IndiaMART
IndiaMART InterMESH Limited – Full Year and Fourth Quarter ending March 31, 2023 – Results Press Release
Noida, India, April 28, 2023: 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,
2023.
Financial Highlights (Q4 FY2023):
IndiaMART reported consolidated Revenue from Operations of Rs. 269 Crore in Q4 FY23, a growth
of 33% YoY primarily driven by 20% increase in number of paying subscription suppliers and addition
of Rs. 12 Crore revenue from accounting software services. Consolidated Deferred Revenue increased
by 28% YoY to Rs. 1,162 Crore as on March 31, 2023.
The Company continued making growth investments in manpower, product and technology, sales and
servicing resulting into growth in revenue and paying subscription suppliers. As a result, consolidated
EBITDA was Rs. 66 Crore for Q4 FY23 representing EBITDA margin of 25%.
The Other Income increased to Rs. 31 crores primarily due to fair value gain on treasury investments.
Net Profit for this quarter was Rs. 56 Crore representing margin of 19%.
Consolidated Cash Flow from Operations for the quarter was at Rs. 209 Crore. Cash and Investments
balance stood at Rs. 2,335 Crore as on March 31, 2023.
Operational Highlights (Q4 FY2023):
IndiaMART registered traffic of 252 million and Unique business enquiries of 22 million in Q4 FY23.
Supplier Storefronts grew to 7.5 million, an increase of 6% YoY and paying subscription suppliers
grew to 202,690 a net addition of 8,335 subscribers during the quarter. Total headcount increased by
170 to 4,583 at the end of the quarter with focus on strengthening Sales and Servicing teams.
Commenting on the performance, Mr. Dinesh Agarwal, Chief Executive Officer, said:
“We are happy to close the financial year with a continued growth in customers, revenue and cash flows
while maintaining healthy margins in the business. We continue to invest in further strengthening our
product, technology and building strong customer relationships. This remains integral to our long-term
strategy to drive profitable growth and leverage our value proposition to create value for all our
stakeholders.”
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.
The Grand Finale of the Thinkers of Tomorrow, presented by Symphony
Symphony Ltd. in association with the News18 network, awarded MSMEs who are working tirelessly to foster a culture of sustainability, inclusion, and employee care at the grand finale hosted in Delhi on 20th April 2023 in the presence of Policymakers & Industry stalwarts.
Sustainability has gained significance globally in recent years, causing governments to take concrete steps to encourage MSMEs to adopt quality standards and processes. Building on the premise of sustainability, Symphony Ltd., in association with the News18 network, has launched Thinkers of Tomorrow. This unique initiative recognises the innovative efforts of MSMEs to adopt sustainable business practices. The campaign received an overwhelming response, with over 2,000 entries. Zonal winners were shortlisted from the north, south, east, and west, who then went on to compete for the grand finale, adjudged by an illustrious jury and facilitated by EY.
The finale award ceremony commenced with a welcome address by Anuj Arora, CMO, Symphony Ltd., who spoke about extreme weather conditions playing havoc on productivity and costing India 5% of its GDP.
He reported an alarming loss of nearly 160 billion potential labour hours as a result of these adverse conditions. He stressed the need to take serious cognizance of investing in ESG and its correlation to profitability.
His address was followed by a keynote by Shri B.B Swain, Secretary, Ministry of MSME, GOI, who, quoting an economic survey, shared how the GST collections from MSMEs in the current financial year are higher in comparison to the pre-pandemic years. He further stated, “As many as 14.6 lakh MSME accounts were saved from becoming NPAs during the launch of the Emergency Credit Line Guarantee Scheme”.
Mughda Kalra from the network engaged in an insightful panel discussion on Navigating the New World Order and Building a New India. Panelists comprised Vishwachetan Nadamani, COO, Ecom Express; Ashok Saigal, MD, Frontier Technologies, & Co-Chair, CII’s National MSME Council; Dinesh Gulati, COO, IndiaMART; Vinod Sharma, MD, Deki Electronics Ltd.; and Amit Kumar Group CEO & Executive Director, Symphony Limited.
