TBO Tek Limited (TBOTEK) Q3 FY2026 Earnings Call Transcript & Summary

Good evening, everyone. I'm Vanessa Fernandes from the Adfactors PR Investor Relations team. On behalf of TBO Tek Limited, I would like to welcome you all to the earnings conference call for quarter 3 and 9 months FY '26. Today on the call, we have with us from the management, Mr. Ankush Nijhawan, Co-Founder and Joint Managing Director; Mr. Gaurav Bhatnagar, Co-Founder and Joint Managing Director; Mr. Vikas Jain, Chief Financial Officer; Mr. Anil Berera, Advisor; Mr. Akshat Verma, Whole-Time Director and CTO; and Mr. Pramendra Tomar, General Counsel; and Mr. Shreshth Mahajan, Associate Director, Investor Relations. We will begin the call with brief opening remarks from the management, followed by a Q&A session. Please note that certain statements made during this call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties that could cause the actual results or projections to differ materially from those statements. TBO Tek will hold no responsibility for any such actions taken based on such statements and undertakes no obligations to publicly update these forward-looking statements. I will now hand over the call to Mr. Vikas Jain for his opening remarks. Thank you, and over to you, Mr. Vikas.

Thanks, Vanessa. Good evening, everyone, and thanks for joining us. This quarter represents an important milestone in TBO's journey as we integrate Classic Vacations into our financial and operating metrics for the first time. While the consolidation meaningfully expands the scale of our platform, it also adds complexity to how certain headline metrics should be interpreted. As a result, we believe it is important to provide shareholders with additional clarity regarding some matters. Regarding the accounting policy, Classic Vacations recognizes revenue from hotels and ancillary services on a check-in basis, unlike TBO Tek, which recognizes such revenue at time of booking. This statement is consistent with Classic Vacations historical accounting practice and aligns with the nature of its business, given the longer booking to stay window and continued post-booking services until check-in. Revenue from Air transaction, however, is recognized at time of booking, consistent with TBO Tek's policy. Accordingly, all revenue and related metrics for Classic Vacations have been reported on the above basis, while TBO Tek's organic business continues to report revenue and metrics on a booking basis. Revenue from operations of INR 784 crores for the quarter translates into an enterprise take rate of 8.08%. The organic business delivered a take rate of 6.04%, while Classic Vacations reported a headline take rate of 24.94%. It is important to note that Classic Vacations take rate includes a 12.4% commission component that is passed to the travel advisors, which is structurally much lower in TBO's core platform. As a result, these take rates are not strictly comparable on a like-to-like basis and introduce noise into the blended take rate metrics. For this reason, we believe gross profit as a percentage of GTV is more analytically robust measure of value capture. Gross profit strips out pass-through commissions and better reflects the net economic value retained by the platform. The second critical cause of platform health is the conversion of gross profit into adjusted EBITDA, which reflects operating efficiencies and execution discipline. Gross profit to adjusted EBITDA conversion at enterprise level stood at 23.7% for the quarter compared to 25.3% in Q3 of FY '25. Within this, the organic business delivered a conversion of 25.3%, while Classic conversion of 19.6%. On a holistic basis, enterprise GTV to adjusted EBITDA conversion improved to 1.18% in Q3 FY '26 from 1.05% in Q3 FY '25, supported by contribution from Classic Vacations, which delivered a 2.46% GTV to adjusted EBITDA conversion for the quarter. Thanks. And with this, I hand back the call to Vanessa for opening the floor for the questions.

Thank you, Mr. Vikas. [Operator Instructions] We have our first question from Mr. Karan Uppal.

A couple of questions from my side. Firstly, the Air business recovered very strongly, 16% Y-o-Y growth on an organic basis. So just wanted to check how are you seeing the Air business from here on? Is the growth sustainable? That's the first question.

So Karan, as we don't talk about forwards, but yes, I can tell you that we are -- we will continue the momentum in Q4 as well.

Okay. Okay. Secondly, this quarter, we have Ramadan. So there is some distortion in the numbers because of this, especially in the Middle East geography. So how are we thinking about the impact this quarter, Q4 FY '26?

See, on a quarter-to-quarter basis, Ramadan fell pretty much in the same quarter last year as well. So while there will be a monthly deviation in numbers because Ramadan is straddling February and March this time -- last year, it was completely in March. But from a full quarter perspective, there won't be a very material change. The only difference is that there is an uptick in business towards the end of Ramadan and then going into the Eid period. So that will straddle the -- last year, it was straddling the Q4 and Q1. This time, it is largely going to be within Q3, Q4. So that's the only difference. It should not have a very material impact this time because it is all within the same quarter.

Okay. Gaurav, just one question on Classic. How is the integration playing out? Any early signs of cross-sell whether TBO business to Classic or Classic to TBO? Any early signs there?

So TBO selling to Classic has already started. So we've done that integration. And I would say that the early signs are quite promising. Because Classic has a very long booking window and a check-in window, so when it starts to, one, convert into travel -- because there's a long window between which their business can cancel as well. But the early signs are quite promising. The business -- the Classic buying from TBO has -- well, I can't share any numbers, but it's becoming meaningfully large. So if I were to look at Classic as a stand-alone customer of TBO, it will already be amongst like a top 20 customers, right? So from that perspective, it is promising. TBO buying from Classic is going to start in a matter of time. There is a bigger integration that is required to enable that to happen. Apart from that, the overall platform migration is happening, but that's a several quarters long project because it is complex and the systems are legacy on the -- very legacy on the Classic side. So the platform migration will probably take 2 or 3 quarters, but the cross-sell from both the platforms will start sooner.

