Hello, everyone. I'm Vipul Garg, Vice President, Investor Relations at MakeMyTrip Limited. Welcome to our fiscal 23, 2023 Q3 earnings webinar. Today's event will be hosted by Deep Kalra, our company's Founder and Chairman. Joining him is Rajesh Magow, our Co-Founder and Group Chief Executive Officer. Mohit Kabra, our Group Chief Financial Officer. As a reminder, this live event is being recorded by the company and will be made available for relay on our IR website shortly after the conclusion of today's event. At the end of these prepared remarks, we will also be hosting a Q&A session. Furthermore, certain statements made during today's event may be considered forward-looking statements within the meaning of Safe Harbor provision of U.S. Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance, are subject to inherent uncertainties. Actual results may differ materially.
Any forward-looking information relayed during this event speaks only as of this date, and the company undertakes no obligation to update the information to reflect changed circumstances. Additional information concerning these statements are contained in the Risk Factors and Forward-Looking Statement section of the company's annual report on Form 20-F, filed with the SEC on July 12th, 2022. Copies of these filings are available from the SEC or from the company's investor relations department. I would like to now turn over the call to Rajesh. Over to you, Rajesh.
Thank you, Vipul. Happy New Year, welcome everyone to our Q3 earnings call of fiscal 2023 for the last quarter of 2022. 2022 started with a cautious optimism amid the Omicron 3rd wave. As the year progressed, we witnessed steady improvement in the COVID situation in India and most countries in the world, which helped demand led by leisure-related travel. Indians increasingly took to traveling during the year, the demand recovery trends improved with each successive quarter. The reported quarter is the 2nd highest leisure travel season quarter of the year, aided by winter and festival breaks and long weekends. We leveraged on this demand and executed our business strategies well to get back to full recovery over pre-pandemic levels in gross booking terms, while driving operating leverage from the cost optimization initiatives over the last few years.
As a result, this has been our highest ever quarterly performance, both in terms of gross bookings and registered operating profit. Gross bookings for Q3 stood at $1.74 billion, witnessing an increase of 64.4% year-on-year and 15.9% quarter-on-quarter in constant currency terms. Adjusted operating profit stood at $19.7 million versus profit of $13.2 million in Q3 fiscal year 2022. As we enter 2023, consumer sentiment continues to stay positive for travel while we watch the COVID situation with China opening its borders, global inflation, and other macro challenges in the world closely. Trends suggest that travelers are back on all travel segments, with leisure, business, pilgrimage, and corporate events, and will continue to drive the growth in the coming years as well.
While domestic travel led the recovery in 2022, we believe that full restoration of supply, aided by some fare rationalization and easing of visa processes, could help international travel recover to pre-pandemic levels soon with improved travel-traveler sentiment. During this quarter, the industry witnessed strong recovery in domestic aviation traffic, which is good news for the airlines and the other partners. government is committed to the growth of the sector and it is projected that in the next five years, government and other private entities are going to spend up to $12 billion on the infrastructure development of the airports. As per plan, in near future, there will be capacity expansion in many of the existing airports and new greenfield and brownfield airports will be set up. Recently, a second airport was operationalized in Goa with an annual capacity of 4.4 million passengers.
Goa is among the most popular tourist destinations in the country, and this will help drive tourism growth. A new terminal in Bangalore is now functional and expansion work in Delhi Airport is underway. India is now the third-largest aviation market globally as per government data and initiatives are being taken to drive tourism and air travel to smaller cities. In the last eight years, 72 new airports have come up in the country. In coming years, air travel growth will be driven by addition of new airports, infrastructure growth and increasing disposable income. All Indian airlines have placed record orders of new aircrafts and this will help drive penetration further into smaller cities. Outlook for aviation market is favorable and we expect a prolonged period of sustained growth on the back of these initiatives. Another important pillar for domestic tourism growth is ground transport.
World-class highways are a prerequisite for fast and seamless movement. This has been a focus area of government. The length of national highways has gone up by more than 50% from 91,287 km as on April 2014 to more than 140,000 km in March 2022. Government has set an ambitious target to develop 200,000 km of national highway network by 2025. Similarly, for accommodations, the outlook continues to be robust. Almost all hotel chains have announced expansion and increasing their footprint in India. In next couple of years, there's an estimated increase of 25% in the number of hotels for these hotel chains. Coming to highlights of the reported quarter now.
We restarted our brand campaign both on TV and digital media platforms for both MakeMyTrip and Goibibo after a gap of two and a half years. We launched 360-degree campaign to capture large chunk of festive demand. The campaign focused on relevant value propositions such as enhanced flexibility, book hotels with the no upfront payment, and numerous choices best suited to varied customer needs. For Goibibo, we ran a campaign on promotion promoting daily steal deals on both hotels and flights, a collection of deals unique to Goibibo. We deployed a digital-focused campaign across platforms in order to target relevant consumer segments to drive efficient conversions. As for business segments now, starting with air business, we continue to add value for our customers through our industry-first features.
