Tbo Tek Ltd (NSE: TBOTEK) Q3 2025 Earnings Call dated Feb. 12, 2025
Corporate Participants:
Snighter Albuquerque — Senior Group Head
Gaurav Bhatnagar — Co-Founder and Joint Managing Director
Ankush Nijhawan — Co-Founder and Joint Managing Director
Vikas Jain — Chief Financial Officer
Analysts:
Manish Adukia — Analyst
Karan Uppal — Analyst
Swapnil Potdukhe — Analyst
Anirudh Agarwal — Analyst
Raghav Malik — Analyst
Sarthak Awasthi — Analyst
Presentation:
Snighter Albuquerque — Senior Group Head
Yes. Yes. Got it. Yeah. Good evening everyone. I’m Snyder Albuquerque from Ad Factors Investor Relations. On behalf of TBO Tech Limited I would like to welcome you all to the earnings conference call of Q3 and 9 month FY25 today. On this call we have with us from the Senior Management Mr. Ankur Najawan, Co Founder and Joint Managing Director. Mr. Gaurav Bhatnagar, Co Founder and Joint Managing Director Mr. Vikash Jain, Chief Financial Officer Mr. Anil Barrera, President Strategy and Mr. Rajiv Kumar, Head Investor Relations. We begin the call with brief opening remarks from the senior management followed by a Q and a session. Please note all participants lines are in the listen only mode and there will be an opportunity for you to ask a question after the presentation concludes. 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 could cause the actual results of projections to differ materially from those statements. TBO Tech will not be in any way responsible for any actions taken based on such statements and undertakes no obligation to a publicity of update these forward looking statements. I would now like to hand over the call to Mr. Gaurav Patnagar for his opening remarks. Thank you. And over to you Gaurav.
Gaurav Bhatnagar — Co-Founder and Joint Managing Director
Thank you Snyder and welcome everyone to our Q3 earnings call. Before I kick off on the numbers, a quick reminder on our business so TBO is among the top four global travel distribution platforms. Our vision is to be the largest travel distribution platform in the world. We aggregate offline travel demand on one side, offline demand driven through travel agencies, tour operators, independent travel advisors, travel management companies, so on and so forth on one side and we aggregate travel supply on the other side. Supply being hotels, airlines, car renters, transfers, cruises, etc. And we make money on every transaction on the platform. The business is very global with over 185,000 registered buyers across more than 150 countries. We are we operate at a global scale with more than 55 currencies supported on the platform, more than 20 plus payment options across the board across the world including alternate payment modes enabled on the platform. The platform operates in 16 languages. Coming to our numbers for this quarter we continue to look at our business metrics starting with the North Star metric of monthly transacting buyers. The thesis of the business is that our GTV will typically grow faster than the number of transacting buyers on the platform and we expect revenue, gross profit and EBITDA to grow faster than GTV on the same lines. So now if you to look at the numbers for Q3 and I have the nine month numbers as well on the slide there is a 9% increase in the monthly transacting buyers compared to same period last year. This has led to a 26% increase in GTV leading to a GDP of 7,166 crores. This led to a 29% increase in revenue and a 34% increase in gross profit leading to an overall increase of 26% in adjusted EBITDA and ending at 75 crores for this quarter. The numbers look largely similar for the nine months as well. So this in fact we have accelerated growth on certain parameters in this quarter as you will see that active agents are growth is faster in this quarter and GTV growth is faster in this quarter compared to full year. But full year numbers are trending at the same pace and we are trending toward the 25% increase in adjusted EBITDA. So what is really driving the growth in the business is the growth in hotels and ancillaries segment. Overall you would see that for this quarter, the year on year growth is very impressive, 48%. Both India and the international operations are growing at a fast clip. Leading contribution this quarter has been from Europe which has grown 90% year on year. This of course has contribution of Jumbo Online, which is an acquisition we completed last December. But even if I was to take the Jumbo Online contribution out, it would still be a 60% plus growth on the organic business in Europe. And just as a reminder, when we talk of, you know, business from a source market, it is where the business is originating from. So it is not a destination, but this is demand originating from Europe. Similarly, Latam has seen a very impressive 34% year on year growth. Middle east on a very large basis grown 31% year on year. APAC and North America are new markets for us and growing at a fast clip. We have been making significant investments in adoption of AI into our business processes and I’ll talk a little bit about it through the course of this presentation, but I’m very happy to report that overall we are seeing very impressive gains in productivity and user engagement wherever the early trials on some of these AI bots have concluded. And finally we are fast tracking given the growth that we’ve seen in the first nine months of the year and as we plan for next year, we are fast tracking our planned investment and geographic expansion and I’ll talk a little bit about it in subsequent slides. Looking at the KPIs, our active agent base has grown by 10% compared to same period last year. This is largely driven by a 24% increase in the active agent base outside of India. In the international business, our active booker base growth continues to grow at a faster clip than active agent base, which is always a positive sign because it shows user engagement. The difference between bookers and agents is that agency is one travel agency working with us if there are multiple bookers within that travel agency working with us. So that counts as multiple active bookers from the same travel agency. So if active bookers grows at a faster clip than active agents, it generally means that there is more engagement in the travel agency and we’re probably gaining bullet share. GTV grew by 26%. 52% growth in GTV outside of India largely driven by the hotel segment. And finally revenue has grown by 29% at an enterprise level. There was request in the last earnings call that we should provide more color on the source of growth of the international business. So we split it out by source markets. And once again the reminder when we look at these numbers, this is origination of demand, not destination. So you would see Europe contributes 33% of our hotels and ancillary GTV. And and it is by far our largest source market now. This has grown 90% on a year on year basis in this quarter. Middle east and Africa is the second largest market at 27%. GTV contribution has grown by a very impressive 31% on a large base India is 13% of our hotels and ancillaries contribution growing at 18% and then Latin America is 10% of overall GDP contribution growing at 34%. Just to highlight on Latin America, this growth is especially impressive given the currency headwinds that Latin American markets have faced raised in Q3 since the US elections, just going deeper into the hotels and ancillary segment. So now the numbers on the screen are only for the hotels and ancillary business. So