Good evening, everyone. I'm Vanessa Fernandes from the Adfactors PR Investor Relations team.

On behalf of TBO Tek Limited, I would like to welcome you all to the earnings conference call for Q3 and 9M FY '26. Today on the call, we have with us from the management: Mr.

Ankush Nijhawan, Co-Founder and Joint Managing Director; Mr. Gaurav Bhatnagar, Co-Founder and Joint Managing Director; Mr.

Vikas Jain, Chief Financial Officer; Mr. Anil Berera, Advisor; Mr.

Akshat Verma, Whole-time Director and CTO; Mr. Parmendra Tomar, General Counsel; and Mr.

Srishti Mahajan, Associate Director, Investor Relations. We will begin the call with brief opening remarks from the management, followed by a Q&A session.

Please note that certain statements made during this call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties that could cause the actual results or projections to differ materially from those statements.

TBO Tek will hold no responsibility for any such actions taken based on such statements, and undertakes no obligations to publicly update these forward-looking statements. I will now hand over the call to Mr.

Vikas Jain for his opening remarks. Thank you, and over to you, Mr.

Vikas.

Thanks, Vanessa. Good evening, everyone, and thanks for joining us.

This quarter represents an important milestone in TBO's journey as we integrate Classic Vacations into our financial and operating metrics for the first time. While the consolidation meaningfully expands the scale of our platform, it also adds complexity to how certain headline metrics should be interpreted.

As a result, we believe it is important to provide shareholders with additional clarity regarding some matters. Regarding the accounting policy, Classic Vacations recognizes revenue from hotels and ancillary services on a check-in basis, unlike TBO Tek, which recognizes such revenue at time of booking.

This treatment is consistent with Classic Vacations' historical accounting practice and aligns with the nature of its business, given the longer booking-to-stay window and continued post-booking services until check-in. Revenue from air transaction, however, is recognized at time of booking, consistent with TBO Tek's policy.

Accordingly, all revenue and related metrics for Classic Vacations have been reported on the above basis, while TBO Tek's organic business continues to report revenue and metrics on a booking basis. Revenue from operations of ₹784 crore for the quarter translates into an enterprise take rate of 8.08%.

The organic business delivered a take rate of 6.04%, while Classic Vacations reported a headline take rate of 24.94%. It is important to note that Classic Vacations' take rate includes a 12.4% commission component that is passed to the travel advisors, which is structurally much lower in TBO's core platform.

As a result, these take rates are not strictly comparable on a like-to-like basis and introduce noise into the blended take rate metrics. For this reason, we believe gross profit as a percentage of GTV is more analytically robust measure of value capture.

Gross profit strips out pass-through commissions and better reflects the net economic value retained by the platform. The second critical gauge of platform health is the conversion of gross profit into adjusted EBITDA, which reflects operating efficiencies and execution discipline.

Gross profit to adjusted EBITDA conversion at enterprise level stood at 23.7% for the quarter, compared to 25.3% in Q3 of FY '25. Within this, the organic business delivered a conversion of 25.3%, while Classic, a conversion of 19.6%.

On a holistic basis, enterprise GTV to adjusted EBITDA conversion improved to 1.18% in Q3 FY '26 from 1.05% in Q3 FY '25, supported by contribution from Classic Vacations, which delivered a 2.46% GTV to adjusted EBITDA conversion for the quarter. Thanks, and with this, I hand back the call to Vanessa for opening the floor for the questions.

Thank you, Mr. Vikas.

We will now begin the Q&A session. Participants are requested to raise their virtual hands to ask questions.

We request you to introduce yourself and the firm you represent before going ahead. We shall wait for a minute for the question queue to assemble.

We have our first question from Mr. Karan Uppal.

Mr. Karan, please unmute yourself and go ahead with your question.

Yeah. Hi, guys.

Can you hear me?

Yes, we can.

Yes.

Couple of questions from my side. Firstly, the air business recovered very strongly, 16% Y-o-Y growth on an organic basis.

Just wanted to check, how are you seeing the air business from here on? Is the growth rate sustainable?

That's the first question.

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

Okay. Secondly, this quarter we have Ramadan.

There is some distortion in the numbers because of this, especially in the Middle East geography. How are we thinking about the impact this quarter?

It's Q4 FY '26.

See, on a quarter-to-quarter basis, Ramadan fell pretty much in the same quarter last year as well. While there'll be a monthly deviation in numbers because Ramadan is straddling February and March this time, last year it was completely in March.

From a full quarter perspective, there won't be a very material change. The only difference is that there is an uptick in business towards the end of Ramadan, and then going into the Eid period.

Last year it was straddling the Q4 and Q1. This time it is largely going to be within Q4.

That's the only difference. It should not have a very material impact this time because it is all within the same quarter.

Thanks. Gaurav, just one question on Classic.

How is the integration playing out? Any early signs of cross-sell, whether TBO business to Classic or Classic to TBO?

Any early signs there?

TBO selling to Classic has already started. We've done that integration, and I would say that the early signs are quite promising.

Because Classic has a very long booking window and a check-in window, when it starts to one, convert into travel, because there's a long window between which this business can cancel as well, but the early signs are quite promising. Classic buying from TBO has, well, I can't share any numbers, but it's becoming meaningfully large.

