NEW DELHI – IndiaMart InterMesh Ltd, the country’s largest online business-to-business marketplace, will go slow on investments and mergers and acquisitions in the near term, Managing Director and Chief Executive Officer Dinesh Agarwal said.
“In the last two years, we have already met 200 plus companies, and we have invested in 10-12 companies out of that, I think the inflow has decreased now,” Agarwal told Informist.
IndiaMart typically makes small-ticket investments and has investible cash reserves of about 5 bln rupees a year. In the year ended March, however, the company invested about 9 bln rupees in small companies and startups. Of that, it spent 5 bln rupees on acquiring 100% stake in 25-year-old accounting firm Busy Infotech Ltd.
It also invested in a number of companies, including business accounting software companies like Vyapar and RealBooks, and retail intelligence platform Bizom.
In addition to generating good returns in the long term, investment in companies across key categories will help IndiaMart expand its platform and attract more buyers. The e-commerce company is actively looking to expand its fleet in categories such as payments, logistics and tracking, and transaction financing, Agarwal said.
“I think the pace (of investments and acquisition) may not be the same as that in last 18-20 months…we will be generating 400-500 crore (4-5 bln rupees) every year, and we have to continue to look at capital allocation by M&As (merger and acquisitions) or investments,” he said.
Asked if the company will raise funds again to make strategic investments, Agarwal said there was no need for that at present as it already had a cash reserve of 18.8 bln rupees.
To expand its business primarily through strategic investments, the company had raised 10.7 bln rupees last year from qualified institutional buyers.
“At that time, I only had 1,000 crore (10 bln rupees) and out of that, 700 crore was of customer (deferred revenue). So, I had 100-200 cr (1-2 bln rupees) of surplus cash,” Agarwal said, adding that raising the funds was important to acquire Busy and make other investments.
Deferred revenue is the amount a company has received for the services it is yet to provide. Since IndiaMart largely drives revenue by selling subscriptions, its cash reserves largely comprise deferred revenues.
The company will not make any further investments in Busy Infotech to scale up its operations. “Busy already has 50-60 cr (500-600 mln rupees) and is already profitable. So, even if they go into some investments, they already have an accrual,” Agarwal said.
In the June quarter, Busy Infotech generated revenue of 105 mln rupees, with a net profit of 40 mln rupees.
At 1358 IST, shares of IndiaMart were flat at 4,765.15 rupees on the National Stock Exchange. End
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