Quick Book feature for was launched last quarter has led to reduction of 15% in time taken for bookings for these travelers. During the quarter, we strengthened our free cancellation flow within 24 hours of booking. This is again an industry-first initiative. All these innovations help us remain the first choice of customer. We continue to maintain our leadership position and our market share in domestic air ticketing this quarter stood at 30.3%. We witnessed a jump in domestic air traffic during this high season quarter. Domestic air ticketing for us has gone beyond pre-pandemic levels, while international air ticketing recovery is still lagging. Traffic to most of the domestic leisure destinations have now surpassed pre-pandemic levels and has started to grow. For international destinations, we witnessed steady recovery for short-haul tourist destinations across Southeast Asia, Maldives, and Middle East due to tourism demand.
Demand for international long-haul destinations, however, improved in this quarter, but still face high fares and visa backlog headwinds to full recovery. We expect this to normalize during this year, as stated earlier. Our accommodation business, which includes hotels, package segment, with continued focus on expansion is now comparable to pre-COVID levels. This has also helped us now offer stay options over more than 2,000 cities. Aided with seasonality, this quarter we sold more than 53,000 unique properties, which is at par to pre-COVID levels. The recovery continues to be strong across all price points, barring the super budget segment of $20 or lower per room night stay. Overall gross booking for hotels has recovered to pre-pandemic levels on constant currency basis on the back of strong growth in premium and medium premium segment and partially aided by higher room tariffs.
We continue to innovate and invest in our product. Book at Rupee One launched last quarter that offered flexibility to the customers, which helped drive growth in longer advance purchase bookings. GoStays, which is our flagship program, for certified budget hotels, is now contributing to over 40% of the overall budget volume with much better customer experience and NPS. International outbound travel opened in March 2022. Since then we have been witnessing a steady recovery for short-haul destinations. While we saw some slowdown in international travel bookings with COVID scare as China opened at the end of the quarter. Overall, we witnessed good traction, and during 2023 we hope to see travel to Europe and long-haul destinations also return fully. Homestays continue to lead recovery in overall accommodation category.
10,000+ unique properties across 640+ unique destinations have been sold during this quarter. During this quarter, we launched a new section of properties called Hidden Gems, where every property in this set has unique USPs and are away from the center of the city. We also launched our brand campaign specifically for homestays to create more awareness among travelers. The campaign emphasized on the concept of stay for every need and highlighted various stay options, including pet-friendly villas, pool villas, and villas best suited for large families. Moving to packages business, you would recall we talked about how we have scaled up this business with the addition of holidays and packages. We are now reaping the dividends in the high season quarter. Total packages bookings are now more than 150% of pre-pandemic volumes, with online channel leading the growth.
Domestic packages are now more than twice of the pre-pandemic volume, and for international packages, the recovery is now picking up. Our bus ticketing business revenue recovery was at around 113% as compared to same quarter pre-pandemic on constant currency basis. This quarter saw growth in inventory compared to pre-COVID, with both number of private bus operators and the number of schedules being higher. Recovery in southern market, which has been traditionally strong for buses, lower than expected, as large IT workforce is still working remotely. This slowness has been made up by non-traditional markets in central, north, and east, which have witnessed both as an increasing number of bus operators are adopting online channels for their distribution in these regions. Our initiatives to drive higher revenue through value-added inputs to our customers and partners have gathered steam in Q3.
RedBus Assurance program that protects the customer from bus cancellation has also seen increased traction. Our other ground transport services, such as intercity cabs, rail tickets, et cetera, continue to scale well and gross booking value touched an all-time high. We have now opened up our Trip Guarantee product for non-bookers also, wherein a user who has a wait-listed train ticket booked from any channel outside of MakeMyTrip can buy a Trip Guarantee product by paying a small fee. If the ticket remains wait-listed at the time of charting, the user is eligible for a 3x refund, which you can use to book an alternative mode of transport. Business travel is now normalizing, and both our platforms are growing at a robust pace. Active corporate account for myBiz has crossed 42,000, while on Q2T, which is our platform for large enterprises.
Active customer count is 431 as compared to in December. We have doubled the number of customers in last one year. On product side, on myBiz, we went live with enhanced workflows to support in-app approval and to support easy reconciliation. We went live with our report module. The new reporting module allows corporate to customize and schedule reports according to needs of different corporations and their departments. myPartner, our travel agent platform, added 2,892 agents during the quarter, taking the overall number to 34,600+. Quarterly repeat rate for buying travel agents is at a healthy 80%. Coming to international businesses, our OTA business in GCC growing slowly and steadily. Gross booking value grew 29.6% quarter-on-quarter.
We launched our first radio brand campaign in November to increase MakeMyTrip awareness amongst Emiratis, Arab and Western expats in the UAE. We reached about 780,000 audience with presence across English and Arabic radio stations. Our RedBus international business is showing robust recovery in Malaysia. RedBus has more than doubled its business in Q3 as compared to the same period pre-pandemic, and emerged as a clear market leader with a 25% share of the overall market and running profitably. The same playbook is being replicated in other big bus markets in emerging countries in Southeast Asia and Latin America. With this, the contribution of international to overall bus business has now crossed double digits in Q3. With this, let me now hand over the call to Mohit for financial highlights of the quarter.
