Good day ladies and gentlemen, welcome to MakeMyTrip's Fiscal 2016 Second Quarter Conference Call. The company wishes to remind you that certain statements made on this call are considered forward-looking statements within the meaning of the Safe Harbor provision of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance and by their nature are subject to inherent uncertainties, actual results may differ materially. Any forward-looking information relayed on this call speaks only as of this date and company undertakes no obligation to update the information to reflect changed circumstances. Additional information concerning these statements is contained in the Risk Factors and Forward-looking Statements section of the company's Annual Report on Form 20-F filed with the SEC on June 6, 2014. Copies of this filing are available from the SEC or from the company's Investor Relations Department. And now I would like to introduce the speakers from MakeMyTrip; Deep Kalra, Rajesh Magow and Mohit Kabra. Please go ahead.

Good morning and good evening everyone. On our last earnings call we spoke about the explosive growth mobile internet can drive in India's online travel market, particularly in the underpenetrated and highly fragmented domestic hotel segment. We have seen this phenomenon play out during the past quarter and expect the trend to continue over the next foreseeable future. The proliferation of smartphones, driven by decreasing prices and increasing functionality and better quality bandwidth, allows Indians, especially those in smaller cities to leapfrog wireline and desktop technology and easily book a room on their mobile phones. As we shared last quarter, KPMG and IAMAI estimate that India's 159 million mobile-only internet users could increase to 400 million by 2018, implying that India's mobile phone user base would far exceed the total population of the United States. Further, even at 400 million mobile phone users, just about a third of India's population would be online, reflecting strong growth headroom in online travel for years to come. Last quarter we mentioned that we would aggressively increase our marketing efforts to exploit the rapid growth among Indians moving online. We said that we would focus on standalone hotel rooms booked on mobile devices, with the goal of improving our leading market share position. We also announced new guidance metrics to better measure our progress in the domestic standalone hotels opportunity, which we believe is still in the early days of online penetration. Specifically, we had guided that our target fiscal 2016 hotel and packages transactions growth, excluding EasyToBook or ETB, to range from 50% to 55% and India's standalone online hotel transactions growth to range from 75% to 100%. Today, I'm pleased to share, that in the second quarter of the current fiscal, we have delivered more than 100% growth in transactions in the…

Thanks Deep. As mentioned by Deep, we posted exceptional hotel transaction growth in the quarter, particularly from mobile devices. I would like to share some more details on our mobile initiatives and results. During the quarter, we began rolling out our refreshed mobile app for Android and Apple devices. We've added features and functionalities, particularly for hotel transactions, to make it easier for our customers to book hotel rooms on smartphones and to differentiate our apps from the competition. This is an ongoing effort, as we continually seek new ways to activate, engage, and retain our mobile customers. Our strategy to drive aggressive transaction growth and mobile adoption through marketing and attractive pricing offers will move in tandem with our product development efforts. Continued development of interesting and useful features will remain the most preferred mobile app and Indian Travellers is an integral part of our strategy to maintain our market-leading share and remain India's number one online travel agency. While we are doing all of this, we are retaining razor-sharp focus on customer delight. Some of this will start manifesting itself in terms of features and functionality that we offer to our loyal customer base, both on the mobile and the desktop. We are also empowering our offline channels including the call centers to serve our customers better by automating a lot of the back-end manual processes and also in terms of equipping the offline agents with better internal tooling to improve conversion rates. I'm pleased to share that our focus on investment in and commitment to mobile is bearing fruit. As Deep mentioned earlier, our lifetime mobile downloads now exceed 12.5 million. During the quarter, we drove more than 400% year-on-year growth in the standalone domestic hotel transactions via mobile devices. This was significant acceleration from the 216%…

Thanks Rajesh. Good morning and good evening everyone. I will refer to our results in constant currency terms. In Q2 the Indian rupee depreciated approximately 7% year-on-year versus the US dollar. In Q2, MakeMyTrip delivered net revenues of $33.2 million, which represents a constant currency growth of 11.5%, in line with the guidance rolled out in the last quarter. The adjusted operating loss was about $5.7 million versus a loss of about $0.3 million a year earlier, driven by increased marketing expenses to support our aggressive transaction growth which has far exceeded the guidance range rolled out in the last quarter. We are therefore pleased that while delivering revenue growth in the guidance range rolled out last quarter, we were able to significantly over deliver on the transaction growth guidance. I will now update on the financial performance across our key business segments. For the quarter, net revenue from the air ticketing business was $18.2 million, an increase of 6.9% in constant currency terms, driven by year-on-year transaction growth of 7.2%. As expected, this quarter saw a slight increase in average transaction value, vis-a-vis falling ticket prices over the last four quarters which accelerated transaction growth comparatively during this quarter. Net margins in the air ticketing business in this slow travel season quarter was 5.8%, down from 6.2% in Q2 last year, although slightly up from 5.5% in Q1, which was a high travel season quarter. We will continue to target high transaction growth in the air ticketing business to offset margin compression, if any, during the rest of the fiscal year. Now I would like to present the financial highlights of our H&P or hotels and packages business. The highlight of the quarter has been the 167.9% transaction growth in India standalone hotels, which was well above the guidance…

