Yatra Online Limited (YATRA) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Yatra Online Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Sagarika Chetty from Antique Stock Broking Limited. Thank you, and over to you, ma'am.

Thank you. Good morning, everyone. On behalf of Antique Stock Broking, we welcome you all to the Q1 FY '27 Earnings Call for Yatra Online Limited. Today, we have with us the management of the company is represented by Mr. Dhruv Shringi, Executive Chairperson and Whole-Time Director; CEO, Mr. Siddhartha Gupta; and Chief Financial Officer, Anuj Kumar Sethi. Thank you all for joining. Over to you, Dhruv, Siddhartha and Anuj.

Thank you, Sagarika, and good morning, everyone. Thank you for joining us on this conference call to discuss our first quarter fiscal year ended 2027 earnings. As you might have seen in social media and our marketing campaigns, we recently completed 20 years of taking at taking Indians to work and taking -- helping Indians get off from work as well. And accomplishment, we are extremely proud of. As we look back, I would like to reflect on a few of the key strengths that have shaved Yatra over the past 2 decades. First, the trust in our brand from over 1,000-plus corporate customers and millions of retail customers; second, our technology capabilities; and third, the resilience of our business model. Over this period, our brand has become synonymous with online travel in India. This trust has won us numerous consumer accolades and continues to drive a high degree of repeat usage and direct traffic onto our platform. Our corporate customer base also continues to rise consistently with retention rates in excess of 91%. For nearly 20 years, technology has been at the core of our business, enabling us to continuously evolve with the changing needs of traders and enterprises. Over this period, we have built and refined a comprehensive travel technology ecosystem covering booking, travel management, expense management, automation and analytics which support more than 1,300 large and midsized enterprise customers across India. And now with our partnership with Cano Travels, we will be extending our reach into the Middle East as well. We believe the capabilities we have built over the last 2 decades provide a strong foundation for the next phase of Yara's AI-driven growth as AI becomes an integral layer across our platform, making travelers simpler for users, smarter for enterprises and more efficient for our own operations. We believe that AI can fundamentally change the economics of managed travel. AI is automating routine workflows, surfacing saving opportunities in real time, improving policy compliance at the point of booking and accelerating expense reconciliation. As a result, companies are able to handle higher transaction volumes with fewer manual touch points reducing cost leakages for their customers and unlocking better operating leverage as they scale. Our own investments are firmly aligned with these trends. We are embedding AI into search recommendations and conversational interfaces so that travelers can find the right options faster and with less friction while in policy. We are also using a machine learning to automate service interactions flat out of policy or anonymous spend earlier and provide travel and finance leaders with richer, more actionable insights into their programs. In practical terms, this translates into a better user experience, stronger compliance for our corporate clients, lower cost to serve and a more scalable operating model for us. We believe AI will increasingly be a structural advantage in travel management for us not just enhancing the customer journey, but also improving margins and returns for our businesses. As we deepen these capabilities across the Atlas platform, we see a clear opportunity to drive both sustainable top line growth and continued improvement in our operating efficiency over time. Let me now turn to the broader travel backdrop. The travel industry has gone through a period of disruption over the last few months. International travel was particularly impacted with the West Asia conflict disrupting air connectivity and affecting vice activities. At the same time, we are operating in a structurally expanding market India's overall online travel market is expected to grow at a high single to low double-digit CAGR over the next several years, outpacing many global peers supported by rising disposable income, rapid digital adoption and improving air and rail connectivity across Tier 2, Tier 3 cities. During this period, while international travel has got impacted to a certain extent, Domestic travel has remained resilient despite global challenges. Air passenger traffic in India grew around 2.3% year-over-year in the period. driven by a young increasingly affluent and mobile population that is prioritizing travel and experiences over other discretionary codes. We are also seeing sustained growth in non-air categories such as hotels, as travelers look for short-haul gateways and new for money options. Outbound and international travel have seen no mix trends the West Asia conflict and rerouting of flights led to higher AFFs, longer routes and uncertainty around certain long-haul destinations, which weighed on outbound sentiment. Industry-wide inquiries for some international destinations declined by roughly 10% to 15% during the period. At the same time, the medium-term outlook for outbound travel from India remains very robust with multiple industry reports projecting low-teens growth in around spend over the next decade as more Indians travel overseas for leisure business and education. As Vesa regimes ease connectivity improves and new destinations ramp-up capacity targeted at Indian travelers, we see a long runway for growth in this segment. Our discussions with the foreign tourism boards also supports these views with Neodent Tourism Board steamy awaiting the normalization of the situation to initiate joint marketing candidates to stimulate demand. Given our higher business mix of international travel and MICE, these near-term headwinds have had a disproportionate impact on our business. However, based on past cycles and what we are already seeing in the market, we expect this to recover quickly as the macro environment stabilizes. As you have seen in the past, even travel following periods of disruption has been very strong and ground, both in India and globally, and we expect it to be the same this time around as well. In fact, we're already seeing early signs of this in our own numbers, given that in the first half of the current quarter, which is quarter 2, MIS bookings are already trending at approximately 50% higher than Q1. I Importantly, if we step back from these temporary factors, the underlying travel opportunity in India continues to strengthen. Rising disposable income, improving airport and road infrastructure, growing preference for experiences are supporting greater demand for domestic tourism, while corporate mobility is being supported by continued economic growth and investments. Importantly, the shift from off-line to online travel still has a long way to go. Online channels currently account a small proportion of overall travel spend, especially when it comes to business travel and are expected to grow meaningfully faster than the broader market over the coming years. Against this backdrop, our Q1 performance reflects the resilience of our franchise and the benefits of our diversified model. Despite the challenging external environment, gross bookings increased 17% year-over-year to [ INR 21,007 million ]. Gross margin increased to INR 1,248 million. Total transactions grew 12% and air passenger volumes increased 5%, roughly double the industry growth, reflecting further market share gains. Our corporate business also continues to demonstrate strong traction. During the quarter, we added 54 new corporate customers with an expected annual billable potential of INR 2,273 million. This provides a healthy pipeline of incremental business as these accounts progressively ramp up. We believe this is why Yatra's differentiated positioning becomes particularly relevant. Our diversified business model across corporate and consumer travel, air and hotel and other travel services combined with our strong corporate relationships, extensive domestic hotel supply and technology-led platform give us a strong foundation to capture the growing travel opportunity in India. As the market continues to shift towards organized and online travel and as outbound demand normalized from the current geopolitical disruption, we believe are well positioned to benefit from the structural transition and to deliver sustainable, profitable growth. With this, I now hand it over to our CEO, Siddhartha Gupta, for further commentary. Sid?

