MakeMyTrip Limited (MMYT) Q3 2026 Earnings Call Transcript

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Overview

The earnings call highlights strong growth in international and domestic travel, boosted by macroeconomic measures and strategic product developments like Myra. Despite some challenges like GST impacts, the overall sentiment is positive with growth in key segments such as air ticketing and hotels. The Q&A session provided clarity on risks, with stable margins and no significant financial downturns. Overall, the strategic initiatives and market opportunities suggest a positive outlook for stock movement.

Key Financial Performance

Air ticketing adjusted margin $107.9 million, registering a year-on-year growth of 20.4% in constant currency. This growth was driven by strong growth in the international air ticketing business, which now accounts for about 43% of the adjusted margin within the air ticketing segment.

Domestic air market growth 2.2% year-on-year growth, compared to the industry growth of just 0.9% year-on-year. This was achieved despite disruptions in December due to new flight duty rules.

Hotels and Packages volume growth 20.3% year-on-year, with stand-alone hotels growing even faster at 20.6%. This growth was driven by strong demand, aided by the recent rationalization of GST rates for hotels priced under INR 7,500, where the GST rate has been reduced from 12% to 5%.

Room night growth in non-premium price segment Over 23% due to the GST rate reduction from 12% to 5%, which led to attractive pricing and increased demand.

Bus ticketing adjusted margin $42.4 million, registering a strong year-on-year growth of over 26.1% in constant currency. Growth was aided by festive and holiday travel and inventory addition.

Ancillaries business adjusted margin $27.5 million, witnessing a strong growth of 45.5% year-on-year in constant currency. This growth was driven by building the attach of a variety of ancillary services.

Adjusted operating margin Improved from 1.76% of gross bookings during the same quarter last year to 1.82% of gross bookings during the current reported quarter. This improvement was due to a better mix of higher-margin businesses like hotels and packages, bus ticketing, and ancillaries.

Adjusted operating profits $50.7 million, marking the first $50 million plus adjusted operating profits for the company.

Adjusted net profit $51.4 million, with adjusted diluted EPS growing by about 33% year-on-year.

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Operating Highlights

AI-powered Myra: Developed AI models using LLMs and proprietary data to power Myra, which now handles over 50,000 conversations daily, with 72% rated as good. It aids in trip planning and booking, with 45% of users from Tier 2 cities and beyond.

Tours and Activities: Launched a new product offering over 200,000 bookable activities across 1,100 cities in 130 countries, addressing challenges faced by Indian outbound tourists.

Women-specific travel features: Introduced women-specific ratings, AI-generated review summaries, and safety scores for women travelers across 100+ cities and 33,000+ properties.

International outbound travel: Focused on growing this segment with new features like end-to-end visa guidance, showing strong engagement and positive impact on conversions.

Accommodation business: Achieved 20.3% volume growth year-on-year, with strong demand from Tier 2 cities and beyond. Expanded inventory to 97,000+ options across 2,050+ cities.

Bus ticketing business: Witnessed strong growth with private inventory crossing 45,000 daily schedules, and introduced unified inventory on rail search pages.

AI in customer service: AI voice and chatbots autonomously resolve about 50% of customer queries, improving service scalability and efficiency.

AI for supply partners: Introduced Gen AI-powered digital performance analytics in audio playbook format for hotel and host partners, enhancing engagement.

Corporate travel: Strong growth in corporate travel platforms myBiz and Quest2Travel, with increased active customer counts and integration with Happay for travel expense management.

Buyback program: Repurchased $46.1 million worth of shares and convertible notes as part of a $200 million buyback plan.

Investment in AI and strategic opportunities: Continued investments in AI and organic initiatives while exploring strategic investment opportunities.

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Risk or Challenges

Flight Duty Time Limitation (FDTL) Rules: New and stricter flight duty time limitation rules for pilots caused temporary disruption in December, leading to a decline in domestic air travel and daily departures.

Domestic Air Market Disruption: The domestic air market experienced a degrowth of -5% in December due to the FDTL rules, impacting travel plans and bookings during the peak season.

Supply Recovery in Air Travel: Complete recovery of flight operations supply is expected to be delayed into the next fiscal year, affecting the company's ability to fully capitalize on peak travel demand.

