Le Travenues Technology Limited (IXIGO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Le Travenues Technology Q1 FY '26 Earnings Call, hosted by DAM Capital Advisors Limited. [Operator Instructions] I now hand the conference over to Mr. Anmol Garg from DAM Capital Advisors Limited. Thank you, and over to you, sir.

Thank you, Niko. Good evening, everyone. On behalf of DAM Capital, I welcome you all to IXIGO's 1Q FY '26 Earnings Call. We have with us Mr. Aloke Bajpai, Chairman, MD and Group CEO of the company; Mr. Rajnish Kumar, Director and the Group Co-CEO of the company; and Mr. Saurabh Devendra Singh, Group CFO of the company. Before I hand over the call to Saurabh, I would like to highlight the safe harbor statement on the second slide of the earnings presentation and it is assumed to be read and understood. Thank you, and over to you, Aloke.

Okay. Hello, everyone. This is Aloke here. Welcome to our Q1 FY '26 Earnings Call. We have kicked off FY '26 with a fantastic quarter for the IXIGO Group. We have managed to beat our own expectations and continue to grow at a strong pace despite this quarter having its share of challenges for the broader market. Q1 FY '26 had a few events that impacted the aviation market in India and the region. Operation Sindoor led to a temporary airspace closure across parts of North India in May, affecting flight operations for nearly 8 to 10 days. While this was a significant disruption during the period, the post-event recovery has been swift and the ecosystem has adopted quickly. The tragic AI 171 crash in June created another setback due to the dent in morale and passenger confidence in the immediate aftermath. In addition to this, the Air Space closure in Pakistan as well as the Air Space disruptions in the Middle East during the Iran-Israel situation led to some dampening of international flight growth in the interim. Air India also voluntarily cut 15% of its international widebody flights till mid-July to accommodate enhanced safety inspections. And then the Middle East Air Space closures affected many carriers as well towards the end of the quarter. While all this is normalizing, we believe that quarters like these, which have some headwinds, give us an opportunity to test our customer-oriented mindset. In Q1 FY '26, our team saw spikes in customer reach out for reschedules, cancellations and alternate arrangements with the help of our AI augmented customer support and newly launched voice AI capabilities, we got the ability to go above and beyond for our customers and we were able to demonstrate more agility and responsiveness in these situations, helping us to continue to gain market share. Penetration of air travel in India is still in its early innings compared to global benchmarks, and we see headroom for growth, particularly from regional airports and underserved segments. Just over 4% of Indians travel on flights compared to 37% plus in China and 85% plus in the U.S. And once the GDP per capita crosses the $400 mark in India, we expect discretionary to flow further into flight and hotel categories. India's airport infrastructure is also undergoing a transformative expansion with a number of operational airports doubling from 74 in 2014 to over 160 in 2025. The government is targeting 200 airports by next year and 240 airports by 2030, through a INR 92,000 crores investment push. The regional connectivity boom back by INR 60,000 crores in private terminal upgrades unlocks massive demand from Tier 2, 3 cities, where IXIGO already has a very deep market penetration. Our multimodal capabilities and personalized offerings position us perfectly to serve and scale with this next wave of Indian air travelers. On our Bus business, we have strategically been prioritizing growth over near-term margin optimization for a few quarters now given the sheer size of the opportunity in front of us. That philosophy remains unchanged. Bus travel in India is also undergoing an inflection point. Despite the segment scale, only 20% of bus bookings happen online, leaving vast room for digital expansion. Simultaneously, most buses run at 60% to 70% capacity while trains and flights on parallel routes are frequently waitlisted or overbooked. This supply-demand mismatch, coupled with rising expectations around travel comfort and flexibility presents a massive opportunity. Private operators already upgrading their fleets and bus travel is now happening on clean modern buses and is being marketed as a preferred mode of transportation for Gen Z travelers. This growth is being further accelerated by the massive expansion of India's road infrastructure. We've been expanding our geographic footprint, Abhibus, which initially had strongholds in South and West India now has a growing presence in the North and East as well and our partnerships spanning both private fleet operators and SRTCs across the country have continued to grow. These relationships are foundational to our ability to scale efficiently. In fact, our bus partners are working more closely with us than ever before to identify ways in which we can help their business not just grow but also market their new routes, bus amenities and improved passenger experience. This quarter, we've made significant strides in cross-selling buses and flights both across our ecosystem on IXIGO, ConfirmTkt and Abhibus apps and websites, thanks to proprietary tech enhancements and products such as travel guarantee, which offer customers flexible multimodal alternatives capturing spillover demand from wait-listed customers. Our biggest achievement has been our ability to maintain leadership in the OTA category in terms of user base, not by outspending competition, but by continuing to see a lot of organic