IndiaMART
IndiaMART looks to protect revenues and customers in FY21 | HBL
Covid-induced lockdown has badly hit the B2B e-commerce player’s average revenue per user
B2B e-commerce company IndiaMART is looking at protecting current revenues and customers in the coming year. The company’s average revenue per user has already been “substantially” hit and collections to have come down to “near zero” for at least two months, since the lockdown began.
Collection growth, which stood at 32 per cent in FY18/FY19; came down to 10 per cent in FY20 (₹738 crore) indicating the economic stress on micro, small and medium businesses (MSMEs). For IndiaMART, maintaining similar numbers “will be a miracle” in FY21, with uncertainty around Covid-19 looming large.
According to Dinesh Agarwal, MD and CEO, IndiaMART InterMesh Ltd, its e-commerce platform is not adding any new customers especially because of the lockdown. Moreover, the very few who are coming, are primarily for particular product categories. This in turn will impact subscriber base.
Subscriptions account for 95 per cent of the BSE-listed company’s revenue from operations.
“We are not adding any new customers. Whatever little we have done is in sectors that are working despite the Covid pandemic,” he told BusinessLine.
Impact on subscriptions
Subscriptions (of suppliers who list products on the site) can come down and there may be downgrades too. IndiaMART incidentally has 1,47,000 paying subscribers, and nearly 50 per cent of them had made one-year subscriptions, Agarwal had said in an earnings call.
Market sources say B2B e-commerce players are losing subscribers (suppliers) as many MSMEs are going out of business or changing their business models to adopt the new normal.
“In the next three months, (if) all of this is over, I may lose 20 per cent of my customer base and as things return to normalcy (in) over another six months, we will start to adding say 1,000 customers per quarter and then 2,000 and then 5,000 customers in sometime,” Agarwal had said during the earnings call. But these numbers depend on “how the lockdown is lifted and the economy plays out after that”, he further added.
In order to retain customers, the B2B e-commerce player has already offered discounts, shorter duration renewals, and relaxed payment terms.
Silver lining
Incidentally, an unintended consequence of the lockdown is likely to be increased Internet adoption.
According to Agarwal, with a greater thrust on manufacturing (in India) and this the increased Internet adpoption, the company’s market size could see an expansion. Online and tele-sales could grow; physical meetings may decrease leading to more efficient operations across segments including in the B2B space.
Traffic in April is “50 per cent of what it was”, but there have been buyer inquiries and calls and request for quotes,indicating a pent-up demand in the system. Queries are seen across categories such as sanitisation, safety items, hospital, pharmas and food supplies, chemicals, packaging and so on.
“We are identifying these new categories and are working on increasing our supplier base across India,” he said.
Indicating that the company was open to acquisitions if they were a strategic fit, Agarwal said: “There may be certain opportunities for us to consolidate. We also have a cash balance with us.”
Focus on current customers and revenues, growth will come later,’ says IndiaMART CEO Dinesh Agarwal | Medianama
“It will take some longer period before we can look at that kind of grown [20%] again,” IndiaMART CEO and MD Dinesh Agarwal said during the company’s earnings call for Q4FY20 on May 13. Right now, the company’s aim is to protect its current revenues and customers, and focus on the growth and ARPUs later since the customers are also suffering from a financial crunch, he said. The lockdowns have already affected the company’s ARPUs for Q4FY20 and for April, and will continue to affect them “substantially” in the short run, and in the long run, depending on how the lockdown plays out, he said.
Having said that, Agarwal also said that the company’s geographic and category diversification could help them leverage staggered opening of the lockdown and that the company’s subscription-based model, negative working capital and robust cash reserves made them confident.
- Impact of economic slowdown exacerbated by the lockdown: Last year, the auto sector and real estate were severely affected, followed by financial turmoil, followed by the NBFC crisis that hit the SMEs, and now the pandemic. “The last financial year has been challenging because of the weakness in the overall economy and we have been sharing this information since last 2-3 quarters itself,” Agarwal said.
- Expect sales and collection from customers to remain suppressed for next few months: The company is taking cost optimisation measures such as “relooking at the current cost structure, renegotiating vendor contracts, looking at variable costs, deferment of appraisals and temporary salary rationalization without doing any kind of layoff”, Agarwal said.
