MakeMyTrip Ltd. Q2 FY2027 earnings call

Management highlighted resilient performance despite challenging macro conditions, emphasizing strategic shifts and technological investments.

• Macro Environment & Resilience

  • Growth was driven by domestic travel, short-haul international leisure, and corporate business, offsetting declines in air travel caused by the West Asia conflict, high ATF prices, and INR depreciation.
  • The non-air business mix expanded to 63.2%, demonstrating reduced reliance on volatile air ticketing.
  • India’s underlying economic momentum and propensity to travel remain robust, supporting long-term growth views.

• Strategic Focus on Non-Air Categories

  • Hotels: Expanded domestic accommodation portfolio to >105,000 options across 2,080 cities. International directly contracted hotel supply grew 30% YoY to 40,000 accommodations across 110 global destinations.
  • Ground Transport: Intercity cabs business grew >40% YoY on a small base. Bus ticketing benefited from highway infrastructure improvements and fleet upgrades.
  • Tours & Attractions: Launched 'MMT Experience Pass' to bundle activities, showing early success in Southeast Asian destinations.

• AI Integration & Myra Assistant

  • AI is viewed as a net positive, enhancing discovery, booking, and service rather than replacing the need for reliable supply.
  • Myra 2.0: Engages in >90,000 daily conversations and assists >3,000 bookings/day. Users engaging with Myra convert at 1.7x the rate of non-users (2.1x in Tier 2/3 cities).
  • Myra resolved >53% of post-booking queries autonomously for flights and hotels.
  • Generative AI embedded in booking journeys; semantic search accounts for ~10% of hotel searches with 24% higher conversion than filter-led search.
  • AI investments also target engineering productivity, partner onboarding, and customer support automation.

• Operational Execution

  • Maintained >30% market share in domestic air ticketing despite industry volume declines.
  • Launched integrated flight-plus-cab booking experience connecting 200+ destinations without airports.
  • Corporate platforms saw steady growth in active users, indicating resilience in B2B demand.

The company reported strong growth across most segments, with air ticketing being the primary exception due to macro headwinds. The financial performance for each segment is as follows:

• Air Ticketing: Adjusted margin was $108.6 million, representing a year-on-year constant currency growth of 14.3%. Despite a decline in domestic and international passenger volumes due to high fares and geopolitical issues, the segment maintained its leading market share (30%+ in domestic) and improved unit economics through strong ancillary attachment.
• Hotels and Packages: This segment, which accounts for approximately 40% of the business mix, delivered an adjusted margin of $116.8 million, growing at 20.2% year-on-year in constant currency terms. Standalone hotel room nights grew 18.6%, driven by robust domestic demand (up over 20%) and mid-single-digit growth in international rooms outside the Middle East.
• Bus Ticketing (redBus): Adjusted margin reached $45.1 million, reflecting a strong 29% year-on-year constant currency growth. Volume grew by 24.7%, supported by inventory additions on pilgrimage and overnight routes and market share gains.
• Other Segment (Ancillaries): Including inter-city cabs, rail, insurance, forex, and tours/activities, this segment posted an adjusted margin of $24.4 million, growing 29.8% year-on-year in constant currency. Non-air business mix increased to 63.2% from 61.5% in the prior year period.
• Corporate Business: myBiz served ~84,600 active corporate customers (up from ~75,500 YoY), and Quest2Travel served 568 large customers (up from ~527 YoY).

Management provided qualitative outlooks and context for forward-looking statements but did not provide specific quantitative financial guidance for future quarters.

• Long-Term View Unchanged: Management reaffirmed an unchanged long-term positive view on India’s travel opportunity, citing expanding traveler bases, smaller city participation, and digital payment adoption.
• Near-Term Caution: Acknowledged that the near-term environment requires careful execution due to geopolitical risks and macro pressures. No specific revenue or margin targets were issued for Q3 or FY2027.
• Investment Discipline: Commitment to continue investing in capabilities (AI, supply aggregation, ground transport) to support long-term growth while maintaining profitable operations.
• Margin Trajectory: Indicated that adjusted operating profit margins may normalize as airfare increases and volume trends stabilize, suggesting potential for margin expansion once exceptional fare hikes subside.

Key risks and operational challenges discussed include:

• Geopolitical Instability: The West Asia conflict continues to impact international travel demand and contribute to inflationary pressures.
• Macroeconomic Headwinds: High ATF (Aviation Turbine Fuel) prices and INR depreciation have weighed on air travel demand and increased processing costs relative to revenue.
• Air Travel Demand Decline: Domestic departures declined 7% YoY and international departures declined 4% YoY due to constrained capacity and high fares.
• Regulatory Uncertainty: The timing of the proposed IPO for MakeMyTrip India Limited remains subject to regulatory approvals (SEBI) and market conditions.
• Competitive Dynamics: While management believes capital dumping is less effective now, they acknowledge the need to maintain competitive pricing and service quality to retain market share.

Q: Sachin Salgaonkar (Bank of America) asked about December quarter indications given DGCA traffic declines and rising inducements. He also queried if consumer comfort with agentic AI poses a risk to top spenders moving to horizontal agents, and sought clarity on the India IPO timeline amidst soft sentiment.

A: Mohit Kabra noted that overall platform growth has remained robust despite air de-growth, aiming to build resilience by dialing up other segments. Regarding inducements, he explained that higher marketing spend as a % of GOV is optical and driven by a mix shift toward higher-margin businesses like hotels. Rajesh Magow added that vertical AI assistants are better positioned than horizontal ones due to proprietary data and accountability, especially in emerging markets. On the IPO, Mohit stated they filed confidentially (valid for 18 months) and will proceed when market conditions are favorable, with no fundamental change in approach.

Q: Manish Adukia (Goldman Sachs) questioned why air adjusted margin grew faster than volume, asking if IFRS revenue is a better metric. He also asked if declining inducement costs in air would lead to sharp EBIT margin expansion if demand recovers, and sought details on hotel inducement costs and share fungibility plans.

A: Mohit explained that air margins are relatively fixed but benefit slightly from ASP increases and rear-end incentives. He clarified that the 1.7% EBIT margin is distorted by a larger denominator due to 25-30% airfare hikes; normalized, it would look better. If air demand recovers and mix shifts back, efficiency gains could improve profitability. He attributed hotel inducement rises to last-minute attribution and mix shifts, denying competitive pressure. Regarding fungibility, he confirmed exploratory discussions with regulators are ongoing but premature to detail until after the India listing approval.

Q: Parash Jain (HSBC) inquired about competition intensity, specifically if capital access is a differentiator for gaining share in subdued markets. He also asked if the company focuses on value/service over price, and how they address the holding company discount concern regarding the dual-listing structure.

A: Mohit stated there is no significant change in competitive dynamics, noting that online penetration thresholds make capital dumping ineffective. He emphasized winning customers via value and service rather than deep discounting. Rajesh Magow reinforced that stickiness comes from holistic strategy, scale, and partnerships, not just excess capital. He asserted their favored-nation pricing power due to scale. Mohit briefly deferred detailed comments on the holding company discount/fungibility structure, referring to previous answers.