Addressing the unfortunate credit gap that paralyses most MSMEs, Dinesh spoke about the lack of a formal structure among MSMEs, which prevents them from taking advantage of various government schemes and financial aid. He said, “Almost 85% of businesses are informal; they don’t have any structured balance sheets; they don’t have any structured credit payment systems; they don’t monitor how the accounts work, and that’s where they lose out”. On the other hand, commenting on the regulatory framework that challenges MSMEs, Ashok stated how the government is proactively taking steps to weed out the apprehensions amongst most MSMEs. He added that there is a 59-minute loan scheme at public sector banks; all one requires is a PAN card and GST return to avail of this service.
Busting the myth that ESG is not linked to profitability, Vishwachetan said that awareness is important, and secondly, he explained that it is easier to embed the principles of ESG in a smaller organisational setup as compared to a large organisational setup. Speaking proudly about Deki’s contribution to the energy efficiency revolution, Vinod explained how their company scaled up over the years in a zero-duty environment. He said, “Every single capacitor we sell is technically benchmarked with the best in Japan, reliably benchmarked with the best in Germany, and price-wise, it is benchmarked with the best or the cheapest in China”.
Concluding on an introspective note, Amit pointed out the gap between the decisions made in air-conditioned corporate offices and their actual translation on the field. The discussion was followed by the award ceremony.
Strategies to boost MSMEs growth through digitization
Over the last two decades, technology has influenced every aspect of our lives, permeating every facet of society, from healthcare and education to social relationships, and personal habits to business behaviours.
While technology has overpowered every sector and function of the world of enterprise and has led to significant innovations and opportunities, it has also resulted in a digital divide. Formal businesses have embraced technology, while the large universe of informal businesses, primarily MSMEs, have been struggling to catch up on this front.
If we look at China’s SME ecosystem, it has been clocking a 10 % growth year-on-year, resulting in the addition of ~ 5 million new businesses each year. This is because they have been early adopters of digital technology and hence played a crucial role in China’s economy, contributing over 60% to its GDP and accounting for 80% of employment opportunities in the country.
Now, let us compare this with India’s small and medium business communities. India’s MSME sector is the second largest after China, with over 64 million businesses significantly contributing to the nation’s socioeconomic growth. They even help in reducing regional disparities, assuring a fairer distribution of national income and wealth by creating employment opportunities across the nation.
For many decades, MSMEs had to face many challenges related to policy and regulatory frameworks, such as complicated taxations, licensing procedures, high compliance costs and inadequate infrastructure in Tier 2,3 cities and rural areas, which inhibited them from growing and prospering further. Both, the prohibitive cost of automation and awareness of the solution have mostly limited digital adoption among MSMEs.
But thanks to the increasing affordability of smartphones, low tariff of the internet, growing use of digital media and rising awareness of online platforms like marketplaces or e-commerce are spurring the future growth for MSMEs in India. Adding to it, the enhanced digital infrastructure through government policies like GSTN, e-way bills, MSME Udyog Aadhar, NPCI, and many more are playing a vital role in democratizing business opportunities and making it easier for MSMEs to embrace digital technology.
The need for Tech enablement
Marketplaces and digital platforms on one side do serve the basic needs of MSMEs to have access to new markets, on the other side they also create access to technology such as cloud-based applications, automation, data analytics, and business intelligence which enable MSMEs to gain an in-depth insight into market trends and consumer journeys. It facilitates faster decision-making based on up-to-date, real-time information resulting in increased sales and revenues. While many MSMEs are taking advantage of going digital for local markets, it also allows them to go international by adopting borderless marketplaces, thus boosting scalability and optimizing resources and costs. These online platforms including marketplaces, e-commerce platforms and social media comprising features such as online presence through websites, rating systems, feedback mechanisms, payment tools, conversation tools and trust certificates, build credibility in the market almost immediately thus democratizing the business opportunities for them irrespective of their demographics.