[Operator Instructions]. And our first question comes from Lloyd Walmsley of Deutsche Bank. Your line is now open.

This is Kevin LaBuz on behalf of Lloyd. My first question is on mobile booking and what trends are you seeing between mobile web and mobile app and are there any significant differences in consumer behavior engagement from mobile web to mobile app and I have a follow-up.

Sure. Just to give you an idea -- just taking a step back from what was the trend earlier. So couple of quarters ago, it used to be 60% web and 40% app, changed to about 50%-50%. And now increasingly, specifically for hotel booking, we have seen this trend moving towards app from a consumer behavior standpoint. And I guess part of it is influenced by the push that we are also trying to do consciously as well. But we do see even without the push independently behavior changing in favor of app more and more than web. So our estimate is that in the forthcoming quarters, for this Q in favor of app, and may be it will probably touch to about 70%, 75% in the couple of quarters down the line.

And then just in terms of the promotional environment for mobile bookings, what percentage of your first time transactions on mobile are you guys discounting?

I can give you a sense of the number of customers or the percentage of customers that are coming through mobile for the first time. I mean, in terms of if you see part of the growth that is coming from the first time transaction on mobile and maybe another part of it would be, they are also coming in from different cities like Tier 3, Tier 4 cities as well that they had not transacted with us before on desktop with us. So specifically, on the hotel bookings, as part of the overall transactions or the incremental growth that we're getting about 30% to 40% of the transactions coming in through the mobile app for the first time, users are transacting on MakeMyTrip.

Thanks.

Thank you. [Operator Instructions]. And our next question comes from Arya Sen of Jefferies. Your line is now open.

Just wanted to understand what is the reason for the sharp decline in take rates in H&P, because my understanding is that promotions -- the gross booking is reported ex of whatever discounts you would have given on account of promotions, right. So how do we look at this decline in net revenue margins?

Arya, I will take that. Arya, we kind of show the gross bookings net of discounts, you just need to find out -- bear in mind that the percentage reduction is much higher when it comes to net revenues compared to the percentage reduction that comes in at a gross booking level and the discounts are reduced and that's the core reason for the net margins to go down and this is something that we had called out that the more and more would be actively pushed for higher transaction growth on the base of promotional offers, as well as product feature enhancements, we would continue to see some amount of margin dilution and that would happen. And considering the fact that we have been able to drive transaction growth way beyond the initial guidance range of about 75% to 100% in the India standalone hotel suite, where the aggressive competition is perhaps the most. That's the reason that we are seeing certain amount of dilution on the take rates. Overall, we still have good -- our overall take rates on the H&P segment which continue to be in double digits.

Right. So I mean is the decline in take rate purely a function of the promotions or is there -- are you also seeing any other factor playing out like on a like-to-like basis, the same hotels paying lower commissions because of increased competition?

Yes, Arya, this is clearly on a factor of increased dilution opposite to customer. When you look at it from the supplier side, the overall margin have actually kind of strengthened on a year-on-year basis compared to the last two fiscal, we believe we have added close to about 1 percentage point in terms of gross margins from the suppliers per se. So essentially this is little bit more dilution being done in order to drive transaction growth and in order to drive more and more online penetration in the H&P segment.

Also there were some news that you are not going to sell the inventory of budget hotel aggregators like OYO, Zo, is that correct? Can you confirm that?

Arya, this is Deep, I'll take that. Yes, that's accurate news as was reported. I mean, essentially what we are doing right now is responding to customer feedback and also seeing what impact that's having to have some of these ultra-budget chains and also we've been very, I think, rapidly aggregated. We're finding the feedback is not positive all across. And so we are actually seeing the impact; it is, as we have shared, right now in experiment. And we have delisted OYO and then subsequently to that Zo as well and we are going to be seeing the impact without this. I think what we need to bear in mind is that, in this segment, which we call budget or ultra-budget, customers are not really brand conscious, they are really looking for value and therefore what we've responded with out here and we've got with our curated list of properties that we call Value Plus as we shared in our script just a short while back. And these are properties which through really deep market knowledge of our market managers, over a 100 of them out there in the market for the last several years, they have the knowledge which are the properties who are very particular about providing value at that price point and have consistently done so. So it's not just a quick kind of job, with a couple of jobs where -- for [indiscernible] brands et cetera. These are hotels which over time have been delivering that value or very realist about their brand name and their reputation and we've gone ahead and accredited these and called these Value Plus and we will be now pushing customers within that price point and in those areas to these well-located hotels, as Rajesh shared, with certain facilities and certain amenities and a quality of service like a service guarantee that we will be giving for these properties. So, yes, this is part of the same experiment.

