 we should start to see a lot more operating leverage flow through in the, in this part of the business.
Okay, with that, we’ll take a pause here and open for questions.
Questions and Answers:
Aashvi Shah
Thank you, sir. We will now begin the Q and A session. Participants are requested to raise their virtual hand to ask a question. Request you to introduce yourself and the firm you represent before going ahead. We will wait for a moment till the Kashin Kyot assembles. We have the first question from Mr. Manish Adukya. Sir, please unmute yourself and go ahead with your question.
Manish Adukia
Yes. Hi, good evening. Thank you so much for taking my questions and really appreciate all those detailed disclosures. My first question is on the demand. Clearly you’ve called out a lot of headwinds in the June quarter. If you can maybe give us some flavor as to how are you seeing things progress post June in the month of July. And the question is specific to the three key geographies of India, Middle east and Europe. And maybe a related question is when I look at the quarter, the June quarter, surprisingly your Middle east growth was quite resilient at north of 20%.
But Europe was quite weak and Europe actually saw a meaningful slowdown versus what you were growing organically until now. So you can also maybe help us understand that dynamic would be helpful. That’s my first question.
Gaurav Bhatnagar
Okay, so Manish, you’re right. Middle east saw a very improved growth. And this is in spite of the fact that we lost significant days of sale in Q1. Part of it is, part of it is timing as well. And you know this because when Ramadan happens and when summer holidays start, so little bit is, a little bit of it is, uh, timing, but a lot of it is also just the fundamental, uh, initiatives around new customer addition and just improving our customer service. We’ve been investing in creating a new customer operations set up in Egypt, which has helped us improve our quality of our Service.
So that’s one Europe, you’re right, Europe has slowed down in Q1. Part of that slowdown is because we count Israel as part of Europe and Israel is a top 10 source market for us. And that is one market that went to zero, in fact negative sales for the period of that time and little bit of trickle down happened post the end of the conflict as well. Having said that, at least on Europe and Middle East, July has been increased, has been very positive. We’ve seen a very quick recovery. And that is a secular pattern now in travel that we see that while business gets impacted by disruptions, it tends to come back very quickly.
So our hope is that this quarter there’s going to be significantly better than last quarter, especially for Europe and Middle east. And demand is pretty much normalized to where we expected it to be if this, if these headwinds are not happening. Q1 Ankush for India. Yeah.
Ankush Nijhawan
So Manish, I think you all saw one of the toughest quarters probably post Covid. Right. And I must say that in spite of that, if you remember, our GTV growth degrowth was about 11% in of Q4FY25, we actually regrew by about 9%. So we actually gained 2% in spite of what we saw as a real tough quarter. So this actually reflects the underlying strength of our platform and obviously the early stages of recovery. And also on the good side that we still grew 4% on a hotel business yoy. And keeping in mind the peak of summer, I think India literally was badgered for about 45 days with the airports being shut in north India and obviously the Air India crash.
So I think to be fair, we did, I would say rate ourselves. We did well in the quarter. Right. Keeping in mind the situation we were all facing. And for this Q2 I think we do kind of anticipate some GTV growth and some turnaround which we can already see. But obviously the margin pressure on the airline business still remains.
Manish Adukia
Thank you for answering that question. My second question is just on the mismatch between GTV and revenue growth. And I understand the mix shift towards hotel, but even let’s say within the hotels segment, low teens GTV growth translating about 30% revenue growth. And I think last quarter also the difference between the GDP and the revenue growth was quite stark. So when we think about, let’s say the TBO business and from A forward growth perspective and let’s say in the past you’ve talked about, you know, wanting to grow at least north of 20%, 25%. Should we think about that growth in terms of GTV or should we think about that from a revenue perspective? And why should those two numbers not, let’s say, trend in line over the medium term?
Gaurav Bhatnagar
So I think that’s a fair question, Manish. And in the medium term I think the two numbers will trend in line unless we find meaningful unlocks on take rate expansion on the hotels business standalone. Right now what’s happening is that a fair bit of saliency mix is changing at a very fast clip, right. Every quarter, you know, there are 3, 4, 5 percentage points improvement in saliency towards the hotel’s business and that is disproportionately improving our enterprise margins. And that is the reason you see our hotels, the, the revenue grows faster than gtv. There are a couple of other unlocks that we did in this quarter, Manish, and specifically on certain parts of our business there is, there is income that was dependent on a third party vendor.
I don’t want to, you know, disclose too much detail on that, but there was an income dependent on third party vendor and we brought that technology in house which had a meaningful improvement in our retention of that revenue within our business, otherwise sitting as a cost with the vendor. So that is one change that happened. Other than that, anything else that you want to add?