Thank you so much building on the group's comments. I will spend a few moments on something that has been fundamental to Yatra throughout our journey, which is our ability to eat, adapt and continually rethink how travel should work. Over the last 2 decades, the travel industry has been reshaped it. Through each period of disruption, our response has not simply been to manage the immediate challenge. We have used these PS2 question established way of working rethinking the fundamentals of our business and build for a more resilient future. That mindset has been part of Yatra from the business, and I think our approach to the current environment is another example of this. Coming to Q1. The larger headline is that Yatra continued to deliver strong underlying growth despite a challenging maconomic and geopolitical environment for the travel industry. Gross bookings grew 16.5% year-on-year to INR 217 million, while total transactions increased by about 12.2% year-on-year, supported by a healthy growth across air and hotel cents. Gross margins increased 6.1% year-on-year to INR 1,227 million. Revenue from operations stood at INR 1,879 million , down approximately 10% year-on-year primarily reflecting lower mile top line during the quarter. Adjusted EBITDA was $151 million compared to INR 247 million last year. There are 2 important factors behind this moment. The first factor was the impact of temporary macro and geopolitical disruption on MICE and corporate travel. My top line was approximately INR 300 million lower year-on-year. mainly due to disruption in international group travel. This had an approximately INR 30 million impact on gross margin. In addition, the shift from international to domestic group travel increased competitive pressures resulting in further impact of INR 30 million on gross margin. I want to reiterate that we view this drop of INR 60 million in H&P gross margin as a short-term transitory factor rather than structural change in the business, and we expect the impact to normalize going forward as travel patterns have started to stabilize already. Corporate travel demand was also impacted because of elevated assets. while the timing of airline incentive programs created an additional near-term headwind during the quarter. The second factor, however, is 1 that I want to spend a little more time on because it reflects the deliberate choice we need. We've continued to invest and build through this period of turbulence. -- rather than allowing short-term disruption to define our priorities, we have used this ceded to invest in capabilities and capacity that we believe can materially expand Yatra's future growth opportunity. We've been doing this through a 3-pronged approach. First, strengthening and scaling our core B2B business. We have continued to invest behind Travel Pro, our MSME offerings, including building out the people, platform and the go-to-market capabilities required to expand our reach within the corporate market. We are already seeing early validation of that investment. Of the 53 new corporate customers won during Q1, 30-plus customers representing approximately INR 800 million came through Travel Pro, our offering for that segment. While still early, this gives us confidence in the potential of the new go-to-market engine we have built around our core corporate outlook. Second, expanding our addressable market through recap, our expense management solutions. Since its launch, we've already added more than 20 customers. We continue to invest in product and technology behind recap and believe it can develop into another meaningful growth engine as we scale the proposition. Third, taking our corporate platform beyond India. Over the preceding 2 quarters, we have invested in making our technology global ready, including product, infrastructure solutions and teams required to support international requirements. Our partnership with Canon Travel gives us the opportunity to take capabilities built and refined over many years in India into a large adjacent market in the Middle East, alongside a mature, highly respected regional partner with deep customer relationships and market knowledge. While the region itself is currently experiencing some near-term disruption, we believe the long-term opportunity is very significant. Importantly, across all 3 initiatives, we've been building capacity ahead of the revenue. We expect them to generate at this scale. While this investment is visible in our cost base today, we believe it materially expands the future earning capacity of the business. periods of turbulence have often been periods in which Yatra has done some of its important buildings. We believe this period will be no different. Let me now turn to the individual