Thanks, Rajesh. Hello, everyone, and happy New Year. With improved travel sentiment, we witnessed good uptake in this seasonally strong quarter and have delivered strong performance both in terms of business growth and profitability. Q3 gross bookings were at $1.74 billion, witnessing a growth of 64.4% year-on-year and a 15.9% growth quarter-on-quarter in constant currency terms. Adjusted operating profit was at $19.7 million as compared to $13.2 million during the same quarter last year, an improvement of 48.6% year-on-year. As stated by Rajesh earlier, this is the highest ever quarterly gross bookings and adjusted operating profit achieved by the company.
For the nine months ended 31st December 2022, our YTD gross bookings grew by 141% in constant currency terms and came in at $4.9 billion, while our YTD adjusted operating profit came in at about $51.3 million as compared to $11.2 million for the same quarter last year, witnessing a jump of over 4.6x . Our air ticketing gross bookings for the quarter were at $1.1 billion, witnessing a growth of 71.6% year-on-year and 7.5% quarter-on-quarter on a constant currency basis. As this was a high season quarter, on expected lines, the take rates normalized to about 6.6% compared to about 7.4% in the previous quarter.
As a result, adjusted margin stood at about $70.2 million, registering a strong 45.2% year-on-year growth in constant currency terms. Gross bookings for the hotels and packages segment were at $445.7 million, witnessing a strong growth of 55.4% year-on-year and 36.9% quarter-on-quarter on constant currency basis. Q3 is a seasonally strong quarter for tourism and travel, we recorded a strong growth of over 150% year-on-year in our packages business. Due to the increased mix coming in from the packages business, our margins or take rates from this segment stood at about 16.2% as compared to 17.2% in the previous quarter.
Adjusted margin for our hotels and packages business stood at $72 million in Q3, witnessing a growth of 45.3% year-on-year and a 28.8% growth quarter-on-quarter in constant currency terms. In our bus ticketing business, gross bookings for the quarter were at $227.1 million, growing at about 51.9% year-on-year and 24.1% on a quarter-on-quarter basis on constant currency terms. Take rates were at about 9%, which is in line with the previous quarters. Adjusted margin stood at $20.3 million, registering a strong year-on-year growth of 57.6% and a quarter-on-quarter growth of about 24% in constant currency terms.
Our adjusted margin in all the other businesses in Q3 was at $9.6 million, which is a 79.1% growth on a year-over-year basis and a 30.6% growth on a quarter-over-quarter basis in constant currency terms. In terms of operating expenses, the operating leverage in terms of rationalized fixed costs during the last few years. More efficient customer acquisition spends are helping us drive bottom-line gains with improving scale. The high season quarter also saw us restart our brand campaigns across the brands after a gap of over two and a half years. The higher brand marketing expenses were more than offset by efficiencies in other marketing and promotional costs.
Overall marketing and sales promotion costs for the quarter came in at about 5.2% of gross bookings, lower than the 5.4% in the previous quarter and lower than 5.6% in the same quarter last year. This has helped us achieve the highest ever quarterly gross bookings, surpassing the pre-pandemic peak and at the same time, achieve our highest ever quarterly adjusted operating profit of $19.7 million. With that, I'd like to turn the call back to Vipul for Q&A.
Thanks, Mohit. Anyone who wish to ask the questions now can click on the Raise Hand icon on their application and we will take the questions. We'll just wait for a minute for queue to assemble. The first question is from the line of Sachin Salgaonkar of Bank of America. Sachin, your line has been unmuted. You may unmute yourself and ask the question now, please.
Thanks, Vipul. Good evening, everyone. I have three questions. First question, you know, Mohit, more as a follow-up to the comments what you made. You know, looking at the take rate both at air ticketing and hotels and packages, you know, clearly, it looks like this time around as compared to historical Q3, you know, the decline was slightly higher. Just wanted to check, apart from seasonality, is there anything else which is impacting these margins? You know, how should ideally one look at, going ahead? Should we see normalization now that the seasonality gets behind us?
Sure, Sachin. You know, if you like I was mentioning, you know, particularly if you look at the hotels and packages business, you know, overall, due to the high seasonality, you know, packages kind of, you know, came in much stronger in terms of the overall mix. Packages, as you know, is a lower margin business, and that contributed significantly to a little bit of a, you know, dropping of margins, you know, for the segment as a whole.
The other thing that we've been calling out is, if you would recollect that in the entire recovery process, you know, the mix of the budget segment of hotels has been coming down and therefore, to some extent, you know, that's also kind of keeping the, you know, the overall margins on the hotel side, on the lower end of our range. There is a good kind of probability of the overall margins improving on two counts. One, as the mix kind of, you know, gets restored more in favor of hotels as we get to kind of, you know, regular seasonality. The second is as the mix from budget segment kind of, you know, keeps improving.
I would say possibly there remains an upside of about, you know, about 1% point or so for the margin to improve in the hotels and packages segment overall compared to, you know, this particular quarter for the reasons that I have said. On the air ticketing side, again, you know, if you look at on a normalized basis, possibly we have been guided that, you know, the 6% kind of margin is where we see longer term kind of air ticketing margins stabilizing.