Just wanted to add, during these new starts and while working with some of these aggregators has helped in knowing and kind of looking at the budget segment in the past few quarters, as you would look at it, the rollout of the Value Plus program by us and the fact that we're kind of upping the transaction growth guidance by another 100 percentage points demonstrates that we are controlled or -- supply side control that we'll be able to drive this segment much better on our own through our own contracting assets.

Right. Could you talk a little more about Value Plus? One is, how many hotels out of say, I think you have some 27,000 domestic properties, out of this, what is the sort of subset, which you would think can come under this Value Plus? How small or big is that subset? And two, how do you intend to maintain quality, because my understanding is that the online budget aggregators, they actually have an auditor going around these hotels to ensure that quality is maintained on an ongoing basis. So are you also planning something along those lines or is it purely going to be on the basis of customer feedback?

No, it's not going to be basis on the customer feedback, Arya, it's definitely going to be our selective team members going and also doing some frequent audit. And in fact, we have laid out very stringent criteria for that internally. As you know that we've actually got the BD team's feet on the ground already, so we don't have to just go out and hire new people, I mean, we have been contracting with these hotels in the past as well. Idea was to -- from a customer point of view, bring in more transparency of the hotel name and the location directly with our stamp on it, from a brand perspective, from a service assurance perspective rather than just kind of hiding the name and making that opaque. So I guess from a consumer point of view that will be a part. In terms of how big it could be, so like I mentioned, as I was reading the script, that is beta launch at this point in time. But our plan is to -- out of the 27,000 hotels that you mentioned that will be reported 27,000 hotels at the end of the quarter, but if you reduce OYO and Zo, it probably will be about 26,000. Out of 26,000 of hotels to the start with, we are looking at about 1,000 hotels in this segment. We have plans to expand it to about 2,000 hotels in the next quarter or two. We can potentially take it to about to 3,000, 4,000 hotels as well. So it is going to be a sizable segment and we would also be expanding our overall headcount as well. So as we add our overall headcount -- our overall hotel count from 26,000 plus -- our of the super set of 40,000 or plus unnamed hotels of 30,000 hotels, with our strategy to keep providing throughput, so that strategy will continue and we will keep adding now in both the segments. So we will keep adding the value plus segment as we go along and keep growing them. And we will also keep expanding our supply base on the other segment as well. So that's how we're looking at it. Essentially just going all out and with our stringent audit criteria and MMT brand on top of it; just going deeper into this market, because we do believe that this is going to be also one of the key segments that will drive growth as we grow along.

And just to sort of -- and you are planning to do this as part of the existing MakeMyTrip app, right? So there is no plan to launch a separate app around this value offering?

No, definitely as part of the MakeMyTrip, because like I mentioned it, brand MakeMyTrip is the most important thing that's part of the value proposition as well. So there is going to be a different segment, which we will call out from a UI perspective, obviously it will be very distinctly visible, both on mobile platform as well as on desktop, but not necessarily launching another app for this.

And last question, the transaction guidance that you've changed that is only for the second half, right? That's not the new full year guidance, it is only for the second half?

No, for the rest of the year.

Yes, Arya, that's for the rest of the year. We have been rolling out the transactional guidance for the rest of the year as well, earlier as well. So it continues to be for rest of the year.

Okay. Thanks. That's all from my side. Thank you so much.

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

Just wanted to check what will be the CapEx, OpEx spend on this kind of initiative be for over the next few quarters?

So Gaurav, while we're kind of still sizing up the overall CapEx requirement on these kind of initiatives, what is important to kind of keep in mind is that we already have a sizable BD team, as we call it in terms of doing the hotel contracting, as the focus is going to shift a lot more towards getting in the relevant hotels in the next quarter or two at least. So I don't think that we kind of bring in any sizable CapEx requirements. But we have been calling out that the overall CapEx requirement for the year would range anywhere between $8 million to $10 million. I don't see it kind of changing beyond a $1 million or $2 million with these kind of initiatives.