businesses. Our air business delivered healthy growth during the quarter. with gross air bookings increasing approximately 18% year-on-year to INR 16.79 million. Growth was supported by higher average ticket sizes, along with continued expansion across our distribution channels. Importantly, air passenger volume grew approximately 5% year-on-year, nearly twice the industry growth rate. Despite capacity constraints, elevated sales and softer demand eminent, we continue to grow passenger volumes materially ahead of the market, resulting in further market share gains. Air margins remained under some pressure during the quarter. Our focus remains on building a healthy and sustainable air business with continued discipline around unit economics and quality of growth. Moving to hotels and packages. The segment delivered gross booking growth of approximately 13% year-on-year. Within this, our stand-alone hotel business continues to perform, particularly when with gross bookings growing approximately 4% revenues increasing by 62% and room nights growing approximately 30% year-on-year. This performance reinforces our conviction that our investments in expanding hotel supply is the right strategic priority. We are seeing these investments drive stronger demand across all businesses while increasing the contribution from hotels a higher margin and increasing the important part of the Ass business mix. Online, as I mentioned earlier, my pay a particularly challenging operating environment during Q1, given its greater exposure to international and ideal travel. Geopolitical uncertainty led to delays in corporate decision-making and in several cases, a shift from international programs towards shorter hauls and domestic destinations happen. As discussed earlier, the combination of lower PTV and temporary margin compression resulted in approximately INR 60 million impact year-on-year on MICE gross margins during the quarter. What is important, however, is that is what we are seeing as we enter Q2. The Q2 pipeline is significantly stronger than Q1 and a healthier margin profile. Based on visibility we have today, we believe the Q1 impact was temporary and we are seeing encouraging signs that the mine business is returning to a growth. Coming now to our corporate travel business. Corporate travel remains one of Yatra's key strategic growth pillars. Despite elevated fares and disruption to international travel, the underlying business remained resilient and customer acquisition momentum continued to be stopped. As I mentioned earlier, during Q1, we added 53 new corporate customers these additions provide visibility into incremental volumes as customers are onboarded and progressively ramp up. Beyond new customer acquisitions, we remain focused on increasing wallet share with our existing customers and expanding into the range of services consumed through the ACA platform. The structural opportunity remains significant with online penetration in India. India's managed corporate travel market still relatively low. We believe our scale technology platform, extensive hotel supply and long-standing enterprise relationships position us well as the market continues to digitize. As we look ahead, we have several reasons to be constructive mine is seeing a stronger pipeline and improving margins. Corporate travel is recovering fast. Air margins are improving, and hotel continues its growth trajectory as strong as it was earlier. At the same time, our investments are expanding our growth opportunities. Travel Pros strengthening our B2E go-to-market. Recap is opening new customer segments and Cano is extending our corporate capabilities beyond India. As these factors come together, we expect the operating capacity we built to support a much larger revenue base, driving operating leverage and rebuilding EBITDA margins towards 20% plus. And as corporate travel normalizes and our growth initiatives scale, we believe the EBITDA margin can progress into the 30% range over time. The macro environment remains uncertain, but the underlying opportunity has not changed. India remains 1 of the world's most attractive long-term travel markets. And Miata today has a broader set of growth opportunities than at any point in our recent history. Our priority is, therefore, remain clear, strengthen the court expand our addressable markets, take our capabilities into new geographies and continue using technology, AI and automation to build a more scalable asset. That is how we approach periods of disruption throughout our 20-year history, and it is how we intend to build the next phase of Yatra's growth. Thank you, everyone. And I'll now request our CFO, Anuj Sethi, to brief you on the financial performance for the quarter.

