TBO Tek (NSE:TBOTEK) Q2 2027 Earnings Call

0:00 Good evening, everyone. This is Ashmisha from AdFactors Investor Relations. On behalf of TBO Tek Limited, I would like to welcome you all to the earnings conference call for Q2 and H1 FY 'twenty seven. Today on the call, we have with us from the management, mister Ankush Najavan, cofounder and joint managing director mister Gaurav Patnagar, cofounder and joint managing director mister Vikash Jain, chief financial officer Mr. Akshat Varma, Hold Time Director and Chief Technology Officer Mr. Pramendra Tomar, General Counsel Mr. Suresh Mahajan, Associate Director, Investor Relations. We will begin today's call with opening remarks from the management, following which we will open the floor for Q and A. Before we begin, I would like to remind everyone that certain statements made during this call may be forward looking in nature. These statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied.

0:57 TBO Tek undertakes no obligation to publicly update these or revise any forward looking statements based on subsequent events or developments. With that, I would now like to hand over the call to mister Gaurav Patnagar for his opening remarks. Thank you, and over to you, sir. Thank you, Ashley. Good evening, everyone, and thank you for joining our q two earnings call. We are very happy to report that in spite of a very difficult geopolitical climate, we've been able to deliver strong double digit growth in the core organic business as well. We've shared the numbers, but I do want to highlight that the 16% growth in GTV led to a 27% growth in adjusted EBITDA. So we are demand... Continuing to demonstrate operating leverage for the second consecutive quarter.

1:45 These numbers could be a lot stronger. And I just wanna highlight a few things to demonstrate that once things start to get better, where we can eventually expect the business to be. Middle East, which has been the most impacted market because of the ongoing conflict, also delivered a 10% growth on constant currency basis. With, you with know, with currency, you're seeing a 20% growth. But even in constant currency, Middle East delivered a 10% growth, which is quite remarkable given the circumstances that we are operating in. The market is obviously well below its baseline from a year ago. So our belief is that in a market like Middle East, we continue to gain gaining share. Markets like Europe and APAC have delivered north of 30% growth. Europe on a fairly large base, as you know, it has been becoming our largest source market now, which again is a... Is usually... Generally a consequence of the investment we have done in market development starting early twenty twenty five, which is also be visible in the number of active agents continuing to grow at a solid pace.

2:44 So while the while the quarter has been tough, our belief in the organic business remains because of the fact that the underlying metrics, which is number of active agents, bookings per active agent, and growth in our ancillary businesses, all support continue to point to strong revival and strong even faster growth once the political... The the geopolitical climate improves. The other bit that I want to highlight a little bit on is classifications. We are starting to... It's... We completed one year of, that transaction now. And, we have started to get a fairly good grip of that business. One of the key actions we have taken in the last six months is, expanded our sales team. We have hired about 20 new people in sales, since we acquired the business.

3:29 About half of them are in the company less than six months. In fact, probably a quarter of them are less than three months. About half of them are less than six months in the company. So there's gonna be some lag between when the... When this investment starts to deliver results. But we have a fair clear idea on how we want to develop this business. The investment thesis remains strong on classic. The opportunity with classic is that our entry into the luxury end of the segment, which is which is where we want to operate in the post AI era. Classic is also giving us opportunities to develop a newest corridor, which is The US to Europe corridor. Our belief is that if the if the conflict remains... You know, if the conflict prolongs, then probably that is one corridor which will have relatively less headwinds because of what's happening elsewhere in the world.

4:17 The final bit is we are continuing to focus on operational efficiencies. So while the... While we wait for markets to revive and there's a little bit of pause on on new market development at this point in time. We are continuing to invest in building or using AI and technology to automate processes to build tools for our sales team to become more effective and tools for our operations team to automate a fair bit of work that they do. This is one of the reasons why you will see that our constant currency SG and A growth has been... Is been high single digits and significantly outpacing our top line growth. I'll take a pause here, and we'll open for questions. Thank you, sir. We will now begin the q and a session. Participants are requested to raise their virtual hands to ask questions.

5:03 We request you to introduce yourself and the form you represent before you ask... Before you go ahead. We'll just wait for a moment till everyone assembles in the question queue. We'll take the first question from mister Karanupal. Karan, please unmute yourself and go ahead with your question. Yeah. Can you hear me? Yes. We can. Hi, Karanupal. Hi. Hi, Gaurav and team. Thanks for the opportunity and fairly good set of numbers. So first question is on the demand environment. So, Gaurav, you touched upon it, but just wanted to understand that, you know, that given the elevated fares in international flights as well as uncertain geopolitical and macro environment, Any any pullback you are seeing in the demand given that you cater to, let's say, the premium and the luxury end of the market?

6:02 But but just wanted to understand from you how we're seeing the overall demand. No, Karin. There is there is definitely pressure on demand, and this has actually elevated in October because October has been a, you know, a very, very volatile month globally as you're aware. The crisis in Saudi with the, you know, attacks happening on Saudi airport meant that both Saudi inbound and Saudi outbound has been very, very badly hit. Prior bookings have also gone canceled. On top of it, the the spread the spread of writing across major European cities has also been a major headwind, especially cities like Paris, Euro Country... Cities like Madrid, Barcelona, Italy. These are very, very large leisure destinations. So we are seeing increased cancellation as well as some reduction in demand over there. So, yes, I think there is stress.

6:54 What we are, you know, kind of aiming for is that at least in spite of these headwinds, right, we maintain some positive growth on the overall business irrespective of of these headwinds by one focusing on gaining market share because we've we've invested in market development, and that allows us to get more penetration with travel agent. And secondly, by, like you said, focused on transactions. So even if demand by numbers is reducing, demand by dollar revenue is still a little bit more stable and also focusing on high value transactions. Right. Right. Right. But given these headwinds, how do you think h two will shape out to you? I mean, will h two be more than h one or maybe same as h one? Any any sense there?