And these hotels are part of your existing portfolio. These are not over and above your portfolio hotels, right?

Gaurav, some of them. Like I mentioned, obviously it's part of -- the right now we said that we are attacking, we are taking it out of the super set of some 26,000 hotels that we have. But as we grow in future, we would be expanding that, we'll be adding more and we'll be taking some out of the same segment. I guess it will be important to know that some of those lower budget category hotels, we've been contracting directly, it's not that we haven't really been contracting directly in the past. It is just the -- given the fact that the segment is opening up, it is much more focused and a value proposition built on top of it from consumer standpoint, just to make sure that the stay experience is guaranteed and for -- and how do we guarantee that is with the rigorous audit of the properties and giving our assurance on top of it. So it's going to be, right now from the existing set of hotels, but going forward we will add more.

And in terms of marketing, given the other aggregators have been quite aggressively marketing, they would need to be -- what kind of marketing spend are we looking for this kind of a new segment over the, say, second half? Some number?

So, Gaurav, I guess in hotel segment as we had called out earlier, in any case, as you would have probably noticed in the assets also, there is so much of focus on the hotel side there as well. So we believe as part of our overall marketing initiatives, we will cover this as well, part of it will obviously come from MakeMyTrip branding, but we have to position it perfectly. It's slightly different from some new companies, who are trying to do and create awareness. We believe that we do have enough traffic that is coming our way in any case and growing rapidly, specifically for hotel transaction that we've seen in this quarter. And our commitment to make some marketing investment in the hotel space overall. So we believe that, as part of our overall marketing initiative as planned, including the fact that we will go little aggressive on that as well, but we cover this segment as well. We don't need to necessarily have a dedicated campaign, just going out and trying to create like the other would have done it, because they were just on the new setup. We do have an established brand and we will leverage on that, and push on that with some incremental marketing investments.

Okay, just last question. When -- from beta stage, when will it become like a proper commercial launch?

During the quarter only, Gaurav, its already in Beta, we're testing it on percentage of overall traffic, very soon we'll ramp it up, and so during the quarter only we'll go full blown.

Thank you.

Thank you. And our next question comes from Shaleen Kumar of UBS. Your line is now open.

And just wanted to ask you that what is competition doing as far as OYO and Zo are concerned. Are they also not taking them on their portal or they're still there?

So, you mean the other OTS?

Yes, yes, other OTS.

So I think the other OTS have also been having, I guess, similar kind of strategies at different points of time. There are -- most of the other OTS, if we you look at, they have also been either focusing on their own sub-brands or not selling, but specifically, yes, I think the larger ones are also pretty much doing something similar.

So they're basically not including OYO and Zo on their platform, they are not bringing them?

That's correct.

Do you see that, since OYO and Zo are -- again, I read it in the news that they are again in the market to raise substantially a large amount of funding. So do you see that this is going to again go in that direction where they will pump in and then there will be a kind of a war to affiliate hotels towards them, so who get grabbed the best hotels and then subsequently margin decline kind of thing?

Yes, So, Shaleen, yes, I think the report that you are referring to with the news report, I think what we have to keep in mind is, the big value that our brand plays in this role and it's gains and people are looking to find an air ticket or a hotel room, where do they go instinctively, what do they look at and as Rajesh was alluding to that even earlier, we don't need a specific brand budget for an additional kind of thing. So I think we enjoy a very strong brand appeal there just to refresh of about 70% to 73% of our traffic comes organically, which is people looking for other travel either searching for MakeMyTrip by name or coming through SEO. And we are playing to that strength. I think for anyone else who is new, people will obviously have to spend a very large amount of money to create a brand. And then in the long term we know durable brands only get created by experience, and so you can get trial by spending a lot of money, but I think the key thing what we've learnt as well and I think that's true for almost all industries, all brands everywhere, that real brand value is built over time and it's really built by repeated experiences by the liability, etcetera. I think it's a pretty long way to go, so if someone is going to do that, clearly one will need to raise very large sums of money to try to get into the customer mindset for something like this.

One more thing, so your net revenue guidance has been 10%, 15% for the year, but for first part of the year it has been around 6%. So should we assume that you will be close by around 15% to 20% in the next half of the year?

Shaleen, I would suggest you to look at the constant currency growth for first half and not the reported dollar growth, because what we kind of give out guidance on is constant currency growth.

Yes, the constant currency is different. I thought that you're talking about dollar growth, okay.

Our guidance is on constant currency always.

Yeah, yeah sure sir. That's it from my side. All right. Thanks.

Thank you. [Operator Instructions]. And our next question comes from Rishi Jhunjhunwala of Goldman Sachs. Your line is now open.

