Indiamart Intermesh - Indian Alibaba?

IndiaMART InterMESH, India’s largest online business-to-business (B2B) marketplace for business products and services did an IPO recently which was entirely an offer for sale (OFS), priced between Rs 970 to Rs 973 per share.

IndiaMart did not receive any proceeds from the issue. Promoters Dinesh Chandra Agarwal and Brijesh Kumar Agrawal will sold 14,30,109 shares through the issue. Post the IPO, IndiaMart’s promoters holding fell to 53%, from 58% earlier. Other big investors Intel Capital (Mauritius), Amadeus IV DPF and Accion Frontier Inclusion Mauritius also offloaded some of their holdings through this issue.

5 anchor investors, included ICICI Mutual Fund, HDFC Mutual Fund, SBI Mutual Fund, Birla Mutual Fund, SAIF Partners, Hornbill Capital Advisers LLP and Malabar India.

The company has witnessed consistent growth in its revenue over the past three financial years. In FY17, the company’s revenue stood at Rs 317.8 crore, while in FY18 and FY19 it grew to Rs 410.51 crore and Rs 507.42 crore, respectively. It posted a loss of Rs 64 crore in FY17. In FY18, its adjusted profit after tax (PAT) came in at Rs 55 crore. But in FY19, it de-grew to Rs 20 crore.

In 1QFY20 the company delivered a PAT of Rs 32crs

IndiaMART had a negative net worth of Rs 390 crore as on March 31, 2017, and Rs 321.26 crore in 2018. As on March 31, 2019, its net worth had turned positive, at Rs 1,598.88 million. “Its negative net worth as on March 31, 2017, and in 2018 was primarily on account of its operating losses and net loss/(gain) on financial assets and liabilities designated at fair value through profit or loss (FVTPL) in the respective fiscal/period.

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Alibaba is the world’s largest global e-commerce platform for small and medium sized businesses around the world. The platform, serves more than 18 million buyers and sellers from more than 240 countries and regions, showcases products ranging from raw materials to finished goods in more than 40 industry categories. Alibaba doesn’t sell products and services itself, instead, it runs a platform that connects B2B buyers and sellers. is free to join and makes most of its sales from commissions and advertising.

It is the go-to English-language platform for cross-border trade and helps small/medium businesses worldwide expand to overseas markets. The platform, which serves more than 18 million buyers and sellers from more than 240 countries and regions, showcases products ranging from raw materials to finished goods in more than 40 industry categories.

If you are a seller, you can display up to 50 products/services for free or if you get the Gold membership you get a really nice mini-site to display unlimited products or services. If you are a buyer, post what you need in a ‘Request for Quote’ and let sellers come to you.


India’s largest B2B marketplace with a 60% market share. IndiaMART has 1.5 million sellers and attracts 1.6 million daily visitors. Like Alibaba, IndiaMART provides Basic and Premium membership services in which sellers can create their own homepage. showcase products online, source and contact global buyers, reply to buying leads and post offers to sell. The model and functionality is almost identical to that of and like Alibaba, IndiaMART allows sellers outside of India to promote themselves.

Trade India is very similar to IndiaMart and is the second largest B2B marketplace for small and medium sized companies in India.

TradeIndia launched in 1996 and is headquartered in New Delhi and claims to be the first Indian B2B marketplace to have more than 2 million registered users, of which 1.3 million are SMEs. Like Alibaba, TradeIndia provides Basic and Premium membership services in which sellers can create their own mini-site to showcase products and locate and global buyers.

# IndiaMart CEO Dinesh Agarwal On Competition From Alibaba & TradeIndia, Revenue Streams; Auctions & Marketplaces

Q. What are your key revenue streams?

Ans. We create websites, microsites and catalogs. We do a complete turn key package – designing, hosting, offering higher listing on Indiamart, Search Engine Optimization. We submit the sites to various business directories. So this is a subscription package where you know the website designing and hosting portion has become a minuscle in terms of revenue. Most of the people come to Indiamart not to have a four page microsite designed for Rs. 25,000, but because they see that there is a value in listing that they get on Indiamart platform.