7:43 See, current, he's... You know, given where things are, you know, I think h two is just like q four is just too far away right now. Given, you know, their US elections are tomorrow, and then we... Who knows what happens in the next ten days. What... You know, we know that historically q three is also the weakest quarter in travel. So So that's just, you know, how seasonality works. So we do expect a tough, q three because of the fact that, several, you know, several headwinds in the in the industry right now. Internally, what we are aiming for is that just still manage to deliver year on year growth both on top line and bottom line. That's kind of, like, the framework we are working with right now. With the view that if things, you know, if things magically become much better, which could also happen. Right? Things get worse before they get better, but there... It's like the US elections feel like an inflection point one way or the other. Right? So either it could go really bad or it could get much better. If it gets much better, we would expect to see real quick spring back in the business.

8:43 But if things go forwards, then the best we are hoping for is to deliver continue to deliver some top line and bottom line growth. Got it. Another question I had on, EBITDA to GP. So operating leverage is quite visible and playing out, since last two quarters. So congratulations on that. But how should we think about it, you know, from go forward perspective? Will this number continue to improve? Yeah.. Karan, you know, one thing to be mindful is that operating leverage goes both ways. Right? So if... And q two is our, you know, best quarter of the year. It could have been much better if the situation was not what it is, but q two is traditionally the high summer season for most of most of Northern Hemisphere.

9:31 So, you know, from q one to q two or, know, yeah, you will see that, you know, increasing GP is flowing through nicely to bottom line. But the reverse also happens. Right? So for example, if the... If q three, which historically is always lower than q two, then you will see the reverse also happen. In the long run, the... Conceptually, I feel we have gotten to a point where we know that the investment in s g and a should largely, you know, be lesser than the growth in GP that we are anticipating. Right? So that's kinda like the broad framework if I has to look, say, three... You know, next, say, two, four, six, eight quarters. The seasonality will always come into play. So one useful way to look at it is tailing twelve months to really get a sense of where our, you know, average EBITDA margins are trending to. But we have confidence that we have... You know, we... At this point in time, we... If we are able to demonstrate operating leverage in a very tough situation, they... We don't need any incremental investment, just the improvement in climate and any upside in GP that will happen will directly fall into... Fall to the bottom line. So that's that's some level of confidence now we have on our operating leverage play.

10:44 Got it. Got it. Thanks, and I'll call back in. Thank you so much, Karan. Thank you, Karan. The next question is from the line of mister An... Manish Adukya. So please unmute yourself and go ahead with your question. Hi. Good evening. Thank you for taking my questions. This is Manish Gupta from Goldman Sachs. Great quarter again. Few questions. Starting with growth, you've had consistent broad based growth across some of your regions like Europe, APAC, even North America on an organic basis. And like you mentioned, the overall growth has been tracked down by Middle East. I'm just trying to understand... I mean, just tying up with your earlier comments that the investments you've made last year helping you grow in some of these regions. As, let's say, Middle East recovers sometime next year, let's assume, what is your outlook on organic growth in some of these regions like APAC, Europe, and North America ex of classic vacation? I'm just trying to think, like, if Middle East recovers, does that mean mathematically overall growth should improve?

11:47 Or given just the high base from some of these regions which are growing well today, they will drag down overall growth. So just trying to understand the interplay between these these these various regions. If you can maybe help us understand or throw some some light on that. See, Manish, the economics of the business as we've discussed in the past, really comes down to how productive is our sales team on the ground. And at this point in time, we do believe that their productivity, it has not maximized for two reasons. One, a a lot of sales team is still new. So less than a year in the business or maybe on an average, fifteen months into the business. So it takes three, four years for them to truly max out their own, ability to kind of, you know, maximize their order book. Second is that the markets are depressed right now. There is significant headwind, whether it is, APAC, if it's a very high, there is, you know, stress in the Middle East market as well. In the carriers like, Emirates, Qatar, you know, because people are, you know, these are major transit carriers.

12:50 And if people are not taking... Using these carriers, east to west and west to east is also impacted. Now in that situation, if we have delivered high double digit growth in these markets, I have a strong conviction that when things normalize, we should see a second uptick happen even on these basis. And we had started to see hints of it, in Jan Feb of twenty twenty six, right before the ball started. If you see if you see our organic numbers for those balls for those two months, which we had shared, when we did the quarterly results, they were high. You know, they were not a 50% in certain markets. Now I'm not committing that that is again where we will get to. But, you know, we have not maximized the potential of the investment we have already made just because of the timing of the war. So we do believe that that should start to come back. If Middle East is delivering 10% growth in in a quarter like the current... The previous quarter, they will definitely expect it to deliver more growth next year when peace returns.

13:46 So there's strong conviction, Manish, that if organic is delivering whatever, you know, to a 15, 20% GTB growth... 28% in the international market. 28%. Actually, yes. So the... In the international market, even in this quarter, the organic growth is 28%. You would expect to do something reasonably more than that once recovery happens. Very clear. And maybe related and a follow on question because starting December quarter, you will consolidate classic, like... Or classic will also be in your base. And at least from whatever data we had in the past, classic as a portfolio wasn't growing in a material way. So let's assume that from next quarter, including classification when we look at the numbers, would classic be a drag to the overall growth of the business at least for the foreseeable future? And I know you talked about you making investments in sales in classic, which probably will you the goodness over the next few quarters.

14:41 But at least until then, is it safe to assume that classic should be a drag on overall business growth? See, just mathematically, yes. Because, you know, I don't think I can claim that classic can overnight start to grow, say, 30%, which is where review overall organic business is growing in the international market. So, yes, from that perspective, absolutely, you know, it it pulls the average down a little bit. Not two, three things that we have to be mindful on in classic is that because the booking windows are very long, the revenue we book in any quarter is really an outcome, especially on the group's visit. The outcome of, you know, the booking window on groups is almost three sixty five days or something like that. So it is really an outcome of what got booked almost a year ago. Similarly on hotels, the outcome of what we book several months ago was two or three quarters ago is what shows up in the in the books for for a for a given quarter.

15:36 But having said that, the upside with classic is that the GP is significantly more. Right? It's almost double the GP of the organic business, which means that if any $1 we add in classic is equal... $1 of GTP we add in classic is equivalent to $2 of GTP that we add to our organic business. So I think that does play out a little bit. The other bit, Manish, I think classic helps is the whole billboard effect of being a major player in the North America market, which will help us grow our organic TBO business also in that market. So look, net net, Manish, our, you know, our long term hypothesis remains where it is on the in... Enterprise growth pieces that we've been talking about. This one or two quarters, of course, because of more than classic... The macro headwinds are there, which you really can't control.