Thank you, Siddhartha. Good morning, everyone. For the first quarter of financial year 2021. On a consolidated basis, our revenue from operations decreased 10.4% year-on-year to [indiscernible]. Our gross margin, defined as revenue less service cost rose 6.1% year-on-year in [ INR 127 million ]. Adjusted EBITDA decreased 39.4% year-on-year to INR 151 million, translating to a 12.29% adjusted EBITDA to gross margin ratio. As a result, our profit after tax came in at INR 3.4 million. In terms of segmental performance, our ticketing passenger volume increased by 4.8% year-on-year to INR 1,264,000. However, our gross bookings grew 17.6% year-on-year to [ INR 16,579 million ]. And our air gross margin rose 8% year-on-year to INR 699 million, with margins declining from 4.6% to 4.2%. On the Hotel and Packages segment, total rooms grew nearly nearly 30% year-on-year to 548,000 bookings increased 13% year-on-year to INR 3,876 million, while gross margins expanded year-on-year to 386 million, while margins improving from 9.05% to 9.9%. On the liquidity front, cash and cash equivalent and term deposit stood at [ INR 1,976.9 million ] as of 30 June 2026. With this, I would like to hand it back to the moderator and open up for questions and answer them.

[Operator Instructions] First question is from the line of Sagarika Chetty from Antique Stock Broking.

So my first question is on the Flight segment. So you saw the opening of growth in GTV this quarter driven mostly by value than volumes, but your gross margin increased at a much slower pace. Now of course, at the middle of the second quarter, but are we seeing a similar trajectory in the second quarter given the supply cuts and the incentive finalization that you mentioned. And so is it fair to assume that margins for the [indiscernible] due to the [ year compared to ] '26?

Sagarika, as we've mentioned in -- you would see this in our investor presentation as well. What happened at this point of time is that a lot of the Medstar carriers, especially are still trying to figure out what would be the volume and how much capacity will they deploy during this current year on account of which the kind of PLBs, which are the annual productivity linked bonuses those targets and those deals have still not been closed. Historically, those get closed in the early part of Q1 itself. But in the current year, given the disruption in Q1, they have remained open. Hence, revenue is recognized at a lower number. As things move forward, we do expect that at least in the second half of the year, we are already seeing some degree of normalization in the capacity. We are seeing some more capacity being added back. We do exit margins to improve in the second half of the year. So at this point of time, it's driven more by the macros because of which you are seeing GTV rise at a faster pace, and there should be a catch-up effect of this in the second half of the year.

Okay, fairly clear. And the second question was given the fact that this quarter, there was weaker corporate travel. So what is the traction of our B2B versus B2C, has that changed? Or does that remain broadly the same as it was in the quarter?