Digital proficiency clearly is the need of the hour if a business wants to survive disruptions, build resiliency, and transform itself strategically. It will be even more ubiquitous in the near future. And to maximize the benefits of online platforms, all MSMEs need to do is improve their own commitment directly or provide a dedicated resource to manage online marketing, customer interactions, platform engagement, and regulatory compliance.
Leveraging Digital Infrastructure for MSMEs’ Growth
While leveraging newer technologies helps these enterprises to take advantage of opportunities in today’s changing environment, it alone will not help them to become growth accelerators for India. MSMEs face legacy issues such as inadequate and untimely credit and lack of access to finance. This is because of the lack of sufficient collateral, and low credit score that compels them to rely on unsecured loans at higher interest rates, which dents the economic viability of their businesses, and deters them from expanding and investing in new technology. It also dampens their spirits.
Therefore, the emergence of digital financial services will not only provide viable solutions to some of the challenges hindering the growth of this heterogeneous sector but will also promote financial inclusion. India’s digital commerce ecosystem is increasingly becoming interconnected and interoperable, creating a dense stack of digital infrastructure that amplifies the value of other digital services and facilitates further innovation in the space. The Indian government initiatives such as Atmanirbhar Bharat Abhiyan, allocation of Rs 15,700 crore in the Union Budget 2022-23, and extension of the ‘One District One Product’ (ODOP) scheme to cover 7,500 new products or the Udyam Registration portal and the launch of ONDC are initiatives in the direction to create a strong digital infrastructure. Similarly, marketplaces whether it is IndiaMART or GeM, are acting as catalysts to enable MSMEs and promote this sector’s growth further.
India has improved its ranking in the World Bank’s Ease of Doing Business Index, but the Indian MSME need more at the national scale. They need a more enabling legal, regulatory, and administrative environment to prosper. E-commerce platforms and online marketplaces can serve as critical intermediaries for digital financial services, integrating payment and credit services into their interfaces and aggregating detailed data on MSMEs. By doing so, they can gain insights into the risk profiles of particular groups and develop targeted financial products that cater to their unique needs. Besides, the government must accelerate its effort to assist this segment and encourage innovation of new technologies that offer more customized digital solutions and credit enablement given the complexity of the sector.
Today’s technology is gaining traction at an accelerated pace. The changes in the technology space is opening up a world of opportunities for these small businesses and is key to their growth and formalization. Digital transformation is no longer an option but a necessity in today’s fast-paced business landscape. With the right strategies in place, MSMEs can leverage technology to expand their market reach, increase efficiency, and tap into new revenue streams. As India sets its sights on becoming a $5 trillion economy by 2025, the role of MSMEs will be critical, and digitization will undoubtedly be a key enabler of their success.
With the adoption of AI, we aim to cross demographic barriers: Dinesh Gulati, IndiaMART
The COO of IndiaMART shares the company’s market expansion strategies, advertising campaigns and growth plans
India’s tier 2 and tier 3 markets are evolving fast and improving their contribution to India’s economy owing to rapid mobile internet penetration, tech adoption, the reach of marketplaces & e-commerce platforms and simplification of various policies. This is effectively supporting the growth of India’s B2B sector, says Dinesh Gulati, COO, IndiaMART.
Nearly 35 per cent of the B2B traffic comes from Metros and the rest is from non-metros and smaller towns, Gulati shared in a conversation with e4m. He also spoke on the company’s market expansion strategies, advertising campaigns and growth plans.
What major investments are boosting the overall growth of the company?
We started expanding our network of acquisitions 18 to 24 months back. Earlier we used to have only an in-house sales team and then we started expanding through our channel partners in large cities as well tier 2-3 towns because of the change in traffic patterns, which is coming almost 65 per cent from tier two, three, and four towns. Our revenues are increasing because we have a steady growth in the number of customers being added.