product-led growth as well as word-of-mouth about the overall customer experience we've built leading to market share gains on all three lines of business that we operate in. On the train front, our market share has now crossed 60%, up from 58% two quarters ago. We have recently seen some minor volatility due to a series of passenger oriented policy changes introduced by Indian Railways. However, our trains business remains resilient and our user experience has continued to improve and that is reflected in our rising app store ratings as well as our growth. I'm pleased to report that now we operate India's highest rated travel apps by far. ConfirmTkt and Abhibus have both got 4.8 plus rating on the Google Play store. IXIGO Flights has crossed 4.7 and IXIGO Trains app is 4.6 plus. And we have a staggering 50-plus lakh user ratings, 5 million-plus ratings on the store across these apps, reflecting our scale. For the first decade of our existence, our entire growth story was organic, and we spent almost nothing on brand and performance marketing. It was only in 2023 that we began making deliberate long-term investments in brand once we gain more confidence on the superiority of our product and customer experience. We recognize that top of mind recall brand affinity and trusted scale not only serve as a long-term moat, but also materially improved conversion rates and the effectiveness of our performance marketing channels once product-led growth has established a strong base of early adopters. This quarter, we ramped up brand spend in line with growth and ran a major IXIGO anniversary sale and flat sales for flight and hotels in which we leverage AI into our marketing workflows. Our AI video production cost is 0.1% of what it would be with traditional campaign production. On the train side, we've entered into various brand partnerships, most notably with Rohit Sharma for IXIGO trains, which help drive awareness and adoption of our travel guarantee features and improve top of mind recall, particularly in North India. On the bus side, Abhibus partnered with Chennai Super Kings and the Tamil Nadu Premier League, while ConfirmTkt collaborated with the Royal Challengers Bengaluru team. The RCB partnership gave us nationwide visibility especially during the iconic 18th year title win, an emotional high recall movement that coincided with IXIGO's 18th anniversary. These campaigns were not just about visibility, they were about building deep user trust and emotional resonance across markets. Our line of business owners may choose to prioritize between performance marketing discounts or brand building initiatives based on when and where they see most value for these throughout the year. And we focus on measurable outcomes such as the baseline shift, the stickiness and repeat behavior of the incremental traffic as well as lift in conversion rates across organic and performance channels. Since this is a multiyear exercise, some of these efforts may not show material impact immediately but early results indicate these initiatives are working for us, and we'll continue to do them within specified guardrails. Our strategy of building for Bharat staying asset-light and creating deep user trust over years is what has led to the kind of growth you have seen at IXIGO over the last few years. The gross transaction value CAGR of 83.7% over the last 6 years or EBITDA CAGR of 84.3% since we turned profitable in FY '21 are a reflection of what execution DNA we've built over time. Over the next few years, I believe that we can continue to grow significantly faster than the market in hotels, buses and flights and in line with the online market growth in train with multiple optionalities for new latch on additions such as what we did with food delivery on the Train's business. Travel is an inherently unpredictable experience due to constantly changing prices, availability, terms and conditions, fine trains and all. At IXIGO, we believe it's not just our responsibility but our duty to offer not just tickets, but peace of mind to our users. Our unique peace of mind stack of value-added services allows us to reduce anxiety, protect downside and increase predictability for our customers. And our ability to use AI to price and personalize all these products has been accretive to our growth and margins. We are now able to use a large user base and trust built over years to move up the value chain and grow faster in new categories such as Flights and Hotels. Very few companies have been built this way in India since more cues to focus on the top 50 million consumers only. But since the proverbial pyramid will now become a diamond as middle-class India grows or I should say, Bharat ambitions and wallets continue to expand, consumer discretionary categories will continue to see disproportionate growth. Travel continues to be in the top 3 things people want to spend on to improve their lifestyle. And when you look at buses, budget hotels, tours, et cetera, online penetration is only getting started. Finally, I'd like to point out that our business has a seasonal cadence. Q1 and Q3 tend to be strong quarters due to vacations and major festivals. Q2 is historically a leaner period while Q4 sees regional surges, particularly in South India, driven by festivals like Pongal, Ugadi and the Regional New Year celebrations. Despite this seasonality, we remain well positioned to sustain Y-o-Y growth faster than the overall market in the near to midterm. With that, I'll hand over to Rajnish, who will talk about something we have been talking about for many, many years, but people have recently started paying more attention to, which is AI and our reinvention to an agentic organization. Over to you, Rajnish.