Tactically or kind of, you know, based on a quarter-on-quarter basis, depending upon how the load factors are and what is the kind of, you know, promotional activity that the airlines have to drive in terms of driving load factors to our platforms, that will kind of, you know, marginally tweak the overall take rates, you know, for the air ticketing business. Otherwise, you know, air ticketing business longer term, I think, you know, this is a healthy margin to kind of, you know, remain at. We believe unless there is a significant kind of, you know, drop in the load factors, our margin should largely remain in line with this with a plus or minus kind of half a percentage point range. Very broadly, this is how I would put it.
Thanks, Mohit. Second question. You know, clearly this, as you rightly indicated, was a slightly stronger quarter, and despite that, we did see the air ticketing revenues being down QOQ. I did see the bookings are up. Just wanted to understand, you know, what happened and, you know, why was the air ticketing revenue down?
Yeah, exactly the same thing. You know, linked to the previous one, because the gross margins on the, on the air ticketing business have kind of, you know, come down, that's how you see their revenue kind of adjust and margin coming down a little bit. But the growth overall in terms of segments and gross bookings is higher. Similarly, you would see, you know, even on the marketing and promotional expenses, you know, they have come lower than even the previous quarter for that matter, despite the marketing investment. So it is, like I said, you know, some of these promotional expenses as they kind of, you know, come in from the airlines, can optically look at, kind of, you know, take the margin also higher and take the overall marketing and promotional spend also higher.
In this quarter because the incremental kind of, you know, promotional incentives provided by the airlines were on the lower end, that's how we are seeing that effect come through, both in terms of, you know, the EBITDA margin coming down and also the promotional and marketing expenses coming down.
Mohit, thanks for that. I did look at that, you know, obviously there is a margin dip which happened last quarter, Q3 and so on and so forth. Out there, the airline revenues did not dip despite the take rate going down, so this time around it has more to do with the promotional expenses, what you mentioned?
No, no. See, promotional expenses don't come in. Within the overall adjusted margin, you know, the promotional expenses don't make a difference. It is purely, you know, the overall delta, if you look at it on a quarter-on-quarter basis, it's gone down even compared to the previous quarter. That's what's kind of causing, you know, the delta change.
On the margin side.
Maybe if I can just add an additional point, Sachin. If you look at the numbers on, as Mohit was explaining on gross booking side and the air segments growth, it is positive. It's not a decline. It's like on a constant currency basis, it's 7.5%. The only additional point that I will make to what Mohit has already said, you know, as I was indicating earlier as part of my script as well, that while domestic flights have recovered or domestic opera traffic has recovered, actually more than recovered to the pre-pandemic levels, international is still lagging behind, right? International bookings, international, especially long-haul flight bookings, have not necessarily fully recovered.
In fact, you know, towards the end of the quarter, second half of December, because of the China opening up, there was a bit of a scare on COVID as well. You know, thankfully, after one week, it sort of died down and things got started to get back to normal. You know, all things considered, because of the high fares, you know, with fuel prices going up or the overall focus being on yield by all the airlines, and the, you know, the backlog of operational issues like backlog or visa clearance, et cetera, it continued to sort of play in terms of just putting international bookings under pressure.
That's really, you know, just one more additional factor on just overall air, despite being the high season. While the consumer sentiment remained positive and people want to travel, but, you know, if you continue to see high fares on the international side, then, you know, sort of, plans get pushed if they're not necessarily essential travel related and stuff. That. I think that's the additional point you should keep in mind.
Thanks, Rajesh. Last question is, now that you guys got the NCLT approval for MakeMyTrip IGO, looks like, you know, the key regulatory hurdle for a potential India listing is behind. Any thoughts in terms of timeline and how you guys are thinking about it?
From a, you know, regulatory hurdle point of view, I think, you know, yeah, this is one kind of, you know, incrementally good step to kind of, you know, take in, in that direction. You know, like we've been calling out, you know, tapping into the Indian capital market, you know, is still on the agenda, but not necessarily in the near future. Kind of remain open to it and we'll kind of, you know, really dive in as and when we kind of are able to crystallize our plans around it.
All right. Thank you and all the best.
Thanks. Thanks, Sachin.
Thanks, Sachin. The next question is from the line of Gaurav Rateria of Morgan Stanley. Gaurav, you may unmute yourself and ask the question now.
Hi. Thanks, Rahul, for giving me the opportunity. I have a couple of questions. Firstly, when I look at the volumes in each of the individual segments, they haven't reached the pre-COVID levels compared to the same quarter during the pre-COVID. Somehow the recovery has been a little slower than expected. Is it largely because of international in each of the segments or there is other, some other phenomena going on?
Two reasons, you know, Gaurav, if I could call it out. If you look at it overall, you know, in terms of even the market recovery. If you look at even domestic air, the overall market recovery is at about, you know, 90%, whereas our recovery, you know, is kind of close to about 100%+ . Therefore, you know, while we are kind of, you know, growing ahead of the market, but the market recovery itself is, you know, at an industry level is lagging. You know, the pre-pandemic kind of, you know, segmental volumes. That's one reason.