Vikas Jain
So other than that primarily as we highlight that in hotels because also there is a mix of suppliers. Some suppliers work on the net rate models but there are some suppliers on the commissionable model as well. So for while in the, on the revenue side when the mix shifts towards the commissionable model suppliers, the revenue increase looks higher. But on correspondingly on the expense side there is a parting to the travel agent and that’s the reason you will not see similar growth on the GP side and that’s what is reflected on the numbers as well.
Manish Adukia
Got it. Thank you. Just my last question on the cost and the margin profile and you mentioned in the shareholder letter that you know, starting maybe 4Q of this year, revenue should grow faster than the SG. So again when we think about the margin path and of course the quarter, June quarter was impacted by headwinds on demand as well. But again like is there room for margins to deteriorate a little bit more in the near term given just the investments before it starts recovering? Or would you say that now we are broadly at this is a low point of margin from here on they shouldn’t deteriorate further.
And like by 4Q we should, you know, start seeing EBITDA growth maybe faster than revenue growth.
Gaurav Bhatnagar
So Manish, it’s a little bit difficult to, you know, predict it very accurately because, and we have, I think we have talked about it, about a 2/3 of our investment and hiring has happened. One third is left which will get timed over the next two quarters. There is always a, there was a plan to accelerate and get it done in Q2, but at the same time, because of various reasons including just the ability to find the right talent at the right time, it can spill over to Q3 as well. So but definitely by Q4 we are hoping that if you were to start comparing our SGA growth, you know, same same quarter year on year, then would start to see the growth slow down and hopefully by Q4 we’ll have a, you know, we would have finished our investments and that is where we should be able to stabilize margins.
Manish Adukia
Got it. Thank you so much for taking my questions and all the best.
Gaurav Bhatnagar
Thank you, Manish.
Aashvi Shah
Thank you. The next question is from Mr. Swapnil, so please unmute yourself and go ahead with your question.
Swapnil
Hi, thanks for the opportunity. Now my first question is on your GTV that you reported this quarter. I understand there were a lot of one offs that, that were there affecting the gtv. But if I were to just take a guesstimate from you, how much incremental GTV would you have done had none of this one offs been there?
Gaurav Bhatnagar
This is very hypothetical, Swapnil and I think, look, you also have to allocate GTV between airline GTV and hotel GTV because you know, the revenue impact of the two is very different. One way to look at it, and I know there’s no perfect science to it, is that the Iran, the Iran Israel conflict was 12 days of war and probably had a spillover effect before and after. So maybe we, there were like 20 days of serious headwinds in about 40 of our business. Right Thumb rule. I’m just saying. And so that is one way to project and say maybe, you know, that is the portion of business we genuinely lost during, you know, coming into the high season.
I think India had a similar issue, right? There was complete a couple two weeks of clear headwinds in the peak of the season. I think the India saw it was even worse because huge cancellations happened because of it and then second bit of cancellations happened because of the war as well. So I, because of the crash in India crash as well. So very, very, you know, hazardous to guess what it would have been had these issues not happened.
Swapnil
Understood. The second question is with respect to your gross take rates in the hotels business. You mentioned that there were some changes in your the technology thing that you mentioned and because of the decorates have increased now 8.3% going ahead. Do you see those tech rates staying there or like will there be any volatility on that side? Because ultimately your gross margins also took a dip, right? There was a associated cost with that. So just wanted to get a sense as like what will be the steady state numbers over there.
Gaurav Bhatnagar
So just to clarify, the take rate is looking higher mostly because of the fact that there are suppliers who are commissionable in nature and if the share of business increases for these suppliers, the take rate goes up. But like Vikas mentioned, correspondingly, you know, gross profit will not grow at, you know, in a similar manner because of the fact that once you receive the commission, we share part of that commission with the travel agents. Right. So the take rate that you’re seeing increased, increased take rate is largely driven by the fact that we share shifted some of the business to commissionable supply Visa with net rate supply.
Am I right?
Vikas Jain
Because and also I would like to add something is that if you see the overall gross profit of the hotel business is at around 5.56. So while versus last year same quarter it may look high versus 5.06. But if we take out iron out the things and we see the yearly average we were at a 5.5. So as it has been our stated strategy as well that whatever benefits we will try try to get on the supply side, we’ll try to pass on on the agency side that we are able to grow business faster on the basis that only if you see that the improvement on the GP compared to the yearly average is is nominal only.
Swapnil
So will it be fair to say that instead of looking at the revenue growth, one should focus on your gross profit growth because that is where.
Gaurav Bhatnagar
Yes, yes, absolutely. GP is the number to focus on.
Swapnil
Right, Right. Cool. And just two Q is typically a very strong quarter for us because the Europe since holidays are in 2Q generally is my understanding if I’m correct me if I’m wrong there. So any anything to call out here given that we are already one month down. Any trends that you would like to highlight and how should we look at this quarter trending for you in terms of GTV as well as your gross profit?