16:21 Very clear. My next question was on AI, and I know in the past you articulated your thoughts on how that could impact. But I just want to, you know, maybe check from the last time we spoke, like, three months ago when given some of the recent evolution around personal AI assistant, let's say, MetaMuse, for example, which may be impact from the consumer side tech applications more. But anything incrementally from your side that you want to call out as to how these could potentially impact your business, if at all? Like, if you have any refreshed thoughts on on that, that'll be helpful. Manish, I think one thing that is becoming increasingly clear is that travel will be a significant use case for these AI agent because probably it feels like consumer monetization is easiest on travel use cases. Mark Zuckerberg talked about it, you know, in his in his call as well that, you know, they are looking at travel as a core use case. Instinct, the other AI board, they have talked about that almost half of the billion dollars of transaction they have done is is related to travel.

17:25 So, yes, it does feel like that consumer behavior will will... You know, of it will divert attention towards using these bots to research and book travel. Our conviction remains the same, Manish, that ultimately, at least for the foreseeable future, it is going to be a point to point transaction because you will task a bot. It's much easier and much more predictable to say that I want to book a specific flight or a specific hotel, find me something, and put my credit card and book it over there. That isn't what a travel agent really solves for. A travel agent or a travel adviser is solving for a long complex itineraries with multiple touch points, multiple form, multiple multiple modes of transport, multiple destination and cities, which is where. Right? So that's where we continue to focus, Manish, building out our multi trip, you know, multi destination and trip tools, potentially looking at, you know, opening them as headless services as well so that others or the bots can also consume them. We had launched our MCPs on on cloud and chat GPT in a very experimental manner a few weeks ago. So we continue to explore the space. We don't see an imminent threat on our business right now, but we also acknowledge that travel is is going to get impacted, and it may create some opportunities and maybe some threats as well.

18:40 Thank you. Very helpful. Just last question for me. On those couple of exceptional items and, and and and item that you called out, one is the 8 crore of, you know, irregularities that you called out. One, maybe, is this something that you've seen in the past as well, and what are you doing that something like that does not occur again? And second, also on that FEMA educate... With you. Again, I don't think you've provisioned for that. Maybe you can remind us as to what are the implications of that. And beyond the penalty that's been called out, is there any, like, worst case scenario in which, you know, the outcome can be worse? Like, just trying to maybe understand the, opportunities of that. Thank you. Sure. So let me come in, Manish. So relating to the exceptional, cost of eight point, one CR.

19:31 So just to just to give a background that after the quarter end, we had identified certain irregularities involving suspected collusion among some, employees, which led to some unauthorized bookings made in some government travel agency account. And, obviously, the payment for the same was not received by us. The company's monitoring and review mechanism, which included a periodic review of the outstanding balances with travel agencies, helped in facilitating in identifying these irregularities. However, as we speak, we have appointed an external consultant to conduct a detailed investigation and assessment. But based on the preliminary assessment, we have estimated that net net financial loss of around 8, crore in the subsidiary. We have filed police complaint both in India and UAE regarding the incident. The relevant authorities are taking, getting out their investigation into the matter. And, obviously, we will keep everyone updated on any material development.

20:22 As a group, we had also taken the insurance for such matter and incident, and we have also initiated the process for the insurance claim in respect of the above matter. Regarding the past incidents related, like, similar to this, we have not had some similar kind of instances in in the recent past, I would say, at least last five to seven years. I don't recall any of such instance of collusion of employees. Actions being undertaken. So I didn't immediate action to mitigate the risk of recurrence in the near future. We have implemented certain additional oversight measures involving relevant senior team members. From a long term term perspective, we are undertaking initiatives to automate some of the activities to minimize the human interventions, basically, so that the risk of pollution is mitigated.

21:10 So this is regarding the incident, basically. Coming back on your question relating to the FEMA. So, yes, this matter was already under adjudication. Subsequent to, again, the quarter end, we have received the adjudication order. And based on the advice from our legal consultants, we would be going ahead and filing an appeal against the same. And, again, based on that legal advice, we believe that the chances of our... Meaning of our appeal is high, and, the penalty amount may not be sustained. And that's the reason, as of now, we have not provided for, any provision in the books regarding the same. Thank you for all the color. Very helpful. All the best. Thank you. Thank you. The next question will take from mister Nitin Padmanaban.

21:56 Sir, please unmute yourself and go ahead with your question. Yeah. Hi. Good evening. Thanks for the opportunity. Two questions here, actually. The first one is you did mention that, obviously, as Middle East has sort of picked up, and, obviously, there's uncertainty in the region. And, obviously, Europe also, looks like with these right tiering and all of those, that has some impact. Do you think that sort of creates a risk of, q three being relatively weaker than normal? So that's the first question. And the second is, with respect to Classic, from an integration perspective, what milestones have you sort of crossed, and when do you believe, you know, it becomes possible to really expect some kind of an acceleration?

22:48 You did mention you had 20 people and all of those, and that will take a little bit of time. But broadly, in terms of tech integration and broader, stuff, it'll be great if you have some details around that. Sure, Nathan. Nathan, I think q three has risks, no doubt about it. And like I articulated, you know, in... With... In previous answers, we are aiming... Our internal aim right now is that irrespective of the turmoil, let's aim and deliver some top line and bottom line growth, which is a... Is... Honestly, at this point, it feels like a stress target given where situation is. But what we have seen in the past is that travel rebounds extremely quickly, and these days, it rebounds within hours and days of when good news comes in. So we have to wait for that. I think, unfortunately, what has happened in the last few weeks is both the Saudi issue actually started and constantly escalated instead of deescalating. And the same thing happened with the writing in Europe. It started in one city. And suddenly every major city in Europe is having these riots.

23:49 And then we have, obviously, the, you know, the outcome of the Israeli election hasn't been clear, and the US midterms are happening today. So between all of that, it's very hard to predict, you you know, know, how q three goes. Internally, are just focusing on making sure that, you know, wherever there are pockets of growth, we double down on that and deliver it. Keep a check on cost and make sure that, you know, we are able to on both on top line, bottom line, bottom line gives some growth. On classic, that in the... There are two, three, you know, internal milestone that we're focusing on. So one is... And which is largely completed now is was the ramping of the sales team because, see, classic versus almost 10,000 travel advisers across North America. US is a very, very large. As you know, it's a very large country. They were running on a very short start sales org of 10, 12 people to service 10,000 boogers, and I think we were losing opportunity over there. So account management was... That could be better.