overall our monthly transacting buyers is growing at a faster clip in the hotel segment as compared to the overall enterprise by 13% which is again 28% growth in the international markets. We’ve added over 2000 new active travel agents on the platform compared to same period last year outside of India. Overall Hotels GTV has grown by a very impressive 48%, similar revenue is growing at a more or less similar clip and gross profit has grown a little bit faster to grow by 52% compared to same period last year. So what is driving this growth? So I want to take a couple of minutes just to explain how we are thinking of the business and where we invest to drive growth. So there are three pillars to the business. The first one is the platform itself. We run a state of the art B2B distribution platform well geared to service both small mid sized retail travel agencies as well as large enterprise customers. We continue to make significant investments in just improving the quality of the platform, the ease of use on the platform, the conversion on the platform, a lot of interaction and engagement on the platform is very data driven. So we have what we internally call a customer360 view which is our internal warehouse which houses a lot of decision making on what offers coupons. Marketing is personalized to what travel agents basis. This 360 view and finally AI and automation has become a new theme for us and I’ll talk about some of the initiatives, but it is very clear that this will have quite a material impact on our business going forward. The second pillar of business is diversifying the lines of revenue. So hotels and air are core businesses. We have started to make investments in other lines of businesses as well, which are admittedly quite small today, but we should likely grow at a faster pace than the overall business to become meaningfully important for us. And also these are required for the completeness of the platform because travel if you want travel agents to largely depend on us for fulfilling outbound complex itineraries, then access to high quality attractions, car rentals, rail cruise, etc. Is extremely important. And the third bit is our playbook for geographic expansion. We’ve been doing significant work on setting the base for growth for next year, which includes setting up legal entities in different parts of the world, investing in hiring local talent and local leadership, setting up local payment options, and also making sure that we support all the languages that are relevant in the market that we’re expanding into. So on the hotels platform, two new initiatives I want to talk about. The first one is and we talked, if you you may remember, we talked about a new hotels platform called hnext, so that rollout continues at a very and the outcomes are quite positive right now. One of the new features that we’re launching on hnext in the next couple of weeks is a AI enabled smart search. The idea here is that as a travel agent often I get queries which are slightly, you know, high level in, in nature, right? So people like a travel, like a customer would approach a traveler and say, look, I want to go to Dubai, but I want to stay near the beach, a kid friendly hotel, but I also want a pool villa inside the hotel. Now these kind of queries are very hard to solve for today, even on B2C platforms because the data is not structured that way. It requires a lot of filtering, a lot of research before you can narrow down. So we’re enabling this AI powered smart search on the system where you can see it on the screenshot on the left where a travel agent can just copy paste a query that they receive from a customer or they can type in the query in basically conversational English. And the system uses AI to shortlist the hotels and pricing for those hotels basis the query that was made on each of the recommendations that we make. We also mention why we are recommending the property that we are recommending. And we believe this is quite useful for a travel agent because these are the kind of complex queries a travel agent often needs to deal with. And their ability to turn around faster on these queries with more high quality results will help them improve their own conversion and in return it will help us improve our conversion as well. So that’s one big initiative on hotels. The other initiative is we are launching a new program called TBO Platinum. The idea here is that we are doing some exclusive, semi exclusive tie ups with a curated set of luxury hotels. As we have talked in the past, our sweet spot is premium outbound traveler. So somebody is traveling overseas and going to spend, you know, a significant amount of money on that travel. So typically at least a four or a five star hotel. So we are working with a hand picked set of luxury hotels, bringing them into our TVO Platinum umbrella. What the hotels have to commit to is some exclusives that they will provide to our travel agent. So these exclusives could be in the form of a guaranteed room upgrade or a guaranteed early check in or a meal upgrade. So you book a room only but you get a breakfast included or you book a breakfast but you get a a second meal included or an airport transfer may be included. So the hotels are going to offer something exclusive for TBO travel agents to offer to their customers and there’s some incremental commission that they will pay us for it. In return, we will give them very, very high quality, enhanced visibility on the platform, increase marketing on the platform to drive traffic and bookings for these platinum hotels. It’s a brand new initiative just a few days into into its launch, but we do believe it will allow us to create very meaningful engagement with key hotels and it will also allow our travel agents to get access to something exclusive that they can offer to their customers, especially on the luxury segment. So we’ve been working last two quarters on various experiments to see how we can adopt all the advancements in AI into our business. So two projects that have gone live now. The first one is that we’ve implemented a voice bot which is mirroring some of our outbound calling processes. Specifically where we have to call the hotels. Right now it is live for about 16% of our workflow. The initial results are very promising. So the voice port has similar or slightly better quality of outcome compared to a human caller, but it is 5x faster. So if the on an average you’re taking 5 hours to close a ticket, with a human caller it takes only one hour to close a ticket. So it’s 5x faster and it operates at a 50% of the cost. So this rollout will cover roughly 50% of the workflow very soon. What this will do for us is one, it improves the quality of customer service because our turnaround times reduce. It also starts to free up our resources for more high quality customer service. So these initiatives are largely going to lead to higher NPS and quality of customer experience. And hopefully it will also mean that going forward, as the business grows next year, our cost structures grow at a slower pace, especially on the operations. The other bot that we have gone live with is a bot which reads supplier emails and decides classifies them into actionable and non actionable emails. So currently we get several thousand emails every day from various suppliers on the bookings that have already happened in the platform. And there’s a manual process where we have to go through these emails and decide what action needs to be taken. Now