If I was to look at Classic as a standalone customer of TBO, it would already be amongst a top 20 customers, right? From that perspective, it is promising.

TBO buying from Classic is going to start in a matter of time. There is a bigger integration that is required to enable that to happen.

Apart from that, the overall platform migration is happening, but that's a several quarters long project because it is complex, and the systems are very legacy on the Classic side. The platform migration will probably take two or three quarters, but the cross-sell from both the platforms will start sooner.

Okay. Just last question to Vikas.

Sir, depreciation and finance costs have inched up this quarter because of Classic integration. From here on, should we assume these numbers to be steady-state?

Yeah. This quarter includes the depreciation and amortization cost for the PPA provisional that we have done.

While the PPA study is currently provisional, but we don't anticipate major changes in the same. The depreciation cost is already taken into account.

Amortization cost is taken into account the cost which will get amortized for the CVP, and similarly, the finance cost includes the full-quarter cost for the loan that we have taken for the Classic acquisition.

Thanks a lot. I'll fall back into the queue.

Thanks, Karan. Thank you.

Thank you, Karan. We have our next question from Mr.

Pratik Kumar from Jefferies. Prateek, I request you to introduce yourself and unmute.

Good evening, and congrats for good results. It's Pratik from Jefferies.

May I request that the call be hosted slightly later in the day or next day, because you just posted results and shareholder letter 10 minutes back. It's impossible to go through them and discuss during the call.

My first question is 3Q again was impacted by forex element. How are we seeing the forex element now, and is there any changes in policy which we are introducing to reduce this impact on a sustainable basis?

Year-on-year, forex impact has reduced per se, Pratik. If you see the overall number has gone down materially.

Having, however, said that, since till last year Q4 we were not doing any material hedging, especially for international business, and this as a practice we started after the Q4, hedging would obviously involve some cost wherein wherever in currencies where we have difference in payables and receivables, to cover that risk, we would have to incur such cost, and that cost is getting captured in that forex line per se. Oh,

okay. It's the hedging cost which is there and not the MTM impact or something which is part of that line item?

Both, Prateek. That line would have all the hedging cost, as well as MTM impact of the hedges, as well as if there are any unhedged positions, if there are any gain or loss, that is also included.

Plus, since we had given a foreign currency loan from TBO Tek, the holding company, to Tek Travel DMCC, Dubai entity, for the CV acquisition, any benefit or cost pertaining to the revaluation of those loan also get captured in this line.

Sure. Okay.

Second question is on CV's integration. While, of course, last quarter was particularly impacted by integration cost, but is there any specific integration cost or some specific immediate synergy which we may realize in 4Q versus 3Q?

Is there something specific which had impacted this quarter as well?

Pratik, very early days. The Q4 or, what what our Q3, but calendar year Q4 for CV was in line with what they had projected as part of the diligence.

It has it has played out as we expected it to. The synergies are, like I earlier mentioned, that we have already started selling the TBO inventory into CV.

How that will materialize into incremental revenue or margin expansion is very early to say, because like I said, the booking windows are very long. It'll only be June, July, August, September when bulk of the travel will happen.

At that time, we will know which what part of the business that we have booked today is actually materializing. Is it materializing at a higher take rate?

That is, I think, a few months away. The immediate synergies that we will see are likely going to be us, TBO, also buying from CV, which will which should start happening in the in the next couple of months.

Then the broader benefits will happen when we migrate the core booking platform of CV onto the TBO ecosystem. Which, like I said, is a complex project, so that's a several quarters long project.

That is where we will actually start to see both cost synergies, as well as we our ability to deploy our TBO growth playbook onto the CV platform. That, I think, is a few quarters away.

For now, we try and maintain a steady-state and try and make sure that we accelerate our integration projects. From a cost additional cost perspective, we don't envision any additional cost for for these integrations.

We are managing it within the within the current resources.

Thank you. Third question is on your commentary and expectation which we have sort of given out earlier on organic business revenue growth accelerating versus SG&A growth from next quarter onwards.

How are you looking at that comment now?

No, Pratik, we stick to our conviction. We are expecting to see Q4 So you would have already seen that every quarter the the growth of SG&A has been tapering down, and we continue we expect that to continue in Q4 as well.

At the same time, from Q3 to Q4, we usually see a significant growth in the top line because Q3 is traditionally our weakest quarter and Q4 is our second-best quarter. We expect to see a meaningful growth in top line in Q4, while the SG&A will not grow at the same pace, and hence we should see a significant flow-through to the bottom line.

We remain convinced on that, and that's on the organic business, not counting CV. We should be able to demonstrate that operating leverage in Q4.

One

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

Pratik, we've tried that, but it is simply not possible. The main reason being that CV's business books much in advance.

Then because of the nature of that business, it is luxury and complex, right? Unlike the TBO business where each booking is essentially one hotel or one flight, bulk of what CV books is multi-hotel, multi-product itineraries.

Now between the time when the booking happens and when the travel happens, the booking goes through several iterations in terms of people will add a additional room, add a hotel, add an excursion. There is no point in time when you can nail down the revenue and say, this is the revenue on this booking, until the time the travel actually happens.