Thanks, Aloke. So Aloke talked about why we are growing the way we are. But I believe this growth is a privilege that has to be earned and reearn every single quarter. Our conviction comes from a clear understanding of what drives our differentiation, which is the ability to identify, design and deliver tech-led innovations, that for what we call our Peace of Mind product stack, features that reduce anxiety, improved reliability and simplify complex travel decisions. This focus has enabled us to acquire and retain customers cost efficiently, even in competitive markets, whether it's delay predictions, intelligent fare locks or multimodal routing. We are not just optimizing bookings. We are elevating the experience of travel. That's for fuels our continued momentum. At IXIGO, our journey with Agentic AI started as early as 2017. When we introduced our travel assistant and recommendation agent, better known as TARA today, and award-winning multimodal agentic travel assistant. TARA was way head of its time. It was autonomous, preemptive, multimodal with voice and app-based and hyper-personalized. It could understand our users' past travel patterns, preferences, loyalty programs, everything else to make intelligent travel decisions, so getting our early belief in the power of agentic systems to transform the travel experience. Fast forward today, Agentic AI is now deeply embedded across our business, enhancing efficiency, personalization and autonomy at scale. From real-time fair trackers and price prediction agents to autonomous web check-in agents that deliver your boarding parts straight to your Apple or Google Wallet. Much of what a user experiences on IXIGO today is already powered by invisible agents working behind the scenes interacting with complex third-party interfaces to get your job done efficiently and preemptive. Internally, we are driving significant productivity gains through our Project Trishul, our 3-pronged AI-first infrastructure strategy centered around efficiency, revenue and disruption. Automated testing, intelligent code generation, smart deployments, rollbacks and ML-driven pricing models for products such as PriceLock and Assured, all run on self-governing agentic pipelines. Teams across HR, finance and marketing use DI by agentic tools to automate workflows, to generate content or even deploy voice agents that can all customers or partners autonomously. One of the most powerful applications of agentic AI at IXIGO is in voice agents. Today, more than 60% of our customer support voice interactions are handled end-to-end by fully autonomous AI agents. These voice agents don't just respond. They proactively call customers to deliver critical travel updates, collect NPS scores or feedback and even follow up with business partners on behalf of our users or internal teams. This is saving time, improving service levels and enabling proactive customer care at scale. Democratization of agentic AI across the organization is a key part of our strategy as well. Anyone at IXIGO can build, test and deploy autonomous workflows without needing an engineering background and without writing -- having to write a single line of code. As for the future, we believe travel apps will evolve into conversational multimodal and hyper-personalized autonomous agents, not just recommending but doing for you. From booking your trip at the optimal time to serving your travel at a restaurant on arrival, future travel assistant will act not just advise. And to power this, they'll need real-time inventory, context of decision systems and value-added services, all of which IXIGO is uniquely positioned to provide. A lot of people ask me what percentage of our code is now AI generated. And I think the commonly coded metric, X percent of our code is now AI generated is fundamentally flawed. If we're trying to really measure the real impact of AI and software engineering. And the reason is simple. Coding itself is not the main bottling in software development. In most real-world engineering workflows, writing code barely accounts for about 20% to 30% of our developers' time. The remaining 70%, 80% is spent on far more cognitively intensive and collaborative tasks like system design, architectural planning, writing detailed documentation, thinking through edge cases, defining interfaces, creating test strategies, setting up CI/CD pipelines, et cetera. In that context, even an AI assistant can generate 80% of your code, that's still just a productivity boost on a small slice of the overall effort. And mathematically, it amounts to only about 15% to 20% efficiency gain at best. And that's assuming a near-perfect AI-generated code, which often still requires a lot of review, debugging, the factoring, et cetera. So moreover, code generation has been getting incrementally easier over years whether it's by auto complete in the early version of Copilot or people just copy pasting stuff from stack overflow, but more recently with tools like Copilot or Cursor, et cetera, those things have evolved a lot. So while these are impressive evolutions in productivity, they are at best evolutionary, not revolutionary. Where AI is now playing a role in tracking -- in tackling the upstream and downstream parts of the software development life cycle from exploring trade-offs to helping with design and architecture decisions, generating documentation, writing test cases, creating mocks or deployment scripts and managing infra code or handling observability and rollback logic for self-healing failures. This is where agentic AI becomes especially powerful, not just passively generating code when prompted, but proactively owning parts of the entire software engineering process. So rather than asking what percent of our code is AI generated, a better question would be what percentage of the end-to-end engineering process is now autonomously handled or significantly accelerated by AI. And for us, that number currently would be north about 20% -- 40%, pardon. When it comes to leveraging emerging AI models and tools, we have taken a forward-leaning experimental approach, both to enhance internal efficiencies and to power new customer-facing experiences. We recognize that we are still in the early innings of what is effectively a new industrial revolution. The AI landscape is evolving at breakneck speed with no single model platform or framework having yet emerged as a clear long-term winner for deep scale investment. In such a dynamic environment, we believe it's critical to stay agile and continue investing in cutting-edge technologies and capabilities. These technology expenditures may not immediately translate into operating leverage in the short term, but when one of these bets pays off when a particular use case matures and can be deployed at scale, it unlocks significant operating leverage and competitive advantage. Our philosophy is to stay ahead of the curve, absorb the learning costs today, front-loaded and build a defensible mode that compounds over time through proprietary AI-driven efficiencies and user delight. The other question I get asked frequently is whether Agentic AI will disrupt OTA businesses. Agentic AI may pose risk for those who don't adapt, but for us, it's a once in a decade opportunity to use it to leapfrog. We're not only ready for this shift. We've been building towards it for years. If you want to measure how good a company is that AI adoption for accelerating growth and efficiency, the best measures would be to look at the revenue per employee. For us, last quarter, we have crossed INR 2.2 crore annualized revenue per employee in Q1 or roughly USD 256,000, which even on global benchmarks is pretty decent, but we believe this is just a start. In FY '25, we managed to grow our revenue nearly 40% while growing our employee base by less than 10% in spite of adding newer business lines like Hotels, Food and Trains, et cetera, which will require a couple of years to scale. This is only possible if the mindset inside the team is to use technology and AI instead of just hiring more people. And with that, I'll not bore you further and pass it to my friend who has a unique knack of being good with both numbers and people, Saurabh Devendra Singh.