Our net customer addition is between 8,000 -9000 per quarter. Having said that, there is a lot of work happening on the platform itself so that we can improve our experience for our buyers and suppliers.
As per recent reports, IndiaMART looks to add a credit facilitation offering on its platform to help small businesses. What is the aim behind offering credit facilities?
We were able to enhance our access to the markets by enriching our platform through enriched categories, good content and offering various other technology solutions that MSMEs need today. Besides facing other problems, SMEs are bereft of financial resources to sustain their businesses. Thanks to the technology that we have, we can monitor their behaviour. Hence, we decided we should also look at providing access to funding, finance to these businesses. We are trying to integrate a sustainable and effective solution on the IndiaMART platform to facilitate credit borrowing in simplified way.
Recently, IndiaMART has announced market expansion across India. Besides opening four new branches in Tamil Nadu, the company plans expansion across Gujarat, Maharashtra, Karnataka, and Kerala. How does the company plan to connect larger sellers to local buyers?
With businesses adopting digitisation rapidly, buying patterns have changed explicitly. To keep pace with the GDP contribution from the South, we had to move much faster so that we would be always in sync with the South. Two to three years back we realised buyers from smaller towns were not very well-versed in English. They either use voice search or their vernacular language. We implemented these interventions on our platform and today our buyers can search through voice in nine languages and almost in 180+ languages on-line. We have set up a dedicated service centre in Chennai to serve our tamil speaking TN customers at the moment, but we will expand it to service other southern state customers namely Karnataka, Kerala, AP & Telangana over next few quarters.
Clear detailing of products, their prices on the website, flexible marketing approach, strong SEO and AI-driven marketing algorithm help IndiaMART stand out in the clutter of B2B business. Also, we have been trying to make this platform as relevant for our suppliers and buyers and as functional as it needs to be, rather than throwing money on above-the-line media marketing, and channel marketing. Today we have almost 16 crore-plus buyers. We have more than 10% of India’s population registered on a B2B platform like IndiaMART and our repeat buyer traffic is almost 53%. Furthermore, with the adoption of AI, we aim to cross demographic barriers and make match-making happen across geographies and every aspect of buyer and supplier. Presently, we have almost 400 plus brands that are large enterprises and present on the IndiaMART platform, whether it is Toshiba, Carrier Aircon, Tata Motors, Tata Steel, JCB etc.
IndiaMART launched its campaign during the IPL season. How does IndiaMART plan its quarterly advertising spend?
Our entire investment has been in creating more contenton the platform and developing innovative solutions like cloud telephony, Lead manager, Payment solutions etc. We have 74 lakh suppliers on the platform and keep enriching their catalogues. Out of these 74 lacs suppliers 37% or so also buyers on the platform thus creating strong network effect for the brand.
On branding front we do such videos, mailers, multiple Social media interventions besides participating in various industry seminars, meets. Our sales and service team connect with almost 1mn suppliers either in person or over video meets, that’s the biggest brand building for us.
Which sector does IndiaMart plan to focus on in the following fiscal year?
We have 56 industries on our platform and we are a horizontal marketplace. Having said that, we cannot push any particular category or industry sector but keep working on multiple industries throughout the year depending in multiple factors including seasonality. But these things keep changing. During Covid we started focusing on pharma and medical equipment categories when the entire nation was in the need of medical products, facial masks,PPE kits, concentrators and various chemicals etc.
What are the challenges for India’s B2B sector and what’s the way to tackle them?
In China, internet adoption amongst businesses is close to around 80% or so. Whereas in India we are still less than 50%. So, there is headroom for B2B businesses to improve. Having said that, in the last few years, thanks to UPI, GSTand e-way bills a lot of things have simplified businesses across all demographics. Thanks tothe credit guarantee scheme, the government of India has offered a sizable chunk of loans that are given collateral free.
There are small teething issues where we have scope to improve things. But the biggest challenge is to make finance and funding available for businesses.
