TBO Tek Limited ($TBOTEK)

Good afternoon, everyone. This is Vanessa Fernandes from the Investor Relations team at Adfactors PR. On behalf of TBO Tek Limited, I would like to welcome you all to the earnings conference call for Quarter 4 and FY 2026. 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. Akshat Verma, Whole-Time Director and Chief Technology Officer; 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. Gaurav Bhatnagar for his opening remarks. Over to you, sir.

Thank you, Vanessa, and good afternoon, everyone. We have already shared a detailed shareholder letter yesterday. So I will not go through the detailed results in my opening remarks. But rather, I will just give a high-level commentary on how we have viewed the last quarter and what is the impact of all the geopolitical tensions on the business and how we're reacting to it. So overall, as a company, I think Q4 saw the disruptions, which we are all aware of. But on the whole, we believe that we had a fairly satisfactory response to the disruptions. I think the advent of the war at the end of Feb also tested the resilience of our business and which has shown through in our results in spite of the fact that our largest source market, which is the Middle East market and Israel, which is one of our large -- top 5, 7 source market as a country were very severely impacted. On a year-on-year basis, you will see we're able to demonstrate growth both on top line and the bottom line. Apart from that, we have also seen that the recovery in the business corresponding to the changing circumstances of the war is quite sharp. In pockets, whenever there has been a positive news, for example, when the cease fire was announced in the Middle East in April, we saw a sharp uptick in business at that point in time. So we remain hopeful that while the war has a short-term impact, the long-term impact will be minimal. And depending on when a favorable outcome happens on this war, the business would start to come back quickly. Just to recap the 3 pillars of our strategy for the previous year. The first one was when we had talked extensively about it was our increasing investment into market development activities. And that played out quite well for us. We had increasing spend on SG&A in the beginning 2 or 3 quarters of the year, but that spend started to taper off by Q4. And we've shown data and our shareholders letter, you will see that in Jan and Feb, we were seeing very strong operating leverage, margin expansion as well as EBITDA growth on a year-on-year basis for these 2 months compared to the same period last year. Of course, March was a complete washout for us because of the war. And hence, on a full year -- full quarter basis, the operating leverage did not flow through. But we are starting to see that similar sentiment in the current quarter as well. So the whole hypothesis of accelerating investment into market development focusing on adding new travel agencies and getting them to the first [ 10 ] transactions has worked quite well for us. If you see the number of monthly transacting buyers on a year-on-year basis has grown very dramatically in the last 1 year. So that is where all the investment that we made has gone in. And we will start to see the results from it in the coming year. The second big focus we have been increasingly talking about is anchoring around the luxury end of the spectrum. This is important from 2 perspectives. One is that I think the luxury business is far more resilient to all the geopolitics and rising costs compared to the premium or the budget end of the spectrum. And second is, as [indiscernible] becomes more prominent, especially in the travel booking workflows, we still believe that the complex connected itineraries and the luxury end of the spectrum will still largely be booked via travel advisers and travel agencies. So in that direction, we made significant progress this year. We have created our new AI-first tool called Voya. We shared some more details about it in the shareholder letter as well. And that [ IMS ] segment, the tool has come on really well. The whole business is -- that is being built around Voya is to allow travel advisers to get access to luxury, ultra-luxury supply on the platform, use AI tools to create these complex itineraries, share these itineraries with their travelers and create an AI-led workflow with them to quickly get those itineraries to closure. We believe this is a very important -- I would not say pivot, but an adjacency to our current business, where we will start anchoring more around building complex itineraries as and when stand-alone hotels and flight bookings. The third big news for us last year was the acquisition of Classic Vacations. We had a stated intent to grow in the North America market, and some of our previous attempts had not been successful. The Classic Vacations business is now more than 6 months into our [ fold. ] And we are happy to report that the integration process is well on its way. We are integrating across platforms, across supply and across demand channels. While we are -- I would say, we are probably about halfway through the integration process, but we intend to complete the integration by the end of Q3. So by the end of this calendar year. And finally, just our view on how Q1 is shaping up because there has been a fair bit of uncertainty because of the war. We are pleased with the way the business has started to recover, especially in markets which are not directly impacted by the war. So the initial reaction right immediately after the start of the war was that business has started to slow down pretty much in every source market. Since then, we have seen strong recovery across markets, which are not directly impacted by the war. In the markets like the Middle East and Israel, where we have a more direct -- here, impact of the war, we are starting to see increasing recoveries to the extent that in pockets, we are seeing volumes which are similar to the pre-war volumes not really getting to -- not exceeding those levels though. And as a whole, we would still expect Q1 to be better than Q4, and we would also expect Q1 to be better than same period last year. So that's the broad summary. If the top line plays out as we are anticipating it to be, we continue to have a moderate SG&A growth, and hence, we should see some green shoots of operating leverage play out in Q1 as well. So those are the high-level comments from our side. We'll open for questions now.

