Indiamart seems to be a promising story, where the analysts/market really went overboard, but the company fundamentals have not changed in terms of a long term investment timeframe.
A few thoughts that come to my mind are:-
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Could the affect of Reliance/JD Mart on their business be overplayed? Is this really a market share oriented, reasonably penetrated market like Telecom? I would assume most suppliers are on Indiamart or similar platforms because being there is ROI positive or a potential growth engine. Why would they leave? Additionally, as a supplier, wont I prefer to be on both platforms - considering I want maximum visibility in front of a growing digital buyer base?
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In the short term Indiamart will be heavily dependant on the animal spirits of the SME sector (which are obviously currently affected). In the moderate term though, as SMEs get back to functioning and try to go again from a severe setback like COVID, should the growth story in buyers, sellers and hence revenue/profits for Indiamart not continue? Additionally, in the long term, say India was to become a stronger force in manufacturing (Make in India) or Global trade (new FTAs being negotiated) - it makes Indiamart as well as a Reliance offering both attractive plays for new buyers/sellers
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Dinesh has shown good ability to manage profit. I thought the questions on horizontal/vertical integration and long term vision in the conference call were a bit too impatient. I wonder how the investors would have reacted in case Indiamart would have done a big bang marketing campaign in the middle of COVID or shown losses like JDs last quarter. The fact is that Dinesh doubled his net profit in the last 5 quarters (COVID affected or in the middle of COVID waves) versus the 5 quarters prior to that. I think they know the business inside out - and would there be a point of getting on board more buyers from marketing in this period? Capital allocation as well as business management during crisis seem like positives
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Interesting SAAS investments in very initial stages. I just have knowledge of Mobizy, which is a good business. Dont know much about the other platforms though.
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Couple of doubt areas for me. Biggest is that the market really overhyped the business through very many projections, and I wonder if anything can meet the lofty expectations. The other aspect being that they are very focussed on innovations in their key areas, where the potential for profit pools still have to be proven. I would not be disappointed at all in case I hear about a few more inorganic acquisitions in upcoming SAAS areas that are not even directly a fit into the Indiamart product. Let’s see how that progresses.
Overall, listening to the latest conference calls and going through the presentations, it does seem like the market can really hype up expectations and then punish companies which even do well. For a SME focussed company to manage earnings the way they have shows prudent capital allocation, good management and resilience.
Discl : Invested