Okay. Just last question to Vikas. Sir, depreciation and finance costs have inched up this quarter because of Classic integration. So from here on, should we assume these numbers to be steady state?

Yes. So this quarter includes the debt and amortization costs for the PPA provision that we have done. While the PPA is -- the study is currently provisional, but we don't expect major changes in the same. So the debt cost is already taking into account -- the amortization cost is taking into account the cost which will get amortized for the CBPP. And similarly, the finance cost includes the full quarter cost for the loan that we had taken for the Classic acquisition.

We have our next question from Mr. Prateek Kumar from Jefferies.

Congrats for good results. It's Prateek from Jefferies. First of all, may I request that the call be hosted slightly later in the day or like next day because you just posted results and shareholder letter like 10 minutes back. Just impossible to go through them and discuss during the call. My first question is like 3Q again was impacted by ForEx element. How are we seeing the ForEx element now? And is there any changes in policy which we are introducing to reduce this impact on a sustainable basis?

So year-on-year ForEx impact has reduced per se, Prateek. If you see, the overall number has gone down materially. Having, however, said that, since -- till last year Q4, we were not doing any material hedging, especially for our international business, and this as a practice we started after the Q4. So hedging would obviously involve some cost wherein wherever in currencies where we have difference in payables and receivables. And to cover that risk, we would have to incur such cost and that cost is getting captured in that ForEx line per se.

Okay. So it's the hedging cost which is there and not the MTM impact or something which is part of that line item.

So that line would have all the hedging cost as well as the MTM impact of the hedges as well as if there are any unhedged positions, if there is any gain or loss, that is also included. And plus, since we had given a foreign currency loan from TBO Tek, the holding company, to Tek Travels DMCC, Dubai entity for the CV acquisition, any benefit or cost pertaining to the revaluation of those loan also get captured in this line.

Sure. Okay. Second question is on CV's integration. So while, of course, last quarter was particularly impacted by integration cost, but is there any specific integration cost or some specific immediate synergy which we may realize like in 4Q versus 3Q? And is there something specific which had impacted this quarter as well?

Prateek, very early days. So the Q4 or what -- our Q3, but calendar year Q4 for CV was in line with what they had projected as part of diligence. So it has played out as we expected it to. These synergies are -- like I earlier mentioned, that we have already started selling the TBO inventory into CV. How that will materialize into incremental revenue or margin expansion is very early to say, because, like I said, the booking windows are very long. It will only be June, July, August, September when bulk of the travel will happen. So by that time, we will know which -- what part of the business that we booked today is actually materializing and is it materializing at a higher take rate. So that is, I think, a few months away. The immediate synergies that we will see are likely going to be us, TBO, also buying from CV, which should start happening in the next couple of months. And then the broader benefits will happen when we migrate the core booking platform of CV onto the TBO ecosystem, which, like I said, is a complex project. So that's a several quarters long project. But that is where we will actually start to see both cost synergies as well as our ability to employ our TBO growth playbook onto the CV platform. So that, I think, is a few quarters away. For now, we try and maintain a steady state and try and make sure that we accelerate our integration projects. From a cost -- additional cost perspective, we don't envision any additional cost for these integrations. We are managing it within our current resources.

Third question is on your commentary and expectation which we have like sort of given out earlier on revenue growth -- on organic business revenue growth accelerating versus SG&A growth from next quarter onwards. How are you looking at that comment now?

No, Prateek, we stick to our conviction. We are expecting to see Q4 -- so you would have already seen that every quarter, the growth of SG&A has been tapering down. And we continue -- we expect that to continue in Q4 as well. At the same time, from Q3 to Q4, we usually see a significant growth in the top line because Q3 is traditionally our weakest quarter and Q4 is our second best quarter. So we expect to see a meaningful growth in top line in Q4, while the SG&A will not grow at the same pace. And hence, we should see a significant flow-through to the bottom line. So we remain convinced on that, and that's on the organic business, not counting CV. So we should be able to demonstrate that operating leverage in Q4.

And last question, is there any thought process around bringing both CV's and your accounting to same standards on top line GTV and EBITDA margins?

Yes, Prateek, it is -- we tried that, but it is simply not possible. The main reason being that CV's business books much in advance. And then because of the nature of that business -- so it is luxury and complex, right? So unlike the TBO business where each booking is essentially one hotel or one flight, bulk of what CV books is multi-hotel, multiproduct itineraries. Now between the time when the booking happens and when the travel happens, the booking goes through several iterations in terms of people will add an additional room or add a hotel, add an excursion. So there is no point in time when you can nail down the revenue and say this is the revenue on this booking until the time the travel actually happens. So it would be hard to translate that into our model where we -- when a booking is reconfirmed, we count it as revenue because of the nature of that business. So if we try to do that, I think it will create a fair bit of complexity. So we'll try and run the business on an as-is basis rather than try and force fit it into our business model.

Sure.

And Prateek, your comment well taken on time. So we were anticipating our Board meeting to finish a lot sooner today. And hence, the delay between when we published. But we'll keep that in mind going forward.

We have the next question from Mr. Manik Taneja.