Gaurav Bhatnagar
It is trending in line with our expectations for the European and not basically Northern Hemisphere summer, we would expect it to be in line with what we were hoping to do in this quarter. What is hard to say right now is that will we be able to do some sort of catch up on Q1? Unlikely, given that the impact in Q1 is quite significant. Right. But if you asked to look at Q2 standalone, irrespective of what happened in Q1, Q2 is pretty much in line with what we were budgeting for.
Swapnil
So will it be fair to say that your GTV growth at least should. Should come back to double digits this quarter? Why?
Gaurav Bhatnagar
I will look, we don’t want to do specific guidance on this softness, especially, you know, given that we are in the midst of this quarter. But it is, it would be fair to say that we should see GTV growth in line with what we were expecting it to be before all the headwinds in Q1 happened.
Swapnil
Thanks a lot for taking my questions. I’ll come back in the queue. All the best.
Aashvi Shah
Next question is from Mr. Man Maru. Sir, please unmute yourself and go ahead with your question. Mr. Man, please unmute yourself and go ahead with the question.
Mann Maru
Hello.
Aashvi Shah
Yeah, please go ahead.
Mann Maru
Yeah, hi sir, I wanted to know that the fees which you receive from airlines or hotels is like how many days commission?
Vikas Jain
When you say how many days, what does it mean?
Mann Maru
As in you get like the, like the fees which you get from airlines or hotels. The take rate.
Vikas Jain
Yeah.
Mann Maru
So is it like five days, 10 days, like how many days you receive your commission?
Vikas Jain
So airline commission is of. Is there will be multiple type of commission that we receive from the airlines. Basically. Okay, stuff. So the one is basically the commission which we get on. On cut and pay basis which is on a transaction basis which generally will get paid for at the time will get reduced from the gross amount of the ticket as well. So which is received at the time of the booking itself because we’ll make the net payment to the airlines but there will be some performance like incentives etc, which is based on the targets.
The targets will be quarterly, yearly and those would be only be received after the year is completed and the airline has completed the working for the calculations of the PLB incentives, etc.
Mann Maru
Okay, so it is like a combination of both.
Vikas Jain
Yes.
Mann Maru
Okay. Got it sir. And what growth do you expect further on revenue side?
Gaurav Bhatnagar
We don’t provide specific guidance on revenue.
Mann Maru
Okay. And okay.
Gaurav Bhatnagar
Yeah. Yeah.
Mann Maru
Thank you sir.
Gaurav Bhatnagar
Thank you ma’. Am.
Aashvi Shah
Thank you. The next question is from Mr. Moishe Chandani. So please unmute yourself and go ahead with your question.
Moez Chandani
Yeah, hi. Good Evening and thank you for taking my question. My first question was on your monthly active agents in the international market. So that’s been a sharp growth this quarter. So is there a particular geography that has driven this sharp growth?
Gaurav Bhatnagar
Moish, the good news is that the growth is fairly secular and in fact I think we have given monthly transacting by numbers, by regions as well in the commentary. So we are not giving growth numbers, but broadly it is very secular. The reason is that the playbook is pretty much the same that we run in every market which is getting new sales team on the ground in cities or in countries where we were not present before and then start activating through a very tight sales efficient process. Right. With strong governance on it. So we’ve seen growth come pretty much in every geography and really there are no exceptions to it actually.
Moez Chandani
All right, understood. And the next question is on North America. So that’s grown at about 11% year on year for you this time. And you know, you’ve mentioned that this is probably the largest source market in the world. So obviously there’s a lot of room to grow here. Can I understand how your progress has been in the American market? Because last quarter also you were talking about hiring a leader to lead this North American growth sector. So just your thoughts in terms of growth in that particular job?
Gaurav Bhatnagar
Yeah, Mo, we hired Valerie to to lead that region. For us it’s been only a few weeks, so very early days. We are restrategizing that market right now. We’ve also redone some of the sales team and brought in some new, more sales feet on street as well. We do acknowledge that we should be growing faster in that market. At the same time, it is a tough market because of the way it is consolidated. But we remain very, very confident that we will find a solution for it within this year. And by towards the end of this year we are hoping to show more growth in that market.
Moez Chandani
All right, great. And then just lastly on latam. So again I think there were some one offs, particularly with Brazil, which you mentioned, where there were new rules and regulations that came in. So again, is that market going to be somewhat structurally challenged given that those taxes are typically permanent, or do you think that there could be some growth recovery even for Q2, Q3 and Q4.