24:42 So that process has started. It's almost complete, I would say. The other thing is largely complete is that on a lot of back office processes in in classic, we wanted to implement a CRM. So they did not have an in house CRM, which was tracking the quality of service, tags, SLAs, all the, you know, all the stuff which is important to grow with consistent service. For most of these processes, the CRM implementation has also happened. The tech platform integration for TBO supply into classic is completed. The tech integration for the TBO platform being available to classic is in the works. A beta launch is expected to happen later this month in the, you know, latter half of November. And then we will do a gradual rollout of it across the next several months. Keep being... Keeping in mind that November is Thanksgiving, December is Christmas, and then January, February, March is peak booking season. So we'll do a gradual rollout over there.

25:35 And then beyond that, on an organizational front, we were only going to integrate the supplier, which has already happened. So the North... The Americas supply or both for TBO and Classic is now rolled into Joel who who came from classic, and now she is in charge for both TBO and classic supply for all of Americas. Similarly, Bonte, who again comes from classic, is now in charge of all of Europe supply for both TBO and and classic. So that bit has also been... That is the only... All integration we were looking at. Other than that, the orgs remain fairly independent. So that's that's the broad layout. This will start to deliver demonstrable results somewhere in the next couple of quarters.

26:21 Right? It's very hard to predict right now because multiple things are playing out. Right? So we also have all these headwinds that are playing out. At the same time, we are driving some investment into sales, but driving some cost efficiencies as well. So multiple things are playing out. We don't have a... You know, I don't wanna commit to a specific number on this in a specific timeline, but directionally, we are very confident we're moving in the right direction. Perfect. Very helpful. So broadly, what you're saying is all the bottlenecks are addressed, and it's just about execution. And, obviously, it takes time for people to really ramp up. So that's the only thing that's missing. Yes. Yes. Oh, perfect. They're very helpful. Thank you so much, and all the best. Thank you. Thank you, sir. We'll take the next question from mister Samar Patel. So please unmute yourself and go ahead with your question.

27:17 Mister Samad? Yeah. Am I audible? Yes. Yes. Yes. Yeah. Hi. This is Samad Patel from Acuitas Securities. I had a couple of questions. First one was on Europe. So if I look at this quarter, Europe grew around 36%, and, now it's roughly 36% of total GTV for us. So how much of this growth is coming from new source market, let's say Germany and Portugal that we, entered recently against the deeper in the existing markets like UK, France, Spain, etcetera. If you can give any flavor around that, that would be helpful. Okay. Somewhat, I think the newer markets are growing very fast. I I think think almost triple digit growth in certain those markets, but on a small base. UK Island is also growing significantly, but on a significantly higher base. So UK and Ireland, I'll say, is more of a depth that we are building.

28:09 Some new markets, some of the Eastern European markets or the markets like Germany is really where we started to invest last year, and now they're starting to show results. So I don't have an exact number on on where this is, but it is genuinely both building depth in our existing markets and penetrating into new markets with, you know, early opportunities, and which is why we remain confident to what Manish was asking earlier. That as things progress, even on this base, we should have a long runway for growth because these markets are, like, triple digit growth on small base, they have a long runway before they start to saturate. Understood. That is clearly helpful. Now my second question was on India. If I look at the GTV growth for us this quarter, it was around 14%, but monthly transacting buyers fell around 2%.

28:55 So is it like a consolidation toward larger agency in the market or attrition among smaller ones? If you can just give any flavor around, I mean, this particular aspect. So, Samat, in the quarter, our monthly transaction in India actually grown by 1%, keeping in mind the base is very large because almost 24,000 operate with us on a a quarterly basis. And on the h one, it was up by 4%. So both of things are working somewhat. The important ones, the meaningful partners and agents are extremely important. And, yes, we're trying to win more non air business there, which is obviously higher on profitability. And, obviously, it makes more sense for us to make sure that we keep continue to cross sell on the large distribution what we have here, and hopefully, will will play out and, and continue to grow also on the air business as we have done the the last quarter, and, obviously, see a good growth on the hotel business as well.

29:50 Understood. My next question is on, classic vacation. And, I mean, we touched upon that, in the previous participant's, question as well. So TBO sales into classic, I mean, rose sharply to around 8% of the classic GTV, which was, if I'm not wrong, was about 5% last quarter. Now I'm not, looking for, let's say, in next two to three quarters, but in the steady state, once the entire synergy plays out, what could be the steady state number here? And and follow-up to that is, like, what does TBO on on this particular bookings? Is is it a normal margin or some sort of a transfer pricing that we do? Okay.

30:35 So on the margin, basically, yes, we keep whatever is required as per the arm's length basis transfer pricing margin between the two entities, and it can it can vary from entity to entity and and market to market. So... But we are compliant with the transfer pricing norms. But on the other question, the... Because now we have unified Us contracting supply orgs, So this number would grow or shrink depending on where we put the contracts. Right? So as their team contracts more hotels, we may have an opportunity to get a separate contract for classic as well, you know, which we already have for TBO because, again, it is more efficient. It's more cost efficient. There's no transfer pricing involved. The technology hop doesn't happen and all of that.

31:23 So that is a number which demonstrates some level of... At least synergies, but in the long run, because now the supply hogs are same, I would expect this number to not be the number that demonstrates energy because of the fact that the same team will bring both contracts both for classic as well as for TBO. Understood. That is really helpful. And if I may squeeze one more here. So last quarter, I think, our GTB split between the smaller regions and the API was roughly half and half. So currently, which part of the business is growing faster for us? And any differential and take rate that... Any flavor around that would be helpful. So in the current quarter as well, mix is fifty fifty only. So both, I would say, businesses are growing per se compared to the last year. In terms of the margins per se, basically, the the revenue take rate would be lower in an API business because the revenue kind of flows through to the GP because we don't have any kind of servicing cost, etcetera, between the revenue and GP. But at the GP level, there would be some difference, but we do a business would obviously be marginally higher than the API business in terms of the... At the GP level.