While I do understand this quarter's performance is colored by the consolidation of the Classic Vacations business, but just stepping back on the Airlines business, we are seeing a strong GTV performance in the current quarter unlike the weak seasonality that we typically tend to see in this business in this quarter. If you could spend some thoughts as to what drove the strong performance over here in this particular quarter? And how should we be thinking about these trends on a go-forward basis? That's question number one. The second question that I have is with regards to EBITDA as a percentage of GTV, which also has an impact of the Classic Vacations higher profitability. How should we be thinking about these metrics if you were to think about over a 2- to 3-year period? Those would be my 2 questions.

So Manik, on the Air, I think there were some learnings which we obviously learned from in the last previous quarters. So we kind of fixed that. One thing good is that we did not compromise on our GP. We still maintained the same GP what we were maintaining in the same quarters. But I think we did some things correct which we were wanting to. So I think that kind of played up in our favor. Also keeping in mind, Manik, this also had this disruption in December with one of the carriers which all of us know about. Yet we kind of pulled through with a good growth. And we anticipate the same momentum as we go into Q4. And hopefully, it should be in the same lines, at least double digits. And I think that's the plan what we have internally.

Just to clarify...

[Indiscernible] -- yes, go ahead, go ahead.

Yes. So just on that double-digit growth outlook from the Air business, you're saying Air GTV will essentially grow in double digits over the medium term. Is that correct? Because...

I think let's focus on Q4, at least the short term. And then I think once we are confident on maintaining the momentum, then probably I can give a better color for the medium term as well.

Sure. And other question on...

The question on, yes, how to look at EBITDA as a percentage of GTV. See, the -- it's a bit nuanced, but directionally, it will go in the same direction as EBITDA as a percentage of GP. What we are trying to anchor away is from looking at revenue as the top line metric because Classic has a significantly large revenue, but almost 50% of that revenue is a commission pass-through to the travel advisors. So that's not really income in the true sense of the word. So earlier, the flow-through from revenue to GP conversion was quite high for the TBO organic business, but it is materially lower for the Classic business. And hence, we are -- what we are anchoring around is that the GP is a kind of true net revenue for us in a way. And from there on, the operational efficiency of the business to convert that GP -- that into bottom line cash is a true representation of the business. So one, we are anchoring around saying that let's look at EBITDA as a percentage of GP to truly understand the conversion from revenue to bottom line. We are also starting to talk about EBITDA as a -- or adjusted EBITDA as a percentage of GTV because that is a metric many of our peers are also using. The nuance there is that not all GTV is equal. As you know, that the Airline GTV, while significantly large in volume, actually delivers much lower take rates. So it's a bit -- this number can fluctuate a little bit more than the revenue -- EBITDA to GP number because in a quarter where we have high growth in the Airline business, this number may actually shrink a little bit. So directionally, in the long run, this number will move upwards in the same pace as EBITDA to GP. But our conviction still remains that EBITDA to GP is a more consistent number to measure compared to EBITDA to GTV.

Sure. That's quite helpful, Gaurav. Just to prod you further, because that will basically show the true value of the platform. From an EBITDA to GP conversion, if you could give us some sense of your operating expenses below gross profit. What proportion of your broad other expenses or operating expenses below gross profits are essentially variable in nature, which will fluctuate in line with the volume of business, to what may essentially be fixed cost?

Vikas?

Yes. So Manik, as we have started disclosing the breakup of the SG&A cost below gross profit level from, I believe, last shareholder letter. We have shared those details in our letter as well. If you see there are broadly 4, 5 components in that piece. So primarily, the variable nature of the expense is hosting bandwidth cost and the payment gateway charges. So those -- that expense would primarily -- would grow -- primarily grow in line with the growth in the revenue of the GP or the GTV numbers. But the other cost, which is the employee benefit cost and the business support service and the others, those would primarily be looked at a fixed nature of cost, and therein where we are saying that operating leverage would get generated as we scale our business model.

We have our next question from Mr. Kavish Parekh.

This is Kavish Parekh from B&K. My first question is on Classic Vacations. So at the investor event, you outlined a road map highlighting certain low-hanging initiatives, some of which you have already started to tap into. While benefits remain some time away, do you have any time lines in mind with respect to execution here? And how would you envisage the growth trajectory for Classic over the next, say, 3 to 4 years? That's the first question.

Okay. So Kavish, like I said that the lowest hanging fruit is cross-sell on both sides. Cross-sell from TBO into Classic has already started, and we are seeing quite promising results. Cross-sell from Classic into TBO is a few weeks away because it requires a little bit of work on the tech. The other big integration that we are working on is the platform migration, where we will introduce our booking platform into the Classic ecosystem. That's a several quarters long project. It will be a phased-out project as well. So the benefits of it will start to accrue probably in H2 and not before that. Over a 3- to 4-year period -- coming -- the way to think of growth is not just on the Classic, but the overall North America business for TBO. And that was our investment thesis at the beginning as well. What has happened with Classic is that, one, we have gotten access to about 10,000 active high luxury travel advisors in the North America market. The second access we have gotten is access to very deep consortia relationships in that market, namely Virtuoso, Signature, Travel Leaders, TRAVELSAVERS, et cetera. So both these are relevant for unlocking growth in the core TBO business and the organic TBO business as well. So our view would remain that we will expect over the next 3 or 4 years our North America business to continue to grow at -- in double digits, just like all other geographies have demonstrated growth in the early phases, with a caveat that we're already starting with a large base, right? So for example, you would see today markets like APAC or Europe are growing a good north of 30%, but coming from a smaller base. APAC is coming from a base of a couple of hundred million dollars. Now in North America, we're already starting with a base of more than $600 million. But having said that, we would definitely endeavor to find high double-digit growth in North America as a whole over the next 3 or 4 years. Now some of it may come in the TBO organic business and some of it may come into the Classic business. But from our perspective, the value of this acquisition and the ROI on this acquisition will be measured by finding that growth for North America as a whole, not just stand-alone Classic or stand-alone TBO.