- Affect on employees: Agarwal clarified that the company has not planned any layoffs. Only the variable pay has come down since salespeople aren’t able to meet customers, but are engaging with them via phone and online.
‘Customers severely affected by lockdown, hard to predict impact on IndiaMART’
Because of the lockdown, the platform is not adding any new customers, or very few who are coming for particular categories of products, Agarwal said. Last quarter, weak economy had led to lower customer additions than the long-term average of 5,000+ customers per quarter and low market demand. He also said that economic slowdown has reduced market demand and led to cash flow and credit crunches. ARPU growth also dropped from historical trends of 5%-10% to 7% in Q3FY20.
“So given that we have nearly 150 thousand paying subscription suppliers customers and we are not adding any new customers or adding very little number of customers, who maybe specifically coming from the special focus categories that are working in the COVID times, I would say that let us assume that we would be down by 20% from our current customer base if the current and fourth lockdown is the last one. If the uncertainty continues further, and the economy goes through further challenges, I can only come back and tell you in a month’s time or so, about what kind of feelers do we have. As of now I can only tell you that maybe about 10% are already on hold and in the next 45 days, based upon our experience of the last 45 days, another 10% may go.” — Dinesh Agarwal
“[F]or every month of lockdown, we may end up losing 10% of the existing customer base because during lockdown, lot of customers may not be able to afford or may have to change their business model. SO I would say, that assuming that in the next 3 months all of this is over, I may lose 20% of my customer base and as things return to normalcy over 6 months we will start to add maybe 1,000 customers per quarter and then 2,000 and then 5,000 customers in sometime. But we don’t really know how it will pan out in the times to come.” — Dinesh Agarwal
10% to 20% customers ‘severely impacted’, more likely to churn: Since new sales are not possible due to the lockdown, and IndiaMART’s salespeople can’t meet customers as most businesses and premises are completely closed, Agarwal expects 10% to 20% of the subscriber base to be “severely impacted” and are more likely to churn.
All subscriptions work on a rolling basis, and aren’t affected by the financial year. Agarwal explained their three tiers:
- Platinum tier: 10% of the customers who account for about 40% of IndiaMART’s revenue and 5% to 6% annual churn.
- Gold tier: 30% to 35% of customer base with 10% to 12% annual churn. Both Platinum and Gold tiers are only available as annual or 2 or 3 year subscriptions.
- Silver tier: 33% of customers opt for the Silver monthly tier. Agarwal didn’t give the numbers for Silver annual subscription. These see 20% to 25% annual churn and 5% to 6% monthly churn.
But he acknowledged that it’s hard for people at the top of the pyramid to sustain subscriptions as well because of the costs involved (₹ 1,75,000/year or almost ₹15,000/month) and stress caused by the lockdown. As a result, since March 20, they have received multiple requests to cancel subscriptions, or to give them extensions, or to temporarily suspend their account for a month or a quarter, or to downgrade their account to a lower tier, or . Of the approximately 147,000 customers they have, about 50% have paid for more than a year, Agarwal said.
More than one-third of the customer base is more than 3 years old. Few customers are also more than 15 years old. Customers remain on the platform to make use of the lower subscription rate. For instance, if someone joined in 2014-2015, they paid ₹2,000/month and continue to pay that rate. If they were to churn out and join back in later, they will have to pay ₹3,000/month, D. Agarwal explained. Older customers are also more inclined to upgrade their tiers after experiencing the platform and growthing through it, he said.
Company offers discounts, relaxed payment terms to SME customers: According to Agarwal, the financial crunch started in October-November 2019, and “got further acute when the sudden and long lockdown happened”. To retain customers, it has offered them discounts, shorter duration renewals, relaxed payment terms.
Funding for companies will become tougher in the short- to medium-term; goal should be to consolidate
“[F]unding would become tougher for the short-term to medium term as the funds will chase the best returns in these times and for any new kind of a trial and testing, the funding would be less available,” Agarwal said in response to a question about whether or not competitive intensity would subside as Udaan is facing funding challenges. He, however, pointed out that Udaan already has “a large amount of funds available with them” and because of their financial prudence, had been able to save them for long. “[F]or now, there may be certain opportunities for us to consolidate and as much as we can consolidate, that should be our goal,” Agarwal said.