I’m very bullish about the way things are going to help our B2B micro and medium enterprises to a great extent. However, headwinds are there because of various global factors. We saw raw material prices going up, and inflation going up. But despite that, we continue to grow primarily because of some ease of policies and better consumption patterns. Thanks to PLI scheme there is lot of improvement in manufacturing sector and it will continue to improve further. I’m sure we will see a lot of improvement for our B2B businesses.
B2B Business Less About Brand, More About Functionality: IndiaMART’s Dinesh Agarwal
- Talking about profitability of ecommerce players, IndiaMART CEO Agarwal said that irrespective of the segment in which a company operates, the objective is always to become profitable
- Speaking at Inc42’s The Makers Summit, Agarwal also said that customer acquisition cost is higher for B2B ecommerce players
- IndiaMART, which operates in the B2B ecommerce space, reported a 61% year-on-year increase in its consolidated net profit to INR 113 Cr in Q3 FY23
Over the past few years, B2B ecommerce has emerged as one of the fastest growing segments in the eretail segment. However, while B2C ecommerce brands often resort to aggressive marketing strategies, B2B players are conservative. Explaining this contrast, Dinesh Agarwal, CEO and founder of IndiaMART, said that the B2B ecommerce business is less about brand and more about functionality.
Besides, the B2B business is based on trust and relationships, Agarwal said at Inc42’s The Maker Summit 2023.
Talking about the profitability of ecommerce players, Agarwal said that irrespective of the segment in which a company operates, the objective is always to become profitable.
“Profitability is the mindset of a company, irrespective of the fact whether it is B2B or B2C. You will see a few companies even in the B2C segment that are building profitably, EaseMyTrip for example,” Agarwal said.
IndiaMART, which operates in the B2B ecommerce space, reported a 61% year-on-year increase in its consolidated net profit to INR 113 Cr in the December quarter of the financial year 2022-23.
Talking about the company, Agarwal said IndiaMART also has an advertising vertical.
Advertising platforms in the ecommerce space typically thrive on a premium business model, unlike the transaction platforms, he said. While a lot of B2C companies have premium business models, the value being driven by consumers is very small for them.
For B2B businesses, he said there are only two propositions – either they can provide enough value for customers to stick around or provide no value. Besides, customer acquisition cost (CAC) is also higher in the segment. Hence, B2B businesses have to eye higher average revenue per user and higher margins, he added.
Started 26 years ago by Dinesh Agarwal and Brijesh Agarwal, IndiaMART connects enterprise buyers with suppliers. It got listed on the exchanges in 2019.
Talking about the changes post the company’s IPO, the IndiaMART CEO said that as the platform has been profitable for most part of its journey, the public listing didn’t make much of a difference in the way it operates.
However, he mentioned that a public company is always measured in terms of its growth and profitability.
At $1.47 Bn, the B2B ecommerce segment raised the second highest funding among the ecommerce subsectors in 2022. Overall, Indian ecommerce startups raised $4.01 Bn of funding in 2022.
INDIAMART LOOKS TO DOUBLE REVENUE BY 2027
- B2B marketplace IndiaMART is betting on ARPU improvement, paid customer addition, and new category expansion to drive revenues.
Over the last 2-3 years, IndiaMart has spent more than Rs 900 crore on acquiring stakes in nearly 14 companies. These deals have helped the B2B ecommerce company strengthen its position across categories—HRtech with Zimyo, AI-powered freight movement with Fleetx, shipping solutions company Shipway, and of course, its most expensive buy—accounting software company Busy Infotech, which was acquired in January 2022 for a whopping Rs 500 crore.
These acquisitions are likely to spur IndiaMART’s growth in the next couple of years. “We estimate the proportion of revenue coming from new businesses moving from 0% in FY22 to ~10% in FY25E,” ICICI Securities said in its latest research report on the company.
Founded in 1999, Noida-based IndiaMART has now set itself an ambitious target—to double its revenue from a Rs 1,000 crore run rate at present to Rs 2,000 crore by 2027. This, it believes, can be achieved by further incremental improvement in ARPU (Annualised Revenue Per User), expansion into newer categories, and paid customer (subscriber) additions.