It would be hard to translate that into our book model where when a booking is reconfirmed, we count it as revenue because of the nature of that business. If we try to do that, I think it'll create a fair bit of complexity.

We'll try and run the business on an as-is basis rather than try and force-fit it into our business model.

Sure. Thank you, and these were my questions.

Thanks, Pratik. Pratik, your comment well-taken on time.

We were anticipating our board meeting to finish a lot sooner today, and hence the delay between when we published, but we'll keep that in mind going forward.

Thanks, Gaurav.

Thank you, Pratik. We have our next question from Mr.

Manik Taneja. I request you to kindly unmute yourself and proceed with your question.

Hi, thank you for the opportunity. While I do understand this quarter's performance is colored by the consolidation of the Classic Vacations business, but just stepping back on the airlines business, we have seen a strong GTV performance in the current quarter, unlike the weak seasonality that we typically tend to see in this business in this quarter.

If you could spend some thoughts as to what drove the strong performance over here in this particular quarter and how should we be thinking about these trends on a go-forward basis? That's question number one.

The second question that I have is with regards to EBITDA as a percentage of GTV, which also has an impact of the Classic Vacations' higher profitability. How should we be thinking about this metric if you were to think about over a two to three-year period?

Those would be my two questions.

Manik, on the air, I think there were some learnings of which we obviously learned from the previous quarters. We kind of fixed that.

One thing good is that we did not compromise on our GP. We still maintained the same GP what we were maintaining in the same quarters.

I think we did some things correct which we wanted to. I think that kind of played up in our favor.

Also keeping in mind, Manik, this also had this disruption in December with one of the carriers which all of us know about. Yet we kind of pulled through with a good growth.

We anticipate the same momentum as we move into Q4, and hopefully it should be in the same lines, at least double digits, and I think that's the plan what we have internally.

Just to clarify—

Just to think— Go ahead.

Just on that double-digit growth outlook for the air business, you're saying air GTV will essentially grow in double digits over the medium term? Is that correct?

Because this quarter we've seen almost like a 20%— Don't worry.

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

Sure. The other question was with

regards to— How to look at EBITDA as a percentage of GTV. See, it's a bit nuanced, but directionally it will go in the same direction as EBITDA as a percentage of GP.

What we are trying to anchor away is from looking at revenue as the top-line metric, because Classic has a significantly large revenue, but almost 50% of that revenue is a commission pass-through to the travel advisors. That's not really income in the true sense of the word.

Earlier, the flow-through from revenue to GP conversion was quite high for the TBO organic business, but it is materially lower for the Classic business. Hence, what we are anchoring around is that the GP is a kind of true net revenue for us in a way.

From there on, the operational efficiency of the business to convert that GP into bottom-line cash is a true representation of the business. We are anchoring around saying that let's look at EBITDA as a percentage of GP to truly understand the conversion from revenue to bottom line.

We're also starting to talk about adjusted EBITDA as a percentage of GTV because that is a metric many of our peers are also using. The nuance there is that not all GTV is equal.

As you know that the airline GTV, while significantly large in volume, actually delivers much lower take rates. This number can fluctuate a little bit more than the EBITDA to GP number because in a quarter where we have high growth in the airline business, this number may actually shrink a little bit.

Directionally, in the long run, this number will move upwards in the same pace as EBITDA to GP, but our conviction still remains that EBITDA to GP is a more consistent number to measure compared to EBITDA to GTV.

Sure. That's quite helpful, Gaurav.

Just to prod you further, because that will basically show up the true value of the platform, from an EBITDA to GP conversion, if you could give us some sense of your operating expenses below gross profit, what proportion of your broad other expenses or operating expenses below gross profits are essentially variable in nature, which will fluctuate in line with the volume of business, to what may essentially be fixed costs?

Vikas?

Yeah. Manik, as we have started disclosing the makeup of the SG&A cost below gross profit level from, I believe, last shareholder letter, we have shared those details in our letter as well.

If you see, there are broadly four, five components in that piece. Primarily, the variable nature of the expense is hosting bandwidth cost and the payment gateway charges.

That expense would primarily grow in line with the growth in the revenue or the GP or the GTV numbers. The other cost, which is the employee benefit cost and the business support service and the others, those would primarily be looked at a fixed nature of cost, and there in where we are saying that operating leverage would get generated as we scale our business more.

Great. Thank you and all the best for future.

Thank you, Manik.

Thank you, Manik.

Thank you, Manik. We have our next question from Mr.

Kavish Parekh. We request you to kindly unmute yourself and proceed with your question.

Hi. Thanks for the opportunity.

This is Kavish Parekh from BNK. My first question is on Classic Vacations.

At the investor event, you outlined a roadmap highlighting certain low-hanging initiatives, some of which you have already started to tap into. While benefits remain sometime away, do you have any timelines in mind with respect to execution here, and how would you envisage the growth trajectory for Classic over the next, say, three to four years?

That's the first question.

Okay. Kavish, like I said that the lowest-hanging fruit is cross-sell on both sides.

Cross-sell from TBO into Classic has already started, and we are seeing quite promising results. Cross-sell from Classic into TBO is a few months a few weeks away because requires a little bit more work on the tech.