32:38 Understood. That is it from my side. Thanks for providing me the opportunity, and best of luck for the next one. Thank you. Thank you. Thank you. We'll take the next question from mister Swapnil. So please unmute yourself and go ahead with your question. Hi, everyone. Thanks for the opportunity. My first question is more of a clarification on Guru. You mentioned that three k will face some headwinds and you're expect... Expecting some growth. Now by some growth, do you mean CC growth, or are you alluding to the overall GTV growth? Because there is some currency benefit also available to us this quarter, Six to 7%, if I'm not wrong. So just trying to understand, like, what do you mean by some growth c c? Is it c c or it could be recorded?

33:30 I'm keeping fingers crossed for constant currency growth. Right? The currency uplift is on top of it because that is... You know, we don't contribute to it. So I'm I'm keeping fingers crossed on constant currency growth. Got it, Gaurav. And the the other question is, like, recently, one of your largest b two c players in India talked about having roughly around 26,000 transacting partners, in the agency side... Agency business side. And, and they also talked talked about, having some, support mechanism to support these partners. So the question out here is, like, as b two c companies, see the threat, growing threat from AI, is there a possibility that, these companies will divert some of their resources towards b to b to c kind of a businesses as well?

34:23 I think something the business, if I'm not wrong, what I'm understanding is is the corporate business which the OT or the other company you're talking about is working in that 26,000 is actually those corporate, not travel agencies. I think I think that's a clarification if... Or or why... I think what you're trying to say is is different. No. My... The actual question, Ankush, is that is... Will... Is there a possibility that the BT companies, the the OTs, will eventually... If their core business gets impacted, they will try try to focus a lot more on the, you know, the agency side of the business. They will... Putting in the feed on street and just like you guys are. So, Phil, nobody can stop them entering the space. And why only one? Anybody can. But, you know, it's a...

35:14 It's... They're two... It's a complete different business. Some have tried in the past and failed. One, because there's a lot of, knowledge which you need when it comes to the, you know, credit lines, etcetera, with the travel agents. Second, I think the channel conflict comes in very significantly here because a lot of airline and hotel supply is very cognizant of not extending this, you know, if you're playing a b and a c both. So there are challenges to enter the market. It's not... It doesn't... It's not as easy as it sounds, but, yes, they can absolutely enter and absolutely there's something, which is a threat if it is. And, obviously, we will acknowledge it and, compete as much as we can. Got it. And, staying on, with you, Ankush. So in the in the air business, especially the core air business, which is excluding the m and a, the take rates have substantially come down to around 2%.

36:05 I... If I remember correctly now, our take rates used to be around 2.5%. So there's a significant, you know, decline in those take rates. Any particular reasons you can call out, and how how how do we see these take rates going forward as well? Because I think if there... If you take Yeah. So,, yeah, like, the tickets have come down to 2% versus a 2.3 or 2.4, which used to happen earlier. So there are certain, like, one... Some lower incentives as well as some refund income lower in the current quarter or I would say in the h one. However, like, the impact on the GP is not that high. We have kind of been able to pass on almost more than 50% of that impact in... To the travel agent. So at the GP line, still, are managing around 1% GP in this quarter versus a one point one one point one two last year.

36:55 Is there any possibility of a reversal? Or is there... Or is this See So, generally, the GP, what we've been telling as well is would... Should range between 1% to 1.2%. So in... We we may see some quarters, it's lower, and sometimes it may get recovered in the next quarters as well depending upon sometimes the airlines launch some adult incentives, etcetera. Yeah, But, GP generally should remain between the range of one to 1.2%. Yeah. Ankushu. No. No. I was just adding to that only, because you answered it. Thank you. And and because on on one of the line items, which is their FX loss. So in the past, we have discussed and said that, you know, there will there will be some hedging mechanisms that you you would put to to avoid this kind of losses coming through.

37:45 And despite that, we have seen two consecutive quarters. I mean, in the previous quarter, also, we had some $5.5.5 crores. And this quarter, we have a 9 crores of loss there. Any particular reason you want to call out, like, why It's okay. Like, the other... Yeah. Just to, like, highlight and reiterate again that this line item contains basically the... Like, some line items related to the cost element, which would remain per se. So, basically, the FX conversion related cost or the hedging premium related cost. Because when we do hedging, obviously, the premium cost, etcetera, gets accounted for, and that sits in this line. So so this... Obviously, because we are obviously now doing hedging, the cost item would remain. However, as we have mentioned earlier as well, we do not hedge the entire exposure. We generally hedge between 75% of our open exposures.

38:33 So on the unhedged exposures, in the last year same quarter, we had a favorable impact, which actually was higher than the cost that we incurred, that's and the reason you saw a gain in the last quarter, same year. But in this current quarter, basically, on that un hedged exposure, we had a certain losses. So overall, that has a kind of double m e. Otherwise, the cost line items, I would... If I see between the two quarters, they were, they had kind of grown only in... With the growth of the business only. But because of this, ex... The enhanced exposure gain or loss, that is impacting quarter on quarter numbers. Okay. And just a last one on the working capital side. So this time around, there was a meaningful release of working capital. Any particular reason to call out? Because we didn't have, you know, much GTV coming from The US business this time where the the the booking windows are longer.

39:26 So why such such a big release, and how do we see the... This by the end of this year? So, So, Phil, as we had discussed discussed during the margin as well, in the margin, there was some investment which had gone into the working capital, and we had highlighted at the time as well that these are more the timing differences, and that should get released in the current year. And so that's what has it played out. For example, there was certain overdue specifically in The Middle East due to the war situation in the Eid. At the March end, those receivables had got released. We have certain receivables because of the anticipation related thing that we've not done in Brazil in the last year. Those receivables have gotten this. So these are more timing differences. They're getting released. Yes. Overall as well, some... There are certain benefits that we're getting from the working capital per se in the business. Like, earlier, we used to have a credit card, virtual credit cards, basically, where we are used to make advanced payment to the banks or to the service providers. Now we have got some credit lines. So that has also had been releasing some cash back into the system.

40:30 And we should see a positive, I mean, positive, impact by the end of this year also. Just Yes. Got it. Got it. Thanks a lot, guys, and, all the best. You. Thank you. We'll take the next question from Mr. Vibhor Singhal. Sir, please unmute yourself and go ahead with your question. Yeah. Hi. Thanks for taking my question. This is Vibhor here from. Congrats on a very solid performance in very volatile macro environment. A couple of questions from my side. Sorry, I'm just trying to understand the seasonality a bit here. If I look at our organic business, generally, our Q3 business Q3 is typically soft because of the seasonality factor.