No competition for the products and services IndiaMART deals into: However, their ability monetise on that immediately will depend on the financial situation of the customer. Agarwal differentiated between IndiaMart, Udaan and Amazon: “We are mostly manufacturers, wholesale traders, custom product made, truck load products. Just to give you one comparison, if Udaan has about $60 average order value, at IndiaMART it would be around $600 and at Amazon it may be at around $16.”
- ‘TradeIndia has been around longer, but we are the leaders’: “Today if we get about 50-60 million visits on our platform every month, as per the public data available on similar web; they get less than 5 million or even 3 to 4 million visits on their platform every month,” Agarwal said.
Funding will be harder for smaller start-ups: He predicted that two years down the line, with increased adoption of internet, “the competition and funding can come back with a far more rigor and far more vengeance, just like when IndiaMART became successful, a large amount of funding went into multiple B2B and SME platforms”.
New avenues of growth: Internet adoption, bigger brands with liquidity, and exports
Internet adoption: “An overall adoption curve of the Internet will improve,” Agarwal predicted. Coupled with a potential increase in “manufacturing intensity” in India in the post-COVID-19 scenario, this could increase IndiaMART’s market size. He expects online and tele-sales to grow and reliance on physical meetings to decrease, thereby making their operations more efficient.
200 bigger brands such as Philips, Tata Steel, etc. which are already using the service would be a good source of revenue, especially given their liquidity. This is why investment into Bizom is helpful since they know how to handle big clients, D. Agarwal said. Currently, IndiaMART’s sales and collections are driven by those who have cash, he said.
Bigger brands add trust to the marketplace, attract more traffic: D. Agarwal pointed out that smaller players are usually regional players while bigger brands, such as Tata Steel or Tata Motors, have a dealer distribution network to work at a national level. “[P]resence of a brand gives a lot more trust to the buyer that the entire list of manufacturers or suppliers is present here and it is not a flea market but a more trusted marketplace,” he said. Bigger brands can fulfil remote buyer enquiries while SMEs fulfil long tail of pricing and products. Thus far, the two kinds of enterprises have not quit on account of the other.
Exports: “In fact there could be a possibility even on the export side if ‘Make in India’ becomes better or truer,” Agarwal said.
‘Open to investments and buyouts, but only in strategic areas’
- ‘IndiaMart only invests in strategic areas’: The company is not averse to buying out and will make investments in spaces that “add on to the ecosystem of small and medium sized businesses,” Agarwal said in response to if they intended to buy out companies in adjacent areas. In September 2019, it had invested in Vyapar, a mobile-based self-accounting software.
- ₹10 crore investment in Bizom: Along with Triton Investment Advisors, the company has invested in Mobisy Technologies Private Limited which run Bizom, a “Bangalore-based SaaS start-up offering sales force automation and distribution management system to medium and large sized businesses”. This will help IndiaMART with distribution and direct retail needs of its customers, especially because they “are taking advantage” of mobile phone/smart mobile computer and majority of IndiaMART’s suppliers use the IndiaMART mobile app, Agarwal said.
Operational numbers
50% reduction in traffic but spikes in categories of essential items: Agarwal said that traffic had reduced “on an average of 50%” but varied “significantly across categories and across geographies”. This is true for traffic, enquiry, calls and versus RFQ (request for quotes). “We are witnessing significant traffic growth in categories such as sanitization, safety, hospital, pharmaceutical and food supplies etc. and in indirect categories like chemical, packaging, raw materials related to the above-mentioned items,” he said but did not give numbers for these spikes. The company is identifying such essential categories and is working to increase the number of suppliers for them across India. Though traffic improved in April, but Agarwal wasn’t sure if he could be “hopeful of sustaining everything like this”.