Q. What kind of value adds are you offering on top of that?
Ans. On top of that there are pure advertising services which are more of a top listing, premium listing, banner advertising on a relevant category, special listing on product search. So these are value added products; We also have hundreds and thousands of micro product-specific portals for Apparels, Plastic, Chemicals etc. So we offer sectional sponsorship. We are slowly and slowly moving from a listing fee based model to a lead based model. Our initial model always contains a minimum commitment, where we gave a minimum guarantee – if you are spending Rs.25,000 with us please expet atleast 50 good enquiries in a year from the website. We’ve realized that some customers have matured enough to be able to go to pay per click or pay per lead model as well.

Q. So how do you look at it going forward now?
Ans. We launched a buy lead section, a business prospect finder section, which is mostly for lead generation section. So is a mix of things – a cataloguing plus basic listing fee that comes under subscription revenue, pure listing fees which are on the top of basic listing fees that could be premium listing and payed listing and banner advertising. Then there is a pay per lead revenue. If you see then 5-6 years back 80-90% of our business was purely cataloguing and subscription revenue only 5-10% was pure listing fee and advertising fee. Today 60-70% is cataloguing revenue and about 30% comes from purely listing and premium listing fee …you know those are experienced Internet and Indiamart users, and going forward I think that pay per lead would also become a sizeable chunk of that.

Q. From a listing based model, do you see yourself launching a marketplace like E-Lance and facilitate the entire transaction?
Ans. I don’t think that we can move to a transactional model in the immediate or medium term. , but if we take the basic concept where we can connect the buyers and sellers, without the money part – it’s the pay per lead model. That’s in the trade offer section at Indiamart.

Q. What about auctions?
Ans. As I said, the price discovery does not happen, though we tried an auction model in late 1999. What happens is that B2B is slightly different than B2C – it’s not an off the shelf product, nobody wants an off the shelf product. Most of the people have their own sizing, colours, quality parameters and the deals are not in few thousand rupees but mostly in few Lac Rupees. Buyers and sellers have to talk 5-10 times before they can settle on a price. For example, if there’s an offer to buy 50,000 pairs of socks – there someone is going to make a pitch that I can offer you one variety in 30 days for 1$, another for $1.25 or this kind for $1.3 etc, depending on quality and size. So the price discovery would not take place on a B2B Market Exchange. But I can facilitate buyer and supplier discovery, and whether they do business depends on their requirements.

Q. If you’re looking at a lead generation model, and your primary clients are the sellers – the number of leads would go down in a downturn…
Ans. Yes, but then at the same time the requirements for these leads would go up. Then the sellers who might not have been using the Internet previously but going around the world to trade fairs, would look at the possibility of using the Internet to sell their product. See the Internet finds you unknown buyers, unknown markets. We ourself as a company have discovered some market possibiities which which were strong on the internet.

Q. Like what?
Ans. Like travel. We had never ever even focussed on travel being a B2B company. We might have made a few travel websites by chance and we found that those customers were more satisfied and at that point of time we started doing a lot of marketing on travel and a significant amount of revenue started coming from it. A little more later, in terms of service we discovered that packers and movers became hot. Engineering goods also started doing very well. So we keep discovering new categories where suppliers and buyers find each other. The Tnternet throws you unknown possiblities, just by trying it out. I am sure that in this kind of a downturn lot of suppliers would come to Internet to try out different things. That may not compensate fully for the total market loss that happened because of the downturn but it ened mup making a new market for us.

Q. Talking about the competition, your success depends on the buyer base that you have. Won’t an Alibaba come in with a fairly large global database of buyers whereas you would come with a large database of sellers?
Ans. Alibaba comes in equally with a large number of suppliers from China – that is their strength and weakness both. Indian suppliers typically do not want to compete with Chinese suppliers, and they will have to do that on an Alibaba type of platform. The whole world has been looking at China as their supplier, which is why Alibaba has done so well. If the buyer preference changes, they will start logging on more to IndiaMart more because they know that AliBaba provides chinese suppliers.