Gaurav Bhatnagar
In the short term? There is a structural challenge in that market because this is a new tax. As you know, currencies are volatile right now. Foreign exchange is getting expensive for most of the developing world. So there are some structural challenges in that market. We are reacting to it Taking various actions to see how we can bring the cost of sales in that market to a lower number so that we can pass on the benefits to the customers and reduce our pricing in that market to gain a bit more demand share. I just want to be clear that this is specific to the market per se.
I don’t believe that we have lost share in that market. But the market itself has seen a bit of a headwind come in because of this very unexpected tax that came up. They may be in the short term, they may be a little bit more pain, especially in Brazil. But having said that, in a medium to long term it is a very large, very important high spending travel market. So we remain hopeful of full year growth on that market. But yes, I think for the next few months there is a structural challenge which we’ll have to overcome.
Moez Chandani
Okay, got it. Thanks. That’s all the questions. Thank you.
Gaurav Bhatnagar
Thank you.
Aashvi Shah
Thank you. The next question is from Mr. Chirag. Sir, please unmute yourself and go ahead with your question.
Chirag
Hello, Am I audible? Yes. Yeah. Sir, I have question on this SCA expenses bifurcation which you have provided in the shareholders plat and press release. So if you can throw some light like if you look at the year on your chain that is other actions of by around 31% and mainly this posting and bandwidth. Whereas if you look at the revenue growth that is not in line. So when can we see that it will go down or in and it will be in line with the revenue growth and what caused this increase? Disproportionately the other expenses.
A
Gaurav Bhatnagar
Do you want to take the hosting bandwidth?
Akshat Verma
Sure, sure. So essentially what we have seen in this quarter is a very significant increase in what we call a search traffic, especially for the wholesale business. So we have seen close to more than 100% kind of growth in search traffic and that essentially ballooned the cost. Plus we essentially made significant investments as far as the AI infrastructure is concerned. So these two are the major factors that have increased the cost. We have also we essentially been looking and in fact may when we started to see this trend we’ve essentially been looking at essentially optimization in terms of how we serve this traffic.
And that has led to what we call as a metric called cost per search of how much cost we pay for every search and that we have seen meaningful decrease. And we essentially are going to work on this going forward as well. And I think we started to see a little bit of moderation. So while the traffic is increasing actual cost now on hosting are essentially now moderated trending slightly lower as opposed to going higher.
Chirag
So in H2 it will be lower than H1.
Akshat Verma
See, that is again very hard to really see. We don’t know how much again. Right. The business may grow faster, the traffic may increase a lot. The metric that is in, completely in our control from an infrastructure perspective is again what I call cost per search. There we do expect to see meaningful improvement. So if more traffic comes in, we, in some ways we consider that as a good thing and we’ll try to serve the traffic as efficiently as possible. And there we will make meaningful change. But if the overall traffic increases significantly, then that, that may or may not be, we may not be able to offset with just the efficiency improvements.
Chirag
Okay, thank you.
Vikas Jain
And just for the benefit everyone like to explain that the business support services which is part of the other expenses, this is primarily the expense being incurred for the sales of the contracted personnel who are not on the, on our roles because we don’t have legal entities all across the world. They are working as a board, as a consultant or retainers with us. And that cost obviously, as we have explained, we have been making investment on this field. So that cost has grown by around 24% year on.
Chirag
Okay.
Aashvi Shah
Thank you. Chirag. The next question is from Mr. Karan Upper. Please unmute yourself and go ahead with your question.
Karan Uppal
Yeah, can you hear me?
Aashvi Shah
Yes.
Karan Uppal
Yeah, hi, just a question on Europe. So you know, we are already, you know, within the summer travel season in Europe. So our understanding is that the bookings happen one quarter in advance. So going ahead for Q2, are you expecting Europe GTV to remain at these levels or do you expect some, you know, slow down here? That’s, that’s the first question.
Gaurav Bhatnagar
Okay. No, Karan, you’re right. The Europe does say bookings happen in advance, but a lot of travel agents confirm or what we call voucher those bookings closer to the actual travel date and that is when it converts into revenue for us. Right. So the booking may happen which is, which is like a, more like a hold on a booking that yes, I’m holding the room, but I’m not really confirming or paying for them. So until in that period of time we don’t book it as revenue. So that is one. So you should see that flow through happen in Q2.
The second bit is that the actual booking windows have also shortened this year. And that’s a secular trend across, across the world actually because of all the uncertainties, I think people have been holding off on booking their travel a little bit. So that will also show up in, in Q2. So net net compared to Q1. And Q1 was also impacted because Israel business had gone down to zero. And we count Israel as part of Europe, so that should also recover. So we should see some improvement in the Europe as a source market in Q2 compared to Q1.
Karan Uppal
Okay, thanks Gaurav, for that. Secondly, on the Middle east market, you know, the tcv, sorry, the GTV growth rate has been very strong. So going ahead, you know, what, what sort of growth are you baking in any color there would be very helpful.