Thank you, Gaurav. [Operator Instructions] We have our first question from the line of Mr. Karan Uppal.

This is Karan Uppal from PhillipCapital. Yes. Congratulations to the entire team on a very strong set of numbers despite so much uncertainty as well as Middle East war. So Gaurav, just wanted to understand on the hotels and ancillary growth. The growth has been very strong despite geopolitical shocks as well as elevated fuel prices. So can you attribute some reasons as to the kind of strong performance? Is it the new TAMs, which have been added, they are more productive or they have added high-quality large agents? Or maybe the end clients of TBO are premium or luxury, they are immune to basically changes in the environment? Any reasons you can attribute to the strong growth.

Yes. No, thanks, Karan. Look, I think it is a mix of both the factors that you're talking about. But primarily, we were anticipating and we had talked about on our previous calls as well that we were anticipating in Q4 will be extremely strong in terms of year-on-year growth. The reason was that when we started doing market development investment in, say, Jan of 2025 onwards and spend the next 6, 9 months, signing up new sales teams, onboarding a new sales team and then signing up new travel agents. There's a lag between when you start onboarding travel agency than when they start to become meaningfully productive for you because these are small businesses, and that is why our team [indiscernible] journey is so important. So we were expecting this to happen that by the time we come to Q4, all the effort that has gone into onboarding these new customers will start to pay off. Q4 was we were also a -- little bit of timing that some of our large partners also went live in that one quarter. With that, yes, of course, March was impacted. And even in spite of the March impact, you could see the growth that we've delivered. So if March was not impacted, then the growth would have been much higher. And we are hoping that at some point in the next few quarters as things settle down to pre war area, we will start to see stronger growth. So while, yes, the numbers look good stand-alone, from our perspective, if the war had not happened, the numbers would have been much stronger than what they are. So majority of it is just our market share gain, our market share in the market that we've been investing. Some of it also currently is the other point and which is where we believe in the resilience of our business model that the demand impact of wars or pandemic or geopolitical events or inflation is relatively less at the premium to luxury end of the spectrum and that also show through, because even in a market like the Middle East, we have started to see demand come back fairly quickly. Now that may not be true for the budget or the premium end of the spectrum, but the high-value bookings have already started to happen.

Got it. Thanks, Gaurav, for the explanation. Just on EBITDA to GTV ratio. If we look at it for last 3 years, that has been stable at 1%. Now with SG&A growth tapering down, shall one expect this ratio to move up starting FY '27?

I think that's a reasonable assumption, Karan, and it's a function of 2 things. One is absolutely as SG&A growth tapers down, margins should expand. And second is the saliency mix will also help as our hotels business, which is higher margin business grows faster than the [indiscernible] GTV.

Got it. All right. One question to Vikas, sir. Sir, cash flow from operations has been negative. Even the FCF has been negative this year. You have mentioned in the shareholder letters the reasons for the same. Now from a go-forward perspective, shall we assume that the cash flows will return to its normalcy, let's say, in FY '24, '25 levels, we saw, let's say, 90% CFO to PAT ratio or FCF to PAT was also above 100%. So can we expect the similar levels in FY '27?

Yes, Karan. We are actually working towards the same only. So as I explained in detail the reasons for the negative movement in the current year. But some of these things are primarily timing in nature, be it related to the Brazil anticipation, albeit some trade receivables getting delayed collections due to the war and other situations. So those timing issues would -- is getting resolved as we speak. And obviously, by the next year-end, we will revert back to the original cash flow to -- EBITDA to cash flow conversion percentages.

Got it, got it. Just last question on Classic. So Gaurav, the take rate at the time of the acquisition was around 23%. Now we are operating at 25% and then EBITDA to GTV numbers are higher. So can you explain the reason for the same? And how shall we think about Classic in terms of the growth as well as the take rates and the margins?

So Karan, early days to say, but the changes are not very material as we speak. At times, it is because of the mix impact in the business between the groups and the [ FID ] business. and between air and hotel and so forth, so there's no material change we have made from the perspective of increasing our margins. So we think that the margins that they're operating that would operate in these range only Currently, we are not looking at optimizing margin per se.

And the growth in Classic business, how shall we think about it.

See, very very early days. The way we are thinking of growth is growth in the North America business because we have Classic and TBO North America internally, we are viewing it as one business. We are absolutely anticipating significant growth in that business. I would hate to quantify into a number right now. But on a year-on-year basis, absolutely, the business will grow. Those in certain ways, those businesses are already optimized in terms of SG&A. So the flow-through of operating leverage in those businesses will be higher, right? So these businesses to add meaningfully to the bottom line growth need not grow very highly on the top line.

We have our next question from the line of Mr. Manish Adukia.