The other big integration that we are working on is the platform migration where we will introduce our booking platform into the Classic ecosystem. That's a several quarters long project.

It will be a phased-out project as well. The benefits of it will start to accrue probably in H2 and not before that.

Over a three to four-year period, Kavish, the way to think of growth is not just on the Classic, but the overall North America business for TBO. That was our investment thesis at the beginning as well.

What has happened with Classic is that, one, we have gotten access to about 10,000 active high luxury travel advisors in the North America market. The second access we have gotten is access to very deep consortia relationships in that market, namely Virtuoso, Signature, Travel Leaders, Travelsavers, etc.

Both these are relevant for unlocking growth in the core TBO business and the organic TBO business as well. Our view would remain that we will expect over the next three or four years our North America business to continue to grow in double digits, just like all other geographies have demonstrated growth in the early phases, with the caveat that we're already starting with a large base, right?

For example, you would see today markets like APAC or Europe are growing at good north of 30%, but coming from a smaller base. APAC is coming from a base a couple of hundred million dollars.

Now in North America, we're already starting with a base of more than $600 million. Having said that, we would definitely endeavor to find high double-digit growth in North America as a whole over the next three or four years.

Now some of it may come in the TBO organic business, and some of it may come into the Classic business. From our perspective, the value of this acquisition and the ROI on this acquisition will be measured by finding that growth for North America as a whole, not just standalone Classic or standalone TBO.

Fair enough. Understood.

Thanks for that detailed explanation. My second question is on the margins.

You have indicated that EBITDA growth is expected to outpace GP growth starting next quarter. Here, should we interpret this largely as a function of operating leverage at Classic where EBITDA growth would inherently exceed GP growth as scale improves, or would organic business be the larger contributor?

Further on absolute margins, while TBO standalone margins could potentially reach around 17%, 18%, Classic had margins of about 11% last year. Should we expect this to act as a drag on consolidated margins in the near term?

Or what are the thoughts on Classic's margins converging closer to TBO's levels? Any timeline, any indication here would be great.

That's the second question.

Kavish, on your first question, the Q4 growth that we're talking about is pure operating leverage on the organic business, right? Obviously with Classic consolidation, the numbers look larger.

What we have been committing for the last couple of quarters is that we will demonstrate significant operating leverage and flow-through of incremental GP to bottom line in Q4, and that is on the organic business, and we're sticking to that commitment. On the organic business, we will see a significant margin expansion happening, hopefully, in Q4.

Now on your other comment, you're right that the Classic business, if you looked at as a percentage of revenue, feels dilutive, and which is why my previous comment that the true representation of the business will be looking at EBITDA conversion from GP. Which is more in line with the TBO business, right?

Both are about mid-20s.

Yes. Classic is 20%, and we are at around 25%.

The Classic business is converting from GP to EBITDA at about 20%. TBO business is converting at about 25%.

This conversions, we do expect that to happen. I can't give you a timeline right now, it's very early days, but we do expect to see efficiencies.

Classic has the same operating leverage. I think the business from a cost basis is fully paid for, in the sense that maybe there is some incremental sales team expansion that will happen on the Classic business, but we are not expecting the cost in that business to grow substantially.

Any incremental top-line growth will convert heavily into the bottom line, and hence this margin expansion should happen. While I don't have a timeline for it, we would expect GP to EBITDA conversion to convert for the TBO core business, as well as Classic.

Got that. Lastly on our take rates, organic TBO hotel take rates have remained strong for several quarters now.

While the geographical mix has been largely stable, what is really driving this sustained trends organic TBO hotels? Has there been a shift in the underlying hotel mix towards more premium categories, and if so, how sustainable are these take rates?

Because historically we have seen some volatility in this metric, any color on that stability would be helpful. If I can just squeeze in one more, could you share some color on what drove the sharp jump in the others revenue segment?

Is this the new initiatives that you have been trying to grow, or does this also pertain to Classic?

Okay. On your first question, Kavish, I think part of the take rate fluctuation that you see is also in a similar nature at a revenue level as what you were explaining on Classic, because some of our suppliers are commissionable suppliers.

What happens is we receive a commission on every booking, and then we portion of that commission to the travel advisor, which gets netted off at a GP level. A more fairer and kind of more honest view would be to look at GP as a percentage of GTV as against revenue as a percentage of GTV to get a more consistent view of take rates.

Having said that, we have worked hard to maintain take rates at a fairly consistent level. Part of it is that there are smaller businesses like the ancillary businesses which operate at a slightly higher take rate.

While they're small in size, they do add a few bps to our overall take rate as they grow faster than the core hotels business. Second is that in certain quarters where the mix between our enterprise business and our retail business moves towards the retail business, the take rates also improve at that point.

Then we have incremental margins that we are accruing because of the programs like the Platinum program, which we have talked about in the past. The Platinum program is a meaningful program right now, and the override commissions that we earn over there, they add positively to our take rate.

That has allowed us to maintain or improve our take rates a little bit. What was your second question?

The others revenue segment. I think about ₹40 crore or so.

The others.

Vikas, you want to elaborate on that? Others revenue segment, if you see on the consolidated basis, it is obviously driven by some growth from the organic business, but prima facie, those numbers have inched up primarily because of the Classic consolidation.