this bot is able to with a very amazing accuracy, with 99.5% accuracy, this bot is able to close 45% of those automation notifications automatically. So it’s a huge reduction in workload for our operations teams with what this bot is already achieving. The roadmap for this bot is to eventually be able to action some of the emails as well to become a little bit more agentic as well. But so far very promising results on both the bots that we have launched. Finally, we also launched NPS on the international business via an external tool. The overall NPS stood at 70 in December of 2024, which we believe is a very industry leading score, which is also a reflection of the low churn on the platform though even though the NPS score is already very high, it is creating very meaningful insights for us on how we can improve our experience, customer experience going forward, talking a little bit more on the sightseeing experiences business. This is a relatively new business for us and only starting to get attention and investment recently. We believe this is very important because again, the outbound premium traveler who is work, who is booking through a travel agent is often very driven by experiences. So providing a large variety of high quality experiences on the platform is very important for us to make sure a travel agent is able to fulfill the needs of their traveler. So in the past quarter we have completely revamped our sightseeing experiences portal. We have made it more visually appealing. We’ve updated the quality of content on the platform, the quality of imagery, the quality of offerings that we have on the platform. Several new tie ups have happened with other suppliers who will be providing us these experiences. And we expect four new suppliers to go live in the next few weeks on the platform which will significantly increase the depth and quality of offerings that will be available for sightseeing experiences. The Umrah portal has also seen significant meaningful traction in the last few weeks. So just a quick reminder, UMRA is the the Muslim pilgrimage to Mecca and Medina during about 11 months of the year. So minus the Hajj period, it’s a very large opportunity. Uh, the stated goal of the Saudi government is to get to 30 million inbound tourists for into Saudi by 2030 and Umrah is going to be a significant portion. Why we have created a separate experience for Umrah is because of two, three reasons. Umrah is a complicated itinerary because there is always going to be an element of not just a hotel but a local transfer. So people usually land in Jeddah, then they do go to Makkah and then go to Medina. And often people need some kind of assistance also in terms of local guides. So we have created a Umrah first experience with very high quality, again very high quality imagery. The hotel booking engine is, is geared towards solving for the fact that I am going for a pilgrimage. So the filters change, it goes to a distance from Haram and things like that. The hotels are again, the quality of content on the, on the hotels is very handpicked, curated by us. The ranking of the hotels is decided by us and this is backed by 24, 7, 365 support in various languages which are relevant for this segment. So what we have seen is that the number of the attachment of multiple products on the same booking. So for the same travel agents, for the same passenger booking, a hotel and a transfer, for example, the attached rate on this portal is significantly higher though on a very small base to be fair right now. But overall we see this as a very high potential project for us. Because I don’t think any other B2B or a B2C player is actually offering a unique, dedicated offering like this for this segment. Finally, a note on our geographic expansion. So look, the playbook for the company is quite clear on how to expand into new countries and new geographies. During this year we’ve expanded our sales presence in 15 new countries and 40 new cities within those countries. Australia, New Zealand, France, Germany, Japan, Australia, Romania are some of the highlights. Three new legal entities have been incorporated in the last quarter in Indonesia, Greece and Israel. Again setting the base for significant ramp up in these source markets. Feed on screen Expansion is happening in these new territories as we speak and will continue to accelerate through Q4 and into the next year. One significant integration we did on payments is a new integration called Tazapay. They provide us a bouquet of alternate payment modes across the world, especially in developing markets like Philippines, Indonesia, Singapore, Mexico, Colombia. Again the objective is that and that’s how the playbook operates is to be truly local to the market that we are operating in. And we see especially in the developing markets alternate payment methods are quite relevant and quite prevalent. So we continue to invest in these integrations to make sure that we are able to provide travel agents every possible way to collect from their customers. Before I hand over to Ankush to talk about in detail on the India business, just wanted to take a minute to highlight a few things on seasonality in Q4. So just a reminder, Ramadan is going to be in March this year. So all of March is essentially Ramadan. Ramadan is traditionally a low season for the business because businesses essentially are closed in Middle East, Indonesia and in many of our key markets. So as we talked about it In I think Q2 as well, the movement of Ramadan has an impact on the overall numbers for a quarter but it will get more than made up for in Q1 because Q1 will have Eid and all the holidays. So just wanted to make sure that we are aware of this that because Ramadan is going to fall in Q4 we will have some impact on the growth rate that we have seen in Q3 in vis a vis Q4. With that I’ll hand over to Ankush.
Ankush Nijhawan — Co-Founder and Joint Managing Director
Thank you Gaurav. So I’ll just talk a little more about the India business. So a total GTV for India market came in at rupees 3200 crores, growing nearly at 5% year on year. This was led by strong performance in hotels and ancillary segment which grew at 18% YoY to reach 559 crores. Similarly segment’s gross profit demonstrated an equally healthy growth of 16% YoY and came in at Rs. 13 crores. We are committed to build on this growth and further solidify our market share. Towards this we launched a platinum desk program for our hotels, for our top hotels and ancillary’s account which is basically our travel agents. This exclusive program focusing on top cohorts of the buyers is expected to drive our shareholders of wallet with them through personalized service and focused cross selling of hotels and sightseeings and other ancillaries. Early responses to our Platinum decks are very very encouraging. With focused efforts in platform driven interventions that will drive cross selling and agent stickiness and focus expansion sales we are confident delivering continued growth in the Indian market. We are also enthused by multiple initiatives announced by the Union Budget 2025 like the increase in TCS threshold to 10 lakhs from 7 lakhs with Noida and Navi Mumbai airports kicking off very soon. 120 new airports connectivity in the pipeline under the Rodan scheme As per budget 2025 India outbound story should continue to grow at an accelerated pace. With this I would like to hand over to Vikas to speak about the financial performance of the company. Over to you Vikas.