This is Manish Adukia from Goldman Sachs. Really commend again all the disclosures you've made, quite appreciated. I have a few questions, then most of them are actually follow-ons to Karan's question, and Gaurav, what you spoke in the opening remarks. First one, just on growth from a near-term perspective. You mentioned that the June quarter should be better, both Y-o-Y and quarter-on-quarter, which is encouraging to know. When I look at the month of March, where you had implied GTV being down, I think, mid-single digit and GP being down about 10%. And despite June quarter having like the full quarter impact of travel, you're suggesting that on a Y-o-Y basis, both GTV and GP should be up? You're not quantifying that, but it's safe to assume that maybe in the single-digit range, would that be like fair to say?

Yes. So yes, we are not quantifying it, Manish, but where things are, and with always a caveat that things are at status quo, right? If things were to change in terms -- for the worse in terms of the just geopolitics, then who knows what happens. But let's assume that there is no good news and no bad news beyond what is today. We would expect to see both the Y-o-Y growth from Q1 last year as well as Q-on-Q growth from Q4 of last year.

Very clear. My second question is on the GP growth in Jan and March, which was like high 20s or mid- to high 20s, which seem like a very strong print. And you talked about, of course, the investments you've made in the business in the last few quarters and the goodness of the sales investments, et cetera. So now that let's say you're coming off that investment cycle and that investment will be benefits now. Let's assume that tomorrow, if we were to go back to normal completely, at least from a foreseeable future standpoint, has the growth of the business been reset to like mid- to high 20s, given just the investments you've made? And then maybe at some point in time, you'll have to start making investments again. But for now, I mean, I would have thought of the business, maybe like 20% growth business, but it looks like it's a high-growth business. So I just want to see if Jan-Feb, was there like one-offs that drove the growth higher than what the trend line growth is? Or is the trend line growth closer to that mid- to high 20s number?

See, Manish, I think the aspiration, as we have always talked about is to grow in that range, right, at least I'll not say mid- to high 20s, but early to mid-20s. I think that remains the aspiration for the business. We are absolutely -- look, the investments have already happened, and that is starting to pay off and continue to pay off because these are not one-off investments in the sense that the sales people will have hired -- will continue to add more to the business. What remains to be seen is large markets like Israel and Middle East, when they come back and to what level do they come back from where they used to be. Early signs are still, I would say, look encouraging. But we really can't comment on it until we have gone through at least 2 quarters of just normalcy. It's not very clear what happens because if there have been some outward migration from the Middle East, and there's an impact on outbound travel for the Middle East, inbound travel is also impacted right now. So very hard to say where that lands. But yes, the whole business plan was anchored around this growing north of 20%. We do believe that unless some serious downward movement happens in the base of where normalcy sets in, we should continue to grow in that range.

Very clear. My other question was on AI. And again, thanks for all the color in the shareholder letter. In terms of, let's say, your conversations with your suppliers as well as buyers, what are they doing around AI? Like is there anything that suppliers are doing differently, your buyers want to do differently, which may concern you or any trends that you can call out that potentially could actually be beneficial to TBO? So any thoughts around that would be helpful.

Manish, I think there is a lot of conversation around AI, and that maybe is beyond the travel industry as well. So there's a lot of conversation around AI. I also feel that there is a fair bit of work everybody is doing around productivity, but which is more internal to the organization to say how can I drive more sales productivity, more CX productivity, more developer productivity. But from a change of business model perspective, we haven't seen anything substantially different. Like the obvious stuff is happening, right? People have written some [ MCPs ] to show their results in ChatGPT or on Claude. But I don't think there is any evidence here that, that's meaningfully driving business for anybody. There are voice or AI chatbot people are introducing in their apps, which is all I kind of like expected, but I don't think anything materially has moved either on the supply side or on the demand side as yet for us to either see it as a massive big opportunity or a massive threat.

Very clear. Just last question, maybe a question to Vikas and a follow-on to Karan's question. And again, thanks for all the reasoning in the shareholder letter around just the cash flow and the working capital. But when I look at let's say not just the full year number, but even on a 6-month basis, 6 months FY '26, the disclosures you have made, the working capital was like a large drag, and that drag has only worsened for the 6 months ending March. So I'm just trying to understand that why should that be the case? I understand the explanation for March or the 6 months ending March. But why should it have been worse in September and then it's only gotten worse in March? I'm not fully clear on that part.

No, Manish, a couple of things here. So the [indiscernible] started somewhere in Q2 itself, and that has impacted our September numbers. So from that perspective, September numbers were also impacted. So the worsening is primarily happening, there are 2, 3 things here. So when I mentioned about the performance in bonus incentive. So generally, these performance bonus incentives are from the financial year, especially for the airlines, April to March or, let's say, for the hotels, it is from Jan to December. So by the March end, because of the growth in the business, the PLB balances has increased. The recovery for these balances starts happening in the Q1 -- between Q1 and Q2. So that is kind of driving the March numbers per se. Secondly, as I explained, related to the trade receivables per se because of, one, geological tensions in Middle East due to the war coupled with the fact that there was Eid holidays in the last [ fortnight ] of March, there leads to delay in some collections from our long-standing partners and which leads to a temporary, I would say, build up during the quarter end. And that has also kind of impacted. And third, like we didn't have much of bank deposits, which were more than 12 months. We didn't have any actual bank deposits, which were more than 12 months period in the last year. They also, as per accounting, get classified as other financial assets, et cetera, and they are also getting clubbed under the working capital change movement. So these things are kind of impacting and leading to some worsening in March.