Thanks, Rajnish, and you are not even close to being boring. In fact, I have to tell the larger forum, I feed on Rajnish's discussions on AI. In fact, I regularly get inspired by them. A few days after our last quarterly call, inspired by Rajnish and the work he's doing on AI, I fed all our past presentations, financials for 6 years, annual reports, DRHP conference call into an artificial intelligence model that I've been using a lot recently, just to see what it comes up with. I requested AI model to give me a hopeful best case prediction for this quarter. The model came out with three outcomes, outcomes that I back then classified as highly optimistic. One, IXIGO would build on its momentum, gain OTA market share across every segment we operate in. Two, IXIGO would kick off FY '26 with record revenue and more notably, record profit. And three, I, Saurabh Devendra Singh, would finally stop saying after every couple of words and lose the pumble or the retroflex [ tha and dha ] that heavily defined my conference call accent. I'm happy to report that AI got 2 of the 3 right. Okay. Jokes apart, let's walk through the highlights of Q1 FY '26. As always, all the figures are in rupees crores, unless specified otherwise. Year-over-year comparisons are made for Q1 FY '26 against Q1 FY '25. Starting with the headline numbers, our gross transaction value, GTV, reached INR 4,644.7 crores, marking a 55% increase over INR 2,988.1 crores that we saw in Q1 last year. Revenue from operations stood at INR 314.5 crores, up 73% from INR 181.9 crores in Q1 FY '25. Contribution margin grew to INR 128.1 crores, marking a strong 48% year-over-year increase. Contribution margin percentage stood at 40.73% versus 47.74% in the prior year. The decrease in percentage was as per plan and as Aloke talked about, driven by our focused investments in driving growth and strong performance of cross-sell products like travel guarantee. We've talked a lot about this in the previous FAQ in case somebody wants to dig deeper. Adjusted EBITDA, excluding other income and ESOP costs, improved to INR 31.4 crores compared to INR 20.3 crores last year, an increase of 54%. Profit after tax came in at INR 18.9 crores compared to INR 14.9 crores in Q1 FY '25. There are some one-off/callouts in this number, which I will discuss in the end. Turning now to our individual business lines. For Flights, this was a challenging quarter with several unfavorable developments in the macro environment, which Aloke alluded to in his talk. Despite these headwinds, the flight team has risen to the occasion, staying focused on delivering peace of mind to our customers. Our suite of value-added products have played a key role in maintaining the strong performance and building customer trust during these times. The numbers reflected that. We booked 2.79 million Flight segments with GTV rising to INR 1,848 crores. Our contribution margin grew to INR 43 crores, representing a 42% contribution margin percentage. Flying accounted for 33.5% of group's total contribution margin this quarter. Our Bus business operates out of Hyderabad. And like the city itself is a seamless blend of the traditional and the modern. The business pairs deep-rooted empathy for customers and operators with cutting-edge technology to drive efficiency and scale. Fittingly, the results this quarter were equally balanced, calm, steady and right on plan. This quarter, we completed 6.67 million passenger segment bookings, marking a 74% year-over-year increase. GTV rose 81% to INR 681 crores. Contribution margin for the category grew 44% to INR 42.3 crores with a contribution margin percentage of 55%, a planned tapering consistent with what we had talked about in Q1 FY '25 conference call. Buses contributed 33% of group's overall contribution margin in Q1 FY '26. The pace of growth of Train's business continues to surprise me personally. We have a dominant position in this business line. And in that context, the fact that this business continues to grow significantly faster than in the train OTA market is extraordinary. In Q1 FY '26, we booked 26.6 million train segment, marking an impressive 26% Y-o-Y growth. GTV stood at INR 2,055 crores, a 30% rise. Revenue from operations was INR 129.9 crores, up 29% and contribution margin came in at INR 41 crores, up 14% and at a 32% contribution margin. The Train segment contributed 32% to the overall contribution margin, the group contribution margin. Now as promised, let me discuss the one-off items and the call outs. Now in Q1 FY '26, the share of loss from Fresh Bus, which is an associate company was INR 2.34 crores. For Q1 FY '25, there was a revaluation gain of INR 5.77 crores on Fresh Bus, share of loss from Fresh Bus of INR 2.01 crores and IPO expenses of INR 2 crores charged to the P&L. Now if I were to compare on a like-to-like basis by excluding all these items in both periods, our profit before tax would have increased by 76.2% from INR 16.2 crores to INR 28.7 crores. So what do I expect from the rest of FY '26 and beyond? To answer that, we'll have to start with the reality of what we are stepping into. Artificial intelligence isn't just another trend. It's a seismic shift on par with the invention of wheel printing press or maybe even greater. It's already reshaping how we think, build and adapt. And in moments like these, I'm reminded of a line often misattributed to Charles Darwin, but actually written by Leon C. Megginson in 1963 when he reinterpreted Darwin's ideas for the business world. It is not the most intellectual of the species that survives. It is not the strongest that survives, but the species that survives is the one that is best able to adapt and adjust to the changing environment, which it finds itself. That insight has never felt more relevant. And as Aloke and Rajnish have talked about, we are ready. There will be quarters like this one, full of energy, growth and the thrill of getting things right. And then there will be quarters that humble us. When we reflect, recalibrate and learn. But through both of our -- through both, our compass will remain steady, empathy, honesty and adaptability. With that, I'll hand it back to the moderator for questions.