Q. But then it becomes important for Alibaba to market their services in India better to develop their supplier base. Then there’s going to be competition for you to get suppliers…
Ans. Obviously, and if you really see the market size is very large. It’s a trillion dollar trade opportunity. By the entry of Alibaba, the supplier base will be more educated – more competition is more market development. If you see the example of and Monster both are existing together, and both are equally big. If you see China, it has an equally large player called Global Sources, Made in China, EC21 and there might be 200 smaller ones.

Q. So what about TradeIndia then?
Ans. I cannot comment on them. They are primarily a print company, while we are primarily an Internet company. See when I started I was only 1/10th of their size. Today we are probably 3 to 4 times their size. We have been consistently growing at a 50-60% rate and they must be growing at a slower rate. They must have their own set of market priorities and choices. Growth of anything below 40% is not acceptable for me, and I don’t know if in any of these years they would have achieved any of these minimum figures. So TradeIndia has always been a good follower of ours on the Internet.

# IndiaMart CEO Dinesh Agarwal On Why The Upturn Made Him Raise Funds

Q. How has the downturn impacted you?

Ans. I think the latter part of the upturn affected us more than the downturn. We were highly cashflow positive business, and towards the end of 2006-2007, there was market frenzy. Our costs were going up unnecessarily and the whole business model started to look non-feasible in the medium or the longer term. If costs were to grow at 30-40-50% growth, I didn’t see the businesses flourishing in the long run. That is when I decided to raise the money. We would never thought of raising money otherwise.

Q. Your employee cost must have gone up significantly…

Ans. Yes, that and real estate cost went up significantly during the upturn. That was the initial feeler for me that if tomorrow some serious competition came in and spent a lot of money, we would be in a crunch situation. With the downturn, the market expectation in terms of costing will come down; it will impact our customers as well, which would indirectly impact our topline. But these are the times when Internet advertising grows.

Q. How has the company been doing and how do you think the market will evolve?

Ans. IndiaMart has been a profitable company since day one. We have been growing consistently over the years, whether it was a downturn or not, within a range of anywhere between 30-40% to 65-70%. If you just compute the basic CAGR it is approximately 40-60% CAGR per year over many years. But those were times when our total revenue base itself was at a smaller size. I don’t think that many businesses were adept at using the Internet at a very large scale 4-5 years ago.

In the last 10 years, two things have happened – the Internet penetration and connectivity have become somewhat reliable and secondly, businesses have started responding to the opportunity on the Internet. The second generation has now started participating in the businesses, and an inflexion point is about to come in the Indian business Internet usage, the same way it did in China 8-10 years ago. Now I feel that at a large revenue base like ours, to maintain a growth of 40-60% over the next few years we might have to spend a larger amount of money on different activities like advertising and marketing, and a strong management team. We have not been advertising.

Q. You have had feet on the ground…lots of people in sales…

Ans. That is true. But if you want to penetrate into slightly medium and larger SMEs (Small and Medium Enterprises), a brand pull has to be created. Because we want to consolidate our position as a strong leader, it is prudent to spend a good amount of money on the market initiatives – not just do sales. We have been very strong in sales with a thousand people strong team. We also think marketing will help us attract better talent.

Q. Didn’t you sign up for BCCLs Private Treaties for the marketing?

Ans. Yes we did.

Q. So why not continue with BCCL rather than going with Intel Capital?

Ans. Intel is probably going to complement it with money. BCCL has media properties, but for a larger market pull, you need to invest across various media…and you cannot do private treaty deals with 7 different media houses.

Q. Did you have any issues with the valuations? From what we’re told, Times Private Treaties valued you rather high; So did Intel capital go for a down-round?

Ans. No it was not a down round; it was a slightly better round than that…but in terms of multiples we might have gone down because when we raised BCCL round it was at the height of 2006 and it was more of a barter deal, without cash infusions. The multiples are definitely lower this time, but we have grown to almost double our size since then, so the overall valuation is higher this time.