Gaurav Bhatnagar
See, we, you know, we try and not provide this level of granularity on growth rates. I will just point out that a lot of this growth is happening because of the initiatives that we’ve been taking and a bit of a market timing that happens typically around this time in this time of the year. So we are hopeful that we will continue to see significant growth in that market. But I don’t want to comment on is it going to be even higher than what it is already or is it going to be significantly lower? But we should expect to see growth in Middle East.
Absolutely.
Karan Uppal
So there was an, you know, in the base quarter in Q4, there was, you know, Ramadan, which was there, which was not in Q1. So that would have also contributed to this sort of a growth rate. Is it the right.
Gaurav Bhatnagar
That’s the timing. Yeah, that’s, that’s, that’s the timing I’m talking about.
Karan Uppal
Okay. Okay. And lastly on margins, so between the reported EBITDA margins and the adjusted EBITDA margins, I believe that that is mainly driven by ESOP costs. So by, when these costs would, you know, settle down? If. Can, can you please provide that clarification?
Vikas Jain
So ESOP cost current is obviously dependent on the, what are the balance grants left? And if there are any new grants given during the year, it would be an additional cost. But having said that basis, the grant that we have given till 30th of June, the expense that is had in the quarter is around 6.8 cr. And we expect that overall for the full year it should be in the range of around 25 to 28 cr, depending if the, if there is no further grants, obviously if the further grants would be issued, the overall cost will increase.
Karan Uppal
So because are you expecting, you know, this ESOP cost to continue even in FY27?
Gaurav Bhatnagar
Yeah. Look, Karan, I think ESOP is a, is a very important tool for attracting talent. And really, as shareholders, you know, this is one cost we should build some comfort with because this does allow us to, you know, bring in the right talent for the amount of growth that we are aspiring for. While there is no immediate commitment to any additional ESOPs, we would expect that as we hire people, as we, you know, as, as senior people start to have a lot of their ESOPs best there is going to be incremental cost that will come in over a course of time.
Vikas Jain
And just to like clarify, the ESOP cost gets amortized over a period of four years and it depends on the vesting period and the percentages which get vested every year.
Karan Uppal
Okay, great. Thanks. Thanks a lot and all the best.
Karan Uppal
Thank you.
Aashvi Shah
Thank you. The next question is from Mr. Pratik Kumar. So please unmute yourself and go ahead with your question.
Prateek Kumar
Yeah, good evening. My first question is on this HNA expense schedule which has been given says 29% increase with almost all.
Gaurav Bhatnagar
Your voice is breaking off.
Prateek Kumar
It’s similar or very high intensity said hello, can you hear me?
Gaurav Bhatnagar
Yeah, please.
Prateek Kumar
Hello? Yeah, so I’m saying that the schedule of this is DNA expense which has been given. Most of the line items are like sort of increasing upwards of 20% to 1 of 90, 90% depending on the base. You said that you are expecting slower growth of expenses versus revenue from 4Q kind of. So which particular line item are we talking about here? Or these all line items like sort of expected to grow slower, like incrementally.
Gaurav Bhatnagar
I think the two big line items that contribute, you know, most to the SGA are payroll and personnel cost essentially and the hosting and bandwidth. On both these we are taking initiatives to make sure that on payroll actually we know what our plan is and most of the investment as we had discussed previously was front loaded into Q4 and Q1 and hence we’ve seen this spike happen. We are expecting to wrap up rest of the investment for this year between Q2 and Q3. So that is one cause that on a year on year basis should start to slow down.
You know, on a quarter on quarter basis and then on a year on year basis as well. Hosting and bandwidth like Akshay talked about, this cost is very hard for this cost to and a dollar value come down because it is somewhat, it’s somewhat direct in nature in the sense it’s linked to the amount of traffic that we are serving. But we are building efficiencies over here. So this cost should hopefully not grow at the same pace as the traffic growth and hence booking growth. So for what we call a wholesale enterprise part of the business, that business growth should start to outpace this cost.
That’s the way I would think of it.
Prateek Kumar
Okay, so but this ballpark, this 29% growth, can it come down to like a low, low double digit growth, low teams growth? I mean that’s when the margin expansion will happen, right? Or how are we looking at. Because that’s where your top line have gone right now.
Gaurav Bhatnagar
Yeah. So see Pratik, what, what should play out and you know it is, it is hard to put numbers on. It is. And that’s the reason you showed the data that we showed in our presentation right now. What should play out is that all this new travel agent edition that we started to do through the last four or five months, they should start to meaningfully contribute to the business by Q4. Because these are travel agents, small businesses, they are trying our platform right now, but a lot of them, thousands of them are trying a platform as we speak.