[Operator Instructions] Our first question comes from the line of Anmol Garg from DAM Capital.

Congratulations on very, very strong performance. Just a few questions. Firstly, I wanted to understand what led to a sharp increase in the take rates in the Flight business in this quarter. We have now reached to almost at 9% kind of take rate. And is this kind of -- is this sustainable going ahead?

So yes, there are a couple of things. So one is the underlying ticket price has gone down. It's a fixed business. The second, as I said, there are -- we have what we call a peace of mind or value-added services product, and I've talked about how some of them have done well. It's just a combination of these, which are leading you to feel as though the take rate is higher. But remember, a large part of what we have in the take rate as a percentage is a fixed amount. And thirdly, you have to also realize that in flights, what has led to some of the things is also the fact that we've had -- we've run promotions. So look, on a -- if you see us compared to others, and as I've mentioned multiple times before, we look slightly different because we are more domestic and domestic it's underlying amount, it's a lower ticket item. It's -- our geographical shifts are different. So on the take rate, going back to your original answer on a take rate percentage, yes, we don't look at it that way as a take rate percentage because I don't control the price of the tickets. I control what I take as commission. But what we take as commission and what our attach rate for our products should be, we remain confident on that.

Understood. Understood. And secondly, I wanted to understand that while our Bus segment is growing at a very fast rate, however, if I look at the contribution margin here, on a Y-o-Y basis, it seems that it has dropped almost 20 percentage points. Now is this because of onetime IPL advertisement that we have done in this quarter? Or do you think that this is the range that it will be going ahead as well? And from that perspective, overall margins for the company, should we expect the leverage to come in the overall margins or the focus currently will be on the growth side?

So let me break the question down in a couple of parts. The easiest part out of these is that whenever we are doing branding, that will come below because we see branding as more long term. And I think Aloke has talked about what the IPL in buses that we have done, why we've kind of done it for the Tamil Nadu market, which is where we've been focused on. Look, a year ago, we talked about we were at mid-70s as a contribution margin, and we talked about that we see this as a very low penetration market. We believe it can grow. And when I look at the numbers right now, I know that looking at the contribution margin percentage is important in a lot of cases. But for me, the growth of 44% in the actual absolute contribution margin is very important, especially in an industry or in a sector where it's underpenetrated, it's very underpenetrated. So we have been focusing on that. Is it something where we feel that this is a number that if we continue growing like we are, would we be comfortable with this kind of CM? Yes, we would be. But I would say it on both sides that -- and I've said it multiple times before, I don't believe that you'll see all quarters being 81% growth in buses. It will be -- as in -- I think we're doing well. I hope we continue doing as well. But we'll keep a look out here in that sense. And in terms of what we have above CM, it's a very controlled expense. We can manage it because it's on a per unit basis. It's much easier to manage.

Also, Anmol. This is Aloke here, the brand expenditure is not knocked off from CM. It's actually below, right? So I don't think brand plays a role here. It's largely discounting performance and variable cost that is knocked off from the CM side in that sense.

Understood. Understood. And so should we expect that for the full year basis, we will see some kind of operating leverage benefit to the company?

See, operating leverage on the fixed cost level is already visible. It's just that we are reinvesting that into multiple areas, right? So if you think about new initiatives like Hotels or some of the AI initiatives, Rajnish was talking about or also things like food delivery on trains and things. Those are areas where, as a company, we are pushing the pedal on saying, okay, how do we capture the market opportunity, how do we build out. So despite those investments, et cetera, we are essentially seeing this kind of operating leverage play out. So had we not been making those new initiative investments, the operating leverage will be more visible in the bottom line. But we choose to do that because we want to continue to grow fast and seize on those opportunities, right? So that's what Saurabh was alluding to.

No. And the other part which you said, look, this quarter, and I've said that multiple number of times when I stay with that, you have to realize the branding is bunched up together. So you won't see what you're seeing is the branding cost right now, the amount that we are putting that's on branding, which is below CM and above EBITDA so that will kind of spread across the year. This quarter was a heavy branding quarter because of IPL being there. So as a little kind of balance out.

Understood. Understood.

Just I think Rajnish would want to add something...

Yes, just one more thing that I wanted to add that there are new business lines, which are very far, far away from reaching operating leverage. In fact, they are in build-out phase, and they are like a bigger cost center than all of the other businesses. So you might not completely see that operating leverage. There's some absorption of that happening because of these new lines of businesses like Hotels and food on trains, and food, et cetera.

Our next question comes from the line of Swapnil Potdukhe with JM Financial.

Congratulations on a very good set of numbers again. My first question is with respect to your travel guarantee feature. I would like to know like what percentage of your Flight business and the Bus business are in this particular quarter came from this feature that you have been running? And what would be the contribution in GTV terms or however you would like to explain?

Swapnil, I would have loved to give you a lot of details, but we don't declare that. So the answer would be the simple answer. We can't tell you because we don't declare that.

Yes, but would it be fair to say...