41:16 But in classic... Classifications, it appears that q two is a softer quarter. Is that the right interpretation? Yes. It is the right interpretation, but we also need to take into account that the organic business, basically, we account for basis the bookings made per se. But because of the different nature of business in classic, the... In classic, we book the book basis, the check ins in the quarter. Got it. Got it. Got it. So Q3 should not be as... Should not see... I mean, so just for us, Q3 should not see a Q on Q decline in the GTV. It should generally be a good trend going upwards depending on, of course, the macro and all. Seasonality should not be impacting the GTV of Classic in Q3. That is what I just wanted to check. So yes. So it should be better than the Q2.

42:04 It. Q2 is the weakest for Classic. Got it. Perfect. That's really helpful. Secondly, on the, basically, if I can just check on the, margins part. So, there's been softness in take rates at a console level that, of course, is probably kind of a different mix as well. But I think gross... Or gross profit margins are holding up quite well. So does that relate to some discounts that we are giving to our basically clients? Or do you think there is... I mean, if... Something that you can probably show on that part and something on the churn rate of the agents as well. So on the margins, Vibhor, so if you see in the organic business, while there is a decline in the take rate, but on the gross profit, that will be kept around same lines, 5.6 to 5.5.

42:50 So as I explained earlier, so at times in the take rate, happens, basically, some suppliers work on a commissionable model, some suppliers work on a net model. So if the supplier is working on the commissionable model, we will get the commission recorded as revenue, and when we pass on some commission to the travel agent, it recorded as the cost. But at the GP level, if you see that the same trend is maintained. So this primarily coming because of the mix of the supply. Got it. I think that's really helpful. I think, yeah, I should have fully understood that. Just one last question on the AI part. I understand our business is fairly AI resilient because I think the kind of business that we follow are b two b. I think that's kind of, I would say, not completely, but, yeah, largely AI proof. What is your opinion about, let's say, apps like news and all disrupting the... Our clients' business, the travel agents' business? I know you mentioned that single point itineraries, those are kind of more disrupted rather than complicated ones. But given the kind of evolution, do you feel that at some point of time, the travel agent... I'm just... It's just your view that I'm seeking for that. There are travel industry agents, the travel agents, especially the offline travel agents, their business can get started impacted because of AI, might or might not impact our business as a second derivative. But do you see a risk to their business because of applications and evolution of these things?

44:05 No. So, look, I think, we got... This is a great question, and, you know, we've been thinking very deeply about it. So there are two, three things at play because of AI. And if you step back, I think... And, like, peek into the future, say, you know, five or seven years down the line, there is a strong general sentiment that people people will be working lesser. And especially in developed economies, there is gonna be some kind of a universal basic income or some way to support, you know, the fact that there'll be lesser work to do. That combined with the fact that the demography of the of the developed world is significantly older, and they have significantly more time to travel. There is a general sentiment that travel will become one of those AI proof experiences. Right? So a lot of stuff that you do will probably get replaced with AI, but travel will remain one of those rare things which actually remain AI proof in terms of just experiencing something more human.

44:59 So now that is one sentiment that is likely to happen. Now within that, there is a clear, you know, there is a clear direction towards what kind of experiences and what kind of travel is taking shape in terms of consumer preferences. And a lot of it is towards what we what we like to call connected complex travel. Right? So it is not just I book a flight in a hotel and that's it. I am booking experiences. I am booking multiple things. I am booking multiple destinations. The average length of trip is increasing. The number of people who are aspiring to experience luxury when they travel is also increasing. So there is this one broad macroeconomic view that travel will continue to gain in terms of just one sector where consumer spending will increase. Now overlap that with the fact that the the entry level of travel, which is transactional point to point budget, first went from a travel agent to the OTS.

45:51 It is entirely possible that this will move from the OTS to the... To these bots like Muse or Instinct. All the OTS will reside within these bots and some combination or direct supply versus, you know, these bots or the OTAs playing within these new bot ecosystem. I think that is likely what'll happen. And that probably doesn't really impact the travel agent's income anyway. What can happen and which is where I think the the shift has to happen is that even slightly more complex stuff. Right? If you say that, okay. Point to point bookings earlier used to go to OTAs and anything... A flight plus a hotel probably I went to a travel agent. That complexity will also simplify and could potentially go inside a bot. So if I was to tell news or news or whatever, instinct that book a flight and a hotel, likely it can succeed in that.

46:37 So that probably is where the the shift of business can happen from a travel agent to a bot. Now our reaction to it and our steer to the travel agencies is that what we need to make sure is that we are moving up the value chain. Right? So we have a far more ability to service a truly complex transaction. Right? So not just the $2,000 booking, but the 10,000 or a 15,000 or $20,000 booking. Because that will require personal human experience, the fact that the travel adviser has visited that destination. And that is also where friction that happens post booking is is more meaningful. Right? Even a flight in a hotel, there is less friction possible. But if you booked, you know, several flights and train tickets and several destination that you're going to and multiple experiences, friction and post booking experience also matters a lot. So that's the broad view. We do believe that there's some amount of redistribution of channel that's gonna happen because of AI.

47:29 The first point of impact might be on the point to point transaction that used to go through a through a web or a mobile channel goes through a bot channel, whether directly to the to the supplier or to an OTA. Some bit of complexity, which is a flight plus a hotel or a flight plus an airport transfer could also transfer to a bot. Our belief remains that that is really the reason that we're building this conviction for several years now that we need to start steering our business towards true complexity and true luxury. Got it. Got it. It. Yeah. I think possibly the kind of segments that we are operating in should still remain a a I two for a longer period of time. Point taken. Point taken. Great. Thank you so much for taking my questions. Have a separate conversation on this. Right? I think it's a longish one, so we can have a separate chat as well. Know it's Yeah. Yeah. Absolutely, Ankush.