- Traffic: 180 million, 5% YoY growth from 171 million in Q4FY19 but 4.2% QoQ decline from 188 million in Q3FY20
- Traffic through mobile: 76%
- Total business enquiries: 116 million, 3% YoY growth from 112 million in Q4FY19
- Paying subscription suppliers (subscribers): 147,000, 14% YoY growth from 130,000 in Q4FY19, 3.5% QoQ growth from 142,000 in Q3FY20 (61% of them are in metro cities and 26% in Tier II cities — population > 500,000), net addition of 5,000 suppliers in the quarter
- Non-subscription suppliers: 6 million
- Supplier storefronts: 6 million, 8% YoY growth from Q4FY19 (35% of them are buyers)
- Product listings: 67 million in more than 100,000 categories
- Registered buyers: 102 million, 24% YoY growth from 83 million in Q4FY19, 4% QoQ growth from 98 million in Q3FY20 (55% are repeat buyers, 35% buyers are in metro cities and 26% in Tier II cities)
- Customer Relationship Management (CRM) data for Q3:
- Number of call backs and replies: 40 million calls and messages by about 100,000 businesses
Financial numbers
- Revenue: ₹170 crore, 3% QoQ growth from ₹ 165 crore in Q3FY20, 23% YoY growth from ₹138 crore in Q4FY19
- Revenue for FY20: ₹639 crore, 26% YoY growth from ₹507 crore in FY19
- Collections from customers: ₹206 crore, 12% QoQ growth from ₹184 crore in Q3FY20, 1% YoY decline from ₹208 crore in Q4FY19
- Collections from customers for FY20: ₹738 crore, 10% YoY growth from ₹671 crore in FY19
- Net profit: ₹44 crore (24% margin), 29% decline from ₹62 crore (34% margin) in Q3FY19, 57% YoY growth from ₹28 crore (18% margin) in Q4FY19
- Net profit for FY20: ₹ 147 crore (21% margin), 635% growth from ₹20 crore in FY19
- Average ARPU: ₹45,000/year, 8% YoY growth from ₹ 41,700/year in Q4FY19, 0.7% QoQ decline from ₹45,300/year in Q3FY20
- Approximately 97% of revenue came from the IndiaMart standalone business. A more detailed distribution of revenue from operations of its payment (Pay with IndiaMART) and business management (Pooraa) businesses is given below:
SaaS Startup Mobisy Raising INR 11.4 Cr From IndiaMART, Triton | Inc42
- Mobisy is issuing 100 equity and 1,28,593 preference shares to IndiaMART
- Triton is investing INR 1.4 Cr in Mobisy
- Mobisy was founded in 2012 by Lalit Bhise
Bengaluru-based Mobisy, a SaaS-based distribution technology solutions provider is raising INR 11.4 Cr from B2B ecommerce platform IndiaMART and Triton Alternative Investment Trust.
According to the ministry of corporate affairs (MCA) filings accessed by Inc42, Mobisy’s board, on May 15, approved the issue of equity and preference shares to IndiaMART and Triton.
In this deal, Mobisy is issuing 100 equity shares to IndiaMART at INR 100 per share, totalling to INR 77K. Additionally, Mobisy is offering 1,28,593 preference shares to IndiaMART for INR 10 Cr at a price per share of INR 778.
Meanwhile, Triton is investing INR 1.4 Cr through Triton Alternative Investment Trust and will get 18,018 preference shares. Prior to this, Mobisy closed its second round of venture capital funding of $3.5 Mn led by SIDBI Venture Capital Limited (SVCL) in May 2018.
Founded in 2007 by Lalit Bhise, Mobisy is the maker of Bizom, a SaaS-based suite of automation solutions tailor made for consumer companies. The platform delivers real-time insights for driving greater distribution efficiency that helps organisations to grow.
Bizom, which was developed by Mobisy in 2012, offers solutions broadly including sales force automation (SFA), a partner relationship management application distributor management system (DMS), retail execution, merchandising and van sales automation.
Mobisy claims to have integrated its solutions with technologies such as artificial intelligence (AI) and machine learning (ML) to provide brands with the structure, visibility and insights they require to enable decision-making, as part of all the solution offerings.
According to the company’s website, more than 65K retail outlets are registered on Bizom. The company also claims to be catering to more than 500 enterprises including Casio, Pepsi, Shell, Emami, Unibic, Godrej, Borosil, India Gate, Park Avenue, Raymond, among others.
According to Datalabs by Inc42, India has around 8,633 SaaS startups. A report published by Google India and Accel Partners stated that the Indian SaaS industry will be valued at a staggering $50 billion by 2025.
In recent times, SaaS startups have witnessed massive growth in terms of new customers as well as revenues. Some of the notable SaaS startups in India include Zoho, Wigzo Technologies, Wingify, Chargebee, Anaek, among others.
Recently, contract management software as a service (SaaS) startup SirionLabs raised $44 Mn in Series C funding round led by Tiger Global and Avatar Growth Capital while Vernacular.ai has raised $5.1 Mn in Series A funding in May 2020.