Vikas Jain — Chief Financial Officer
Yeah, thanks Ankush. Good evening and very warm welcome to everyone on this call. Thank you for joining us today. I’m pleased to share our financial results for Q3 and for the third first nine months of FY 2025. For the quarter ended 31st December 24th. At an enterprise level we saw a good growth in key performance matrices. Our monthly transacting buyer base expanded by 9.2% driving a 26.2% year on year increase in GTV. Our revenue from operations reached 422.2 crore up 29.2% year over year. Our enterprise take rate improved from 5.76% and to 5.89% year on year. Breaking this down further, the air business take rate dropped from 3.03 to 2.57 primarily due to performance linked incentive actualization since last year. Same quarter at YTD level take rate is in line with last year at 2.6%. Hotels and ancillary services take rate saw a decline from 7.99% to 7.84% primarily due to change in supplier and customer mix during the quarter. Gross profit as a percentage of GTV for the quarter improved from 3.89% to 4.14% on year on year basis. This enhancement was largely driven by an increased share of hotels and ancillary services within our GTV which rose from 51% to 60% year over year. On the profitability front, adjusted EBITDA reached 75 crore representing a 26.1% year over year increase, while profit after tax came in at 50 crore, so showing a marginal drop of 1.6% over the previous year largely due to 12.48 crore forex loss triggered by sharp movement in USD against other major currencies. For the quarter, our adjusted EBITDA margin stood at 17.77% and PAT margin at 11.84%. Turning to our performance for nine months for FY25, cumulative GTV for nine months grew at 21.1% year over year, driven by consistent growth in our buyer base by 7.5%. Our revenue from operations totaled 1,291.3 crore, making a growth of 26% compared to the nine months of the last year. For the fourth first nine months of the year adjusted EBITDA reached 249.7 crore up 24.5% year over year and PAT totaled at 171 crore reflecting a 10.9% increase. Our adjusted margin for nine months stood at 19.34% and PAT margin at 13.24%. Additionally, it is important to note that the income tax is now applicable to our wholly owned subsidiary in UAE from the beginning of the financial year and thus the 9 month effective tax rate is approx. 16.07%. Our balance sheet remains robust with a net worth of 1115.5 crore as at 31st of December 2024. Notably our working capital continues to remain negative. Our cash and bank balances are also Strong standing at 1335.5 crore as at 31st December 2024. Thank you everyone and with this I will hand over the call back to Snider.
Questions and Answers:
Snighter Albuquerque
Thanks Vikas. We will now begin the Q and A session. Participants are requested to raise their hand, virtual hand to ask the question post which we will unmute. You request you to introduce yourself and the firm you represent before going ahead with your question. We will wait for a moment till the Q and A queue assembles. We have a first question from Manish Adukya. Manish, please introduce yourself and the firm that you represent and go ahead with your question.
Manish Adukia
Thank you. Hi, this is Manisha Dukya from Goldman Sachs. Thank you so much for taking my question and thank you for the presentation and really appreciate you disclosing that hotel breakup by region. Quite helpful. I have a couple of questions. The first one is just the incredible growth you’ve seen across most of your major international markets. Most of the markets are growing at 30% plus with Europe you said 60% one I mean just trying to understand and you explained one of the drivers of this growth where you know maybe penetration is still low and you’re still adding customer base. But just trying to understand the Runway for this growth. In your View Is this 30% plus growth sustainable for the foreseeable future in your view or will the base as it becomes larger change impact this growth? And in that same context, optically the India growth of 18% for outbound hotels looks a bit lower. Counterintuitive that India is actually growing slower than your global markets? Is that because the penetration of MTV is already is quite high in India and that’s why the growth there is lower. Just if you can help us explain those dynamics, that’ll be Great. That’s my first question.
Gaurav Bhatnagar
Thanks, Manish. So, Manish, look, the Q3 has especially. Let me, let me talk about Europe first. One thing to note in Europe compared to Q3 last year is that because of the start of the Israel war, there was a slight depression in Europe last year. So which is why the growth looks abnormally high. But irrespective, I will admit, I think the growth is very strong, especially in a market like Europe, which you know, fundamentally is a slow growing market. So as we’ve always talked Manish, our belief is that the dam is very large and the Runway for growth, the headroom for growth is also very large. We are growing in three different ways. One is just pure new market expansion. I talked of when you go to 40 new cities now within those cities you have absolutely no base today, right? Our playbook is very strong and our conviction is that amongst all the platforms that are available to a travel agent, we remain the best possible platform. So once we localize ourselves so we have local account management in place, we have local payments in place and we have local language support, we do see that, you know, we see very good traction happen. So when you open those 15 new countries or 14 new cities, so that is just like landing in new markets. The second bit is expanding our base in existing countries like you’re seeing, you know, very good growth in Latin America. Now we’ve been around in Latin America for a long time. But again Brazil for example is a very large country. So just to have complete market coverage would require you to have more sales presence within the market. The third bit is, which somewhat shows up in the fact that bookers per travel agent are increasing. The third bit is that the engagement with the platform is increasing and we are actively working on building out capabilities for cross sell and upsell as well. So the third parent, which is something that we believe will start to get relevant in maturing markets like the Middle East. So that’s the broad view. My view remains that on the international business we do feel confident that even though the basis is increasing at a rapid pace, we should be able to demonstrate similar growth. And there is the seasonality is a bit, you know, seasonality is what it is in our business. It is very cyclical and it doesn’t happen at the same time every year. So you will see a little bit of trust and you know, highs come in. But on the whole we do believe we should be able to sustain this level of growth for the foreseeable future. I’ll pass on to Ankush for the India business.
Ankush Nijhawan
So Manish, just to add to the India growth, the actual we grew actually at from 9% in Q2. We actually grew at 18 in Q3. So this shows that you know, what we are, what we had planned, you know, it’s going in the right direction to see a double growth in Q3. Versus Q2. And if you see the headroom of growth in active buyers in India, you know we are still 3%. Yes, we have a very large active base which is very high. But keeping that in mind, the market still remains beyond the whole outbound story which all of us read in the press. You know, I don’t think I need to spend time on this. But the fact is this output story and the addition of new, new routes and airlifts being added will only help our story. So 9% to 18% of India, I think is a very significant growth from Q2 to Q3.
Manish Adukia
Thank you. Thanks. Ankushan Gaurav, My follow on question on that is again just specific on the India non hotel business, which of course, I mean, you know, we’ve turned it around from a GTV perspective. But again from a steady state standpoint, is that like a single digit growth business, just the airline business or outbound airline business from India or do you think that business also has room to accelerate into double digits? And the second follow on question was, you know, just this addition of international markets Gaurav which you talked about and I think you’ve added 15 countries just this year alone. Now from a margin standpoint, how should we think about the impact of that? I mean the adjusted EBITDA margin obviously this time around is down quarter on quarter. And also yoy is this likely to be like the bottom of margins or as you expand into new countries and invest in salesforce, maybe in the short term you could see a little bit of further margin headwind before they start bottoming out. Thank you.