48:18 I would really appreciate that. Thanks a lot. Thank you. We'll take the next question from mister Prateek Kumar. So please unmute yourself and go ahead with your Hi. From Motila Loswal. Congratulation on good operating leverage in this quarter and also posting a double digit CC growth in BT and all. So just one question on classic integration part. In your... One of your remark, you mentioned that some of the headcount you now provided a more larger portfolio, like, managing the entire geo, which the the staff person has come from the Europe. So at at operational level, apart from top heads, what internal, you know, headcount addition or reduction took place in the entity post our... Post we acquired the business so far in past three quarters operating margin expansion point of view in the classic business.

49:24 And that's just I want to understand. Yeah. You know, on the whole, we have added into the supply team. We have driven some operational efficiencies in terms of, you know, some of the finance process may be happening in India or the supplier has been integrated. So some of the supply is actually now saying, look. And some of the technology work is now... Is integrated into the broader TBO tech tech team. But the core view on classic remains that it is... You know, our our conviction is that this is not a a cost efficiency play because we are looking at it as a long term play. Right? Given the previous question and the fact that, you know, truly entrenching ourselves in luxury is very important. So it will remain an investment play and a top line growth play, which should lead to, you know, better bottom line. That's a view where we are thinking of it. Right?

50:15 So, yes, there are some low hanging fruits on on cost efficiency, but that is not the play with classic. The investment thesis is that what we learn with... On on acquiring luxury supply, on selling to luxury travel adviser, engaging with luxury consortia like Virtoso and travel leaders, etcetera, that will allow us to, one, build the right tools and right playbooks for growing the organic classic business in North America and then see that can those learnings be taken to other parts of the world to really entrench ourselves as a luxury seller. So the short term... Even short, medium, long term play really is on learning learning the the business business better, better, investing into it, and drive... Then leading to our top line growth, which will drive bottom line, not just for classic, but TBO and rest of the world. Okay. And from a sales and the top line growth synergy point of two, let's say, normalized two or three quarters down the line, are we, you know, planning to take that one?

51:12 Let's say, is ready, but we are just waiting a situation to normalize and, you know, have a magic moment like a cross selling synergy visible once the situation is normalized. Any thought on that there? See, Gerard, I think we can... This... I will just speak from a enterprise perspective where your description is perfectly right. Right? The pitch is ready. You know, we have every right... Like, all the guns are loaded right now. I... It's a matter of, you know, things returning to normal for a lot of things to start firing in the right direction. And early, you know, early signs are all there in terms of new agent addition, in terms of agent engagement, in terms of markets delivering, you know, good double digit growth, small market delivering is delivering triple digit growth in spite of all the headwind. Right? So everything is loaded up.

52:00 And, hopefully, at an enterprise level, all of that will start to play out. Like, we mentioned earlier as well, you know, demonstrating synergies in a, you know, with with evidence in a public forum is often very complicated because synergies happen because of the fact that, you know, your relationships that you acquired from classic start playing out in TBO as well. The supplier that was not available to TBO earlier now becomes available because of classic, but it... The contracts is classic. In classic. You... The ability to attract talent comes in from a different perspective. Some of the luxury supply that... All the platinum sign ups that will happen because of classic will actually show up in TBO. So it's gonna be hard to say that, you know, what is that synergy number, especially with with a business like classic. But I will, you know, I will concur with you that two or three quarters down the line, hopefully, when things return back to normal, maybe by next summer season, right, which is q two of next year, we should be really delivering good numbers as long as the macroeconomic climate clears up.

52:57 Okay. That's answer that. Yeah. Thanks. You. We'll take the next question from mister. Please unmute yourself and go ahead with your question. Yeah. Hi. Am I audible? Yes. Yeah. Hi. Just wanted one small clarification. Since you mentioned that you would hope for at least some CC growth in GTV for next... For the third quarter. So essentially, we are... Basically, on our reported, we are looking at, like, a mid mid to high teens kind of a growth. Is that a fair sort of way to think about it? It depends on the currency appreciation. We can't forecast that out.

53:46 I think they have some data... That question has so many variables that it's impossible to get it. Right? So I don't even want to comment on it. Got it. So... But, how should... Yep. I I think that this question has been asked, you know, it says from your own perspective, how are you, thinking of, you know, the second half, you know, assuming that things don't materially change from here, right, I think that that that can be one piece case of thinking about it. How are you thinking how this business will will look like both both here as well as for this space? So, Barab, I think we will have to... You know, and maybe the situation will become somewhat clearer over the next few weeks.

54:31 And we will have to take a bet one way or the other to say that, yes, either we believe that situation is normalizing or we believe that we need to find growth elsewhere. Now the good thing is that we have, you know, so to say, our, you know, our... All our fingers in different bias. So if we're starting with North America all the way till, say, Australia and APAC. Right? So we have the ability to rapidly invest and drive new growth in pockets where we may have not invested before. If the situation remains status quo, and let's say in the worst case scenario, we feel that this is something which will continue with several more quarters. We do believe that the North America to Europe corridor is something that we can legitimately double down on. Yeah. So, of course, we're still investing in it, but that can really begin divert energies in terms of, you know, better sales presence or better, you know, contracting for those destinations or opening new destinations which are relevant for US as a source market.

55:30 So that is definitely something that we will be looking at. Far East is a market that we've in the past not really invested too much on beyond Australia, and that could be another pocket. So our view, Barron, remains that right now, it is a bit of a wait and watch because we don't know, you know, which way things will turn. As we come into the next year and we start budgeting, which will... I mean, you know, budgeting exercise will start in a few weeks, we have to take a call to say that, okay. What's... You know, what is our best case conviction? Right? Is it that we really need to refocus energies on building out new markets, which we have the ability to do because we have people on the ground. We have entities. We have significant scale in North America as well as Europe. Or we do believe that, you know, business as usual can become return back, which means that we can expect significant growth coming out of The Middle East or from APAC or from India as well. So then in a in a nutshell, we do believe that irrespective in most scenarios, unless some extreme scenarios play out, in most scenarios, you know, even in most pessimistic scenarios, we will... By that next summer, we would have found either existing pockets of growth refiring or new pockets of growth emerging.

56:37 Got it. Good. Thank you so much. Thank you. Thank you. We'll take the next question from mister Prateek Kumar. Patrick, please go ahead with your question. Yeah. Hi. Good evening. So I am traveling, so there might be some background noise. My first question is on on your cams. So you've said the existing cams can, TAM investment can support further agent addition. Is there a way to, I mean, you talked about, you could be exploring new regions, new investments. So how much headroom would you see in current... In onboarding and activating more agents for existing network, and long this can drive growth before new new cycle of investment can begin for the company?