Understood. You mentioned that there tends to be some variation in the mix between enterprise and retail.

Is there some seasonality here that we have been seeing over these years in terms of contribution from enterprise and retail customers?

No, Kavish, there's no seasonality over there. What happens on the enterprise side is customers are large.

Sometimes their business can be a bit spikey, right? It can significantly go up or significantly go down, and which just changes the mix by a few percentage points here and there, which will reflect in the overall take rate by a few bps.

Got it. Thank you so much, all the very best.

That was it from my side.

Thank you.

Thank you.

Thank you, Kavish. We have our next question from the line of Mr.

Chirag Kachhadiya. Chirag, request you to kindly unmute yourself and proceed with your question.

Hello. Am I audible?

Yes.

Yeah. One question on other expenses breakup which you have given in the shareholder letter.

If we look at year-on-year, it's up almost 18%, while quarter-on-quarter, there's a drop. Can you provide trajectory in next quarter?

Chirag, we are not able to hear you properly.

Hello. Can you hear us?

Hello?

Better, but it could be a little louder, Chirag, please.

Yeah. What I was asking, the other expenses line item, what trend one can expect in this, because on year-on-year, it's up almost 18%, whereas quarter-on-quarter, there's a drop.

Yeah.

As I was answering the other question, other expense breakup primarily contains the employee benefit and the similar business support services and some other items. Also in these expenses, the two line items which we are showing, hosting bandwidth and PG charges, that would be the line items which would grow in line more with the business or revenue, let's say.

The other expenses would, as we scale up, should show operating leverage.

Yeah. Thanks.

Thanks, Chirag. We have a follow-up question from the line of Mr.

Karan Uppal. Karan, kindly unmute and proceed.

Thanks for the follow-up. Just one question on the monthly transacting buyers number which you have mentioned, especially on the international side.

It's around 14,880. Incrementally, 2,500 agents have been added versus what number you have given for the Classic, it is around 10k.

Does that imply that only 2.5k are the monthly transacting buyers from Classic? Any clarifications there?

No, 10k is an annual—

10k is an annual number for Classic. The quarterly number for Classic would be in range of around, yeah, 2,500, 3,000.

Yeah.

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

Okay. Gaurav, from whatever you are saying, only 2,500 agents basically transact on the platform regularly.

Is that what you're saying?

On a monthly basis, yes.

Great. Another question was on the take rates.

On a blended basis, the take rate is at 8.8 and 8.1, sorry, and the hotel business is at 10.5. From here on, on a sustainable basis, should we expect these numbers to remain stable?

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

As highlighted by Gaurav, at times, because of the supplier mix impact, the take rate for the hotel business may go up, down, but yeah, GP is a right metric to see. I think just to add to that, the 2,400 number that you're talking about, that is the average over the two over the 3 months.

If you look at the unique agents who worked with us during the quarter at Classic, that number would be closer to 3,900.

Okay. Great.

Thanks a lot.

Thank you, Karan. Before we proceed to the next question, a gentle reminder to everyone, if you may have a question for the management, kindly request you to raise your virtual hands.

We have our next question from the line of Mr. Devansh Gupta.

Devansh, kindly unmute yourself before you proceed with your question.

Hi. Am I audible?

Yes, Devansh, you're audible.

Yeah. Hey.

Congratulations on a good set of results. Wanted to understand, while, let's say, the revenue recognition policy of CV is different from ours, how does the working capital work for CV?

Is it also a negative, and on a consolidated basis, should the negative working capital situation improve further for us, or how should we think about it?

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

If you can give a numerical sense?

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

Got it. What would be our direct sourcing with and without CV?

For hotels?

See, I think without CV, our direct sourcing in this quarter was about 40%. CV has a significantly higher contribution of direct sourcing.

I don't remember the exact number, but maybe it's in the range of about 80%, 85%. Is that right?

Yeah, 85%. CV's sourcing is 85% direct.

TBO core is about 40% direct.

Got it. Understood.

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

No, no, I think that will not, Devansh. What happens is basically the big gap in the Classic's business on revenue to GP is the commission payout to the travel advisor.

That's irrespective. Whether you book direct supply or you book third-party supply, you will still pay a big commission to the travel agent, and that is what is right now while getting counted as revenue and then getting netted off in GP.

That will not change.

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

In the case of Classic especially, as it stands today, their commissions or their take rates on the direct business are materially more than what they make on third-party supply. In the case of TBO, the difference is rather small because we are still trying to build out more volumes, and we have much larger number of hotels that we directly contract.

In the long run, Devansh, the strategy of direct contracting is twofold. One is to make sure that you have protection from overdependence on third-party supply, and second is, yes, margin expansion in the long run.

Some of the margin expansion that we talked about earlier and why take rates have been strong is because we are generating incremental income on our Platinum portfolio, and Platinum portfolio is all direct supply.

Understood. Another data point question.

What would be our enterprise to retail GTV or revenue mix, and, let's say, how much differential in the margin or realization for us?

GP, revenue, what?

Enterprise to retail GTV for the TBO organic core hotel business is at around 50-50.

Got it.

Classic is all actually retail.

All retail. Got it.

What would be, let's say, our take rate differential if can give a sense on it?