Gaurav Bhatnagar
Yeah Manish, I think on, on the margin. So look, growth you know, comes at a cost and the cost is investment into, you know, into sales, product, tech. That we continue to do. And we do believe that because the business should be, you know, orders of magnitude larger than what it is in the, in, in the future. Right? I’m not saying in what foreseeable future. In the future we continue to invest quite heavily. So while the business is generating a lot more cash, it is getting reinvested back. On a ROI perspective. A lot of those investments have quick turnaround on just the payback but they do bring the EBITDA margin down. So one way we are looking at it internally is that are we delivering healthy EBITDA growth dollar by dollar to dollar or a year on year basis. So for example, this year we’re trending to about 25% increase in EBITDA compared to last year. And the aspiration is that if we are able to continue to invest in the business, continue into our geographic expansion, continue to invest in technology and still maintain this 25% ish EBITDA growth every year. We are happy with that. Now this may not translate into operating leverage per se because the operating leverage is getting invested back. But at least the management view is that it’s a very happy compromise to be able to grow high digitized, continue to invest in the business while continuing to increasingly generate more cash. So that’s the way we are looking at it.
Vikas Jain
And Manish, on the if your question was regarding the India Air business that it has started going in a single digit and will it continue, was that the question per se?
Manish Adukia
Yeah, the question was specifically on the India Air business and directionally, or let’s say steady state, medium term, how should we think about the growth outlook for that business?
Vikas Jain
Okay, so if you see basically this, this quarter, we have grown in a single digit, but if you see the last two quarters, we were kind of having negative. So we are trying to move towards making a balance between the growth and the gross profit margin. So even managing our gross profit margin in the range of 1.2 to 1.3%, we are able to now grow at least in the single digit growth and we are working towards that direction that we are able to manage such kind of growth with such kind of GP numbers. But yes, we will keep on reviewing our strategy on ongoing basis for the EF business.
Manish Adukia
Got it. Thank you. Just last quick question again. Maybe Gaurav directed towards you. Of course, the expansion into international market continues at a fairly rapid clip. I mean, can you contextualize for us, I mean the expansion in the last 12 months that you’ve done, has that been faster compared to, let’s say your pre IPO history? And the reason I’m asking is in terms of, let’s say your ability to manage multiple markets and sub markets, at what point do you think like, maybe you get to a place that, you know, maybe you’re growing too fast or expanding too far, like how do you strike that balance that, oh, you’re not doing too much and making sure that wherever you are, you’re adequately focusing on those before you expand into new markets. That’s my last question. Thank you.
Gaurav Bhatnagar
Yeah. So Manish, the good news in our business is that the playbook is very homogeneous. So whether we open a new market in Latin America or we open a new market in Asia Pacific, the playbook changes very marginally. And that is something that we spend years kind of perfecting that if we need to open in any part of the world today, we know what are the three or four things that need to happen. We know where the hiring is going to come from, we know what we need to do for payments and APMs, we know what languages to support. And there is a bit of a flywheel effect over here because most of the language now when we cover 16 languages, most of the, you know, languages are covered. So any new Spanish speaking country we go in, we already support Spanish as a, as a language. You know, any new Arabic speaking country we go into, we already support Arabic as a language, we go to Portuguese as a language, French as a language. So it’s our sense is it gets easier. We must keep in mind that while there is this large sales team on the ground and there is a, the go to market is very sales led. Ultimately it is a platform business. The transaction happens on the platform. The travel agent, once onboarded, largely interacts with the platform and which is why the efficiency of a salesperson grows very rapidly. And from a management perspective, creating the clean sales structure is not very hard and which is largely in place. So as you know, our regional leadership is pretty much in place. Their country managers are pretty much in place. So when we expand, if a country manager needs to hire a few more salespeople on the ground, from a management bandwidth perspective, it is very, very isolated to the country where that hiring is happening, but not much changes in terms of taking up the management bandwidth of senior leadership or any significant investment that needs to happen on the tech platform to customize it.
Snighter Albuquerque
Thanks Gaurav, Pankush and Vikas. We’ll move to the next participant. Mr. Karan Uppal, please introduce yourself. The company you represent and go ahead with your question.
Karan Uppal
Yeah, thanks for the opportunity. This is Karan Upal from Flip Capital. The first question is on the organic growth. So I can see that the GDP has grown by 28% on a YY basis and revenue growth is around 29%. So you can help me with the organic growth in these two categories.
Gaurav Bhatnagar
Because.
Vikas Jain
So organic growth in terms of the GTV without including the jumbo numbers, basically we have grown overall at around 20% year on year in this quarter.
Gaurav Bhatnagar
And I think Vikas 3 Hotels standalone is 35%, 36%.
Karan Uppal
36% organic in the hotel business. That’s correct.
Vikas Jain
Hotel business. Yes.
Karan Uppal
Okay. Okay. Second question is on margins. So the margins have dropped on a sequential basis as well as on a YY basis. Now if I look at the some of the cost items so other expenses has been quite sticky. It’s not moving in tandem with the gdv. So what is, what is leading to this elevated other expenses and what’s the outlook there on the overall margin?
Vikas Jain
So if you see when you’re seeing margin as a percentage of revenue, if might be a slight decline coming in because of the revenue lower growth as compared to the gtv. But if we see adjusted EBITDA as a percentage of GTV we have maintained a similar kind of margins at 1.05% this quarter versus last quarter, same year. Yes. However as a while our GP has increased but as Gaurav had mentioned we would we will keep on investing in the future for the future growth. So that’s the investment that we have made. But as as a percentage of GTV we are trying and keeping the similar kind of margins that we earn as a percentage of GDP for the adjusted EBITDA margins.
Karan Uppal
So going ahead directionally, if you can provide some sense, you know EBITDA margins at this point reported margins are at 16% versus let’s say 18% last year. So directionally how should we think about the margins?
Vikas Jain
So at a YTD level, if you look that we are trending towards 19 plus percentage of EBITDA margin. So. So that’s what we are targeting towards maintaining in the future as well.