We have our next question from the line of Manik Taneja.

I actually had a couple of questions. Question number one was with regards to competitive intensity, given what we've seen from some of your global peers talking about resetting their take rates to a much lower number. Would love to get your thoughts as to how do you see that playing out? That's question number one. The other question that I had was with regard to why you were mentioning that Q1 maybe a positive growth quarter both on a sequential and year-on-year basis, given some of the impacts around pricing and some airlines also reducing their connectivity. How do you see this playing out with regards to the second quarter of your financial year, which typically is the best quarter that we enjoy. And the last one, basically, clarification question on cash flow. Vikas, basically, while you've called out multiple factors impacting your cash flow, would love to understand how does the dynamics around the changes in Brazil, et cetera, impact your traditional cash initiative would be? So those would be my questions.

Competitive intensity. Look, Manik, yes, I think our peers and competitors have talked about some lowering of take rates. Now you have to see it in the context that we have started from traditionally the most competitive and most price-sensitive market, which is like India and Middle East. And then we have progressively moved to higher take rate markets like North America and Europe. So while, yes, there is always this pressure around take rates. For us, it's one, balances off from a perspective that we are starting from markets where the average take rate is lower to markets where the average take rate is higher. And you will see that our growth is largely being driven by a higher take rate market. Second is that we fundamentally operate our business at a certain -- at a certain margin and a certain EBITDA margin, which allows us to remain competitive at the take rates that we operate at today. So we are not anticipating any immediate, right? And when I say immediate, I mean, short to midterm downward pressure on take rates, and we absolutely intend to maintain them at the current levels. We are also not trying to improve our take rate from where they are because we have always been clear that it's an aggregation business. You have to take market share. So we should not be -- we should be leaving money on the table for our travel agent. So there is no effort to improve our take rates, but there is also no downward pressure on the take rate as it stands today.

So Manik, on the supply side, on the airlines, like you said, there might -- there are some [indiscernible], which are happening. One, I think it is temporarily because as the oil hopefully comes down, if the war settles down, these inventories, which the airlines have cancelled will come back very quickly. The other thing is that the supply might have reduced in domestic, but the fares have gone up, but the passengers are still traveling because this is a peak of summer holidays as well within India. Secondly, the international routes, which we heard have been cut by Air India, et cetera, will obviously substitute to another European airline or somebody traveling to East of -- to Asia Pacific, et cetera. So from that, what we have seen is the shift of business happened, especially -- I mean, there are hardly anybody traveling into Dubai still, but the business is either into Asia Pacific. And for example, Japan has been the flavor for a lot of HNIs, and obviously, a lot of HNIs still continue to travel to Europe. So we are seeing these trends. And I think keeping in mind because of the summer season, which obviously, most of us are -- the kids are on leave, I think travel is something which will continue to happen in spite of a little crunch in the inventory in the airline sites.

And Manik, on your question related to the cash flow on the Brazilian discretion. So look, just to refresh that in Brazil, we generally collect payment from customers to credit cards where the payments are being made in installments, but nobody goes to us. So now earlier, we used to anticipate or discount the collected payment so that we use to receive the payments up front by paying certain charges. However, in Q2 of last year, we tried to do some kind of an experiment to see if we don't anticipate, if there are any positive impacts in the business since whether we are able to drive business up by lowering down the margins, which we have increased due to cover this [indiscernible] costs. So we ran that experiment for a couple of months, a few months, actually, but we saw that there was not a very measurable increase in our business. So we reverted back to our old position somewhere in mid-December. But what this led to is basically during that period, the customers receivable, we have not discounted for. Those monies, we would be receiving until -- I believe majority of the payment will get recovered by Q2 of this current financial year. So that impact will go down from -- after Q2.

Sure. Any thoughts on what should be our FCF to EBITDA or FCF to EBITDA ratios with the way our business mix is progressing?

So historically as well, we have been delivering more than 100% per se. And that's what we would strive to do by end of this financial year as well.

We have our next question from the line of Mr. Prateek Kumar.

Congrats for great results. So my first question -- this is Prateek from Jefferies. First question is on -- like what is the quantum of EBITDA you think you would have lost in Q4 based on the run rate you were thinking for March from Jan-Feb levels versus around INR 110 crores EBITDA, which you have reported for the quarter.