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

Got it. Just two more questions.

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

The revenue recognition would happen as per the terms of the contract, if it is as per booking or if it is as per check-in. The incentives due from hotels or suppliers would happen as per that contract.

The payouts obviously would happen once the period of the contract is over and the numbers are finalized at both ends.

Got it. Revenue mota-mota will happen at the time of booking, whereas payout will happen annually, I'm guessing?

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

Got it. Just last question.

Given all the volatility in the forex exchanges, and this is not regarding the loan that we took for CV, what is our hedging policy and how much of currency that we hedge, and was there any, let's say, big benefit because of forex exchange in this quarter, or hit? As per

regarding the hedging policy, basically wherever we have difference in payments and collections at any currency level, let's say for an INR or an euro or a GBP, we try to hedge the difference amount in the range of around, let's say, 70% to 75%, we try to hedge that amount in any particular entity or market. From the perspective of gain or loss which are accounted for in this quarter, we did make some gains on account of the revaluation of the loan that we had given to TBO Dubai.

Other than that, primarily on the revaluation, we had negligible gain or loss. Primarily the balance of the expense pertains to hedging-related and conversion costs.

Got it. Thank you.

This is very helpful. I'll join back the queue.

Thank you, Devansh. We have a follow-up question from the line of Pratik Kumar.

Could you please unmute yourself?

Thank you. I have couple of questions.

Firstly, your air segment's organic net take rate seems to be at multi-quarter low. Is this also obviously benefited the top line, GTV growth getting faster like in— Yeah.

Pratik, in case of airlines, at times the take rate is not in our control, but generally the airline business operates on a commissionable model wherein we receive commissions from airlines or the other partners. If you see the GP line, there is only a marginal decline, not a significant decline between different quarters, 1.1 to 1.2.

That's the kind of number which varies across different quarters.

Meaning even the gross take rate is lower?

Yeah. That's what I'm saying.

It is 1.1% in this quarter versus 1.15% in Q2 and a 1.2% in the last year's same quarter. Not a significant decline, I would say, in terms of the GP.

In terms of the take rate, you might see a higher decline, but not in terms of the GP.

Prateek, what is important in the airline business is the GP. See, because that is something we still control.

Take rate is something which can move any direction depending on the airline, right? What is important is that our intent is to continue our 1.1, 1.2 as a GP on the airline business.

If the growth has to come, Pratik, that's a matter of discounting, right? If you drop it to a 0.8, we will start winning GTV.

That was the intent. I think this is a true growth what we have demonstrated in Q3, maintaining our GP as well.

Okay. Also can you discuss region-wise growth expectation?

You used to discuss earlier region-wise, different geography-wise. I know for quarter— Prateek,

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

You can go through, and we can connect offline, Pratik, on this with me.

Okay. Last question, can you comment on competition both in India and outside?

How's it shaping up, maybe in specific geography or otherwise?

I don't think there is any material change in the competitive landscape in the last few quarters, Pratik. Things remain competitive as they were before.

I would not say that anything has become more competitive or anything has become less competitive at this point in time, pretty much status quo.

Some geographies might be intense, Pratik, but the fact remains it's still the same. Nothing has significantly changed on the comp side.

Sure. Thank you and all the best.

Thank you.

Thank you, Pratik. We have our next question from the line of Mr.

Mithun Shah. Mithun, request you to unmute yourself and introduce.

Yeah. Am I audible?

Yes, you are.

Thanks for giving opportunity. I would just like to know who would be your comparable peers, probably either in the Indian listed category or elsewhere?

Mithun, I think the closest peers would be Webjet, Web Travel Group, listed in Australia, and HBX, listed in Spain. Expedia has a B2B business as well, but bulk of their revenue still comes from the B2C business.

Beyond that, I don't think I can think of any other listed peers.

One more, Gaurav. In case of HBX and Web Travel, they are primarily more into enterprise business than retail kind of a business like ours.

Yeah.

Is it possible to quantify any particular market share, percentage-wise?

No, very hard, Mithun. I think one, the markets are very large and very fragmented.

It will be hazardous to take a guess on market share.

Understand. Is it possible to quantify average revenue per employee?

Do we share headcount?

We don't share headcount, but again, this metric may not give exact color, basically, on the basis of the nature of the business we are into. It's not purely a sales-driven business.

We do share our overall headcount, including Classic, including what all our consultants and retainers that we have, is north of 2,600-plus as of December end.

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

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

Understood. Last question, how are we connected to guys like Amadeus and RateGain per se?

Both are platforms that we connect to for supply. These are intermediaries that help us connect to the supplier, we're connected to both Amadeus, RateGain, as well as many other GDS and channel managers.

Got it. Thanks a lot for answering, and once again, congratulation on good set of numbers and wish you all the best.

Really appreciate.

Thank you, Mithun.

Thank you, Mithun.

Thanks, Mithun. We have a follow-up question from the line of Devansh Gupta.

Devansh, kindly unmute yourself.

Hey, thanks for the follow-up. One more basic question.

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

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

Got it. My question was actually on flights.

Like we mentioned that, let's say, we have our take rate of 1.1. If we go to 0.8, we can do larger volumes.