Secondly, if you look at it in terms of the overall, you know, air ticketing kind of a base, like Rajesh was calling out, you know, international hasn't really kind of, you know, bounced back as strongly. That's the other reason for the, for the lag in the overall recovery for the air ticketing business as a whole.
Got it. Second question. How should one look at the lower customer inducement charge as percentage of the gross booking? Is it that the competition or the competitive activity has subsided in the market and hence there is no need for that high customer inducement charge? Is it more tactical, like a shift between branding versus customer inducement charge? How should one think about, like, overall ad and promotion spend? You have always been saying 5%-6%, but it's kind of come out the lower end. How should one think about it on a sustainable basis?
I think on a sustained basis, like we've been saying, you know, possibly the range would be more like 5%-6%. Couple of things going in over there. You know, one clearly is the extent of competitive, you know, activity that we are seeing in the market. As you have seen, you know, that kind of, you know, makes a difference. Secondly, more importantly, I think it is also about building a certain amount of base of volumes, you know, in each of the relevant or important segments. You know, particularly including the hotels and kind of, you know, packages segment or, you know, overall accommodation segment. There, if you see over the last almost like six, seven years, we have gradually built a, you know, robustly, you know, built volumes over there.
As you know, is kind of, you know, inherent in the e-commerce models or the online models, as you build volumes, your customer acquisition costs start kind of, you know, panning out much better. I think it is about getting to a threshold base, and therefore you see why there has consistently been a decline in the marketing sales promotion expenses over the last, I would say six, seven years. That reduction has kind of, you know, become sharper over the last few years as we kind of cross that threshold. Pretty much almost, you know, just kind of, you know, pre-COVID is what I would put it around. That's another factor apart from the fact that there is, you know, much lower competitive intensity, particularly in the hotel segment.
Last question. The cash balance, if I compare versus last quarter, it has come down from $466 to $449. Is there something missing? you have generated a lot of, like, large bit during the quarter, cash balance should have gone up. How should one read the decline in cash?
You know, you're right. You know, this being a seasonally high quarter, you know, usually we do see deployment in working capital during peak seasonality, and then you also see releases happening, you know, as you kind of move into the, you know, the lower seasonality quarters. It's kind of largely linked to seasonality per se, nothing else over there.
All right. Thank you so much.
Sure. Thanks, Gaurav.
Thanks, Gaurav. just to remind the participants, anyone who wish to ask a question, click on the Raise Hand option. Next question is from the line of, Aditya Suresh, from Macquarie. Aditya, you can please unmute your line and ask the question now.
Yeah, thank you, Vipul. Sir, a few questions. First question was just on the competitive dynamics which you mentioned. Can you elaborate a bit about kind of what's happening in the air segment, in particular with Cleartrip, getting kind of a new supply perhaps? Can you maybe speak about that a little bit? I do kind of note that your customer inducement costs and kind of marketing spend has kind of come down, but in absolute terms, it's still a fairly chunky number in particular the environment where some competitors may be kind of challenged for funding, at least the conditions are a bit tighter. Can you speak a little bit about that? One is the competitive intensity in air, and the Cleartrip, et cetera.
Two is when I think about fiscal 2024, fiscal 2025, are you sticking with this 5%, 6% of gross booking as a guide, or is there any kind of numbers I think you might as well?
Aditya, maybe I'll take the second part, and I'll invite Rajesh to kind of, you know, share more color on the first one. On the second one, it may not be kind of, you know, relevant to kind of look at the absolute number per se, and therefore looking at it in terms of a percentage of spend might be a better way to kind of, you know, look at it. Yes, we do kind of, you know, expect this to remain in the 5% range. I'll go ahead and invite Rajesh for the first one.
Yeah, happy to. Happy to. Aditya, two questions. I just wanted to remind you and everyone, I think we should always keep in mind that MakeMyTrip, as we've been sort of reporting about 30% market share of the total market. Also the fact that, you know, for whatever it's worth, the flight product has been fairly short and we continue to keep innovating, as I was also trying to highlight some of those unique features that pretty much every quarter we will end up sort of launching. You know, that helps the customer confidence, that helps us becoming the first choice, you know, in for a while.
you know, that's precisely the reason no matter what the competitive dynamics might be in the market, we've been either gaining share or has been able to stabilize, you know, at around 30%. I think these are important points because I think they get lost in the noise often. You know, from our point of view, we've seen they actually work beautifully well when it comes to the repeat rate over a period of time. The stickiness really come to your platform if you continue to keep delivering the promise on the product side.
As far as the, you know, sort of specific dynamics on every quarter of who are now or actually, you know, I'm not sure that sort of, you know, we watch the competition, we obviously look at the competition very, very closely, et cetera, but we're not necessarily obsessed by what's happening specifically for a particular, on a particular day of what kind of discounting that is happening and so on. I think our strategy has been very, you know, continuously keep improving our product experience. You know, and eventually that sort of helps get more and more customers and more and more market share. You know, and keep managing your P&L or the unit economics accordingly, basis whatever might be the dynamics in the marketplace.