Fair enough. Understood. My second question is on the margins. So you have indicated that EBITDA growth is expected to outpace GP growth starting next quarter. Here, should we interpret this largely as a function of operating leverage at Classic where EBITDA growth would inherently exceed GP growth as scale improves? Or would organic business be the larger contributor? So further on absolute margins, while TBO stand-alone margins could potentially reach around 17%, 18%, Classic had margins of about 11% last year. So should we expect this to act as a drag on consolidated margins in the near term? Or what are the thoughts on Classic's margins converging closer to TBO's levels? Any timeline, any indication here would be great. Yes. That's the second question.

So Kavish, on your first question, the Q4 growth that we're talking about is pure operating leverage on the organic business, right? So obviously, with Classic consolidation, the numbers look larger. But what we have been committing for the last couple of quarters is that we will demonstrate significant operating leverage and flow-through of incremental GP to bottom line in Q4, and that is on the organic business. And we are sticking to that commitment. So on the organic business, we will see a significant margin expansion happening hopefully in Q4. Now on your other comment, you're right that the Classic business if you look at as a percentage of revenue feels dilutive, and which is why my previous comment that we -- the true representation of the business will be looking at EBITDA conversion from GP and which is more in line with the TBO business, right? Both are about mid-20s, right?

Classic is 20%. We are at around 25%.

Yes. So the Classic business is converting from GP to EBITDA at about 20%. TBO business is converting at about 25%. And this convergence, we do expect that to happen. I don't -- I can't give you a timeline right now. It's very early days. But we do expect to see efficiencies. And Classic has the same operating leverage. I think the business from a cost basis is fully paid for in the sense that -- maybe there's some incremental sales team expansion that will happen on the Classic business, but we are not expecting the cost in that business to grow substantially. So any incremental top line growth will convert heavily into the bottom line, and hence, this margin expansion should happen. So while I don't have a timeline for it, we would expect EBITDA to -- GP to EBITDA conversion to converge for the TBO core business as well as Classic.

Got that. Got that. Lastly, on our take rates. So organic TBO hotel take rates have remained strong for several quarters now. While the geographical mix has been largely stable, what is really driving the sustained strength organic TBO hotels? Has there been a shift in the underlying hotel mix towards more premium categories? And if so, how sustainable are these figures? Because historically, we have seen some volatility in this metric. So any color on the stability would be helpful. And if I can just squeeze in one more. Could you share some color on what drove the sharp jump in the others revenue segment? So is this the new initiatives that you have been trying to grow? Or does this also pertain to Classic?

Okay. So on your first question, Kavish, I think part of the take rate fluctuation that you see is also in a similar nature at the revenue level as what we are explaining on Classic, because some of our suppliers are commissionable suppliers. So what happens is we receive a commission on every booking and then we part a portion of that commission to the travel advisor, which gets netted off at a GP level. So a more fairer and kind of a more honest view would be to look at GP as a percentage of GTV as against revenue as a percentage of GTV to get a more consistent view of take rates. Having said that, we have worked hard to maintain take rates at a fairly consistent level. Part of it is that there are smaller businesses, like the ancillary businesses, which operate at a slightly higher take rate. So while they are small in size, they do add a few bps to our overall take rate as they grow faster than the core hotels business. Second is that in certain quarters where the mix between our enterprise business and our retail business moves towards the retail business, the take rates also improve at that point. And then we have incremental margins that we are accruing because of the programs like the Platinum program, which we have talked about in the past. So the Platinum program is a meaningful program right now and the override commissions that we earn over there add to -- positively to our take rate. So that has allowed us to maintain or improve our take rates a little bit. What was your second question?

The others revenue segment, I think about INR 40 crores...

The others -- can you also elaborate on the others?

So others revenue segment, if you see on a consolidated basis, it is obviously driven by some growth from the organic business. But primarily -- those numbers have inched up primarily because of the Classic consolidation.

Understood. And you mentioned that there tends to be some variation in the mix between enterprise and retail. So is there some seasonality here that we have been seeing over these years in terms of contribution from enterprise and retail customers?

No, Kavish, there is no seasonality over there. What happens on the enterprise side is customers are large. So sometimes their business can be a bit spiky, right? It can significantly go up or significantly go down, which just changes the mix by a few percentage points here and there, which will reflect in the overall take rate by a few bps.

We have our next question from the line of Mr. Chirag Kachhadiya.

So one question on other expenses breakup which you have given in the [indiscernible] letter. If I look at the year-on-year impact, it is almost probably about 18% -- probably about 18% and quarter-on-quarter there is a drop. Can you provide [indiscernible] in next quarter, what...

Chirag, we are not able to hear you properly.

Hello? Can you hear us? Hello?

Better. But if you could be a little bit louder, Chirag, please.

Yes. So what I was asking, the other expenses line item, what trend one can expect in this? Because on year-on-year it is up almost 18%, whereas quarter-on-quarter there is a drop. And so -- yes.