The question is that if the process is largely automated, even with a 0.8% take rate and a larger base, we would see a very high operating leverage flow-through. Am I missing something there as to why we would not want to pursue that strategy?

Devansh, that 1.1 is is a GP, you are right. What you said, I understood the question.

See, for us, it's the tech and the platform which helps us the efficiencies, right? If you see our headcount in the last 3 years in terms of our air ops, etc., there's been no increase.

The plan is to keep building GTVs, which would obviously help us in our operating leverage particularly for our airline business, right? Because that's more India-centric, and to be fair, we can't be mixing it with our hotel business at an enterprise level.

You're absolutely right. For us is to But should we dilute 0.8 and get more GTV?

I don't think that's the plan, Devansh, because it doesn't work in the short and medium term, because sooner or later somebody will match it, and then it's better that we be consistent. The market also kind of appreciates that, and we still rather grow in our early teens, if we can grow more, but we're very happy to maintain our GP, as well as some decent growth, and obviously outbeat the market, right?

I think that's more important as well.

Got it. As you had mentioned that, let's say, the previous airline had a lot of turbulence in this in the last quarter, and we grew.

Anyways, IndiGo does a large own website sourcing. It's a safe assumption that, let's say, we are much more stronger with Air India and Akasa.

I'm guessing Akasa is still a minor player, but Air India is a bigger share of We have a good relationship with Air India. Is that a fair statement to make?

No,

I think our relationship with airline supply in India is probably the best, be it any airline. For us, IndiGo still remains our largest air carrier in domestic in specific.

The disruption obviously kind of affected us. We could have grown faster than what we did, but absolutely very well-poised with every airline flying within India, as well as overseas.

I think from that perspective, we are equal. Our focus remains in all the airlines which are meaningful, and we will continue to do that.

Got it. Just one data-keeping question.

What would be the working capital cycle for a flight and for a hotel, ex of CV?

For hotels, basically even in the organic business, it's a negative working capital cycle business, because generally we would be paying near to the time of check-in or after check-in to hotels or suppliers, but we generally would be collecting starting from at the time of booking till at the time of check-in. It's a negative working capital business.

Air is, I would say, almost a working capital-neutral business kind of thing. We do get credit from airlines for a week.

We do pass on such kind of credit to a selected agents, and so on and so forth.

We don't fund the airline business, Devansh, but

it's a working capital-neutral, yes.

Got it. I think a couple of quarters ago you had mentioned that the time from booking to check-in is seeing a compression, either because of geopolitical or might be various other reasons.

Are you seeing that number stabilizing, improving, reducing? Any color you can throw on it?

I don't think there is a major deviation, right? It has shrunk.

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

Got it. Just one question that when, let's say, I'm a customer, I'm going through an agent and booking through TBO, do I get an option to, let's say, this is a B2C portal experience that you pay something more, you pay something less upfront, or you pay with something extra, but you can pay at the hotel, and where effectively the difference is the working capital financing?

As a TBO agent, do I have that offer to give to our customer?

No, we don't do pay-at-hotel, Devansh. We don't do pay-at-hotel at all.

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

Any reason for it, because we also give credit to our customer, but if we are collecting everything from the customer upfront, but then the credit limit should not exist, right, to the agents?

Generally we will not be collecting upfront from the customers. At times, we may allow travel agents to use the credit card of the customer on the pass-through.

Generally, it would be that the travel agent would be making payment to us. He may be collecting or giving a credit to his end customer, and that's his own call.

No, I was talking TBO-to-agent credit.

Yeah. TBO-to-agent credit we do give depending upon the credit assessment that we do for the travel agent, but I'm not able to understand your question.

No,

I think Devansh is asking that if the credit card was charged directly by the hotel, then the travel agent will not need credit and travel agents' books will not see the business. Devansh, what happens is often travel agents are packaging the hotel along with many other things.

Now if each component has to be paid at destination, then packaging is not possible. Hence, mostly travel agents prefer a model where everything is paid for upfront.

Second is, in many cases, travel agents also choose their own commission on every booking depending on the propensity to pay and competitiveness of pricing, which is also not possible if the customer directly pays at the hotel.

Got it. My question was actually a bit different.

If TBO does not allow pay-at-hotel, which means the customer will pay to the agent, now he pays through credit card, he pays in cash, doesn't affect TBO because TBO will say to the agent that you need to pay because you have collected money. Is this understanding broadly correct?

Yeah. Yes.

Then why is there a need for credit to be given to the agent? Because agent already has the money from the customer.

If he was not having money—

Because, Divyansh, there's also a mix of just not leisure business, right? Agents are also serving corporate, large itineraries, groups, incentives, right, which obviously require credit.

Therefore, the credit has to extended, especially to the players who are meaningful travel agents, the largest travel agent partners of ours. Even in case of leisure travel as well, travel agent has a set of customers, and he would be offering credit to them as well.

For the walk-in customers, he may demand payment at the time of booking itself, but for his loyal set of customers, he would be extending credit to them as well.

Okay. Got it.

Understood. What has been our actual last year write-off on credit?

We do give the provision for bad debt numbers in our financials. I don't have that handy, but it's—

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

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

Got it. Thank you very much.

Thank you, Devansh. We have our next question from the line of Mr.