For this 2019 debutant, Covid-19 brings blessings & challenges both | Economic Times
The company has kept its multibagger status intact amidst the Covid-19 meltdown
New Delhi: Internet-based businesses are making the most in a world changed for good by the coronavirus pandemic.
India does not have too many listed internet-based businesses. The ones that are there are already getting lapped up by investors.
One such opportunity domestic investors seem to be betting on is the country’s only listed B2B marketplace, IndiaMARTNSE 1.33 % Intermesh, which however faces a near-term challenge in the face of the dark clouds looming over the medium and small enterprises, who form the bulk of its customer base.
The company has no listed peer in India, but has kept its multibagger status intact amidst the Covid-19 meltdown. Listed on July 4 last year at Rs 1,302, at a 33.87 per cent premium to its issue price of Rs 973, the stock scaled its peak of Rs 2,862 on February 20, 2020. It crashed up to 40 per cent from there during the March selloff to trade at Rs 1,758 by the end of that month. From there, the scrip has recovered 27 per cent to trade at Rs 2,360 on May 19. The stock still trades 127 per cent above its issue price.
“During the lockdown, we contacted various manufacturers and suppliers for face masks, hand sanitizers, PPE kits and face shields, which resulted in a decent enquiries and business,” says Dinesh Agarwal, founder and CEO of IndiaMART Intermesh.
He claimed IndiaMART has since become a major destination for the supply of safety, sanitisation, hygiene, chemical and medical products and related raw material.
The company’s March quarter top line increased 3.3 per cent QoQ to Rs 165.80, while bottomline shrank 37 per cent to Rs 40 crore.
Brokerage Edelweiss Securities has a ‘Buy’ rating on the stock, but has revised its target price downward from Rs 2,815 to Rs 2,535. The stock currently trades at 27.5 times FY22E EPS.
“The lockdown would accelerate digital adoption, implying higher growth potential for the company over the medium-to-long term. However, the management painted a gloomy outlook for MSMEs, which would translate to 10-20 per cent business mortality among its paying customers,” said Edelweiss.
The management also highlighted that the lockdown has hurt business activity, almost halving its traffic. The biggest challenge is to retain its 1.47 lakh customer base as businesses may face issues related demand, affordability, debt and survival, at worst.
The company’s focus is now on customer retention via discounts and relaxed payment terms. It has undertaken cost-cutting measures such as salary rationalisation, cutbacks in discretionary spends to absorb the impact on profit.
A major portion of the company’s business comes from small business enterprises that are under constant pressure. Events like demonetisation, GST, NBFC crises, liquidity crunch, trade war and economic slowdown have hit them hard. Now, Covid-19 and lockdown added fuel to the fire, Agarwal said.
Delhi-based brokerage firm Wealth Discovery expects IndiaMART to deliver up to 15 per cent return in next one year and has set a target price of Rs 2,600-2,650.
Domestic brokerage firm Nirmal Bang has kept its outlook ‘neutral’ for the stock.
However, SPARK Research has a ‘sell’ rating on the stock with a price target of Rs 1,880, citing key challenges to retain the top 10 per cent of customers who contribute 40 per cent of revenue as they are facing a contraction in cash generation.
However, the company sees some silver lining ahead. The usage of the internet and ‘Atma Nirbhar Bharat’ scheme may pave the path for various opportunities for the company.
“The government scheme focuses on diversification from single-point sourcing and strengthening domestic manufacturing and supply chain. Also, if India can attract a decent chunk from major global businesses pulling out of China, this can push the second leg of ‘Make in India’ scheme,” Agarwal said.
Last week, IndiaMART acquired a 9 per cent stake in Mobisy Technologies, owner of Bizom, for Rs 10 crore. Mobisy has a marquee customer base, including Coca-Cola, Philips, Reckitt Benckiser, and Bausch + Lomb and offers mobile-enabled digital transformation of sales and supply channels of consumer brands distributing through retail stores.
“The government has reduced the effective tax rate and surcharge on new manufacturing units in September 2019. Now, it is trying to do some handholding of the MSMEs , all of which are a good omen for IndiaMart in the long run. But one has to see how things actually play out in the short term,” said Agarwal.