Just to say something here, I mean, even if you look at just the fact that even when we hadn't launched travel guarantee, we were able to grow at a certain velocity even 2 quarters ago. I think we are starting off at a very low base of market penetration when we started our Flight business just about 4, 5 years back, right? So in that sense, I think there is still a very, very, very long runway even outside of the additional delta that travel guarantee might be adding in terms of upsell, et cetera. So I think in the larger scheme of things, it will look like a smaller piece.

And I would, Swapnil, I would recommend this. Last quarter, if you go to our FAQ, we did a very detailed explanation of how we think of this product. So you can just go through that part, and you'll get a lot of your answers on this product thematically.

Right, right, sir. But if I were to just prod you a bit more, I mean, yes, you may not give me any numbers per se, but any sense as in incrementally how much is that growth coming because of this future? And also because of not just travel guarantee, but also your partnership with someone like a PhonePe, right, which has been there for 1 year now almost. But because I'm just trying to triangulate things because your contribution margins have been a bit under pressure. So where is exactly growth coming from and where margin has been...

Sorry, I missed it contribution margin has been...

Contribution margin has been come down a bit, right? So is it because of some investments that you're doing on the third-party platforms, revenue sharing or those kind of things?

So firstly, Swapnil, as in -- I think me and you are slightly different on the definition. When I say contribution margin, it's a rupee crore number. Contribution margin percentage is what you are?

Yes, I'm looking at the percentage. Yes.

So I'd like to kind of clarify that part first. The second part is to realize, look, contribution margin percentage is something you look at. And when I look at and which is what I'm saying, in each of these businesses, when I introduce a new product and which is why I'm saying I've given that logic in a lot of detail in the last FAQ, when I introduce a new product, I can decide on what I want to optimize on. Am I optimizing it on margin or am I optimizing it on usage? Now a couple of things from our side is we don't like having a loss-making product sustainably for a very long time. So when we look at it, we say that, firstly, we are able to launch the product and why we can launch the product at probably a more optimized cost than anybody else is because of what Rajnish talked about in his section in the AI and products that he is launching. So when we launch a product, we kind of take that call saying, look, in the initial parts of the product, I don't want to get a crazily high margin. I want to make money on that because otherwise, it doesn't make sense for me. I'm an OTA. That's my idea, but I want it to be a win-win between me, the customer and the supplier in cases where it might be, which is why whenever you see a product initially and especially what we call the peace of mind stack product, we would optimize it for a lesser margin. Now as the product grows, we might choose to increase the margin if people find the utility and people are using it much more. The other part for you to realize what you've asked on travel guarantee. Remember, travel guarantee, the person is, say, I have a train ticket, I take a travel guarantee, I buy a flight. Essentially, I'm still -- you should -- and you should use travel guarantee if you travel on trains, you'll realize the utility of the product. If you have to have a time-sensitive meeting, event, function where you have to be there, in that case, what I'm doing is I'm giving you an incentivization to get into a new mode of transport in many cases. So when Aloke talked about the 4% penetration of flight and where it is growing. So I think if you want the real answer, you can check how many new flyers are coming in, in India. And I would argue that a significant percentage of those would be from us.

So last time we had given out this metric that for the new flyers that we are adding from our MBU apps, half of them were actually flying for the first time because we run surveys on that cohort and ask them whether it's the first flight of their life, right? So I think the real win with products like travel guarantee are that we are making flyers out of people who are not flying before, right? And in that sense, we are growing the market, growing the aviation market and not necessarily entering into anybody's market share.

Understood, Rajnish sir. That's pretty clear. So another question on Flight business here. And this is a follow-up to the previous question that was asked by Anmol. You did mention 3 reasons for your take rates going up. One was your domestic pricing coming down, which is understandable. But you did mention that there were some anniversary sale and flat sales promotions also with certain bank partners. How does that help your take rate per se? Do you...

No, I was just talking about General Flight business. So I wasn't talking about take rate. I was giving you the 2 reasons which I said. One is the domestic/tier 2 base. The second, which I was giving was the fact that I have these products which are also included in the take rate. And the third, which is the underlying ticket price, which was what I said. If the ticket price, because mine is a fixed price, what I get, if the underlying ticket price of a flight changes or average flight changes in our route, my take rate varies.

Got it. So just to be clear, when you report gross revenue, you don't include ad income there, right? You include that in the net revenue that you report?

So when you're looking at GTV, there wouldn't be any ad income, GTV into take rate would be ticketing revenue, then you add other income, which is ad and bank offers. And then you get to take off the discount, you get to revenue from operations.

So things like bank advertising will show up in the revenue from operations growth. So whenever we run these kind of campaigns, if you see any excess jump in the revenue from operations, some of it could be because of that. But on the gross take rate side, right, it's basically the gross ticketing revenue that we consider.

Right. Perfect. That answers that question. And just on your Bus business, was there any tailwind on a -- when you look at a Y-o-Y basis because last year, probably there were -- it was an election quarter, right? And so the numbers could have been a bit depressed when you look at it from a Y-o-Y perspective. And any incremental benefit, you had mentioned in the last quarter also that some of the traffic, which was affected on the air side because of the situation in the North Indian states during -- with Pakistan. The Bus business was likely to benefit from that, right, some traffic shift.