You know, and if you see the history for last few quarters, going into, you know, specifically on, let's say domestic air market, there might be volatility, there may be, you know, specific quarters you will see some more, you know, competitive action, et cetera. Over a period of time, it sort of stabilizes because that sort of discounting, et cetera, is never stable. You know, so you have to just sort of deal with that on a quarter-to-quarter basis.
From a long-term standpoint, we haven't really, been, you know, shifting or moving or even have plans to shift or move our strategy, you know, in the, in the domestic flights market or for that matter, any of the product and services that we offer.
Thanks, Rajesh. That's clear. I guess the second question was me trying to think about incremental EBITDA margins or incremental profit. You did kind of mention quite a few growth levers across different products. Now over time, I think your employee expense has been a fairly large partly, at least as a proportion of revenue. Can you maybe touch on two things? One is in terms of incrementally, how are you thinking about kind of staff expenses? That's one. Two is, therefore, do you have any guide in terms of incremental EBITDA margin? Let's say you add $100 million next year incrementally. I think it should be much more than that, let's say you did add $100 million.
How much of that do you think you can keep as EBITDA?
Hi, Aditya. Maybe I'll take that. You know, if you really look at it in terms of, you know, fixed costs overall, including kind of, you know, people costs in particular, they've kind of now, you know, despite like almost, you know, three, you know, Rounds of inflationary increases going through, they are still kind of, you know, below the pre-pandemic levels in that manner of sorts, and almost getting closer to that, but they're still kind of slightly behind the, you know, same quarter numbers for pre-pandemic year. That way I think we've kind of done a significant amount of rationalization on the fixed costs. Clearly it's not that they'll remain completely constant.
They'll kind of, you know, possibly increase at a lower proportion than the growth in the volumes of the business. Secondly, large part of the increase is gonna come in more in terms of inflationary increases, because we're not, we aren't really kind of planning any significant headcount increases per se in the business in the quarters or years to come. That's, you know, one part of the question that you asked. The other is, you know, what is the margin expansion opportunity? You know, again, would kind of, you know, refrain from getting into shorter term kind of, you know, margin gain opportunities.
The longer term, you know, opportunity clearly that we're kind of looking at is, you know, there is clearly an opportunity to take this business to at least possibly getting to about 1.5% points of, you know, adjusted operating margin from on a gross booking base. That would be kind of the same trend continue, but it would be indicated in.
That's clear, Mohit. Thank you. Thank you for the explanation.
Okay. Thank you.
Thanks, Aditya. Next question is from the line of Puneet Saraogi of Hill Fort Capital. Puneet, you can unmute yourself and ask the question now.
Hi, this is Hari from Hill Fort Capital. Yeah, I had a couple of questions. My first question is on the working capital. Can you just double-click on the working capital and why it's higher in this quarter seasonally, and how do we generally think about OCF in relation to EBITDA on an annual basis? My second question is whether an India listing is on the annual at all or not.
Yeah. Well, Puneet, maybe I'll take both, and probably you missed some of the, you know, the earlier kind of, you know, questions on this. But on the working capital side, like I said, you know, there's seasonality involved in the business, generally we do see kind of, you know, deployment happening in working capital during high season quarters. Generally releases kind of coming through in the off seasonality. So I think it's better to kind of, you know, look at it on a, on a kind of a, you know, more of like a annual basis or a whole quarter basis. On a, on a annualized basis, I would just kind of, you know, suggest that, you know, you need to bake in some amount of deployment on the working capital linked to volume.
That's on the overall kind of, you know, working capital, and the trend lines over there. When it comes to your second questions, yes. I mean, you know, the India capital markets are kind of open to e-commerce platforms, you know, clearly, and we have seen some of the e-commerce, you know, companies kind of go and tap into the Indian capital markets. From our point of view, you know, one of the key things is that we're not necessarily looking at any fundraising in the short term. We are kind of sitting at, you know, a good amount of, you know, cash and cash equivalents on the balance sheet, including free cash.
You know, even if you were to kind of potentially look at, you know, setting aside certain amounts, you know, for the convertible bonds that we had kind of raised, two years back. After setting that aside, we're kind of sitting on a healthy cash balance of close to about $250 million. From that point of view, you know, tapping into the capital markets on an immediate basis doesn't seem like a requirement. From an overall, you know, kind of investor value creation and from kind of leveraging the brand and multiple other things, we would kind of, you know, keep an eye on kind of tapping into the Indian capital markets at some point in time. Like I said, you know, probably there's no immediacy to it.
In the longer run, come an opportunity to kind of, you know, tap in the capital markets, I think India will be a more preferred market, than kind of, you know, tapping it or going into the U.S. market once again. That's how I would put it.
Understood. Thank you so much.
Thanks, Hari. The next question is from the line of, Vijit Jain of, Citi. Vijit, you may please unmute yourself and ask your question now.
Thank you, Vipul. Yeah, congrats on a great set of numbers. I have three questions. First is, within the hotel segment, would you say that barring that super budget category you called out, sub $20 a night, every other category, perhaps with the exception of international, is now back to pre-pandemic levels? That's my first question.
Yes, Vijit.
Yes. Yes, yes, Vijit.
Okay. Got it. What would be international now as a percentage of your GBV? I know last quarter you guys had mentioned something early double digits. How has that moved in this quarter?