“Our search is better than Google, our B2B catalogue is better than Amazon,” Dinesh Agarwal, Founder and CEO, IndiaMART tells YourStory. “We do analytics and machine learning to improve search and match-making. Have price- and location-specific analytics. We focus on the sell side behaviour to improve consumer side matchmaking,” he adds.
As of 2023, the company commands over 60% market share in the B2B listings space. With a network of 7.4 million suppliers and over 90 million listings of products and services, it is now looking at further strengthening this position.
“The number of customers on our platform has been growing at 15%-20% per annum and our ARPU has been growing at 5-7% per annum. If you add that up, we are seeing a CAGR (Compound Annual Growth Rate) of 25% per annum,” says Agarwal. “At this rate, we would double our revenue every 4-5 years.”
IndiaMART clocked an operating revenue of Rs 251 crore at the end of Q3 FY23 on a consolidated basis, as compared to Rs 188 crore at the end of Q3 FY22.
The business roadmap
By taking the acquisition route, IndiaMART has been slowly expanding its ecosystem to go beyond discovery—towards financial accounting, logistics technology, and distribution or order management. At least four of its acquisitions have been in the accounting space—Livekeeping, RealBooks, Busy, and Vyapar. The company believes this could be a billion-dollar market, especially with small businesses needing tax and accounting assistance.
IndiaMART is also adding another layer of transactions to enable customers to place orders via the platform. Besides the ‘Pay with IndiaMART’ platform, it is now working on integrating logistics and tracking onto the platform. The management did allude to a combination of subscription- and transaction-based revenue models in the future on a recent investor conference call. However, it did not share exact details.
Along with the new business push, IndiaMART is also looking to make its existing product categories stronger. It operates in 56 industries, with the highest share of paying subscribers (about 8%) coming from industrial plants, machinery and equipment, and construction and raw materials.
“We are now working to make categories like agro and pharma mainstream. We are not good in consumer services categories as well,” said Agarwal.
“Our own product-market fit has become much better because we were left with nothing but to do deep work in each category (during the pandemic). I don’t think we have done such in-depth category work ever,” he added. Deep data mining and analytics helped the company understand areas of weakness and potential scale-up opportunities.
This has helped IndiaMART drive customer engagement and add more paid suppliers. The company added 6,600 paid customers in Q3 FY23 while 90-day repeat buyers stood at 54%. Going forward, it expects customer addition to be upwards of 8,000 quarterly while maintaining the churn.
Paid customers for IndiaMART have increased from 156,000 in Q3 FY22 to 194,000 in Q3 FY23. ARPU stood at Rs 49,400 in Q3 FY23 as compared to Rs 48,000 in the year-ago period.
“We expect INMART to deliver a 23% revenue CAGR over FY23-25, aided by sustained paying subscriber additions and strong growth in deferred revenue. We continue to see the company as a key beneficiary of the technology adoption by India’s MSME universe, as well as of a shift to a formalised ecosystem,” a recent research report by broking firm Motilal Oswal noted.
IndiaMART also wants to improve its presence in cities like Bengaluru, Hyderabad, and Kolkata, and also add more sellers from Tier II cities. At present, 55%-57% of IndiaMART’s paying customer base comes from the top eight metros and the rest are from Tier II cities.
Challengers in the market
The total addressable market of B2B ecommerce in India is poised for a CAGR of 55.8% over FY23E-FY25E, according to research by ICICI Securities. Given this market size, analysts believe that there is potential for two or more players to co-exist in the market.
While IndiaMART commands the largest market share, players like Udaan, TradeIndia, and Reliance-owned JustDial are also working aggressively to scale up.
“It is important to define B2B in ecommerce; it is a very broad term. When you say IndiaMART, Amazon (Business), etc., they are all very different businesses and target different customers. They are not solving the same problem,” said Agarwal. “All these businesses have the ability to expand into areas. They have found their own niche.”