Karan Uppal
Okay, thanks. Thanks for that clarification. Third question is on the take rates. So Gaurav, the take rates in the hotel business has been improving. This is the third consecutive quarter of take rate improvement especially in the hotel business. So is it because the Jumbos take rate have, have improved post our acquisition that is leading to improvement in the overall take rate? And what’s the sense, how should we think about it from a go forward basis.
Gaurav Bhatnagar
So Karan, actually Jumbo being more of an enterprise business is slightly dilutive to the overall take rate. Largely like while we’ve seen a slight, you know, the take rates have been inching up, you know, last three quarters largely it’s a, it’s a function of mix. So for example, our retail business happens at a slightly higher take rate compared to our enterprise business. So if in a quarter the retail business grows faster than the enterprise business, then the take rates improve. If the international hotels business grows faster than the India hotel business because that operates at a higher take rate, then the take rates improve a little bit. Our view remains that they’ll remain fairly range bound. Right. I think we’ve been guiding around between 7.2 to 7.6% because right now the company is not really focused on improving the take rate. We do want to maintain them because that is an important metric. So we don’t want to buy business by reducing take rates. But we are also not focused on increasing take rates at this point in time because again the focus is on top line growth. So as long as we can deliver profitable top line growth without meaningfully having to increase take rate, that’s better for us. Right. Just, you know, like we’ve said this in the past, we are a platform business. So everything that we take keep as a take rate is taking away from the travel agents, from their own commissions. So we try and maintain a certain range within which we operate with our take rates without any specific effort to significantly improve them in the short to medium term.
Karan Uppal
Okay. Okay. And last bit is on the impact from Ramadan. If you can quantify the impact for Q4. Yeah, thanks.
Gaurav Bhatnagar
Hard to quantify it because one, it is just hard to quantify given that, you know, there are many factors that come into play. But you know, just from a year on year perspective, Q4, you will see two changes happen. One, Q4 will have full impact of Jumbo online in the business. Jammu Online is a mature business. So it will definitely not grow at the same pace as our organic business. So that is one. And second is Ramadan will mean that the Middle east business will see a little bit of slowdown towards the end of Feb and then for most of March, for 20 days of March. Very hard for me to say what it translates into actual growth rate. But it will, it will have some impact. Which you know, the converse to it is that because last year Ramadan was in, in Q1. So when you see Q1 to Q1 on Q1 numbers then we will have a. I have a tailwind over there because last year Q1 numbers are depressed because of Ramadan.
Snighter Albuquerque
Thanks, North. Thanks, Karan. We go on to the next participant. The next participant is Swapil Poduke. Please introduce yourself and the company you represent and go ahead with your question. Swapnil.
Swapnil Potdukhe
Hi. Thanks for the opportunity and congratulations on a good set of numbers. This is Swapil from JM Financial. So a couple of questions first, starting with the previous participants question and dwelling a bit more on the mix between the retail business and enterprise business today. And if you could just give a sense of where we are in terms of that mix and any, any trajectory that we have seen. I mean have we been significantly increasing our retail business off late because of the expansion that we have done in newer countries? Any sense of that?
Gaurav Bhatnagar
If I include the Jammu Online business as well, then the enterprise business is slightly larger in terms of GTV compared to the retail business. The thing with enterprise business is that it sees it’s slightly lumpy in nature because when you sign up a customer, often these are large customers, right? So they may take a long time to get started with you, but once they start then they suddenly bring very meaningful business growth. But in the long run the company is quite clear that the value proposition and the differentiation from all the other B2B players is on the retail side and all the investment is going into building in the retail business. So yes, going forward, right. If I looked at the mix over the next 12 to 18 months, it should swing back to more of a half and half. Today I would say with Jammu online it’s probably skewing slightly more towards the enterprise business. But in the, in the medium term the retail business should grow faster than the enterprise business.
Swapnil Potdukhe
Okay, fair enough. The second question is on your forex losses that you have mentioned. You know, now I would like to understand the nature of this loss. Is this operational loss or this is related to the cash which might be sitting in some of our subsidiaries, you know, foreign subsidiaries.
Vikas Jain
So this is primarily so something there is a time gap between a booking is made and either we see payment in the local currencies or we make payment to the suppliers in the local currencies. But due to this sharp movement in USD versus currencies like gbp, Euro, BRL and others after the post the US election results, this has caused us a big impact on the forex losses that we have in our books. So that is the key reason basically.
Swapnil Potdukhe
Okay. And the other question is with respect to your tax rate. Now there was a mention of, you know, Dubai being getting some tax increment increase recently, but that didn’t reflect in your three Q numbers it seems. I mean your tax data has in fact come off on a sequential basis. If I were to look at from that perspective.
Vikas Jain
Yeah, good question. So one Dubai tax is effective 1st of April 24th. This is baked in in a nine months number. But in this quarter per se, in one of our subsidies. There were some losses wherein we were able to take benefit of defer tax aside. So that has helped to reduce our overall effective tax rate for the quarter. But if you ask me, for the full year it should be ranging in the range of around 16.5% to 17% on the overall effective tax rate for the full year.
Swapnil Potdukhe
Got it. And just one last question on some of the countries where we have been already been present and G did highlight about expanding the base in existing countries itself. So apart from Brazil, is there any other opportunities that we have been working on and we see significant, you know, significantly large market which is untapped despite the fact that we have been present in those geographies?
Gaurav Bhatnagar
Yeah, definitely. So I think even though Europe already looks large on the, on the numbers, we have been making quite significant inroads in the southern European markets like Italy, Spain. We are still very small over there, especially on the retail business. But that is where some serious investment is going through. Investment is happening in market like Australia as well. We continue to expand our, our sales presence in Indonesia. So just, you know, on the whole, the way we are structured, every region is looking at their own market expansion and it happened at a fairly micro level because like I talked the cost of setting up a new market or especially in an established market, opening a new market or new city is fairly low for us. Right. Operationally the cost is almost zero, except for probably people on the ground. And hence it continues to happen fairly democratically across the, across the globe. Right. So I don’t want to pick up. You’re not banking on one or two countries to deliver very large growth next year for the whole needle, for the enterprise needle to move.
Swapnil Potdukhe
Okay, and just the last question. Any updates on possible M and A that you will be working on? I mean earlier we were considering something in North America. So any, any moment on that side. Thank you.