Same, same. Similar, similar, Vijit. I mean, it's not, you know, substantial change from what we had shared earlier.
Got it. My last question is, just, you know, on, staying on this international theme. Now in the last two to three years, you've launched these programs like My Affiliate and myPartner, et cetera. You're working with a lot of offline agents as well. I guess my question is, how are you thinking about ramping up your international business, in the next, one to two years? What would be the focus areas there? If you can shed more light on, you know, how you're going to use even Ctrip's partnership, et cetera, to kind of ramp that business up? If you can talk a little bit more about that?
Yeah, sure, Vijit. No, I think it's a great question given that the recovery is lagging behind, but, you know, are we really prepared for, you know, when the business comes back and future growth on top of it? The answer is, Vijit, it's absolutely all set from our side. You know, when you look at the levers that you could use potentially to grow international business, given the fact that it is an underpenetrated online, underpenetrated sort of segment, even pre-pandemic we, you know, our growth rate was much higher both for international flights and hotels. We are almost sort of restless and waiting for that sort of open up.
You know, from supply side, you know, multiple sources of supply on our platform, on the customer side, the, you know, whatever new features and innovation that we could sort of unlock, in the international flights, for example, or for that matter for international hotel bookings, they are all ready. They all have been actually rolled out, tested on the domestic side, we are expanding that to the international side. In terms of customer acquisitions, like you rightly pointed out, we made investment in some of the other channels also, you know, besides our own core B2C platforms. They would definitely be, you know, sort of helping us grow or get the incremental demand on the international segment.
International segment, international travel market, like I mentioned, it is under-penetrated, which effectively means that there is more market offline available as well. We do have a channel which is, you know, myPartner, which is through the travel agency, can reach out to the B2B2C sort of demand coming our way as well. Whether it is distribution channels or it is on the supply side, including, you know, [audio distortion] , multiple suppliers on our platform. On fronts, we have absolutely tested and like I said, w[e are all set waiting for.
Thank you.
markets to open up.
I guess, just my final question to Mohit. The brand campaign spends that you mentioned in this quarter for both Goibibo and MakeMyTrip, how should we think about that on a going forward basis? I know you have mentioned in the past that some of these expenses are fungible between here and the customer incentive spending, et cetera. But, just trying to get a handle on how to think about it on a quarter-to-quarter basis. Secondly, the fixed cost overall, which you mentioned is still below pre-pandemic levels for us there. I think last, we have is an approximate $14 million-$15 million a quarter, sorry, a month type of a figure in terms of your fixed cost base. Is that now closer to $17 million-$18 million?
Yeah. You know, if you look at it, you know, the first question was maybe more on, you know, the brand marketing kind of, you know, expenses. Generally, you know, if you see historically, we've kind of usually have kind of had higher kind of expenses on the brand marketing side, particularly in the high season quarters. That's typically Q1 and Q3 from our fiscal year point of view, you know, which is April to March.
Right.
Generally that is the, those are the quarters where you kind of typically would see higher spends on this particular side. Overall, like I've always been calling out, you know, see, you know, overall customer acquisition cost is what is relevant. You know, some of it kind of possibly pays out, you know, with a shorter duration timeframe and some possibly have a longer kind of a lead time as well as a lag effect. I think it's kind of, you know, relevant to look at it more in terms of a blended number.
Four, I would just say, you know, that's the reason that we kind of call out the, you know, the marketing and sales promotion kind of, you know, expenses together, because that gives you a better, you know, kind of overall understanding of how, you know, customer acquisition costs are trending. Kind of looking at it in isolation may not be a great idea, but yes, you can kind of budget for a slightly higher mix coming in from brand marketing expenses, particularly in the seasonal quarters.
Got it. Thanks, Mohit. My second question was just on the fixed cost base, where are we in terms of run rate?
If you look at it in terms of, you know, the run rate pre-COVID used to be almost like, you know, about $15 million-$16 million. We're still just shade below $15 million in the reported quarter. That's what I was calling out that, you know, despite kind of, almost three inflationary increases going through, we are slightly kind of, you know, below that run rate. Reasonably good on that.
Got it. Great. Thanks, Mohit. Those were my questions.
Thank you, Vijit.
Thanks, Vijit. The next question is from the line of Aditya Chandrasekar of UBS. Aditya, you may please ask your question. Unmute please so you can ask your question now.
Hi. Thanks, Vipul. I have a question on the air side. This has been seasonally strong quarter, right? We also saw the passenger data, et cetera, from DGCA, I mean, being quite healthy with record highs, et cetera. Just wanted to understand, like was there a potential of a better growth on the air side? I mean, even ignoring international, because we saw 4% kind of QOQ growth in air gross bookings. Could that have been higher considering the large air volumes? Have we lost... I mean, I don't think we have lost any market share, but just wanted to get a sense of, could the growth be better, or should it have been better in Q3 considering the volumes as well as it being seasonally strong, and how should we look at that going forward?