Q. Where is the synergy with Intel Capital? You’re a B2B marketplace…

Ans. For me, they are more of a venture capital fund. I met different venture capital companies over the last two years. Intel matched better with us, they had a longer horizon, and are less impatient than some of the pure VC firms. Some of them think that you have to burn faster to run faster . Somehow my companys DNA does not match with that, we have been a slow, steadily growing company. We are not at that stage where we are a small company, and we not do need a day to day guidance. I mean, we have been able to grow sustainably to a thousand people team.

Q. So where is the exit for Intel Capital?
Ans. I would say that IPO would be an exit for them, or an M&A possibility, but that is not going to be any time soon.

# No Single Category Contributes More Than 10% To Our Revenues - IndiaMart CEO Dinesh Agarwal

Q. What are your expansion plans?

Ans. There are 2-3 things: We have started to utilize our database of SMEs (Small and Medium Enterprises) to expand our offerings. We participate in almost 150 trade fairs across the world – half of them in India, half outside – and end up spending almost a million dollars per year on that. To strengthen our buyer relationships we came out with a sourcing guide or a buyers guide, which lists our clients, and has additional advertising for revenues. That also brings buyers back to as a platform for updated information. Most of the big companies in our space have been print Yellow Pages initiatives that have gone to the Internet. For us, going to Print is a buyer acquisition strategy, and there can be other media like mobile and Interactive TV going forward.

The other is a geographical expansion – we cover about 60-100 cities from 25 offices across india, and we want to penetrate deeper and broader into Indian territories, going into Tier 2 and Tier 3 cities as well. We might even look at international opportunities.

Q. What is the kind of dependency do you have on specific categories?

Ans. Our dependency on any particular category is low. No single category contributes more than 10% to our revenues. That is the precise reason why we have been able to survive different types of market situations.

Q. What is the range, in terms of the revenues, of the sellers in your platform?

Ans. Around 90% of them range from from Rs. 50 lakhs to Rs. 50 crores…probably 60% range from Rs. 1-10 crore range. Most of them are small and medium enterprises, with small scale companies having a larger share.

Q. How do you see this mix evolving, as you increase marketing spends and roll out your expansion plans?

Ans. Two different things will happen – one is that obviously the small is going to have the larger share, but with our marketing spends, I see a slightly larger size of SMEs coming on board with us; these are normally late in adopting any kind of technology because of their corporative structures. We think middle and slightly larger SMEs will become the part of our database.

Our entry level services start at Rs. 20-25,000, but there are lot of customers who pay us in excess of Rs. 1 or 2 lakhs per year. The growth would probably happen in all the segments parallely, but we expect that a larger chunk of medium sized enterprises will contribute higher revenue and a large number of small suppliers that would contribute to the data base.

Q. Makes me wonder…how did you start out? How did you get your first client?

Ans. When we started out, we collected association directories, from Federation of Indian Exporters, Ph.D. Chambers of Commerce, CII and attended certain Trade Fairs…we collected the data and sent mails and bulk faxes to them. We started as a website making company, and the IndiaMart market place came much later – the marketplace was a by-product of the website making business. Because I was making businesses websites and I thought it would be a prudent to keep on making a directory of business websites.

So the first few clients that we attracted were primarily for website making. Nirula’s, one plastic wholesaler, one leather exporter were some of the first clients that we started with. I am proud to say today that Nirula’s is still with us after 12 years. We were the first ones that accepted credit cards on Nirula’s website in India. Theirs was a single page website and then we launched Others include Jindal steel, the Triveni group, and also some exporters.

The mix changed during 1998-99 when inbound travel and tourism took off. We were making websites for Indian Travel Agencies and Tour Operators, and much of our revenue at that time was from inbound tour operators in Delhi, as inbound tourism is concentrated around Delhi. I think it continued till September 11th, 2001, and after that once the travel market went down the drain. By then, our B2B marketplace was matured enough, and took a fast growth path. In 2006 we claimed 10,000 clients.