Prateel, it's a very hypothetical question, which we have, by the way, talked about and limited about enough internally. I don't want to give a specific number, but I think the one easy way to look at it is that given our costs or whatever, right? So there were no material change in cost from Feb to March, given that that was just the start of the wall. Typically, historically, March is usually stronger than Feb. So you could extrapolate yourselves to see that any incremental GTV, especially hotel GTV would have largely translated to the bottom line. So I'll leave it there. It's an easy calculation. But it's a significant loss for us. And again, from a margin expansion perspective, I think that is all the operating leverage expansion that would have happened got lost because of it.

So because first 2 months, we're running at 50%, 60%. It seems like you have lost like INR 30 crores to INR 50 crores in that month because the full quarter number has significantly come down because of like at 5% to 7%.

So Prateek, as Gaurav mentioned, so we can't give you an exact number. But you can derive it based on the numbers we have already published.

Okay. And this 16% SG&A growth, how are you looking at this growth? Are there any specific measures to control cost in this environment? Or how are you looking at SG&A cost for on like-for-like basis in FY '27?

Prateek, the SG&A growth will definitely not accelerate from where it is. It will slightly taper down as well. And hopefully, the gap between SG&A growth and GTV growth will increase, which will roll -- lead to operating leverage and expanding margins. Just to be clear, while there is a strong focus on cost control and hiring freezes in different parts of the business, we do recognize that our business model essentially works very well with expanding size of the sales force and adding salespeople where we didn't have salespeople before. That investment will continue. But that investment is not at the same scale and intensity as last year. And hence, you will see SG&A will still grow, right? So you will not see that SG&A has come flat compared to last year because I think that will be a little bit too short sighted. But the top line at this from hereon should definitely grow faster than the SG&A.

And then on a like-for-like basis, you said that you are growing year-on-year and quarter-on-quarter. Of course, SG&A growth will be still like a higher number, like, let's say, 15% growth run rate. So on a like-for-like basis, margins will still be lower, right, on -- in Q1? That's what we should think about?

Yes. Very -- look, Prateek, very hard to -- given the uncertainties of the situation, very hard to say where it lands, but we are just hopeful that we will show at least in dollar terms both EBITDA growth from previous year as well as from Q4, but I really don't want to comment beyond that.

Okay. Other question is on impact of war on international travel because clearly, there is like a lot of noise around high airfares and amount of capacity, which is being taken out. And in companies definitely seems to be doing more, but global companies are also taking out capacity. So when you say that you are seeing normalization generally. So is this something which doesn't impact or like more hotels are seeing better recovery, which are -- I don't know, which is how that is getting driven? But there is a lot of noise around high airfares and capacity withdrawn from the system.

Yes. Look, Prateek, I think corridors have shifted for sure. That is one thing that we are seeing. And because Middle East other destination is a large destination, which is really that it has seen a big downturn. Second is there are certain -- there is certain uncertainty around traveling on the Middle East carriers as well as at this point in time, especially from Europe to the East. So corridors have shifted. I think there's a bit more in the regional business that we are seeing, where I think, typically, airfares don't impact so much because, for example, if you're traveling within Europe, the airfares are still reasonable at least in dollar terms and definitely lower than, say, if you were going to do long-haul travel. So that is one thing that is clearly visible. The corridors have become shorter. The other thing that has happened is that the booking windows have also shrunk a little bit, which is why, overall, the industry remains hopeful that if some resolution happens to the wall in the next few days, we can still capture the June, July, August, September -- June, July, August, September, summer traffic. So yes, I think there is an impact. We can't say there is no impact. Like Ankush said, the consequence of that is that airfares are higher from a GTV perspective, you probably need to sell less tickets to get the same amount of GTV. And then the other bit is that the spectrum that we like to try to operate in, which is more premium and luxury, less sensitive to minor changes in airfares, but yes, more sensitive to the actual geopolitics of choosing not to fly certain carriers or through certain transit points.

Okay, so in your case, because the business is like accounted by a source of market. So Middle East, other source of market will -- would have like still being lower in terms of contribution in Q1, right? Other markets might have been doing much better?

Yes, that is correct. I think Middle East still continues to be below prewar levels. But it is catching up.

Okay, last question is on competition. So Expedia reported like a 20% growth in B2B higher than the B2C segment. How should we look at their comment on growth? Is this a growing competition? Or because they are also one of their, I think, your suppliers, so they're your large suppliers. So is this sign of increasing competition or generally, the B2B market is growing more now?

I think in general, I do think that the B2B market is growing faster than the B2C market. There seems to be some level of saturation in whoever is going to book online, self-book is already there. So I think just finding new customers to book online is harder. It's hard to really comment on the source of growth for Expedia because they don't lay it out. But their core business is selling to large, like partners like us or large loyalty banks, airlines. So there, they are not direct competitors for us from that perspective. They also have a travel agent [ retain ] program, but our understanding is that, that is not a very large program, and it is strong in pockets, but probably not -- we don't directly compete with them in many of the markets that we are growing in. So I think, I guess without knowing the color of their growth, it's hard to comment on where it is coming from. But from our perspective, we don't see Expedia as an immediate direct competitor for the most part, especially on the retail side of things.