If we are able to retain them and nurture them, then by Q4 all of these should start to become productive. Which will mean that from a CAM efficiency perspective that how many travel agents are active per key account manager or how much GTV is being in here is being driven by per salesperson. That metric should start to increase by Q4. This should outpace the growth in SGNA. Right. I don’t want to be very precise on exactly how much of, you know, outpacing is going to happen because it’s early days. Also very hard to say how much investment will happen in Q2, Q3 and if there’s going to be some spillover in Q4.
But broadly the hypothesis that we’re working against is that on one side our investments are slowing down now because the investments have happened. On the other side the return on those investment will start to happen and most both of them should converge in Q4.
Prateek Kumar
Sure, I understand. My next question is on air segment. So air segment, which obviously had external factors impact this quarter, but is that something which we expect to return to growth this year on a quarterly basis?
Ankush Nijhawan
So Pratik, we saw some very 2% kind of day growth in the improvement in the air business even in Q1, in spite of all the headwinds we are facing. So we do kind of, you know, believe that we will have some kind of growth in Q2 and let’s see how it plays up. But as we said, you know, we can’t give you any guidance. But you know, so that would be my answer to your question.
Prateek Kumar
Sorry, 2% growth. I said it’s 11%.
Ankush Nijhawan
We had a recovery of 2% growth in Q1. I mean for DE growth. I mean the degrowth was lesser in Q1 in spite of the challenges what we faced in, in this quarter in the last quarter.
Prateek Kumar
Okay, and one last question on the numbers which have been like discussed on the call earlier on ballpark, 30% growth in hotel GTV and mid-20s EBITDA growth. Where do we stand here on these numbers?
Gaurav Bhatnagar
Sorry, I didn’t understand the question. Prati.
Prateek Kumar
We have discussed about like ballpark 30% kind of GDP growth in hotel segment and mid 20s EBITDA growth expectation for the full year, around 25% EBITDA growth full year. So where do we stand on these numbers in terms of after Q1 performance?
Gaurav Bhatnagar
So Pratik, given the headwinds that we’ve seen, obviously Q1 was behind budget. It is, it’s hard to predict at this point in time what kind of recovery and catch up can happen on what we lost in Q1 over Q2. Q3 for top line. For bottom line growth. I think it’s a toss up between holding back investments and driving higher EBITDA and also seeing how we pace the investments, it’s very, very early days for us to kind of be able to give some kind of a view on how that will play out. Because on one side we have seen very promising results on the investment we have made so far.
So we are very hesitant to kind of pull back on investments when, you know, when it’s going so well. But given what we have seen in Q1, it will be, you know, we’ll have to take a call on it. But as of, as of now, it’s very hard to say what the full year numbers are going to look like.
Prateek Kumar
Sure. Thanks. Thank you.
Gaurav Bhatnagar
Thank you.
Aashvi Shah
Thank you. The next question is from Mr. Ravi Purohit. Please unmute yourself and go ahead with a question.
Ravi Purohit
Yeah. Hi. Am I audible?
Aashvi Shah
Yes.
Ravi Purohit
Yeah. Hi. So thanks for taking my question. I don’t have any quarter specific question but just wanted to, you know, kind of understand our business a little bit more. So you know, on, on, especially on the hotel side. So how do we kind of approach onboarding new hotel properties or you know, inventories for new hotel properties? Is there any specific area that we focus on, the kind of hotels that we focus on? You know, given the difference in take rates between let’s say five star hotels or three star hotels. And, and secondly, how do we make our platform attractive for the offline agents from the point of view of say a good spread of inventory geographically or helping them, the kind, you know, the right kind of hotels for their customers.
So a lot of OTAs provide these ratings and feedbacks and reviews. So, so from our customers point of, offline agents point of view, how, how does this kind of, you know, become a, a very, very attractive platform from them. So if you could just share some insights on that. And connected to this is also if you could help us understand the entire payment cycle. Right. So from, right, from a, a customer making a booking on a offline agents, you know, page or the offline agent making a booking for the customer, then the customer making the payment to the offline agent who will make the payment to you and then when do you make the payment to the hotel? Right. So if you could take a very, very rudimentary example for, for our simplicity sake and explain how this entire cycle and chain works, that would be very helpful. Thanks. Those are my two questions.
Gaurav Bhatnagar
So, Ravi, I’ll, I’ll answer your question on how we look at supply, then I’ll pass on to Akshay to just talk a little bit about platform hooks and how do we make the platform more attractive for a travel agent to discover the right supply? And then maybe, you know, Vikas can spend a minute on just explaining the payment cycle. So the business is, you know, the business is focused on the outbound premium traveler. So this is somebody who’s traveling from their country to some other country and likely to book premium to luxury travel. So our supply strategy is also anchored around it.