At present, Just Dial has a 26% revenue exposure to the B2B ecommerce segment, with an approximate 15% market share. “We think this is likely to be the primary growth driver for the company and estimated to increase to ~36% of overall revenue by FY25E aided by growth in the segment,” according to a B2B ecommerce report by ICICI Securities.
As more MSMEs enter the digitisation fold, competition in the industry is heating up and players will have to strengthen their businesses within niches to be able to co-exist.
IndiaMART looks to add credit-facilitation offering on its platform to help small businesses
Online B2B marketplace IndiaMART InterMESH has said the company is exploring new technologies to offer loan facilitation services and expand offerings for the sellers and buyers on its platform. IndiaMART claims it has 60 percent market share of the B2B advertising space with over 70 lakh suppliers, mainly micro, small, and medium enterprises, using its various services to connect with potential customers as well negotiate bulk deals.
According to the company’s founder and CEO Dinesh Agarwal, SMEs (Small and Medium Enterprises) need credit at the time of purchasing or at the time of selling and that too “in small amount with no time”.
“For them, interest rates do not matter as much as time matters, and the amounts matter,” Agarwal told PTI.
He said, “we will definitely like to play a role in credit enablement for MSMEs” and the company has been discussing with financial institutions to start the service on the platform.
“We have been doing multiple experiments. However, these are in very very early stages… it will take some time,” he said.
Agarwal said his company has already tied up with GST invoicing software provider Vyapar and is betting big on the innovative Open Credit Enablement Network (OCEN) which will ensure easier loan processing for SMEs by digitizing various manual steps involved in loan disbursal.
“Under OCEN, there will be standardization of loan forms and machines will be able to read those documents. it will reduce the cost of lending and, thereby making banks to lend (in) smaller quantities,” he said and expressed hope that the process will start in next two-three years.
“We are at the mercy of the lenders to adopt that. It’s not that the problem is from our side. For us, it will be just putting a few more links on our platform to say that now you can also get loan, see eligibility and apply for the same… I think, in the next two-three years it would happen,” he explained.
The company is also looking to scale up the pace of customer acquisition and add around 8,000 new users each quarter.
Agarwal said the Covid pandemic has forced more people to use the internet and this has led to manifold jump in the number of visitors on his platform.
The company which was usually adding 20,000 customers in a year, is now adding 8,000 customers in each quarter.
The number of employees at the company has also increased from 3,000 to 5,000 in the past one year, Agarwal said, adding that he plans to hire 100-200 people every quarter to cater to the increasing number of users.
“As we are growing handsomely at upwards of 25 per cent and as the number of customers will grow, we typically need more people for every 100 customers that we add. So we have almost increased our technology team by 50 per cent, we have doubled our servicing team and we will continue to add 100-200 people per quarter,” he added.
According to its latest financial statement for October-December 2022, IndiaMART registered a 60 per cent rise in net profit at Rs 112.8 crore as against Rs 70.2 crore in the year-ago period.
The company’s revenue also increased 33.6 percent to Rs 251.4 crore during the period.
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Margin will slowly start to inch up to 33-34% soon: Dinesh Agrawal, IndiaMART
So, for the next foreseeable one or two quarters, I think we will remain around that 28%, 30% and then we can start to improve year-on-year and reach 33-34% soon,” says Dinesh Agrawal, Founder & CEO, IndiaMART.
Let us first talk about the numbers and if I am looking at the margins for the last four quarters, the margins have been below your 30% mark. The Street was expecting margins to almost touch 35%. Could you share with us the growth levers and if at all you also sense this improvement to 35%?
I had already clarified this in the beginning of the year last year itself that now we are in a growth phase after two years of lull due to COVID. We had not invested in manpower and salaries also got re-rated heavily and that is why the margins have come down from upwards of 40% to 25%, 27%, 28%. And this was to be continued for this entire financial year and that is where we are. Once this entire backfill of the investment and backfill of the people is done, then I think margins can start to improve further from here on. So, for the next foreseeable one or two quarter, I think we will remain around that 28%, 30% and then we can start to improve year-on-year and reach 33-34% soon.