Gaurav Bhatnagar
So we continue to explore opportunities and like we’ve said in the past, uh, you know, we are very cautious uh, in committing to something. Uh, so all I can say at this point is we are exploring uh, across the, across the globe in multiple uh, geographies, but nothing at this point in time which looks close to coming to fruition in the next few weeks or months. So no further comments on that.
Snighter Albuquerque
Thanks Rapnil. We move to the next participant. Aniro Dagarwal, please introduce yourself, the company you represent and go ahead with your question.
Anirudh Agarwal
Yeah, thanks for the opportunity and congratulations on the strong performance. Had a few questions. So Gaurav, first on the 36th percent organic growth. If I just try to back calculate the jumbo numbers. It seems that jumbo has very strong seasonality. I mean absolute Jumbo GTV seems to be meaningfully lower, you know, versus what we’ve been doing in the past couple of quarters. So just wanted your take on that. And in terms of, you know, the like to like Jumbo growth rate that we would have experienced in this quarter.
Gaurav Bhatnagar
So Anirudh, the like to like is not possible in this quarter because the integration or the business was acquired only on 18th of December, 18th of December last year. So we’ll have slightly more like to like numbers in the coming quarter. Jumbo business does have a strong seasonality because of the nature of the business. So that business largely services the tour operators and the leisure market from northern Western Europe traveling to Southern Europe, largely Spain, Portugal, you know, the Mediterranean coast. And hence the summer is when most of the check ins will happen, right? The July, August is where most of the check ins happened. But the nature of booking windows in these markets is very different from the rest of the world. They book well in advance. So Jan, Feb, March is where you will start to see bookings happen for July and August and hence you will see a spurt in bookings in Jan Feb leading to check ins in July and August. We are expecting, so we have, we are expecting Jumbo to deliver on the business case we have created for it in terms of EBITDA and growth. I will reiterate that it is a very mature business. The business has been around for almost 50 years. It’s a very mature business in a mature market. So the real uptick in the business is going to happen. The use case we have created is the cross sell that happens between the Jumbo inventory selling on TBO and TBO inventory selling on Jammu online. So some of the growth will actually start to appear in the TBO business because when Jumbo Online buys from TBO it has a top line growth in TBO as well. So we will absolutely not expect Jumbo Online to deliver similar kind of growth rate like this. 30, 36, 37% growth rates is absolutely not possible. Not factored in and not budgeted for. But having said that, on a standalone basis it’s a meaningful portion of our business and it meaningfully improves our overall value proposition, supply value proposition in Europe.
Anirudh Agarwal
Oh, got it. Second question Gaurav was on, you know, the use of AI across operations that you mentioned. So you know this is one part that could help us with, you know, some margin expansion. While understood that, you know we’re investing incremental margin or profitability into growth initiatives across the globe. But is there some part on the operations and admin side that we can save, which helps with near term profitability or that will also go into growth, at least in the near term.
Gaurav Bhatnagar
The overall view of the company is that the AI led initiatives are largely to improve customer experience and stickiness on the platform. From a cost perspective and you know, I don’t have the exact numbers but operations is probably 5, 6% of our, you know, revenue as cost. Right. So if you it will not have a huge impact on our EBITDA margins if we were to shave off some cost and we’re not planning to shave off cost because really the objective is to free up resources to focus on high quality customer service where actual physical human interaction is required. Yes. What should happen is that the pace at which our operations cost grows visa ways are top line. That should slow down. Right. So if operations are growing by x percent, if GDP is growing by x percent, the cost of operation should not grow at x percent, should grow at some x minus 5%. That should definitely happen. I think in the medium term you will see some margin expansion on account of it. I do agree with it, but because it is not 20, 30% of our cost. Right. It’s like 5% of our cost. So it is not going to be a very huge improvement in margin on account of reducing this cost.
Anirudh Agarwal
Thanks. Final question from my side in terms of just profitability of the business. So while reported margins may continue to look more in the similar range in terms of the mature geographies, if you could share a ballpark in terms of how would profitability be looking in markets, let’s say like the Middle east wherein you know, where large mature and been there for a period of time.
Gaurav Bhatnagar
So Anirudh, it is one, it is hard to bifurcate profitability in this manner because the supply is common. And just from accounting perspective it is not possible to derive true accounting profitability by source market just because of nature of how revenue is counted. Having said that, one indicator we look at is what we call regional contribution which is generally speaking and it’s, it’s a loose metric but we’re looking at, you know, after taking out all the cost in the, in a region, what is the net contribution, cash contribution of that region to the, to the business? That number as a percentage of GTV continues to improve in mature markets like Middle east would be one example, you know, every year as a percentage of gtv that number continues to improve. One, we are not, you know, we are not kind of disclosing what those numbers look like. And second, it is also very hard for us to create and you know, share a number with you which will tee up with the accounting numbers because just because of the nature of how revenue is getting counted. But yes, we are definitely seeing if you wanted to. If you. If your question was, are we seeing operating leverage at least in a. In a mature region? Absolutely. Yes.
Anirudh Agarwal
Got it. Fair enough. Thanks a lot. And all the best.
Snighter Albuquerque
Thanks, Anirudh. Before we go to the next participant, may I request anyone who has a question may please raise your virtual hand. We would go ahead and unmute you to ask your question. The next question is from Raghav Malik Raghav, please go ahead, introduce yourself and the company you represent and ask your question.
Raghav Malik
Yeah. Hi. Hi. This is Daga from Jefferies. I just had two questions. So the first one is a follow up to the previous participants question on the Forex impact. So I mean I had asked this before in terms of any permanent sort of hedges that we may have and I don’t think we do, but is there some sort of natural hedge that we have, like in terms of your business to mitigate some of, you know, currency headwinds as they may play out? Yeah, that’s the first question.