We look at hotels, typically five star hotels, maybe four star high end of the four star hotels that we do want to work with directly. These hotels would typically be in attractive inbound destination. So large destinations where a lot of international national travel happens to, you can think of like Dubai, London, you know, Paris, parts of Spain, Italy, etc. Our model of onboarding is that we have a Freedom street supply contracting team on the ground combined with a team which is focused on, for smaller hotels doing more of remote contracting. We have a fairly sophisticated tech stack which allows us to rapidly onboard a new hotel.
So yes, the commercial negotiation needs to happen with a hotel on the ground. But once a hotel has been onboarded, getting their supply inventory and rates on the platform happens fairly through a automated process which allows us to continue to add inventory fairly quickly. We also work directly with chains with several chains directly, which is more of a tech connectivity combined with commercial negotiations. Akshay, do you want to discuss the tech, the platform itself?
Akshat Verma
Yeah. So coming to essentially, how does an agent discover the hotel with the right value for their customer? Right. It’s not very different from the way B2C platforms approach this problem, right? So we also have essentially a review rating that agents can look at and look at hotels that would make sense for them in general anyway. We do not offer a lot of like really low rated properties in any case. So that’s essentially on the photo selection part. But what is very crucial for travel agents is this. Are there comparable properties that are giving better value either in terms of exclusives that TBO provides to them or in terms of rate? And all right, so we have essentially what is called a standard sequencing algorithm.
Which order do you show hotels for every search? And there we take all of these factors into consideration. We also essentially run digital campaigns educating customers on what would be the relevant inventory that they should add a lot of value on. So in a nutshell, right, I mean we have to do exactly the same kind of things you have to do on B2C with the caveat that in our case we can actually talk about things which are slightly more difficult for a B2C customer to understand. So exclusives, things like early check in, late checkout, those kind of things are something that B2C does not highlight as much, whereas in our case we essentially need to highlight those in a much better fashion.
So that’s essentially how we help the customers discover the right value for them.
Vikas Jain
On the payment cycles. Basically, especially on the hotel business, it is a highly negative working capital business. But it means it basically we work with travel agents either on the advanced model or on the credit model. In case of advanced model, travel agent would have to maintain some funds with us against which he will be able to make the bookings on a credit model as well. We may be giving a fortnightly weekly monthly credits based on bookings or check ins. However on the supply side generally we would be making either payment near to the check ins or when we are working with third party suppliers etc, we make payment to them on a monthly basis or a fortnightly basis based on the check ins.
That results in a very good negative working capital for our hotel business.
Ravi Purohit
So what’s the typical length of this negative working cycle? And this is like, I think you mentioned an important point earlier that there is a difference of number of days between booking and the voucher of creation. Right? And, and so when, when does the customer make the payment? Let’s say if, if I am standing on T0 or let’s say day zero and I am a, I’m a, I’m a customer who wants to kind of make a booking, overseas booking for a hotel and I Confirmed to the agent today that yeah, I would like to take this, you know, whatever this can you go ahead and make the booking for me? So, so how, how, how does the entire thing like if you could explain like in days or let’s say make it very simple or if, if it’s possible to kind of you know understand.
Vikas Jain
That since so, so in terms of like what are the payment terms which a travel agent offers to his customers would vary again from his whatever relationship he has with his customers or not. So there might be some walking customers where he might be charging upfront before booking a package and there might be some repeat customers he might be offering some credit. So for example, but I can explain you let’s say for example there is a booking which is for a check in of let’s say we are sitting on 4th of August and their booking is check in is happening on September per se.
So in our model basically if a travel agent is working on an advanced model he would have to pay upfront before he can voucher the booking. And in case a travel agent is working let’s say on a credit period of monthly bookings kind of thing, he will be making 1st to 30th of month payment by let’s say next month of by 5th or 10th we actually we would be paying to the supplier in the month of check in. So it could be at the time of check in if it’s a VCC supplier which is a virtual credit card supplier or if it is a third party supplier and we where we enjoy a fortnightly or a monthly credit, we will be making payment of the September check ins in the month of October.
To give you perspective in the number of days per se at an overall enterprise level we would be generally be sitting on a negative working capital of three to four days of gte.
Ravi Purohit
Okay. Okay, great. Thanks a lot.
Gaurav Bhatnagar
Thank you.
Aashvi Shah
Thank you. The next question is from Mr. Nitin Sharma. So please unmute yourself and go ahead with your question.
Nitin Sharma
Yeah. Hi. Thanks a lot for taking my question. Firstly how one should see your airline. GTV over the next next few years translating into. But what I mean is that what percentage of GTV do you see is. Coming from the airlines? Since has been kind of the growth has been slowing. What’s the thought process there?
Vikas Jain
So airline GTV I would if I if I see overall it is currently in this quarter was contributed around 38% in terms of the GPV. But if you and 62% was contributed by hotels and ancillary. However if you see the Gross profit numbers there in the airline business would be contributing around 1112 percent and hotel business contributes more than 85%.