So as I was answering the other question, other expense breakup primarily contains the employee benefit and the similar business support services and some other items. Also in these expenses, the 2 line items which we are showing, hosting bandwidth and PG charges, that would be the line items which would grow in line more with the business revenue, let's say. And the other expenses would -- as we scale up, should show operating leverage.

We have a follow-up question from the line of Mr. Karan Uppal.

Just one question on the monthly transacting buyers number which you have mentioned, especially on the international side, it's around 14,880. So increment 2,500 agents have been added versus -- what number you have given for the Classic, it is around 10,000. So does that imply that only 2,500 are the monthly transacting buyers from Classic? Any clarifications there?

No. So 10,000 is an annual...

10,000 is an annual number for Classic. So the quarterly number for Classic would be in the range of around 2,500, 3,000 only.

Yes. Keeping in mind, Karan, that the average booking value of a Classic travel advisor is much, much higher than the average booking value of a TBO core travel agent.

Okay. So Gaurav, from whatever you are saying, only 2,500 agents basically transact on the platform regularly. Is that what you're saying?

On a monthly basis, yes.

Okay. Okay, great. And another question was on the take rates. So on a blended basis, the take rate is at 8.8 and -- 8.1, sorry, and the hotel business is at 10.5. So from here on, on a sustainable basis, should we expect these numbers to remain stable?

We would expect the numbers to remain range bound, Karan, because we are not anticipating any pricing action on our end. And we're also not expecting the saliency of the business to change dramatically over the next few quarters.

Yes. But as highlighted by Gaurav, at times because of the supplier mix impact, the take rate for the hotel business may go up, down. So GP is the right metric to see.

And I think just to add to that, the 2,400 number that you're talking about, that is the average over the 3 months. If you look at the unique agents who've worked with us during the quarter at Classic, that number will be closer to 3,900.

[Operator Instructions] We have our next question from the line of Mr. Divyansh Gupta.

Congratulations on a good set of results. Wanted to understand while the -- let's say, the revenue recognition policy of CV is different from us, how does the working capital work for CV? Is it also a negative? And on a consolidated basis, should the negative working capital situation improve further for us? Or how should we think about it?

Yes. Divyansh, actually, Classic Vacations' business, because the window between the booking and check-in travel happen is too large, so it's a highly negative working capital business and it would obviously support in generating more negative working capital business at an enterprise level.

If you can give a numerical sense.

Numerical sense -- because -- since we are not publishing the balance sheet numbers right now, we will give more color on it in the March quarter.

Got it. Got it. And what would be our direct sourcing with and without CV per hotels?

See, I think without CV, our direct sourcing in this quarter was about 40%. CV has a significantly higher contribution of direct sourcing. I don't remember the exact number, but maybe it's in the range of about 80%, 85%. Is it right?

85%, yes.

85%. So CV's sourcing is 85% direct. TBO core is about 40% direct.

Got it. Understood. So linking the metric that you were saying that what -- let's say, you would track or what we should track is EBITDA to GP, first, one basic question, does a higher direct sourcing reduces the gap between revenue to GP for us? Or that is just purely which agent drives which kind of business?

No, no. I think that will not, Divyansh. What happens is -- basically, the big gap in the Classic's business on revenue to GP is a commission payout to the travel advisor. So that's irrespective. Whether you book direct supply or you book third-party supply, you will still pay a big commission to the travel agent. And that is what is right now getting counted as revenue and then getting netted off in GP. So that will not change.

But I'm saying from a business fundamental perspective, does a higher direct sourcing give us any added advantage in our unit economics for a transaction or business?

Yes. In the case of Classic, especially, as it stands today, their commissions or their take rates on the direct business are materially more than what they make on third-party supply. In the case of TBO, the number -- the margin -- the difference is rather small because we are still trying to build on more volumes and we have much larger number of hotels that we directly contract. But in the long run, Divyansh, the strategy of direct contracting is twofold. One is to make sure that you have protection from overdependence on third-party supply. And second is, yes, margin expansion in the long run. So some of the margin expansion that we talked about earlier and why take rates have been strong is because we are generating incremental income on our Platinum portfolio, and Platinum portfolio is all direct supply.

Understood. Understood. And another data point question. What would be our enterprise to retail GTV or revenue mix? And how does -- let's say, how much differential in the margin or realization for us?

GP revenue...

So enterprise retail GTV for the TBO organic core hotel business is -- it's around 50-50. Classic is all actually retail.

All retail. Got it. And what would be, let's say, our take rate differential, if you can give a sense on it?

That we generally don't publish, Divyansh. At a GP level, there is not much difference.

Got it. Got it. Just 2 more questions. On the contracts that we have with hotels, I'm guessing there will also be some slab-based incentives depending on certain, let's say, room nights that we enable for them. When does the payout of that happens? And how does the revenue recognition follow for it?

So the revenue recognition would happen as per the terms of the contract. If it is as per booking or if it is as per check-in, the revenue recognition would -- the incentives due from hotels or suppliers would happen as per that contract. The payouts obviously would happen once the period of the contract is over and the numbers are finalized at both end.

Got it. So revenue [Foreign Language] will happen at the time of booking, whereas payout will happen annually, I'm guessing.

Yes. At the time of booking or check-in. It can vary depending on the contract with the supplier.

Got it. And just last question. Given all the volatility in the ForEx exchanges -- and this is not regarding the loan that we took for CV -- what is our hedging policy and how much of currency that we hedge? And was there any, let's say, big benefit because of ForEx exchange in this quarter or hit?