Q. When talking to customers during the initial stages, what did you pitch to them?

Ans. We pitched to them a website and a business through the website – we always knew that Internet would be used to generate business through searching from AltaVista and Yahoo. There were very few Indian websites at that point of time – if you searched for a “Restaurant in Delhi”, Nirula’s website or “leather exporter in India”, our websites would show up high on search. But as more websites were created over the years in India, search engines began tracking more sites – newer and smaller websites. At the same time the market place caught on.

Today the traffic mix for the websites we make is 60-70% through and 20-30% direct, while earlier it used to be 10-20% through and 80% direct. So over the years things have changed the market place has started gaining momentum and stickiness. But, from day one, we were commited to making business websites for the purpose of generating business, and not just for using it on a visiting card – whether directly through search, or indirectly through

Q. You have also tried the B2C space – with the Indian Gifts Portal

Ans. It was launched in 1999 as a subsidary company, but before the Intel Capital funding, we hived it off…de-subsidarized it. It remains in my ownership, and continues to grow at a 40-60% per annum though we are not marketing it actively.

Q. What percentage of your revenue comes from ABC payments.

Ans. Maybe 3-4%, less than 5 for sure.

Q. Did you try any other B2C initiatives? You tried Hotel Reservations…

Ans. We still do about 5% of the business from travel and we are in the process of launching another small travel lead aggregation business. We launched the hotel reservation business as a part of the travel business, but I think the time was not right in the year 2001. Our expertise was in the foreign inbound tourism space, and hotel reservation was an extension. Now there are many players in the travel space, and I don’t think we will ever go back into the hotel reservation or B2C travel.



  • If we are unable to maintain a critical mass of suppliers and buyers on our online marketplace, the perceived usefulness of our services may decline, and our business, revenue and prospects could suffer.

  • Competition from new and existing companies may reduce demand for our services or cause us to lose visitor traffic, market share or paying subscription suppliers, any of which could adversely affect our business, financial condition and results of operations.

  • Our business, financial condition, results of operations and cash flows could be materially and adversely affected if we are unable to retain existing paying subscription suppliers on or attract new paying subscription suppliers to IndiaMART.

  • We earn most of our revenue from Indian suppliers purchasing paid services on IndiaMART. Factors that adversely affect such Indian suppliers could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.

  • We have been and may continue to be subject to allegations and lawsuits or negative publicity claiming that items listed and content available on our online marketplace are pirated, counterfeit or illegal.

  • Any factors that negatively affect the growth and profitability of the online commerce industry in India or the Internet as a medium for commerce in India could adversely affect our business, financial condition and results of operations and prospects.

  • We acquire a significant portion of our suppliers on IndiaMART through the unsolicited creation of supplier storefronts and such suppliers may refuse to consent to their information being made publicly available on our online marketplace, which may negatively affect our business and may subject us to various legal claims.

Disclosure: Invested


Company delivered Rs32crs PAT in 1Q20.

Extrapolating the same could imply 128crs PAT in FY20 implying 28.7x P/E at current market cap of Rs3445crs.

My own estimates suggest FY20 PAT could be higher at Rs170-190crs implying P/E of 18.1-20.3x at current market cap of Rs3445crs.

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IndiaMART leads Series A investment in Vyapar

BENGALURU : Business-to-business (B2B) marketplace IndiaMART has led a Series A funding round worth ₹36 crore into ‘Vyapar,’ a mobile-based billing and accounting software targeted at small businesses.

The Series A investment round also saw participation from existing investors including India Quotient and Axilor.

Vyapar is a Bengaluru based start-up co-founded in 2016 by Sumit Agarwal and Ruqiya Irum which offers a mobile-based app to small businesses to manage their daily billing and accounting operations.

With over 1 million downloads of its Android app, Vyapar also separately offers a desktop version for billing Goods and Services Tax (GST) invoices, managing stock inventory, and accounting.

“Over the last two decades IndiaMART has effectively overcome the problem of access to market and technology by building a digital marketplace for MSMEs. This investment in Vyapar, that is solving the complex billing and accounting needs of MSMEs in a simplified manner, is aligned with our long term vision to make doing business easy for millions of businesses by providing them tech-enabled easy and cost effective solutions," said Dinesh Agarwal, Managing Director, IndiaMART in a statement.