Yeah. Sure, Aditya. You know, like I called out, you know, if you really look at it, you know, in terms of recovery during the reported quarter, you know, the domestic area recovery, the industry recovery was more about, you know, 95%, whereas our recovery was, you know, close to about 100%. You know, from a, that way, if you look at it, you know, possibly our kind of market share kind of gains continue to kind of, you know, help us, and we are kind of growing ahead of the market. Like, could the overall, you know, industry growth been higher? Yeah. I mean, you know, clearly the potential is there for, you know, the overall domestic industry numbers to kind of, you know, keep increasing.
Quite a few challenges there in terms of, you know, the prevailing kind of inflationary pressures, et cetera, and some amount of, you know, challenges being faced by the airlines also on the maintenance and spares availability. As a result of which, you know, some of the kind of, you know, planes are also kind of, you know, right now grounded. As all of this capacity comes back, hopefully in the coming quarters, you know, we should see, you know, the industry expanding faster as well.
I guess the important point, I mean, Sorry, Aditya, I was just going to add one more point.
Yeah, sure.
I think the important point is, you know, what we all sort of get, you know, excited about at times, including us, is the peak numbers for certain days. You know, I think the important point will be just to look at the full quarter numbers in terms of, you know, sort of, overall, the domestic, market traffic. You realize that the sort of up-down overall is more, you know, the traffic recovery was for the, for the market it was about 8%. Additional data point on departures, like departures, and given the fact that we just literally have, you know, every flight and we monitor that very, very, closely as compared to what it used to be pre-pandemic, was actually 92%.
The reason for that was, is that, you know, the load factors have been high. The airlines have been very, very careful in deploying more traffic because they've all been, and rightly so, you know, coming out of the tough period of pandemic, focused on, you know, high load factors, more yield per passenger, and then, and thereby reducing the losses for them. As we get into the steady state market and, you know, we, you know, all the sort of, you know, the health, the financial health of the airlines start to improve with some of these results and, you know, we're getting some news from Air India that they might turn profitable, et cetera. Some of these things that happen, it'll further stabilize, we'll get more capacity for sure.
Because of that, you know, the demand and the growth will also come back.
Thanks. Thanks, Rajesh Magow. That was helpful. Just a very quick question on the marketing side again. This quarter it came at 5.2%, even though we did TV campaigns, et cetera, after a while. You've mentioned multiple times that it probably stays in that 5%-6% range. Do you think there's also a potential for it to come down also from these levels? Going forward, if we don't do some of these TV or ad campaigns, which we probably won't do quarter, right? We are seeing efficiencies in the other side of the other marketing costs. You think it could head toward that 5% or be 4.8%-4.9%, or you think largely 5%-6% is where we should aim for?
Like I was calling out, Aditya, we kind of currently estimate it to remain in the 5%-6% range. I think it's good that at least in the, in the peak seasonality in the reported quarter, we were able to kind of, you know, keep it more closer to the lower end of the range, you know, while reviving the brand campaign. Let's see. As we kind of, you know, keep making progress, we'll keep sharing color, but our current estimate remains 5%-6%.
Okay. Okay, cool. Thanks a lot. That's it from my side.
Thanks, Aditya. The next question is from the line of Tarbir Shahpuri of Nidara Capital. Tarbir, you may please unmute yourself and ask the question now.
Thanks, Vipul. Actually, my question is for you, Vipul. When are you gonna organize an investor day for us?
Hmm.
We're working on it. Give us some time. We are getting the structure ready. Hopefully, soon we'll come back with the details.
Vipul.
Sure.
Anyway, congratulations, guys. Good luck for the next year.
Thank you.
Thanks, Tarbir. The next question is from the line. It'll be the last question. We are out of time. It's with Lester Poon from Hong Kong. Lester, you may please unmute yourself and ask the question now.
Hi. In the past, the management gave a guidance that the adjusted operating margins should not be lower than 1% of the growth booking revenue. For Q3, I did a quick calculation, it's about 0.12%. Q3 already is a peak season. Does it mean that our in other non-peak seasons, the percentage may fall below 1%, or you are confident that you can maintain the 1% in the future? Thank you.
You know, Lester, let me take that. We had guided for this full fiscal year, we would kinda, you know, look at close to about 1%. If you look at on a YTD basis, we are kind of slightly, you know, better than the 1% that we had guided for. You know, we do believe that for the full year also as a whole, we should be able to kind of, you know, maintain that 1% run rate or be slightly above that. You know, we should know in about a quarter's time. We'll share more color about the subsequent years as we kind of, you know, get into the new fiscal year.
Okay. Thank you very much. See you soon in person in a conference.
Surely. No problem.
Thank you, Lester. That was our last question. I'll just now hand over to Rajesh for his closing comments.
Yeah. Thank you, Vipul, and thank you everyone. Thank you everyone for your patience, your time, and all the interesting questions. Look forward to come back to you next quarter. Thanks a lot.
I would just add that, you know, in case we have not been able to take questions from any of the participants due to paucity of time, please feel free to, you know, writing to Vipul, and we'll try and get back to you as soon as we can.
Yep. Thank you.
Thank you, Rajesh. Thank you, Mohit. This brings us to the end of the call. You may please disconnect. Thank you.
Thank you.
Thank you. Bye.