57:30 So, Pradeep, I think I will, you know, keep the two... Both the questions separate and they are not correlated. We do believe that there's significant runway for growth with the existing camps, which is what is happening right now. You can see that our, you know, SG and A spends are, you know, only marginally up. So on the whole, whatever investment you've been doing in the last several quarters is what is firing right now. Given the situation, you know, as things normalize, we should see, you know, new growth come out of it. Now the new cycle of investment is a separate discussion, and I I don't want to correlate it with this existing discussion because new site... New investment cycle may begin with different source markets depending on how the geopolitics is playing out. Are... There is a certain growth target that we work with, which we want to achieve irrespective of market situation beyond the point. Right?

58:21 You can't... You know, if I... If if a war continues for a whole year, you can't say that we'll still continue to wait for the war to end and need to figure out where else can we find growth. So if that is what the circumstance happens to be, then there are new pockets where we will be able to invest and find new... Fresh new growth, even which is somewhat more immune to, you know, the the geopolitics that is playing out elsewhere. So the answer on when is I don't have it as yet because we haven't started budget planning for next year. But for the rest of this year, I... We're not expecting to see any significant changes in our investment into market development. Okay. Other question, I'm not sure if it is discussed already. On hotel GP margin, there is some sequential improvement despite competition remaining high in Middle East. So how should we look at these margins for hotels?

59:17 So if the situation, Prateek, remains the same, we hope to continue with the similar kind of margins that we have achieved in q two. Obviously, if the if the supply is high and demand is low and and we get into a more competitive scenario, we may have to change our stance. But as of now, we are hopeful to remain in in the similar kind of margins... Percentages. Thirdly, on... Has there been any discussion around... I mean, you've mentioned about this earlier regarding change in methodology about TBO versus classic on bookings versus check ins accounting? So I mean for the classic some metrics.

1:00:08 So to... For the classic vacations, Patrick, as we have explained earlier, because there is the booking window to check-in window is high and there are changes happening per se. So from the accounting standard perspective, we recorded on the checking basis, only, and that's what we started with the practice when we started consolidating the classic number in last year, q three. And that's the same practice we would have to follow for the classic vacations. It will not be possible to change that, practice and a similar practice what TBO is following for the classification because of the different nature of business that they are doing. Okay. A 14 on your... The impact of order related to... This led to which geography for the company?

1:00:54 So it is pertaining to our Dubai... The Middle East subs... The UAE subsidiary. Okay. There's some agent or or, like, particularly based out of Dubai would have colluded for such That we don't know that we don't know for sure regarding agency involvement. That's what is getting investigated as we speak. Lastly, you said you're looking at some growth. I know multiple questions have come on this topic, but the sum growth is, like, q on q some growth you're seeing. Right? Or continuation of current growth trend into, like, quarter two Pradeq, q two to q three, you know, q two is our, you know, strongest quarter because of seasonality.

1:01:40 We're talking year on year. Okay. So you're generally for the classifications. Okay. So you generally, like, very cautious while, like, discussing outlook probably because because as it stands, we're generally accelerating into two q from one q, and I think have changed in maybe different parts of the world. No. No, Pradeek. Two q is better than one q always, And three q is the weakest quarter always because of the fact that, you know, some holidays are over and we're... We we swing back, you know, after September, October October, November are usually, you know, weakest months for travel. Right. Right. No. I was asking year on year trend only because January 12 was, like, looking at 50, 60% and then kind of moderated in q one and March, and then q two improved. So, yeah, that's where I was coming from. I believe the challenge is, you know, every time our disruption, like what happened in Saudi happened or what happened in Europe happens, previously booked revenue also reverses.

1:02:52 Right? That's a challenge. So the moment something will happen in Paris, massive cancellations will happen. So now the book revenue that you're already booking will have to be reversed. And hence, it's a very unpredictable quarter. Okay. Yeah. We understand. These are my questions and all the best. Thank you. Thank you. Thank you. We'll take one more question from mister. Please unmute yourself and go ahead with your question. Hey. Hi. Thank you for the opportunity. I just had one question. Thinking from a business point of view, is there a possibility that geopolitical uncertainties create better opportunities for us? As in when people see travel disruptions to occur or to potentially happen, will they shift more towards agents? And, eventually, when all these things settle down, is there a possibility that they might, you know, shift to booking by themselves?

1:03:48 Good situation. Think that's a great talk. Yeah. Go ahead, Anush. I think one one more. Yeah. No. No. I... Look. I think this is something that we observed after COVID as well. In several markets, there was a strong perception that the... You know, what... Booking directly with suppliers or with OTS means that it's a bit impersonal due to get on a, you know, go talk to call centers or your... They they just stick to policy without giving... Trying to be worse. So, yes, that does play out, Patrick. Hopefully, that plays out this time as well. But historically, yes, we have seen that that post a crisis, often people will go back to travel agencies because they just find more comfort over there. Sorry. My question was more from this particular period point of view. I mean, given we are already in a crisis for the last past six months or seven months or maybe eleven months. Just trying to understand maybe is that causing then clear... A clearer shifter towards more agent booking?

1:04:45 And once things, you know, settle down, will they go back to maybe booking by themselves on ODs? No. Looks like I think our... See, I... At this point, it's not that the channel shift has happened towards travel agents. And which is why we believe that we would have grown faster if this whole crisis was not happening. Right? So it... Otherwise, you know, this... Because if you look at January 10 numbers and now, you know, growth has tapered down because of the fact that just the markets are are very depressed right now. So these phenomena usually play out post a crisis. In the middle of crisis right now, there's genuinely... You know, just travel is depressed. Got it. Got it. Thanks. Thanks for the answer. Yeah. Thank you. Thank you. Thank you, everyone. That was the last question for today. I would like to now hand it over to mister for his closing remarks.

1:05:36 Thank you, everyone, for joining, the call today. And, you know, if anybody has a follow-up, please happy to, you know, take any calls. You can reach to any one of us, and, look forward to you, in January. Thank you. Thank you, everyone. That concludes the conference. You may now disconnect your lines.