Not really -- see the growth you are seeing on the bus side is not just a 1 quarter story. If you look at the last 3 quarters, actually, we've been growing pretty rapidly on the bus side. And again, there is no base effect here. I mean, elections, what happens is, yes, there could be some people who may choose not to travel during that, but then there are other people who will go back to vote in the city where their vote is, right? So in some cases, we've seen even more travel on certain axis as a result of the elections. So I don't think there is any kind of a base effect playing out here. And the fact is that, look, we are still like #2 in this, and there's a long runway for us to grow because the market is only 20% penetrated. So like Saurabh said, I think those are the reasons why we are not looking at whether the CM is 55% or 60%. I mean that's not material for us because as long as the absolute CM is growing at this kind of velocity, there will naturally be operating leverage flowing in because our fixed costs are not growing at that kind of base of contribution margin growth rate.

But [indiscernible] , you should see the product which we have right now. What has happened over the past 1 year is we have really improved the product. And again, maybe Rajnish can talk a bit more about what we've done there, but it's a product that has really improved.

Yes. I mean... Like a lot of changes that we have done in the product recently, including the introduction of the new edge platform and utility features like bus insights, et cetera, which is giving passengers a really deep insight into -- and otherwise, a really fragmented inventory business, right, where when you're actually traveling in bus, you really [indiscernible] arrive. And I think bus insights is giving you this peak into the quality of the fleet and what the filters like brand and bus filters, et cetera. All of this has boosted a lot of trust and conversion rate in bookings. And I think some of these things are kind of feeding into a positive customer service reach getting us to 4.8 rating and the conversion rates, et cetera. All of these things are kind of impacting our conversion rates and creating a virtuous cycle of quality and demand where we are able to kind of capitalize on this and grow purely like with a product-led growth approach and then amplifying that with performance spends which are optimized.

Got it, Rajnish. Just one thing on train as well, some comments because there were some changes by IRCTC recently. And I think Saurabh also had touched upon briefly on this point. So any impact of those changes, if you can just clarify or give some color on that?

Yes. So I think, look, there were broadly 3 types of changes that happened there. Just so you know, I mean, one was there was a change in the Tatkal timings, which reverted back to a 30-minute delay from 10 minutes that it had earlier been reduced to and while we are still in discussion to understand what the impact and why that. I think there is -- it's just too early to quantify the impact of that. We did see some volatility as a result of that. But of course, since we are also growing quarter-on-quarter, month-on-month, so it's harder to break out how much of that is resulting from the change in particular. Aadhar linking is the other change where on Tatkal tickets, you need to link your Aadhar and there's an OTP that will come -- Aadhar OTP that needs to be filled in. And while this is now rolled out and it's just the first couple of days that this change has been implemented. So it's very early, and we haven't seen -- we haven't really seen a material impact as a result of that, but there is a slight impact, I would say. And in terms of the third change, which was chart preparation being done 8 hours prior rather than 4 hours prior, I think that's a great move because it allows customers to plan accordingly and maybe shift to alternate modes of transport sooner rather than later. So in that sense, I think that has been a positive move in terms of even booking volumes, et cetera. So I think net-net, we are not seeing -- if I had to say that some impacts were positive, some were negative and they kind of are canceling out each other as we speak. But it's very early to comment. I think these changes are very, very recent. And I think even passenger behavior will adapt to it over time over the next few weeks. So I think we will only know at the end of this quarter how this kind of impacts us, but nothing materially negative to report here.

Got it, Aloke. And just last word on Zoop. How is that business doing? You mentioned that it's doing more than 10,000 orders per day. I would like to understand like any sense on the unit economics, what kind of revenues you make on a per order basis or those kind of things will be helpful?

Swapnil, it's still a smaller business in that sense as if it was material enough, I would have pulled it out to another line of business. It's not material as of now. Look, what we -- as I said before, when we acquired Zoop, the idea of Zoop was to increase the monetization of the users that we are -- that we have. So it's our funnel, which are traveling, increase the monetization. So right now, we are still building the product, expanding our user base. So giving any color, it won't help you, it won't help me and it will put unnecessary pressure to the team beyond this. So the idea is we have been factual in what we've been reporting. But beyond that, we are still working on the product. And like we do for everything which is new, we would only start giving more numbers once the product has been established and stabilized.

Our next question comes from the line of Rohit Thorat with Axis Capital.

First of all, congrats on the good set of numbers. My first question is on the technology and related cost part. So we have seen a sharp decline on a sequential basis in technology costs. Now in the previous quarter, you had mentioned that the cost had increased because you had seen a surge in number of queries in some of your products like flight tracker and train tracker due to which the cost has gone up. Now this quarter is also not like a seasonally weak quarter. So those queries should be high in this quarter as well. So what is driving the reduction in technology cost for this quarter? And how do you see the trajectory going forward for the rest of the year?

Yes, technology costs get bunched up, I would say, just look at it over the year. Over the year, what we've talked about last time will remain. So it is -- as in what you see this time is just some bunching up, but otherwise not reflective of the year in that sense. What I said in these things, so the simple answer is what we said last quarter is what you should look and model.

Okay. And second question is on the bookkeeping side of things. Now you -- today also you have made an announcement that you have granted some ESOP. So how do you see the ESOP costs going forward on a full year basis?