I think there's obviously a slight decline in that. While the corporate business has come down a little bit in terms of share, B2C business has gained a little bit more, but it's not a very substantial change, which would be there in the mix. There is obviously a little bit of mix. On the B2B side, the 1 part which has really picked up a little bit more is the travel agency part of the business, which has got a bit more boost in terms of volumes. But on an overall basis, the mix would have moved from like 60s to mid-16s right now. It aren't very material in terms of the change.

The next question is from the line of Nitin from Investec.

A couple of questions. So the first is on the mine recovery -- so you indicated that there's a $300 million sort of loss of revenue on a year-on-year basis. Do you think this loss of revenue in at least on a year-on-year basis gets bridged immediately in the following quarter as you see an improvement? Or do you think this maybe sort of bridged only sometime is year? So that's the first question.

So mine as a segment has gone through a bit of a restructure. And the restructure actually started somewhere around mid of last quarter. and the demand had to shift from international group travel had to kind of transform itself into domestic group travel, which was maybe slightly higher margin but smaller order sizes. So that transformation was going on as we progress from Q4 to Q1. And what we saw was an industry that was responding to the change in demand and what we could execute from a mine segment standpoint. And I think that phase of MICE transformation is already over. As Dhruv earlier said in his speech, our Q2 volumes are looking 50% better than what we've seen in Q1. and the margin profile of the groups that we have received and are executing are far better as well. So we do not expect a very too long change in the business now. Now things are stabilizing more and the pipes are looking better and the magic size is looking better as well. So to answer a short answer to your question is that I think the massive change that was to happen has already happened. The industry has responded to the market condition, and I think things are normalizing as we speak now.

Perfect. And on the travel pro seems to have done pretty well in terms of bookings and seems to be seeing good traction. Do you believe that the rebookings that you have sort of done because of Travel Pro, considering the client sizes are maybe relatively smaller than the core corporate, do you think that this sort of INR 200 crore kind of bookings run rate should is something that you can sort of aspire for on a consistent basis or thereabouts because this sort of does better? And the second part of the question is, do you think that Travel Pro also gives you longer-term contracts like 2, 3, 4, 5 years? Or is it any way different from the way it is for the rest of the corporate business?

If you look at our numbers, we've we've announced 53 new logo acquisitions of about INR 220-odd crores annual billable potential. Out of that, 30 logos are Travelochis just the beginning of the scale of Travelport. So we believe going forward, Travel Pro would bring in more number of logos from a number of wins perspective, obviously, Travel Pro would start reporting much lesser number. INR 80 crores out of INR 140 crores, again, is a very, very good start. And this business is trending nearly 20% to 30% higher in Q2 already. So we believe there's a huge headroom white space, which is still not digitized from a corporate online travel perspective and our ability to create a product which has really resonated and with very large customers for small and medium enterprises is starting to get traction in the market. What we usually are elite customers would come in with at least a 2 to 3 years kind of a contract. But in Travel Pro, we are seeing that most of our projects are about an annual contract that we signed with our customers. These are still too early days to comment on exactly how this part of customer cohort will be going forward and the stickiness but glad to report that there is no deterioration in our net retention percentage that we have been holding on for the last 2 to 3 years, where our corporate net retention is as high as 97%.

I have some questions on cost, but I'll come back in the queue.

The next question is from the line of Anmol Garg from DAM Capital.

A couple of things I wanted to ask. Firstly, I wanted to clarify how much is our international business versus domestic as of now?

As of now, I know the international share would have come down to less than 30%. If you recall, given our higher mix of corporate travel and my international MICE, we were trending closer to late 30s to almost 40% in terms of the mix. So it's under 30% at the moment.

Understood. Understood. And Dhruv, our underlying volume growth in the air has been 5%, which is greater than the overall market growth. Now this is despite pressure in the corporate bookings at this point in time. So I just wanted to understand -- have we increased our focus on the B2C side of things, which is leading to at a little bit better growth than the market at this point in time within here?

