@reem and @MihirDam, Just putting my thought process behind assumptions -
Subscriber Growth rate - 15% is quite fair assumption as mentioned by Mihir. Even current run rate of company is adding 7 to 8 K paying subscribers per quarter which is more than 15% annual growth rate on current base. And considering network effect, after getting required base (Indiamart has already got this critical base) it shall go up non-linearly. For sake of conservative approach have taken recent past growth rate for future projections
Subscription Fees - On prima facie it looks on higher side. But consider that company is earning 95% of operating revenues from subscription fees. There are other hybrid options which company hasn’t excercised yet - like per transaction pricing or advertising. Also, mentioned figures are of average subscriber revenue. As per dsiclosed data in recent earning presentations, top 11% subscribers contribute to 41% of total revenue. Its very likely that company will try to add more customers in this premiuim category. Considering MSME growth story in India it has wide scope to do so. But yes, for more conservative computation you can reduce this subscription growth rate after few years - at least after 5 to 6 years when absolute hike figure looks higher even though percentage is same.
Hi Sham, yes, EBIDTA margins look quite towering. But I am wondering with asset light model and being in platforms business where profits grow as square of revenue growth, what could be upper limit to profitability. I have considered cost growth of 10% YoY instead of taking it as % of sales etc. Something looks wrong with very high EBIDTA levels, but wondering whats correct approach to cost assumption. Will try with percentage of sales method - but it looks like circular ref - where you compute cost from revenue and then compute EBIDTA on same revenue base.
QIP price as per SEBI Formula fixed at 9065.61 (- a possible 5% discount). Downside risk should be now protected for existing Investors. Decent price to raise money. Hoping to see good subscription from QIP’s considering the increased activity in concalls with investors. EOGM at 22nd February for raising of money.
The company has successfully raised 1070 crores at a share price of 8615. Decent list of subscribers, Arisaig Asia Consumer Fund, Platinum Asia Fund and Driehaus Emerging Markets Fund are the FII’s whereas Axis and Kotak are the DII’s who have subscribed.
What I expect is an alternate business model use for this Cash, similar to the one Info-Edge has. With Dinesh Agarwal’s deep understanding of start-ups, we may well see the cash being reinvested for inorganic opportunities.
March is usually the best quarter and I expect the new customers to be added in the range of 7500 customers in the last quarter (up from 5500 (1500 were old customers)).
I also expect the run-rate to be around 30000 customers for FY 22.
With mobile accounting apps like KhataBook doing extremely well, we may well see a takeover of Vyapaar and other synergistic acquisitions in the near future.
Disclosure - Invested from Lower Levels, may add depending on Q4 new customer acquisition numbers.
Promoters are expected to offload almost 2% holding in block deals worth ~500 Cr in open market deal. They have huge cash in books, QIP gave them similar amount & now news of reducing holding (obviously this 500 cr odd will not go to company books)
How do we see such cash piling till promoters come up with concrete plans of its utilization?
The E-Commerce market is very huge, any entrepreneur who is willing to pay the price to make big company, can tap the market. The key thing in the retail industry is shipment , logistics and procurement. Better techniques to handle these process is by categorizing them based on the steps, you can approach the company which applies Category Management Solutions in their process to get better results.
When it comes to Indiamart, I always have a dilemma: the promoters, management of the company, led by CEOFounder Dinesh Agarwal is good, but the current valuation seems too high.
I personally admire Indiamart’s management and the way Dinesh built and scaled Indiamart to reach where it is, a profitable digital company with massive market share in the tough B2B segment.
Very hard for digital cos to IPO in India, as you can see from the 100s of startups that have been funded by so many VCs which have failed. So top marks to Dinesh and Indiamart team for quality leadership and management, including the way they rewarded their employees.
The only thing we need to figure out is the valuation: Can we enter this stock at 8500-9000 per share or if we have entered at lower levels, do we exit and book profit or do we hold on? So we need some clues as to what the strategy of the company is with the cash raised. As @MihirDam mentioned, are they are going to use it for investing in startups to drive inorganic growth across diversified sectors? becoming a surrogate way for retail investors to participate in the private equity market (like Infoedge)? That will be an interesting move, as Indiamart will have access to these cos and their experience will help them spot startups with better quality founders/ vision. Right now, we are just speculating, and need some more clarity.
Simple. Just wait for general market correction. If stock holds and correct less than the market, then valuation debate is moot. Like it was the case during COVID correction when stock barely corrected compared to general market.
If it falls more than the market then of course there will be a point where valuations are not so scary.
yes, so did Alibaba try and enter with Paytm and thrice before to compete, Udaan and tradeindia also are there but have no been able to make a dent on indiamarts business. Just cause another platform has come doesn’t mean its going to be able to compete, Indiamart already has the liquidity and the platform , no one will just go shift to another platform that doesn’t have enough liquidity on their platform.
Key takeaway:
Capital raised will be deployed over the course of next 1-2 years (so I wonder if they have any active opportunities at this stage). ROE will remain subdued till 3 years
Indiamart Intermesh Limited (hereinafter referred as “Company”) has indirectly, through its wholly owned subsidiary, Tradezeal Online Private Limited, agreed to acquire 11.01 % of the share capital (on fully diluted basis) of Legistify Services Private Limited (herein after referred as “Entity”) through SSHA signed between the Parties.
Total revenue of 1.73 crores in FY 2020, the consideration is at a value of 11.8 crores with the company investing 1.30 crores for a 11.01 percent. Valuation at 6.8x Sales.
Maybe this acquisition was already on the cards, the company seems to have met with multiple companies over the last 2 years for acquisition. I expect the company to takeover/ hold a majority stake in Vyapaar along with one major acquisition in the next few months.
Indiamart is trying to go the InfoEdge way. Investing extra cash in small startups. If you want to take part in a Venture Capital fund but aren’t rich enough to do so, Indiamart and InfoEdge are here for you. IndiaMart’s MD had already said that 1100 Crores would be used for new internet opportunities, mostly acquisitions. InfoEdge got lucky with Zomato and Policy Bazar. Not sure if Indiamart can do the same. The MD also invests in his personal capacity. He had invested 10times.com and later Indiamart bought a 70% stake in that company. This could indicate a conflict of interest in the future.
Why I am confident, that IndiaMart & InfoEdge can both invest profitably in startups :
Both of them followed typical startup route while growing, they know the ecosystem.
Founders of both the companies are active quite active in TiE Delhi NCR Chapter. (TiE is a startup network.) I have listened to & met both the visionaries quite often in TiE events (pre covid) as I am also a member.
I cannot be 100% sure, but my highly reliable source had told me that Sanjeev (InfoEdge), has a team of analysts, which tracks only startups & invests in them when opportunity arises. Dinesh (IndiaMart) is super focussed in what he does. I personally believe he has everything to pull it off.
PS : These are my personal views. Invested in Indiamart. Not in Infoedge (sold too early ).
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