We have our next question from the line of Moez Chandani.

This is Moez Chandani from AMBIT. So my first question was on the Middle East. So I mean, at the first 2 months of this quarter, how deep is the cuts in demand? Are you maybe say, 30% to 40% below your expected levels that you might have reached, let's say, last year in 1Q of FY '26? Or has now the cuts in demand been much more severe?

Yes, Moez, I think -- so 2 ways to look at it. If you were to just look at it from, say, where those numbers were before the beginning of the war. The numbers are actually better than that 30%, 40%. They're slightly better than that. But if you were to look at it from a perspective that this is also when the volumes start to increase, right? So you would expect in general, this is a high season now for bookings. So from that perspective, yes, we are still seeing significant loss of GTV because of the war. If the war had not been there, the numbers would have been significantly higher.

Okay. Understood. And then so how are hotels in the Middle East? And how are governments in the Middle East approaching this based on your interactions with them? Is there -- as things ease, is there a plan to maybe be very aggressive in terms of marketing, in terms of incentives to make sure that tourism recovery happens faster? Or has there been, let's say, a significant economic impact because of the war and things might take a little longer to recover in terms of tourism there?

No. Moez, I think there is a very strong resolve to bring things back to normal and more across the region. The tourism boards that we've interacted with are absolutely looking to reinvest in building out the market, and we are already engaging with them on plans on how and when that happens. So I think the sentiment on the whole still remains very cautiously optimistic. Of course, the region has suffered, there is no doubt about it. But I think there is a strong sense on the ground that once we put this behind, the recovery will be strong. And I think especially markets like UAE take a lot of hope from how they delivered post the pandemic, through and post the pandemic as well. So they have playbooks in place. So we still remain very confident that eventually, the region will come back to where it used to be and probably even show growth on top of that.

Understood. And then, say, looking at the markets ex Middle East, right? A, was there any -- did you see, say, slightly better-than-expected demand because maybe there were travelers who reprioritized or changed plans and decided to go somewhere else, who are planning to go to the Middle East and decided to go somewhere else? And then also B, in terms of operating leverage ex of the Middle East, has that played out your expectations? Is the other margins ex Middle East at the level that what you were expecting at because of the changes that you've done in your SG&A costs, et cetera?

Yes. So on the first one, yes, I think demand diversion has happened. And the trigger -- what it triggers is that other destinations become more expensive, especially in Europe and Southern Europe. And which we -- I mean, as a platform, we are fairly agnostic toward in the sense we have a supply available for Europe as well as for Middle East. So if the demand moved from, say, Middle East to Europe, we would still be able to sell. And that you've seen in the numbers. On your second question on what is the operating leverage looking like ex Middle East. Our view would be, yes, we are seeing it. But I would caveat that these -- ultimately, these analysis are a little bit hypothetical, right? Ultimately, we need to deliver operating leverage as a business, as a full enterprise, which would obviously start to show up only when our GTV growth surpasses our SG&A growth. But yes, if you were to carve out one region out and say that, okay, let's look at our cost structures and our growth ex of it, we would see improving margins, absolutely.

We have our next question from the line of Mr. Swapnil Potdukhe.

This is Swapnil from JM. So my first question is with respect to the benefit that we got because of rupee depreciation. It will be great if you can quantify what percentage of GTV at a consol level and possibly at our hotels level came because of rupee depreciation.

So Swapnil, basically why we don't convert our numbers at a constant currency, but we have done some back of the calculation because we are dealing with multiple locating entities dealing in multiple foreign currencies, et cetera, et cetera. But at the back of the [indiscernible], we see the overall impact would be in the range of -- on a year-on-year basis for the full year would be around 4% to 5%.

Okay. This is at a consol level? And it will be slightly higher for hotels? Is that understanding correct?

So no, I'm talking about the impact in the change in the exchange rates. So that impact would flow especially because when I'm saying, the foreign currency thing that is impacting primarily the hotel GTV. So this is primarily for the hotel GTV.

Okay, got it. And Vikas, will it not be fair to say that you should start reporting constant currency numbers as well given the nature of our business? I mean, a decent proportion of your profits as well as GTV comes from globally. So will it not be fair to say that it will be great if you can start reporting those numbers on a quarter-to-quarter basis as well?

Yes. Great suggestion, Swapnil. We will discuss this internally and see how transparently we can share disclosures around it.

The second question is with respect to the capitalization, which is happening on our -- some of the tech costs I'm presuming. Can you give some color on the nature of these investments? What is the amortization period of this cost? And also a related question to that is like, how are you amortizing Classic Vacations or the intangible stuff on that business which are there?