Look, I've talked a lot about ESOP, and you can go through question 9. But ESOP cost going forward would be around slightly north of INR 30 crores per year. If you see what I've talked about the change from -- I think Manik or one of these guys asked the question last time. And in this FAQ, I thought I'll document my answer in a lot of detail why there was a difference between INR 20 crores and INR 30 crores. Part of it is because we did three kind of ESOPs. So one is the Black Shoes, which is time-based ESOPs. The other is success-based ESOPs, which is calculated using Monte Carlo. And you have to realize that, that if the success doesn't happen, it is expensed, but there is no real payment as the ESOPs are not given, but it's still expensed and you don't get it back in that sense. And the third is when, say, something like Zoop, where we have a choice to either decide to acquire Zoop and give them cash or give ESOPs because we feel ESOPs is more aligned to the -- aligned to the long-term vision for the company. So Zoop, we have chosen the ESOP path, even though it affects the P&L rather than cash, which won't have affected the P&L at all. So it's a combination of these 3, but yes, the number would be slightly north of INR 30 crores. Can you hear me or...

Mr. Rohit, does that answer your question? So there is no response from the participant. May we move to the next one.

Yes, we can. We can take one more question. And again, I apologize to all the others who asked the question and we can't answer, but please drop an e-mail, and we'll set up a call and do that. But yes, we can do one more question.

The next question comes from the line of Lakshminarayanan K G with Tunga Investments.

A couple of questions. First, I just want to understand how the Hotels vertical is gaining traction. Second question is, I just want to understand do you have any B2B verticals for travel, especially Air and Hotel? And third question is that I just want to understand what's your market share, how it has trended on Airline? And second, on ex IRCTC, your train market share and how the bus share has been shaping up? These are my questions.

Can you repeat the second question? It wasn't very clear. I didn't get the second question.

No. The second question is that, do you have any B2B vertical? For example, some of your competitors do offer B2B options where they tie up with the corporate and the entire corporate travel happens to some kind of a micro vertical based on the Internet. Do you actually have that thing? Is there a big opportunity for you? That's my question.

Sure. So let me answer the first 2 for you, and then I'll let Aloke answer your third one. So on Hotels, like I mean, it's still very early. We are still in the build-out phase, and we believe it will be premature to share specifics or discuss any numbers at this point beyond the fact that we are seeing very strong month-on-month growth in room nights, which is the only metric -- checked out room nights is the only metric that we are right now tracking very obsessively. But apart from that, fortunately, we have access to this very strong top of the funnel, which is 84 million unique monthly active users on our platform. And this large user base, it gives us this unique advantage of creating the product -- right product market fit whilst you can kind of run your product through multiple iterations, identifying problems and then iterate through solutions. And we have an amazing test bed of massive number of users, which we are using to kind of fine-tune the product and arrive at the correct market -- product market fit. The fact is that you know what we've been very, very late entrant to this vertical, right, and have been like lots of players out there in the last 2 decades in this space. And what we have discovered is that -- there's still a lot of unsolved customer pain areas and supply-related problems that could drastically improve customer experience and solve some of these problems. And so we are focused entirely on some of these problems, and we are trying to kind of get to a point where we have this product market fit, and we feel confident about scaling this beyond that. So that's what I would say about Hotels. Regarding corporate, et cetera, it's pretty obvious that these are verticals that we would definitely want to get into at some point of time. It's only a matter of time. And the reality is that given that if your platform has 84 million monthly active users, it's almost like saying that you have a mall where you have huge amount of footfalls, but you don't have a certain kind of section in the mall. And so it would only make sense to kind of have some of these products. However, at this point, I can't tell you exactly where that fits in our road map or time line, et cetera, but definitely something that we have in our radar.

Sorry, what was your third question? Third question was about market share, right?

Third question is regarding the market share in Air and your market share outside IRCTC train and also in the Bus I know it has been trending.

Yes. Sure, sure. So on train, like we said earlier, we have crossed 60% of OTA market share. So -- and I think that's about 2% more than where we were 2 quarters ago. On buses, we would be in mid-to-late teens. We obviously we still await others to declare their results to conclude where the market share exactly was. And similarly, on Flights, I think since we are the first to disclose our results this time around, right, I think we would await numbers from others in order to get a sense. But based on DGCA numbers, I think we are growing nicely quarter-on-quarter in terms of market share even on the flight side. So we would have definitely gained share.

I mean that should be obvious with our growth numbers, I guess, you can see that because you can look at how market is growing, how others are growing and what our growth rate is. So I mean that part is pretty obvious.

Got it -- just on the train thing, what percentage of train reservation happens outside IRCTC?

It's 20% to 21% of IRCTC bookings that are happening through OTAs based on their last disclosed numbers. And I think that outside of that, there is also third parties which are offline or B2B, et cetera, which would be another 10% to 15%. But yes, I think in that 20%, 21% bucket, we, like I said, are 60% of that.

Ladies and gentlemen, that was the last question for the day. I now hand the conference over to the management for closing comments.

Thank you so much for all of you joining us today from all parts of the world to hear out our story. And it's definitely getting late here in India. So I'll let you all go. We'll speak soon next quarter. Thank you.

Thank you. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.