Economic Impact of GST Reduction: Reduction of GST on hotel rooms under INR 7,500 has led to a divergence between volume growth and gross booking value growth, reflecting lower tax components rather than structural weakness.

Currency Depreciation: Translation-related foreign currency losses due to rupee depreciation amounted to $5.3 million, impacting financial performance.

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Guidance & Outlook

Indian travel market expansion: The Indian travel market is expected to grow, driven by economic, social, and technological factors. The company plans to leverage AI for product innovations to enhance customer experience and operational efficiency.

AI-driven personalization: The company aims to improve customer journey aspects such as inspiration, discovery, search, booking, and post-sales through AI, offering highly personalized experiences.

International outbound travel: International outbound travel from India is seen as a significant growth opportunity. The company has introduced features like end-to-end visa guidance to enhance user engagement and conversion rates.

Accommodation business growth: The accommodation business is expected to grow, driven by increased demand for leisure travel, wedding season demand, and MICE events. The company is focusing on deeper penetration into Tier 2 cities and beyond.

Holiday packages and new destinations: The company plans to expand its holiday packages business by exploring new destinations and simplifying visa processes to unlock potential in unexplored markets.

Bus ticketing and inventory growth: The bus ticketing business is expected to grow, supported by festive and holiday travel. Inventory addition remains strong, with private inventory crossing 45,000 daily schedules.

Corporate travel growth: Corporate travel platforms, myBiz and Quest2Travel, are witnessing strong growth due to new customer acquisitions. The integration with Happay has been completed, offering a comprehensive travel and expense management solution.

Financial outlook: The company reported its first $50 million+ adjusted operating profit in a quarter and plans to continue investing in AI and organic growth initiatives while exploring strategic investment opportunities.

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Shareholder Return Plan

Buyback Plan: The company increased the size of its buyback plan to $200 million, including the recently issued 2,030 convertible notes in the repurchase plan. During the quarter, the company repurchased 0.55 million shares for an aggregate amount of approximately $41.5 million. Additionally, it repurchased 2,030 notes with a principal amount of $5 million for an aggregate amount of approximately $4.6 million. The total utilization for the buyback program was about $46.1 million, marking the highest in-market buyback to date.

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Key Q&A

Q:Can you break down the growth in the stand-alone hotels segment by premium, budget, and international categories? Are there any changes to the underlying take rate?

A:The stand-alone hotel room nights grew by 20.6%, with stronger growth in the non-premium (budget to mid-pricing) segment at 23% year-on-year. Margins remained stable at 17.7%, with no significant changes in the margin structure.

Q:Can you quantify the underlying margin for the growth in ancillary services?

A:The growth in ancillary services is driven by new services like intercity cabs, airport transfers, rail ticketing, byte-size insurance, forex, sponsorships, and ad tech. Some segments have industry-aligned margins, while others significantly contribute to profitability. Margins are reported at a platform level.

Q:Why has the year-on-year growth in the hotel business dropped from 17% last quarter to 9% this quarter? Is this a one-off impact?

A:The drop is due to GST rationalization, which reduced GST rates for sub-INR 7,500 price segments, impacting gross booking value by 5%. Growth in constant currency was 15.8%, aligning with volume growth. This GST impact will persist for four quarters.

Q:How should we view domestic air traffic growth given IndiGo's capacity cut?

A:The disruption caused by IndiGo's capacity cut is expected to stabilize. Daily departures should return to positive growth in the current quarter, with further improvement expected in the next seasonal quarter (April-June).

Q:What is the feedback on Myra since its launch, and how does MakeMyTrip view competition from Agentic AI tools like Google and ChatGPT?

A:Myra has seen 50,000 daily interactions, with 20% from new users, mostly in Tier 3 and Tier 4 cities. MakeMyTrip views Agentic AI tools as an opportunity rather than a threat, focusing on protecting direct traffic and leveraging its brand and customer base.

Q:What are the revised timelines for an India IPO following the NCLT approval for the MakeMyTrip and redBus merger?

A:There are no revised timelines for an India IPO. The restructuring facilitates an eventual IPO, but there is no change in the thought process.