So as per -- regarding the hedging policy, basically, wherever we have difference in payments and collections at a particular -- any currency level, let's say, for an INR or an euro or a GBP, we try to hedge the difference amount, in the range of around, let's say, 70% to 75% we try to hedge that amount in any particular entity or market. From the perspective of gain or loss which are accounted for in this quarter, like we made some gains on account of the revaluation of the loan that we had given to TBO Dubai. Other than that, primarily on the revaluation, we had a negligible gain or loss. Primarily, the balance of expense pertains to hedging related and conversion cost.

We have a follow-up question from the line of Prateek Kumar.

I have like a couple of questions. Firstly, your Air segment's organic take rate -- organic net take rate seems to be at multi-quarter low. So is this like also obviously benefited the top line -- I mean, GTV growth getting faster? Like...

Prateek, in case of airlines, at times, the take rate is not in our control. So generally, the airline business is on a commissionable model, wherein we receive commissions from airlines or the other partners. But if you see the GP line, there is only a marginal decline, not a significant decline between different quarters, 1.1% to 1.2%. That's the kind of number which varies across different quarters.

Meaning, even the gross take rate is lower?

So that's what I'm saying, it is 1.1% in this quarter versus 1.5% in Q2 and 1.2% in the last year same quarter. So not a significant decline, I would say, in terms of the GP. In terms of the take rate, you might see a higher decline, but not in terms of the GP.

I think what is important in the airline business is the GP, because that is something we still control. But the take rate is something which can move any direction depending on the airline, right? But what is important is that we -- our intent is to continue our 1.1%, 1.2% as a GP on the airline business. And if the growth has to come -- Prateek, that's a matter of discounting, right? So if you drop it to a 0.8%, we will start winning GTV. So that's not the intent. So I think this is a true growth what we have demonstrated in Q3, maintaining our GP as well.

Okay. Also can you discuss region-wise growth expectation you used to discuss earlier, like region-wise -- like different geography-wise? I know for a quarter...

I think we've given all of that in the -- we have shared that in our shareholder letter. So -- and we have given region-wise -- I think we have given some region-wise growth numbers as well.

You can go through, and you can connect offline, Prateek, on this with me.

Okay. And last question on -- can you comment on competition both in India and outside, how is it shaping up, maybe in a specific geography or otherwise?

I don't think there is any material change in the competitive landscape in the last few quarters, Prateek. Things remain competitive as they were before. I would not say that anything has become more competitive or anything has become less competitive at this point in time. Pretty much status quo.

In some geographies, it might be intense, Prateek. But the fact remains it is still the same. So nothing significantly changes on the comp side.

We have our next question from the line of [ Mr. Mateen Shah ].

Yes. Am I audible?

Yes, you are.

So I would just like to know like who would be your comparable peers probably either in the listed category, Indian listed category or elsewhere?

[ Mateen ], I think the closest peers would be Web Travel Group listed in Australia and HBX listed in Spain. Expedia has a B2B business as well, but bulk of their revenue still comes from the B2C business. But beyond that, I don't think I can think of any other listed peers.

And more point, Gaurav. See, even in case of HBX and Web Travel, they are primarily more into enterprise business than retail kind of a business like us.

Yes.

So is it possible to quantify any particular market share percentage-wise?

No, very hard, [ Mateen ]. I think, one, the markets are very large and very fragmented. So very hard to take a -- hazard a -- it will be hazardous to take a guess on market share.

Understand. Understand. And is it possible to quantify average revenue per employee?

I think -- do we share headcount?

We don't share headcount. But again, the metrics may not give exact color basically on the basis of the nature of the business we are into. It's not purely a sales-driven business. So we do share our overall headcount, including Classic, including all our consultants and retailers that we have, is north of 2,600 plus as of December end.

Okay. And I guess one of the guys had already asked. It will be good if you can give percentage-wise contribution geography-wise. It will give us a better idea of how the business is shaping up in different geographies.

We do give GTV especially for our hotels business, the GTV numbers at a region-wise level and what kind of growth we have year-on-year. And we do provide some color on the commentary on the regions as well.

Got it. And last...

Beyond that, we -- yes, yes, continue.

No, no, understood. Understood. And last question, like how are we connected to guys like Amadeus and RateGain per se?

Both are platforms that we connect for supply. So these are intermediaries that help us connect to the supplier. So we are connected to both Amadeus, RateGain as well as many other GDSs and [ travel ] managers.

We have a follow-up question from the line of Divyansh Gupta.

One more basic question. My understanding, correct me if I'm wrong, is that the hotel booking process is not, let's say, a very smooth and automated process, but at least flights, given all the GDS and all other tech that surrounds, it's a highly automated flow. Is that understanding broadly correct?

Divyansh, the hotel booking process is also fairly automated. The only thing with hotels is that the post booking handling is slightly more complex on hotels compared to flights, but the booking process is largely automated.

Got it. So my question was actually on flights. So like we mentioned that, let's say, we have a take rate of 1.1%. If we go to 0.8%, we can do larger volumes. So the question is that if the process is largely automated, even with a 0.8% take rate and a larger base, we would see a very high operating leverage flow through. So am I missing something there as to why we would not want to pursue that strategy?