Vikas Jain
Which is higher as well as the forwards being taken for the currency at the net level. Yes, natural has helped us to mitigate our losses. But in terms of the power that we have been taking, we’ve been taking cautious call basic basis, the kind of currency that we are dealing in and the kind of mortality we were having. So in some markets we were taking forwards and in some way or not, but after the sudden movement that we have seen in USD versus other currency, the kind of revamping our hedging strategy as well as we are also increasing the frequency of review of our foreign exchange exposure so that we are able to mitigate our losses, we are also exploring some tech solution which can help us out in, in doing micro hedging kind of thing.
Raghav Malik
Okay, got it. And secondly, more of a strategic question. While I know we’re prioritizing our, you know, growth of GTV over margins currently and not asking for a timeline by any means, but in terms of the strategy for, you know, the longer term, when we say that we expect margins and EBITDA and profitability to grow faster than gtv, do we mean more like when we are in a mature sort of situation with gtv kind of normalizing to like say high, single, low double digits and that’s when margins will start to play out better or like how do we see this more from a strategic point of view, say 5, 10 years or no timeline per se, but just yeah, strategically.
Gaurav Bhatnagar
Yeah, I think Rajab, it is fair to say that margins should expand quite significantly when we stop reinvesting or reinvesting some of those margins into top line growth. You know, again we can’t share timelines on it because as long as we see Runway for growth, because the company’s aspiration is very clear, we want to be the largest travel distribution platform. So as long as we see Runway for growth, the company will continue to invest in that top line growth. It is very important because a lot of initiatives which will actually drive accredit margin to the bottom line. For example, cross sell, ancillary sales, sightseeing, car rentals. All of these are, you know, dependent on having a large active customer base buying air and hotels from you. Because these are, these attaches only happen on these core products. So and those products have much higher gross margins as well. So the strategy, from a strategy perspective, our view is we are building a platform. So more nodes on the platform, more active nodes on the platform is the number one thing that we are focused on today. What we are happy about is that we are able to do it profitably by reinvesting some of the profits and the cash we generate through the year. So in the short term, absolutely, the margin expansion might be quite muted, but in the long run, in a steady state, we absolutely expect it to be a much higher EBITDA margin business from where it is today.
Raghav Malik
Okay, got it. Thank you.
Snighter Albuquerque
Thanks Raghav. Anyone who has a question, you can please raise your hand. You unmute you and you can go ahead and ask your question. Yes, the next one is Sartakavasti Sartak, please go ahead, introduce yourself and the company you represent and ask a question.
Sarthak Awasthi
So yeah. Hi sir, this is Sardar from Asset Management Fund. So my question is on that hotel industry as a sector is very cyclical. So I just wanted to understand the long term perspective that in a previous down cycle of the hotel industry, how did we tackle the at that time the market scenario? And suppose if there is a oversupply in the hotel industry, then how we are going to tackle that type that time market scenario, sir.
Gaurav Bhatnagar
So one, because our focus is on the outbound premium traveler, that segment is slightly more immune to cyclical factors like inflation or other geopolitical factors. So I think there is some resilience in the business because of the fact that we are not focused on a budget traveler. We focus on a more frequent, slightly more mature, high spending traveler. Your other comment on over supply. See over supply usually works in our favor because when there is oversupply, hotels very heavily lean on platforms like us to offload inventory, right? In fact, the reverse happens when the supply is very tight and demand is far outpacing supply. That is where the intermediaries have a challenge creating incremental value for the hotels. So hotels oversupply does not really bother us much because that actually allows us to create more value for the hotels by driving meaningful volumes for them. And on cyclics look, you know yes, travel business per se has is influenced by geopolitical factors. We’ve seen many of those come in and for example you know the Israel Palestine war is you know as recent as last year. There was a slight dip in the business because of that. Prior to that the Ukraine Russia war because we have meaningful business in, in Eastern Europe and in Ukraine as well also had an impact on the business. But again a slight dip. So how we look at it is that because we are building a global business, no one country, no one geography or no one region is overwhelming the revenue mix. And secondly by focusing on the premium outbound traveler we are little bit resilient to factors like inflation or cost of living and things like that.
Sarthak Awasthi
Yes, that’s answered my question sir. My second question is on that the that we are focusing on luxury hotel segment. So we will be having a take rates on a higher end on that part.
Gaurav Bhatnagar
So satak there, you know we may receive better commissions from hotels. The question always comes on this is that how much are you keeping for yourself and how much are you going to pass on to your travel agents. So we continue to maintain a view over here that it’s you know, it’s in the interest of the business and the travel agent travel agents on the platform that if we pass on majority of that benefit to the travel agents right now. So we are not expecting while yes, that program is very important for us. Luxury hotels are important for us. It will probably create more income for us from the hotels but we are not expecting it to increase our take rates because a lot of that benefit we will likely pass on to our travel agent partners.
Sarthak Awasthi
Okay so just one more question if I may sir. Like recently in channels I came to know that there’s a lot of increase in the competition in the domestic front. So how we are going to tackle that part means like travel agent has a lot of options of the platforms.
Ankush Nijhawan
So Sachar, are you talking about the air business or the hotel business?
Sarthak Awasthi
I’m talking about the hotel business.
Ankush Nijhawan
So Satu, for us our focus still remains is the outbound story, you know and that’s our key focus for India outbound and for people traveling overseas. From a domestic hotel point of view our business is relatively small. Right. So I don’t think that kind of bothers us. But yes, we are focusing on organized chains, you know, the typical 5 stars instructor change, you know, which we will continue to get the supply on our side. But we don’t need to. That business of selling two stars, three stars, etc, so you know, our stories remains outbound. And that is the plan going forward.
Sarthak Awasthi
Thank you, sir. Thank you. That answers my question. Thank you.
Snighter Albuquerque
Thank you, Sarta. That is the last question for today. Since there are no further questions, we would like to end the call. I would like to give it hand over to Gaurav for his closing remarks.
Gaurav Bhatnagar
No. Thank you, Snyder. Thank you everyone for attending this call and for all the insightful questions. Thank you.
Ankush Nijhawan
Thank you.
Snighter Albuquerque
Thank you, Gaurav. Thank you, Uncle Shanda. Management.
Ankush Nijhawan
Thank you, Stanton. Thank you, everyone.
Snighter Albuquerque
Thank you, everyone. In case of any queries, please reach out to us. And we will now end the call. Thank you.