“At Vyapar, our vision is to digitize every business in India and simplify the business processes that help them grow. IndiaMART’s scale and expertise will help us achieve this goal faster in turn transforming the MSME landscape in India,” added Vyapar founder Sumit Agarwal.

Founded in 1999, IndiaMART is one of the leading players in the online B2B marketplace for sourcing business products and services, connecting buyers with suppliers. This is IndiaMart’s first investment into a startup after its initial public offering (IPO) which announced in June.

Vyapar is one of the many brands in the B2B space to attract investor attention in the last one year. Apart from software as a service (SaaS) products, robotics, logistics, and trucking have witnessed several notable deals. Mumbai-based Peelwroks, a SaaS startup focused on offline retailers, had raised $5 million in a Series B round led by Equanimity Ventures in May.

In April, mobile analytics and marketing startup CleverTap on had raised $26 million in a Series B funding round led by Sequoia India. In March, Bengaluru-based Fyle, which provides expense management software for enterprises, had raised $4.2 million in a Series A round led by Tiger Global.


Excellent information …looks like a cash machine.

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Govt of India will soon be launching Bharatcraft, a marketplace platform for MSMEs

Will this impact Indiamart ?

Don’t think this govt. initiative will impact them much since maintaining and sustaining these is more important than just creating another white elephant. But my bigger concern is the competition from Amazon business. I got this mail from them.


"As an Amazon Business customer, you have access to:

  1. GST invoice for Input Tax Credit
  2. Business Pricing & Bulk Discounts
  3. Business Analytics
  4. Amazon’s A-to-z Guarantee
  5. 3-Day Returns for Damages
  6. Fast & Reliable shipping"

Disc: took Small position and the stock ran away.


If 170 cr PAT is really a possibility, why would they come for an IPO early?

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sometimes you have to IPO to provide an exit to the PE investor.

Company has a lot of positives:

  • Negative working capital
  • 740 cr cash on balance sheet
  • Dominant market share (60%+)
  • High revenue growth
  • Operating leverage
  • Proxy to play tech in India (SMBs are rapidly switching to internet . Lot of new companies are targeting this ecosystem)

On competition: Amazon is not in top 3 B2B players, as of now I don’t envision amazon selling machine parts, construction supplies, industrial machinery etc. Also, business has network effects - more buyers and sellers join higher is the likelihood they will come again and influence more set of buyers and sellers. Network effect would make it tough for anyone to replace Indiamart.

What needs to be seen is how they utilize cash on balance sheet and cash flows to build an ecosystem of tech products(like InfoEdge started with Naukri and added 99acres, Jeevansathi, Zomato, PolicyBazaar etc).

Edelweiss views:
Coverage on sector:


Weak subscription fee based business model with no fees from transacted goods or advertising, both huge Drivers of Alibaba profits.

Their supplier acquisition strategy of creating storefronts without permission is weird to say the least.

Search engines can probably do a better job.

Far more stronger players are likely to take up this space. Promoters seem to be lala type guys.


Can you please explain what lala types means

Meanwhile another B2B startup keeps guzzling cash. Their previous setup i.e. Flipkart never made money. The key question is will it be any different?


There is comprehensive report on the company by Edelweise Securities. It is available on the net, hence believe that it is a public document. Here is the link
Disclosure: Invested


Time and again institutions are accumulating scalable models after IPO and retailers exit en masse taking home tiny profits. New shareholding suggest retail holders declined by 75% and corp body nos. jumped 9x. Now it is reasonable consolidated with less than 4% retail holding.

Disc: Invested


Similar is the case with Affle India, where the retail share holding has fallen to less than 2.5 percent.

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Solid PBT growth of 60% plus YOY. Change in tax rules has resulted in higher taxes which has lowered PAT.

See management interview


IRCTC and Affle similr examples where stock reaching new highs after weak hands have exited.

Besides Nippon life and HDFC MF any idea about instt names invested in IRCTC?