Nitin Sharma
So is it, where do you expect it to remain? Are you, is it a comfortable number. Or it could go down further as. A percentage of revenue.
Ankush Nijhawan
So, Nitin, obviously as a hotel business keeps growing as an enterprise, the absolute percentage of the airline business will obviously shrink. But historically our hotel air business has grown at about 10 12%. Yes, we had some degrowth in the last three quarters, but we are confident going forward we should maintain the same levels of growth. But in the overall scheme of the gtv, obviously our focus remains on hotels and ancillaries, you know, which will keep growing in other markets as well as an enterprise. So I think to be fair, you will see some growth in the air business.
But overall gtv, you know, would probably remain in the same line. What we anticipate.
Nitin Sharma
Understood. And the second question on the hotel take rates. So are there any factors that you want to point out that could drive. Your hotel takes rates up from here over the next 12 to 24 months?
Gaurav Bhatnagar
Nitin, that’s not a focus area for us right now because it’s hard to drive top line growth as well as margin expansion. At the same time, there is obviously significant effort and investment going in improving our quality of our supply, which will often lead to just better pricing. But at least in the short term, our view is that let’s continue to pass on the benefits of that pricing to the customer or the travel agent to remain competitive.
Nitin Sharma
Understood. Thank you.
Gaurav Bhatnagar
Thank you.
Aashvi Shah
Thank you. The next question is from Mr. Mohit Mutwani. Please unmute yourself and go ahead with your question.
Mohit Motwani
My first question is on, you know, you spoke about how a large part of your investments should be done by 4Q. So can you share with us, you know, how long does it set you up in terms of growth? Maybe let’s say for next two, three years, given that, you know, you have a sense of which market has what kind of opportunity. And you had been investing in markets like Australia, so you’ll be already investing in having more sales agents and you know, ultimately you expect to extract a lot of efficiency out of them and have higher booking.
So the investment that you’re doing right now, what kind of result and how long do you expect to get growth from that as a table team as the investments tapered out in the subsequent years?
Gaurav Bhatnagar
So Mohit, I think one way to look at it is to see, you know, how the old cohorts typically perform in the business and we have seen that it takes roughly two to, you know, two years plus to truly start deriving full value out of a, of a specific year’s cohort because for any given year, you know, the, the full year cohort is only active in the business only for half of the year. So they will usually see them double their business the next year. But then they have significantly outpaced the overall growth in the subsequent year as well.
And then they start to plateau out a little bit. So that is, that is purely from travel agents or the ski account manager sales people that we are adding this year we would expect to see at least 2, 2 to 3 years of Runway of fresh growth because of these cams. Having said that, there is also work happening on CAM efficiency which should make our existing cams also more efficient which should also drive some uptake. Now having said that Mohit, it is important to kind of take a pause and look at the size of the market and how large or small we are in context of that market.
It’s hundreds of billions of dollars of tam. So once collectively the management has built the conviction on the fact that adding new sales drives disproportionate value, we might continue to invest in building out new markets or building depth in existing markets in the subsequent years as well. But yeah, I think it is reasonable to expect that because the size of the business will be larger and there’ll be a trickle down effect or roll on effect of the fact that this new agent addition is strong in subsequent years. These quantum of investment compared to the quantum of growth we expect from the investment should be lesser and hence we should see some margin improvement happen.
Mohit Motwani
Thank you for the detailed color on that. My second question is, you know, you, you spoke briefly about, you know, how you lost 20 days in this quarter of April to June where there was another Iran Israel war. They were a disruption for India as well. Now you know, given that your international GTV hotels GTV is primarily international in nature and is a basis source of demand. So can you give us a color? How are the months of April and May for you? Did you see a good growth in those months? I am assuming that there will be having a sharp decline in June on a year on year basis.
So how about the months of April and May if you can give share some color on.
Gaurav Bhatnagar
I don’t have the numbers top of my mind but I think we were seeing north of 20% growth in April and May. Right? So we were seeing north of 20% growth in April and May. Unfortunately you know, June saw the headwind it saw, which was just, you know, just bad luck. Sure.
Mohit Motwani
Thank you for the clarification. That’s also my.
Gaurav Bhatnagar
Thank you.
Aashvi Shah
Thank you. That was the last question for today. I would like to now hand it over to Mr. Gaurav for his closing remark.
Gaurav Bhatnagar
No, thank you, Ashi. And thank you, everyone, for the detailed Q and A. Would love to get feedback and SH is available for that on this format and as well as any incremental feedback on the format of the shareholder letter. Thank you, everyone.
Vikas Jain
Thank you.
Akshat Verma
Thank you.
Ankush Nijhawan
Thank you.