Okay. So the intangibles, as part of the [ special locations ] for the Classic Vacations have been recognized now fully in the books. Primarily, the amortizable asset primarily there is the supplier relationship asset, which is around INR 50 million in cost, and that would get amortized over a period of 15 years. On your question related to the tech-related capitalization, primarily, whenever there is any new feature, new product line, anything which would have future economic benefits as per the relevant accounting standards, et cetera. All those things only get capitalized. We have kind of separate cost allocated for the maintenance, et cetera, which goes directly into our operating expense. Only the development, which are happening for which would be able to generate any future benefits, that cost gets capitalized. And the amortization period for the same varies from 3 to 5 years, depending upon project to project.

Got it, Vikas. And then the other question is with respect to the cash flow. Earlier, there were some comments about some of the reasons why our working capital was negative this time around. My understanding of Classic business was that, it is a significantly cash generating business from that perspective because the lead times are longer than our normal course of business. So the consolidation itself should have benefited us from a working capital standpoint is my understanding. So any color as to why that did not play out?

Swapnil, that would play out now onwards because what happens basically at the time of acquisition when you consolidate and prepare your cash flows, the opening negative working benefit gets subsumed in the cash flow from investing activities only in the net impact, which is coming in the investing activities only. So we don't get benefit of that negative working capital in our cash flow in the year of when we have acquired that out. Only when future when the negative working capital goes more negative, that will benefit us from the consolidation perspective.

Got it. And just the last one regarding the efficiency benefits through Classic Vacation itself. My understanding is like the costs that you're reporting for the last 2 quarters have been around INR 110 crores for Classic specifically. This is the SG&A cost that I'm talking about. Any measures to see these costs going down, going ahead or it will be more of a [indiscernible] story on the Classic side so that the margins improve that business specifically?

See, Swapnil, early days to comment on it for several reasons. One, we are doing a full platform migration exercise right now. And only when the platform now successfully migrated will we truly start to see where this productivity set. Second is, like I said earlier, we are looking at it as consolidated as a TBO Tek North America business. So some of the cost may be relevant for the growth of the overall business in North America as well. So if you were to look at it, if we were club together, the TBO North America and Classic as one and kind of like one entity per se, at that level, we will start to see operating efficiencies. Now will the dollar value cost come down or not, we do not want to comment on it as yet.

We have the next question from the line of Mr. Samarth Patel.

This is Samarth Patel from Equirus Securities. My first question is, if you can help me break down quarter 4 growth for Europe into, let's say, deeper penetration of existing [ Swiss ] market versus new geographical expansion? And a follow-up to that question is what's the typical maturity curve for a new European source market in terms of penetration?

So see, Samarth, it is very -- the way we look at the business is from the unit economics of the key account managers that we put on the ground. So bifurcating this into what's coming from a new source market and what's coming from existing source markets is a little bit tricky because in large countries, you may add more people within the same country and which will be like just in a way, from our perspective, that will be fresh growth. But from our perspective, or did we open a new country or not, it is not. So it's hard for us to think of the business from that perspective. Second is on the maturity curve of an average market or an average key account manager starting to deliver meaningful productivity. It remains like we've talked about in the past, right? It remains about a 6- to 9-month window where they start to become meaningfully productive and many even productive in the sense that at least starting to almost breakeven on cost, and then there is profitability after that.

Understood. That's really helpful. My second question is with regard to like as Brazil anticipation discontinued in the third quarter and then [ IOF ] tax plus currency headwinds there. How should we think about FY '27 and FY '28 LatAm growth in particular?

Samarth, I think LatAm will see moderate growth compared to the overall enterprise because of the fact that there are significant headwinds, which go beyond just our own business over there, and you articulated them already as there is more volatility across the world, those currencies also face those structural challenges, and then it impacts travel very, very sharply. So our own view remains that we will see moderate growth in those markets for this year. Having said that, from a saliency perspective, it is important for us, but it is not amongst our top 3 large source market.

Understood. Now my third question is on the Classic Vacations side. So what percentage of Classic buyers have already started consuming, let's say, TBO inventory? And what proportion of TBO's hotel inventory is now accessible to Classic ecosystem? If you can just help me with those numbers.

Samarth, the way we operate is that we create connectivity between platforms so that TBO supply can be consumed by Classic. The connectivity is already established. However, we are not opening the entire TBO supply into the Classic ecosystem as yet. Part of it is because Classic sits in a different brand, the brand from Classic is very different. And it is largely focused around high curation and high-value luxury hotel. So we are only opening that part of the supply right now on Classic. It is starting to become a meaningful share of Classics overall business. And all the travel advisers who use the Classic platform get access to the supply. So there is no separate channel that needs to be created for travel advisers to consume. So everybody who's on the Classic platform gets access to that supply, and it is starting to become a fair share of Classics overall business.