Q:Why is revenue growth impacted despite strong volume growth in the hotel segment?

A:Revenue growth is impacted because margins are tied to booking value, which is affected by GST changes. The absolute margin is reduced, but the GST cut has unlocked demand in the budget segment, driving volume growth.

Q:Could hotel volume growth have been faster without the IndiGo disruption?

A:Yes, flights are a lead indicator for travel plans, and the disruption in flights likely slowed growth. However, growth in other transport modes like bus ticketing and intercity cabs helped mitigate the impact.

Q:Why has marketing and promotion spend increased to 5.6%? Will it return to previous levels?

A:The increase is due to a mix shift towards higher-margin businesses and the budget to mid-segment hotels, which have higher customer acquisition costs. It is expected to trend back towards 5%-5.5% as the mix normalizes.

Q:Is MakeMyTrip still an operating leverage story, or will margins remain stable?

A:Margins are expected to remain stable as the company focuses on growth rather than dialing down customer acquisition costs. Significant margin improvements would require a mix shift beyond 50% in the accommodation segment.

Q:Did the GST cut shift demand from higher ticket sizes to the sub-INR 7,500 category?

A:Yes, there was a 3% shift in volume from premium to mid-budget segments and a 4%-5% shift in gross booking value and adjusted margins. The GST cut created a significant price differential, unlocking demand in the sub-INR 7,500 category.

Q:Could Agentic AI tools accelerate the online shift in complex travel categories like international packages?

A:Yes, digital agents like Myra could accelerate the shift by offering customization and seamless booking experiences, reducing reliance on human travel agents.

Q:Is the net take rate on air at 7% normal?

A:Yes, the net take rate of around 7% is within the normal range, with minor variations depending on fares and booking timing.

Q:Why is there no significant price growth in the hotel segment despite higher ADRs reported by hotel companies?

A:On a blended basis, there is no significant price increase across segments. Price growth is limited to seasonality and inflationary increases, with no extraordinary changes.

Q:Does MakeMyTrip dominate the domestic hotel segment?

A:Yes, MakeMyTrip is a dominant player in the domestic hotel segment, with significant headroom for growth as online penetration increases.

Q:Review of Unclear Management Responses

A:Management avoided providing a direct answer regarding the revised timelines for an India IPO following the NCLT approval for the MakeMyTrip and redBus merger, stating only that there is no change in the thought process.

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Earnings Word Cloud

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MMYT Transcript

MakeMyTrip Limited (MMYT) Q3 2026 Earnings Call Transcript

Positive1-21

MakeMyTrip Limited (MMYT) Q2 2026 Earnings Call Transcript

Positive10-28

The earnings call highlights strong growth in international air ticketing and hotel revenue, positive cash flow, and a robust cash position. Despite increased marketing expenses, margins are stable, and the company is optimistic about GST benefits boosting demand. Although no stock repurchase occurred, the extended buyback program is positive. Guidance for 20% growth in adjusted margins and expansion in ancillary services are promising. While there are concerns about negative net income due to finance costs and vague management responses, the overall sentiment is positive, supported by optimistic market growth prospects and strategic initiatives.

MakeMyTrip Limited (MMYT) Q1 2026 Earnings Call Transcript

Positive7-22

The earnings call summary indicates strong financial performance with record high adjusted operating profit and significant revenue growth. The Q&A section reveals confidence in achieving growth targets and improving consumer sentiment. Management's optimistic outlook on international growth and ancillary services, along with a focus on AI initiatives, suggests positive future prospects. While there are minor concerns, such as unclear buyback policy and temporary air supply issues, the overall sentiment remains positive, likely leading to a stock price increase in the short term.

MakeMyTrip Limited (NASDAQ:MMYT) Q4 2025 Earnings Call Transcript

Positive5-15

The earnings call highlights strong financial performance, with record high operating profits and gross booking values, alongside strategic expansion into new markets. Despite some competitive pressures and geopolitical impacts, management's optimistic guidance and focus on AI and technology investments suggest potential growth. The lack of a share buyback program is a slight drawback, but overall, the positive growth metrics and strategic initiatives indicate a likely positive stock price movement.

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