IndiaMart: This B2B platform is likely to gain in the long term | MoneyControl
In this edition of Ideas For Profit, Moneycontrol’s Sakshi Batra discusses if the ongoing weakness is an ideal opportunity to gradually build-up position for the long run.
IndiaMart had a stellar debut on the bourses in 2019. The shares got listed at Rs 1180, a 21 percent premium to the issue price. The stock had a strong rally since then only to correct along with the broader markets owing to COVID-19. The stock is down 20 percent from its 52-week high and we feel the ongoing weakness is an ideal opportunity to gradually build a position for the long run.
IndiaMart (CMP: Rs. 2271, Market capitalization: Rs. 6567crore) offers a B2B (business to business) platform. It was incorporated in 1999 and promoters currently own 52.34 percent. IndiaMart has 6 million supplier storefronts, 102 million registered buyers and 67 million product listings with more than 1 lakh product categories.
IndiaMart offers three tiers of subscriptions to suppliers:
1) Mini dynamic catalog or Silver: package includes a supplier storefront and 7 RFQ (request for quotation) credits each week.
2) Gold –Gold based subscribers are provided with 14-21 RFQ per week and their average annual price range is between Rs25,000 and Rs50,000; and
3)Platinum: Platinum based subscribers get the highest priority in search results as well higher RFQ per week. India Mart offer multi-tiered variations of their Platinum package, which is their top subscription package.
All the subscriptions are offered with monthly, annual and multi-year payment options.
Investment rationale
Higher market share to drive growth: IndiaMart has over 60 percent market share (source: KPMG report and RHP) in online B2B marketplaces that helps potential buyers of various products and services connect with suppliers through supplier-specific webs storefronts and telephonic/online enquiries. Its monetization is through a “freemium” model where buyer listings are free but suppliers pay with subscriptions. By paying the subscription, suppliers are given priority in the search results and RFQ credits while buyers are not charged. Currently, India Mart has 1.47 lakhs (as against total registered suppliers of 6 million) paying subscription suppliers growing at a CAGR of 19 percent between FY16-20. This leaves lot of room for conversion from free suppliers to paid subscribers.
The top 10 percent of customers contribute to 40 percent of revenues and subscription revenues contributes nearly 95 percent of income for IndiaMart.Shift from offline-based service to online based offerings: As per IndiaMart, there are more than 63 million MSMEs (micro, small and medium enterprises) in India, of which only 17 percent use the internet. Only 5.7 million of these MSMEs are registered with IndiaMart. Out of the registered customers, only 1.5 lakhs are paying subscribers. Both buyers and sellers want to expand their reach and the internet is providing that medium. Hence there is a steady shift from offline based to online based services. With higher usage of internet and greater adaptability amongst MSMEs, we expect higher numbers of paying subscribers in the years to come.
Visibility in revenues, cash flows and profits: IndiaMart collect advance subscription from its subscribers which gives it good revenue visibility. Deferred revenues (advance subscription received from subscribers) has grown at a compounded annual rate of 28 percent from FY16 to FY20. With higher cash collection from subscribers, IndiaMart has a negative working capital cycle.
Improvement in margin once operating leverage kicks in: IndiaMart has already seen an improvement in operating margins. EBIDTA margin has improved from -23 percent in FY16 to 28 percent in FY20. The company has started employing low cost outsourced sales representatives in its sales team thereby lowering employee cost as percentage to revenues. (41 percent of revenues of FY20 as compared to 65 percent in FY16). We expect further improvement in operating margin with higher revenue growth and greater operating leverage.
IndiaMart’s Q4FY20 earnings was above Street expectations despite the economic slowdown. However, the COVID-19 lockdown has hurt the bulk of its subscribers. Traffic on its website and app has dropped 50 percent and quite a few of its paying subscribers have not renewed subscriptions.
Currently IndiaMart plans to focus on retaining its paying subscriber base via discounts and relaxed payment terms. The management has cut salaries and discretionary expenses to maintain its margin due to a decline in paying subscribers. We expect FY21 to be a weak year for revenues and profits. We would again like to revisit FY21 numbers once we see the full impact in Q1FY21. In FY22, we expect the longer growth trend to be visible once normalcy returns. IndiaMart is currently trading at 33x FY22E. We recommend investors to buy IndiaMart on dips in a staggered manner as the near-term earnings outlook is extremely weak.