Understood. That was really helpful. Last question is just a bookkeeping question. So at the peak of disruption for ME, what was the booking to cancellation ratio for directly affected ME agents, and if you can just help me with that number. Hello? Am I audible? [Technical Difficulty]

Sorry, we lost the video, but we can continue our questions.

Yes. So my last question was related to cancellations. So if you can just help me with what was the booking to cancellation ratio for directly affected ME agents in particular for March?

Samarth, I don't have the numbers offhand, but I do recall that at one point for certain source markets, there were more cancellations and bookings.

But overall, we never had negative sales.

As an enterprise, we did not have negative sales. Yes, I think it's related. So there were certain pockets where, yes, the sale and the cancellation is completely in a way netted off. But as we have shared in our commentary also, now it has started to improve. And the drag that was coming because of all the prior bookings getting cancelled is slowly starting to taper off.

We have our next question from the line of [indiscernible].

I have a few questions. So maybe to start with, could you give us some sense of what percentage of the new agents that you onboarded in, say, FY '25 who did more than 10 transactions, did 10 transactions this year as well? Just to kind of understand what kind of stickiness are we having.

[indiscernible], it's a good question, but I don't have the data handy. But it's a fair question. On the whole, [indiscernible], what does happen is that travel agents signed up in 1 year, the cohort that is signed up in a specific year will roughly double its business in the subsequent year. So that map normally works out. But at the specific question, I don't have the exact numbers.

Okay. Got it. My second question is, is there any seasonality in the number of transacting agents in North America? Like the number has grown from 4,800 last quarter to 6,000 this quarter, which is a pretty good growth. So is there any bit of seasonality? Or is it just naturally like the business is gaining traction over there?

Jan, Feb, March is the very, very heavy booking period for North America because their booking windows are long. So the -- typically, North America would book in Jan and Feb for their summer bookings. So yes, there is an element of seasonality as well.

Understood, understood. Now my third question is on this data that you provide on GTV driven by new and old agents. So over there, when we look at the growth overall, there is like 22% [indiscernible] growth, and 15% or thereabouts is being contributed by new agents that got added in FY '26, which means roughly 7% to 8% of growth was from the agents that were onboarded up until FY '25. So again, is this the growth rate for agents that have been added previously? Will this growth rate sustain? Or are we anticipating this number to improve?

I think, [indiscernible], this specific year, this number got depressed a little bit because our Middle East is our oldest market. So old cohorts are heavily dominated by the Middle East travel agencies, and they saw a very massive hit in their business in March. So that has depressed the numbers somewhat. We would expect this to be a little bit higher from where it was this year.

Understood. And my last question is on the debt that we have on our books. By when do we plan to bring it down?

So we have a debt for -- which have a period of 5 years. [indiscernible] on the repayment for 1 year, our repayment would start from Q3 of this year and would be -- would remain there for another 4 years, unless in future we decided to prepay, but that's the current agreement that we have signed.

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

Yes. Gaurav, can you give the detail on our business mix of retail versus [ API ] at the moment?

The business mix between retail and API. Vikas, do you have the numbers?

At an enterprise level for the hotel business, would roughly sit around without [indiscernible] 50-50.

So it's about 50-50 on GTV, and probably higher for retail on GP.

Yes.

Okay. Got it. Another question was on APAC. So for the last 5 to 6 quarters, APAC has done really well. And I believe that it is all organic. So just some color in terms of which countries are contributing the most? And how is the outlook in APAC geography?

So Karan, I think we started Australia and some serious investments in that market, and that has started to deliver well for us. We also have some large API partners who are based out of APAC, though they may be selling globally. That also contributes to the growth. On the whole, we do believe this market is obviously a promising market. It's a large growing travel market. And we're also starting on a small base over here. Having said that, it is a very price-competitive market compared to, say, Europe and North America. So that is a factor to play in. But we remain quite optimistic about this market on the whole.

Okay. Another question was on air. So the air GTV is now back to INR 3,400 crore level on an organic basis with domestic and international capacity being cut on a short-term basis. But how should we think about the air GTV growth from here on?

So Karan, I mean I can't give actually qualitative guidance, but what I can say that the trajectory for Q1 is definitely a [ shade ] better than Q4. And hopefully, we'll continue the momentum as we move into this financial year.

Got it. Got it. And last is on ETR. So how much should we expect the ETR for FY '27?

The expected tax rate for ETR would be similar in the range of -- in the Q4, which would be around 18% to 18.5%.

That was the last question for today. Thank you, everyone, for participating in the call. I now hand over the call to Mr. Ankush Nijhawan for his closing remarks.

Thank you, everyone, for joining our earnings call, and I think some very nice interesting questions, and we are glad that we could answer every one. If anybody has any follow-up questions, feel free to reach anyone from TBO, and more than happy to answer any query you might have, any follow-up questions as well. Thank you so much, and see you next quarter.

Thank you, Ankush. On behalf of TBO Tek Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.