So Divyansh, that 1.1% is the GP. So you're right, I mean, what you said. I understood the question. See, for us, it's the tech and the platform which helps us with the efficiencies, right? So if you see our headcount in the last 3 years in terms of our air ops, et cetera, there has been no increase. So the plan is to keep building GTVs, which would obviously help us in our operating leverage, particularly for Airline business, right, because that's more India-centric, and to be fair, we can't be mixing it with our hotel business at an enterprise level. But you're absolutely right. For us is to -- but should we dilute 0.8% and get more GTV? I don't think that's the plan, Divyansh, because it doesn't work in the short and medium term, because sooner or later, somebody will match it and then -- so it's better that we be consistent. The market also kind of appreciates that. And we still rather grow in our early teens. We can grow more, but we are very happy to maintain our GP as well as some decent growth and obviously out beat the market, right? I think that's more important as well.

Got it. And as you had mentioned that, let's say, the previous airline had a lot of turbulence in this -- in the last quarter, and we grew and -- anyways, IndiGo does a large own website sourcing. So it's a safe assumption that, let's say, we are much more stronger with Air India and Akasa, I'm guessing. Akasa is still a minor player, but Air India has a bigger share of -- we have a good relationship with Air India. Is that a fair statement to make?

I think our relationship with airline supply in India is probably the best, be it any airline. For us, IndiGo still remains our largest air carrier in domestic and specific. The disruption obviously kind of affected us. We could have gone -- we could have grown faster than what we did. But absolutely very well poised with every airline flying within India as well as overseas. So I think from that perspective, we are equal. Our focus remains in all airlines which are meaningful, and we will continue to do that.

Got it. And just one data keeping question. What would be the working capital cycle for a flight and for a hotel, ex of CV?

So for hotels basically, even in the organic business, it's a negative working capital cycle business, because generally we would be paying near to the time of check-in or after check-in to hotels or suppliers. But we generally would be collecting starting from at the time of booking till at the time of check-in. So it's a negative working capital business. Air is, I would say, almost a working capital neutral business kind of thing. We do have -- get credit from airlines. We do pass on such kind of credit to selected agents and so on and so forth.

But we don't fund the airline business, Divyansh, but...

So it's a neutral kind of business.

Got it. And I think a couple of quarters ago, you had mentioned that the time from booking to check-in is seeing a compression because -- either because of geopolitical or might be various other reasons. Are you seeing that number stabilizing, improving, reducing? Any color you can throw on it?

I don't think there is a major deviation. It has shrunk. It has shrunk, but I don't think it is shrinking further. It seems to be stable at this point in time.

Got it. And is there any way -- and just one question that when a -- let's say, I'm a customer, I'm going through an agent and booking through TBO. Do I get an option to, let's say, like -- and this is a B2C portal experience that you pay something more -- you pay something less upfront or you pay with something extra, but you can pay at the hotel and where effectively the difference is the working capital financing. So as a TBO agent, do I have that offer to give to a customer?

So we don't do pay-at-hotel.

Divyansh, we don't do pay-at-hotel at all.

It works in B2C, but not in a B2B kind of a business.

And any reason for it? Because you also give credit to a customer. But if we are collecting everything from the customer upfront, but then the credit limit should not exist, right, to the agents?

So generally, we will not be collecting upfront from the customers. At times, we may allow travel agents to use the credit card of the customer on the pass-through. Generally, it would be that the travel agent would be making payment to us. He may be collecting or giving a credit to his end customer, and that's his own call.

No, I was talking TBO to agent credit.

Yes. So TBO to agent credit we do give depending upon the credit assessment that we do for the travel agent. But I'm not able to understand your question and...

I think Divyansh is asking that if the credit card was charged directly by the hotel, then the travel agent will not need credit and travel agent's books will not see the business. But Divyansh, what happens is often travel agents are packaging the hotel along with many other things. So if now if each component has to be paid at destination, then packaging is not possible. Hence, mostly travel agents prefer a model where everything is paid for upfront. And second is, in many cases, travel agents also choose their own commission on every booking depending on the propensity to pay and competitiveness of pricing, which is also not possible if the customer directly pays at the hotel.

Got it. But my question was actually a bit different. So if TBO does not allow pay-at-hotel, which means the customer will pay to the agent. Now he pays through credit card, he pays in cash, doesn't affect TBO because TBO will say to the agent that you need to be because you have collected money. Is this relationship understanding broadly correct?

Yes.

Yes.

So then why is there a need for credit to be given to the agent because agent already has the money from the customer? If he was not having money, then I can understand...

There's also a mix of just not leisure business, right? Agents are also serving corporate, large itineraries, groups incentives, right, which obviously require credit. So therefore, the credit has to extended especially to the players who are meaningful travel agents, the largest travel agent partners of ours.

And even in case of leisure travel as well, travel agent has a set of customers, and he would be offering credit to them as well. They are not -- for the walk-in customers, he may demand payment at the time of booking itself. But for his loyal set of customers, he would be extending credit to them as well.

Okay. Got it. Understood. Understood. And what has been actual ever write-off -- the last year write-off on credit?

So we do provide -- give the provision for bad debt numbers in our financials. I don't have that handy, but it is there in...

No, no, I was asking actual write-off, not the provision. Provision you will do, but actual write-off.

Actual write-off is not that material amount. I don't recall. But yes, I can provide you that number.

We have our next question from the line of [ Mr. Amit Jain ].

Just want to understand one thing. A few quarters back, we used to give a detailed cohort about the transacting buyers. So how many -- let's say, if someone got onto our platform 5 years back, so how much he's contributing, whether he is on our platform or not. So something -- the kind of metric at the management level you are looking at between the old transacting buyers and the new transacting buyers?