We like IndiaMart because of long-term accelerated adoption of internet by MSMEs, dominant market share in B2B online space, debt-free balance sheet and upfront collection of revenues from subscribers.
Risks: An extended economic slowdown can hurt revenues and profitability. Competition from other online players also significantly hurt IndiaMart’s profitability with subscribers shifting to other sites or apps.
Buy Indiamart, target price Rs 2,535: Edelweiss | Economic Times
The brokerage is building in a 13 per cent fall in revenue run-rate over the next two quarters and a slow recovery thereafter. But it also anticipates a stronger recovery should the government package suitably address MSME challenges.
EdelweissNSE 4.93 % has given a buy rating to Indiamart with a target price of Rs 2,535, based on 33 times Q1FY22, rolling over the valuation to Q4FY22.
IndiaMART InterMESH’s (IndiaMART) fourth quarter results were significantly ahead of expectations despite the lockdown impact. That said, the management painted a gloomy outlook for MSMEs, which would translate to 10–20 per cent business mortality of its paying customers.
The company’s focus is now on customer retention via discounts and relaxed payment terms. It has undertaken cost-cutting measures such as salary rationalisation, cutbacks in discretionary spends, etc to absorb the impact on profit.
All in all, the brokerage is slashing revenue/PAT by 22 per cent/22 per cent for FY21E and 36 per cent/29 per cent for FY22E. It is building in a 13 per cent fall in revenue run-rate over the next two quarters and a slow recovery thereafter. But it also anticipates a stronger recovery should the government package suitably address MSME challenges. Besides, the lockdown would accelerate digital adoption, implying higher growth potential over the medium-to-long term.
The share price moved down by -0.88 per cent from its previous close of Rs 2297.35. The last traded stock price is Rs 2277.10. Incorporated in 1999, the company has a market cap of Rs 6643.89 crore.
Investment Rationale
The company management highlighted that the lockdown has hurt business activity, almost halving its traffic. Paying customers are requesting a pause in their subscription packages and/or validity extension. In order to minimise churn, IndiaMART is offering discounts and relaxed payment terms. The brokerage has built in a drop of 15,000 paying customers for Q1FY20 and a gradual addition after that.
The brokerage is cognisant of the weakness at hand, but remains optimistic for the long run as the lockdown would accelerate online shift. The stock is trading at 27.5 times FY22E EPS.
Financials
For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 170.10 crore, up 3.15 per cent from last quarter sales of Rs 164.90 crore and up 23.26 per cent from last year’s same quarter sales of Rs 138.00 crore. The company reported net profit after tax of Rs 45.00 crore in the latest quarter.
Promoter/FII Holdings
Promoters held 52.34 per cent stake in the company as of March 31, 2020, while FIIs held 12.24 per cent, DIIs 3.08 per cent and public and others 32.34 per cent.
Indiamart Intermesh, Tata Consumer added to MSCI India index; Tata Power drops | IIFL
The following are changes in constituents for the MSCI India Domestic Index, which will take place as of the close of May 29, 2020.
According to the MSCI India Domestic Index on Tuesday has announced the changes for India-focused overseas funds. The following are changes in constituents for the MSCI India Domestic Index, which will take place as of the close of May 29, 2020.
Effective June 1, MSCI has added six stocks and deleted five from its Global Standard Index.
Stocks such as Biocon, Indraprastha Gas, Jubilant Foodworks, Tata Consumer, and Torrent Pharma have been included, while the deletions from their global index include Ashok Leyland, M&M Financial Services, Shriram Transport, and Tata Power.
Meanwhile, MSCI India Domestic Small Cap Index has added 13 and deleted 52 stocks from the MSCI Global Small Cap Index.
MSCI India Domestic Small Cap Index has seen 52 deletions which include Abbott India, Adani Green, Allcargo, Ashoka Buildcon, BSE, Venky’s India, Jammu & Kashmir Bank, Power Finance Corporation and Dish TV India.
IndiaMart Intermesh, Mishra Dhatu Nigam, Nippon Life India, Future Retail, Ashok Leyland, Emami, M&M Financial and Relaxo Footwears are among the 13 added to this index.
The stock which has been added will see more buying activity from the foreign investors, and the stocks will have positive sentiment going forward.