Amit Jain. I request you to unmute yourself before introduction.

Hello. Thanks for the opportunity.

Just want to understand one thing. A few quarters back, we used to give a detailed cohort about the transacting buyers.

How many, let's say, if someone got on your platform 5 years back, how much he's contributing, whether he's on our platform or not? Something the kind of metric at a management level you are looking at between the old transacting buyers and the new transacting buyers.

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

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

In the GTV terms, yeah. We have shared how much business is coming from new customers versus customers who were previously onboarded in the shareholder letter.

In the annual report, we share the data on long-term cohorts as well. That data will not change very materially on a quarter-on-quarter basis, because you can't compare it for the half year compared to the previous full years, because then the numbers will obviously not be correct.

While we do that analysis on an annual basis, the number we have been sharing consistently is how much business has been contributed by travel agents added in the same year, which is basically a reflection of the effectiveness of the investment we've been doing in the sales team.

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

Similarly, in your case, what kind of a number you are looking at, ideally?

See, it is very hard to articulate a single number, Amit, because the business operates at a global scale, and the nature of travel agents changes from geography to geography. For example, in densely populated, but low-income countries like Indonesia, India, you will see thousands of travel agents will come and go, but the throughput from each travel agent will be relatively small, churn will be high.

If you look at markets like Western Europe and North America, then the stickiness is high, and throughput is also high. When you aggregate all of those numbers, to come up with a single number is very difficult.

Hence the metric we really look at is every yearly cohort, is that cohort on the whole growing or not? If I look at my cohort of travel agents added last year, have they meaningfully grown this year or not?

The cohort that came in 2 years ago, has it started to grown at a slower pace than the last year cohort, but is that cohort growing or not? You can look at a cohort as a whole, but you cannot look at a percentage of travel agents churning or not churning, because that changes a lot depending on in that particular year where did you add travel agents.

Did you add thousands of travel agents in Indonesia, for example, vis-a-vis a few hundred in Europe? It's a very different metric.

I think you rightly said, because our interaction with few travel agents reflects in India, churn is quite high. As they grow in size, I think they move out of the platform and they start dealing directly with the suppliers.

Is this confined to India or few Southeast Asian countries, or you find some in other geography higher churn?

Amit, the example you're giving is actually not very frequent. This may just be a travel agent sometimes reducing their share of wallet if they choose to do something direct.

Churn usually happens because of attrition, in the sense that travel agency closes down, because there is no license required to start a travel agency, or you are a one person, started a travel agency, closed down, started again. Attrition causes more churn.

No, Gaurav, actually our interaction was a very big travel agent, and your wallet share was high, but over a period of time, it reduced. I can see the reason is that they started dealing directly with the suppliers.

I'm seeing this kind of risk. Do you see this is a risk which is to our business as they grow in size?

Amit, if you see our numbers, our monthly transacting is 33,000, right? What you are describing is probably the top 1% or a top 0.1% of a travel agencies who will actually be able to work directly with the suppliers.

The whole business model is dependent on a long tail of small businesses dependent on the platform for accessing supply. In our experience, this is rarely a reason for churn.

This may lead to some reduction of wallet share, but churn usually happens they may occasionally happen because they just didn't like the service, but usually the churn is really a travel agent stopping business or moving out of that company and starting their own agency.

Also, Amit, sometimes we don't expose our credit limits with a huge partner also, so that kind of also kind of can be leakage for them to deal with a supply directly. That can be one of the reasons as well.

Understood. Thank you so much.

Thank you.

Thank you, Amit. We have a follow-up question from the line of Chirag Kachhadiya.

Chirag, can you unmute yourself?

Can you hear me?

Yes, loud and clear.

Yeah. I was just visiting the website of Classic Vacations.

If I look at their UI and UX and web interface, and if we compare it with what TBO's current UI, UX is there, is there going to be any change in terms of, let's say, upgradation in the Classic platform? That is question number one.

Second, the transacting advisors, the numbers which we are providing, is there any concentration, let's say, some of the advisors contributing materially more as a percentage of revenue to the top line? This broad two question I have, yeah.

See, the branding for Classic will remain distinct from the TBO branding, because they service a different kind of customer. The underlying UI, UX may change somewhat, especially when the platform migration happens, then the booking engines will look more similar to TBO, but in Classic's brand and colors, obviously.

I don't think we are trying to homogenize the two platforms at all, right? They service different customers, and we want to keep it that way.

On your second question, I don't think on the whole there is any major concentration of business with specific customers, especially because Classic is a pure retail business, right? There's no large enterprise business over there.

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

Chirag, there is no incremental CapEx for it.

It would be some in-house CapEx for the IT work, but that's not a substantial. That's

not substantial.

Okay. Thank you.

Thank you, Chirag. That was our last question for this evening.

Thank you, everyone, for participating in the call. I will now hand over the call to Mr.

Ankush Nijhawan for his closing remarks.

Thank you, everyone, for taking out time for our call today. One thing we definitely acknowledge that either we should have pushed the call today, unfortunately, our board meeting got a little delayed.

We'll be mindful of that for our next analyst and earnings call so that we can send you the shareholder letter much in advance. Our apologies for that.

Thanks for joining in this evening. Thank you.

Thank you.