So we have a diversified business model, and that is 1 of the advantages of the diversified business model. We've seen, obviously, that B2C is able to scale up and scale up operably. And that's why we've been able to lean on a little bit on the B2C side to build a little bit of the volume to make sure that when it comes to supplier deals, et cetera, we remain at the right thresholds. I think it also reflects -- I think in the last commentary, we have spoken about the fact that we are putting in a lot of efforts to ensure that our tech and form holds for all our customer cohorts. And that investment, which has gone in has resulted in the platform being more stable, the response times being much better and it has a in-effect on almost all LOBs. And that's what we've seen that this investment has started reflecting in performance of B2C as well. So -- and that's the reason why the volumes have gone up there. Obviously, it's a business that's closest to the domestic spend story of India. I think travel demand hasn't come down domestic travel demand. That's why we see people travel as well as hotel business doing really well stand-alone. And I think that's why overall bump up, and you gain market share.

Understood. Just 1 thing on the margin. So we made a comment that we expect our adjusted margins to be 30% plus going ahead. So what will lead to such a strong margin in up and current and. So what will lead to this? And will it happen over the next 1 to 2 quarters? Or this is more of a longer-term guidance?

I think let me answer that from the last part of your question first. That is more like a midterm guidance, which we had given earlier as well. We were at 20-plus percent kind of margin, and we have done the work in terms of how the addition of every incremental corporate customer adds almost 50% cone contribution margin. So as the corporate business would have grown, we would have expected to get to that 30% now given the operating leverage in the business. Unfortunately, we've seen things like MICE, which get disrupted -- which have gotten disrupted for the last 2 quarters. Those are higher-margin businesses. Plus, we've had to make some incremental investments for the Carlo opportunity. So there is some amount of cost impact of that as well, which is there. So the net effect of those is what has got the margin now. If you were to normalize for these elements, meaning if you were to look at MICE come back, which is what we are expecting in the current quarter, air margins on the international route getting stabilized and some further growth in the corporate travel business we will see margins come back very quickly to the 20-plus percent mark first. And as the business continues to scale, we do feel confident that we'll get back to that 30% aspiration in the midterm. So my sense at this point based on what trending we are seeing is that in the second half of the year, we should start being pretty close to the 20% mark post scaling up again from there.

Understood. Understood. Just on that. So in the next quarter, should we see an increase in margins? Or will it remain range bound given that caps constraint is there on the flight business at this point in time?

I think there is a little bit of improvement on account of MICE. The second element, which is the capacity still continues to be coming back only gradually. So I think we'll see a marginal improvement to -- if MICE continues this momentum, Hopefully, we might see some more tangible improvement, but largely remaining range bound in the current quarter before we start seeing further improvement going forward.

The next question is from the line of [ Dhruv ] from Lee Capital.

So firstly, congratulations to the team on the 7-year partnership that we had this quarter. I have just 1 question. on the corporate structure, could you give us an update on the restructuring merger of Yatra India with the parent company? Where do things currently stand? And what time line are you working towards to get disputed?

So on that front, there is obviously work which has been going on now for the last, I would say, at least 6 quarters on that. That entails different jurisdictions, including India, Singapore, Cyprus and Cayman plus dealing with DTC, we did do a block back in February right from that entity into India to fund that entity's legal expenses for the collapse. So I think that's 1 indication that there is work going on over there since we had to fund the legal expenses. But beyond that, from a public disclosure point of view, all I can say is it remains a key priority, and we guys are all working towards that. If I was to give you a sense of a time line, having seen how regulators in different markets behave, it's very hard to give an exact time line on that.

[Operator Instructions] The next question is from the line of Chirag from Motilal Oswal Financial Services.

So a couple of questions. If you look at the customer different cost furnace or some conditions 50% of gross it has slightly alien further. Is it like we provide more discounts in the hotel and like even considering the slowdown in [indiscernible]?

This is slightly unclear.

Having the customer promotion for some cost in in any sector almost of a high level, so is it like we are more discount current partner in the hotel segment?

Yes. So it's got to do a little bit with the business mix as well, given that this quarter, a greater part of the business mix is coming from B2C and B2C does have a certain level of discounting, which is in marketing, which is there. That's part of the reason why you are seeing it at slightly elevated levels. As things normalize back and we have the MICE mix also coming in again in the next quarter, this number should normalize. So this is more of a temporary phenomenon on account of the change in business mix.

Okay. And we also should provide a guidance like from near-term point of view, we are expecting mix to shift to happen like air and hotel [indiscernible]. So is that starting to impact [indiscernible]?