A couple of quick questions. So firstly, on the entire proposition around Value Plus hotels and blocking the branded -- the budget hotel startups. Just wanted to understand, one of the -- the two attributes of the business model of these companies are that from a consumer perspective, it offers a standardized experience in terms of facilities, from a supplier perspective it offers some sort of assurance around occupancy. Are we also trying to replicate that kind of a business model or it is just about having more budget hotels on our website?

It's a good question Rishi. So, on the customer side definitely we would make sure that we want to just get to the position, although our way of doing that would be slightly different to make sure that the consumer experience is assured by auditing the properties rigorously to make sure that some of the things that I've highlighted, that some basic, but very, very important facilities are available. And so from a consumer side, the value proposition is going to be similar or better. I would say more better than the same. And on the supply side, not necessarily, so the reason why they had to do it was a gain, I guess it was a new setup and you have to just go and promise something because you're just setting up a new business. So, as we have been working with them in the past, we know that they've been kind of moving away from that proposition on the supply side as well in terms of just guaranteeing the occupancy or rebuying the inventory and stuff like that. We don't believe that we have to do that in any case, because we've been producing volumes for hotels, for large number of hotels in that country. And on the back of that, we have been able to -- as part of our contracting initiatives with [indiscernible], we didn't have to go down that path. In fact there was so much of inbound interest coming our way, where a lot of the hotels was wanting us to launch this and say that MakeMyTrip brand is a very strong brand and then without any kind of -- almost assurance is taken as guarantees, not necessarily contractually, but otherwise it's done. So we don't feel that we have to necessarily go down that path on the supply side, because we are well covered on the back of our solid performance in Q1. But on the customer side, we are more certainly focused on delivering better stay experience.

Okay and my second question is around your recent promotion around creating your travel sale. Just trying to understand for the largest OTA in India, what exactly are you targeting to get from sales like these apart from traffic, because I'm assuming -- and as a consumer also, I can say that the brand is pretty well known, consumers are already using your website, So from a data perspective and other things also it is not something that will enhance your database in a big way, I'm just trying to understand, apart from traffic, which is of course coming at a cost that you are incurring, what else are you looking at from an offering like that?

Rishi, it's a fair point. We are not looking for this to be our blip for one week out of 52 at all. I think we are looking for the durability of this. Despite being the largest brand and despite being the best-known brand, I think there's always a set of users, who will either know you for one product offering, maybe not the other, we've been very strong traditionally in flights, as we shared, we had 15% market share of the entire market. And you look at the hotel market, it's still very new coming on online and market shares are very small single digit. So there is always scope to grow. I think also what's very clear our signaling through and our messaging through this fest, it's all about the app. So we are indeed getting people on to app, because we've found as we've shared again in the script, that retention rates are higher, repeat rates are higher. If you look at the last 90 days, you'll find that repeat rate of 32% is actually 20 percentage points higher, rather 20% higher than the repeat rate on desktop. So that obviously means that you have much better chance of retaining customers, getting them back to engage and that's what we're trying to do and we are two days gone and things are going really well, in fact into the third day. And we hope to present our entire suite of offerings. Firstly, get people to experience the new and enhanced app. So the app is much improved, a lot of people haven't done that. We all know, people nowadays have lots of apps and till they don't have a travel need or there isn't a trigger they don't go back to the app and they don't upgrade, so we'll that first. Secondly, they get to book hotel offering out there very often, or we are also pushing international flights as we've seen. And also on holidays, we can actually -- this is helping our business all around, but through app as their main port of entry. And thirdly, it will be our job now to be upon us to retain these customers, the new customers we've got through this and then to actually harvest and going forward, and to be able to engage with them much better. So, yes, it is a of course about a boost to your customer base, but definitely not something, which is ephemeral, it goes away after this is done. This is something we want to keep and harness on. As it goes up well, then we are very happy to come back with more and to actually play to our strength of brand and balance sheet to do this. And I would also say the suppliers the next part.

Rishi, as we called out the script, one of the key things that we are looking at from these kinds of activities is increasing the geographic spread. So clearly if the app or the mobile which is helping us gets bookings from lot more cities than we've ever got before. So the fact that the large part of the transactions are now coming from a spread of over 65 cities compared to a spread of around just about 30 cities when it comes to mobile transactions on India standalone hotels. I think that's kind of clearly indicative of the fact that, if you want to get deeper into the market, deeper into Tier 2, Tier 3 then clearly app is the way to go.

Great. Thank you.

Thank you. I'm showing no further questions at this time. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Have a great day everyone.