Yes, [ Amit ], we do look at that number, and I think we've shared that number in the -- even in the shareholder letter have we given?

We've given not in the number terms, but in the GTV terms...

So we have shared how much business is coming from new customers versus customers who were previously onboarded in the shareholder letter. In the annual report, we shared the data on long-term cohorts as well. That data will not change very materially on a quarter-on-quarter basis because you can't compare it for the half year compared to the previous full year, because then the numbers will obviously not be correct. So while we do that analysis on an annual basis, the number we have been sharing consistently is how much business has been contributed by travel agents added in the same year, which is basically a reflection of the effectiveness of the investment we have been doing in the sales team.

So Gaurav, just want to understand, at your level, what is the kind of optimal number you are looking at? Just like in insurance, we used to have a persistency ratio, let's say, how many policyholders remain with the insurance in the policy. So similarly, in your case, what kind of number you are looking at ideally?

See, it is very hard to articulate a single number, [ Amit ], because the business operates at a global scale and the nature of travel agent changes from geography to geography. For example, in densely populated but low-income countries like Indonesia, India, you will see thousands of travel agents will come and go, but the throughput from each travel agent will be relatively small. So churn will be high. But if you look at markets like Western Europe and North America, then the stickiness is high, but -- and throughput is also high. So when you aggregate all of those numbers to come up with a single number, it's very difficult. And hence, the metric we really look at is, every yearly cohort, is that cohort on the whole growing or not. So if I look at my cohort of travel agents added last year, have they meaningfully grown this year or not? Or the cohort that came in 2 years ago, has it started to -- grown at a slower pace than the last year cohort, but is that cohort growing or not? So you can look at a cohort as a whole, but you cannot look at a percentage of travel agents churning or not churning because that changes a lot depending on in that particular year where do you add travel agents. If you have thousands of travel agents in Indonesia, for example, vis-a-vis a few hundred in Europe, it's a very different metric.

And I think you rightly said because our interactions with a few travel agents reflects in India churn is quite high. As they grow in size, I think they move out of the platform and they start dealing directly with the suppliers. So is this confined to India or a few Southeast Asian countries? Or you find some in other geographies this kind of churn, higher churn?

No, [ Amit ], the example you are giving is actually not very frequent. Our churn usually happens -- this may just be a travel agent sometimes reducing their share of wallet if they choose to do something direct. Churn usually happens because of attrition, in the sense that travel agency closes down because there is no license required to start a travel agency or you are a one person who started a travel agency, closed down, started again. So attrition causes more churn.

No, Gaurav, I just asked -- actually, our interaction was with a very big travel agent, and he was -- your wallet share was high, but over a period of time, it reduced. And I can see the reason is that they started dealing directly with the suppliers. So I'm seeing this kind of risk. Do you see this as a risk which is to our business? See, as they grow in size...

If you see our numbers, our monthly transacting is 33,000, right? What you're describing is probably the top 1% or a top 0.1% of our travel agencies who will actually be able to work directly with the suppliers. The whole business model is dependent on a long tail of small businesses depending on the platform for accessing supply. So in our experience, this is rarely a reason for churn. This may lead to some reduction of wallet share. But churn usually happens -- either they may occasionally happen because they just didn't like the service. But usually, the churn is really a travel agent stopping business or moving out of that company and starting their own agency.

And also, [ Amit ], sometimes we don't expose our credit limits with a full partner also. So that also kind of ask them -- can be leakage for them to deal with supply directly. That can be one of the reasons as well.

We have a follow-up question from the line of Chirag Kachhadiya.

Can you hear me?

Yes, loud and clear.

Yes. So I was just visiting the website of Classic Vacations. If I look at their UI and UX and web interface and if we compare it with what TBO's current UI, UX is there, is there going to be any change, I mean, in terms of, let's say, upgradation in the Classic platform? That is question number one. And second, the transacting advisors, the numbers which we are providing, is there any concentration? Let's say, some of the advisors contributing materially more as a percentage of revenue to the top line? Yes, just broad 2 questions I have.

See, the branding for Classic will remain distinct from the TBO branding because they service a different kind of customer. The underlying UI/UX may change somewhat. Especially when the platform migration happens, then the booking engines will look more similar to TBO, but in Classic brand and colors, obviously. But I don't think we are trying to homogenize the 2 platforms at all, right? They service different customers, and we want to keep it that way. On your second question, there is -- I don't think on the whole there is any major concentration of business with specific customers, especially because Classic is a pure retail business, right? There's no large enterprise business over there.

Okay. And the changes which you mentioned for the Classic platform, any ballpark CapEx figure if you can provide like that we're going to incur, any such plan?

Chirag, there is no incremental CapEx for it.

There will be some in-house CapEx for the IT work, but not a substantial amount.

It's not substantial. It's not substantial.

So that our last question for the evening. Thank you everyone for [indiscernible] the call. I would now like to hand over the call to Mr. Ankush Nijhawan for his closing remarks.

So thank you, everyone, for taking the time for our call today. One thing we definitely acknowledge that either we should have pushed the call today. Unfortunately, our Board meeting got a little bit delayed. So we'll be mindful of that for our next analyst and earnings call so that we can send you the shareholder letter much in advance. So our apologies for that, but thanks for joining in this evening. Thank you.

Thank you.

Thank you.

Thank you, everyone.