Indiamart Q4, FY’20 net profit rises 57% to Rs 44 cr | Business Standard
B2B e-commerce company IndiaMART on Tuesday posted a 57 per cent rise in consolidated net profit to Rs 44 crore for the fourth quarter ended March 31.
The company had posted a net profit of Rs 28.2 crore in the corresponding period a year.
Its consolidated revenue of IndiaMART InterMESH Ltd increased by about 22 per cent to Rs 187.3 crore during the reported quarter from Rs 152.8 crore a year ago.
For the financial year 2019-20, IndiaMART posted over seven-fold jump in its net profit to Rs 147.4 crore as compared with Rs 20 crore in 2018-19.
The firm’s annual revenue in 2019-20 increased 29 per cent to Rs 707 crore, from Rs 548 crore in the previous financial year.
“Our growth in cash flow from operations and deferred revenues remained subdued as the economy continued to face strong headwinds,” Indiamart chief executive officer Dinesh Agarwal said in a statement.
He added that while “we expect a decline in demand and business activity in the short term due to the ongoing crisis, we believe our value proposition will only become stronger as more and more businesses look for transforming themselves and adapt to online,” Indiamart chief executive officer Dinesh Agarwal said in a statement.
Shares of IndiaMART closed at Rs 2,192.25 apiece on the BSE, down by 2.6 per cent as compared with the previous close.
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Full Year and Fourth Quarter ending March 31, 2020
Noida, India,May12, 2020:IndiaMART InterMESH Limited (referred to as “IndiaMART” or the “Company”), today announced its financial results for the full year and fourth quarter ending March 31, 2020.
Financial Highlights (Q4 FY2020):
IndiaMART reportedconsolidated Total Revenue from Operations of Rs. 170Crore, 23% growth YoYdriven by anincrease in the number of payingsubscribersas well as higher realization from existing customers.Consolidated Deferred Revenue grew by 17% from Rs. 586Crore in Q4FY19 to Rs. 685Crore in Q4FY20 Crore leading to much better visibility for future revenues.
Consolidated EBITDA was Rs. 52Crore representing a margin expansion from 15% in Q4FY19 to 31% in Q4FY20 partly due to increase in revenues and adoption of IndAS 116. Consolidated EBIT for Q4 FY20 was Rs. 46 Crore representing a margin expansion from 14% in Q4 FY19 to 27% in Q4 FY20.
Profit before Tax was at Rs.61Crore representing a Profit before Tax margin of 33%. Net Profit was at Rs 44 Crore.
The Company generatedconsolidated Cash Flow from Operations of Rs. 94Crore leading toCash and Investments of Rs. 931Crore as on March31, 2020 as compared to 685Crore on March 31, 2019, an increase of 36% YoY.
Operational Highlights (Q4 FY2020):
Traffic grew to 180 million in Q4 FY20 from 171 million in Q4 FY19, an increase of 5% YoY and total business enquiries deliveredincreased to 116million from 112million, a growth of 3%.Supplier Storefronts grew to 6million in Q4FY20 an increase of 8% YoY and paying subscription suppliers grew to 147thousand, a growth of 14%.
Commenting on the performance, Mr. Dinesh Agarwal, Chief Executive Officer, said:
“I am happy to report closure of the financial year with a modest growth in revenues in these turbulent times. Our growth in cash flow from operations and deferred revenues remained subdued as the economy continued to face strong headwinds. While we expect short term decline in demand and business activity due to the ongoing turbulence, we believe our value proposition will only become stronger as more and more businesses look for transforming themselves and adapt to online. Our strong balance sheet and a resilient business model will help us to navigate through these tough times and emerge stronger and better.”
About IndiaMART:
IndiaMART is India’s largest online B2B marketplace for business products and services. IndiaMART makes it easier to do business by connecting buyers and sellers across product categories and geographies in India through business enablement solutions. IndiaMART provides ease and convenience to the buyers by offering a wide assortment of products and a responsive seller base while offering lead generation, lead management and payment solutions to its sellers.
| IndiaMART InterMESH Ltd. CIN :L74899DL1999PLC101534 Corporate Office Tower 2, Assotech Business Cresterra, Floor No.6, Plot No.22, Sec 135, Noida-201305, U.P. Registered Office 1st Floor, 29-Daryaganj, Netaji Subash Marg, Delhi – 110002. For any queries, please contact: investors@indiamart.com |