Looking at increasing your investments, is there a specific thought which is backing this thesis?
Yes because there was a backfill of the people which was needed and we did not hire people during the COVID times because there were so many uncertainties and now that whole backfill exercise is more or less getting complete and from here on the cost structure will increase as per revenue increase. And since revenue has been increasing upwards of 25%, I think the margin will slowly and slowly start to inch up.
To the subscriber or I would say customer base, there are a lot of dynamic changes which have happened because of COVID to SME and MSME sector, now that China has closed down, lot of changes are happening again, so in terms of the total base of your total customer because last three-four years have been extraordinary interesting, challenging and volatile times, is there a profile change? Is there a mix change?
So what has happened is if you look at 1.25 crore SMEs that are registered on GST, we take only GST-registered businesses as our paying subscribers and 99% of them are GST registered. So at the bottom of the pyramid, there is a lot of churn happening while the established SMEs have started to realise the benefit of internet and realise the importance of internet. So, they are becoming more stickier while at the bottom of the pyramid 50% SMEs are still trying to find their new business model because their business models got disrupted during the COVID and many of them have changed their business model. So, I think this particular trend will continue for some time. As the economy stabilises, I think the bottom of the pyramid has also understood very clearly the importance of internet and the adoption of internet and usage of internet. So, I think things will become very-very good probably after this FY24.
Given that you are so optimistic then walk us through your outlook then on your paying subscriber additions that has grown up about 6.6 thousand on a sequential basis, that has been a little bit lower due to the fewer working days in Q3. So, are you confident now of an uptick here in your subscriber addition? Will there be a bounce back?
Yes if you see traditionally our subscriber growth has been in the range of 15 odd percent even before COVID. Now, for the last one year or so, our subscriber growth has been around 25% and we will probably continue to add about 8000 plus customers every quarter for the next foreseeable two-three quarters. So, this subscriber growth will bring in revenue in times to come.
Nearing the completion of the catch up on employee hiring that had not been done during COVID, do you think that the integration can be completed by Q4 because that had been a bit of a stumbling block for the company and what could be the incremental top line that we can expect?
So, as you can see, on quarter-on-quarter our collection from customers has been increasing at around 25-28% so is the deferred revenue which has in this last quarter has increased at 29%. Revenue from operation, because it also includes the busy integration, otherwise on the like-to-like basis that is also in the similar range. Given that by the end of quarter four or by the end of quarter one next year, our all employee-related catch-up should be over and then this growth margin will probably settle down at 25-30%, as well as the cost margin will start to increase as I said earlier.
You raised money at a good price when you raised money via the public market via the QIP route. How much of that cash has been utilized? How much of the cash is being utilized as you expand your business?
So we raised about Rs 1070 crores and we have invested about Rs 665 crores into accounting businesses across, Rs 500 crores have gone into Busy and the other part has gone into the Vyapar and Live Keeping. So effectively 66% of that money has been deployed into the accounting segment which we are completely bullish upon over the next many years. The rest of the amount has gone into smaller investments, minority investments, which are available on our website.
Whom would you say is your biggest competitor? I mean, are you getting any kind of competition from what Amazon is trying to do or the way Flipkart is now trying to migrate?
So these are continuous things, they have certain advantages of being able to deliver consumer goods, smaller value items; while at IndiaMART we have 100,000 odd categories and those categories are highly commercial in nature and highly industrial in nature. A lot of customizations happen. These are truckloads of items. These are heavy-duty items. So, I think we are at a very sweet spot between Google and Amazon while we maintain an advertising business similar to Google and we maintain our catalog which is similar to Amazon. So, I guess there is a need for this kind of platform that is neither served by both the advertising or e-commerce giants.
