Unlisted peer sort of for IndiaMart
Stock down 18% after results
(PAT) for the quarter under review stood at Rs 135.13 crore, as compared to Rs 69.4 crore a year ago, which implies a rise of 94.7 per cent year-on-year (Y-o-Y).
Jefferies has downgraded the stock to “underperform” from its earlier rating of “buy” and also cut its price target to ₹2,540 from ₹3,890 earlier. Collection growth is likely to range between 10% to 15%, unless subscriber addition picks up, which may lower the company’s growth rating and drive a de-rating of its multiples.
Paid customer growth remained muted, with 2,000 new customers added quarter-on-quarter (Q-o-Q), taking the total number to 218,000, which implies a growth of only 1 per cent
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The CEO interview was very underwhelming and did not exude confidence at all!
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You know what guys, I though to keep a check on which company’s quarterly results are good and take advantage is their run up post results. Checked on X as someone known presented the results as bumper - super - duper. I agreed that a 100% or so jump in revenue is good enough only to see next day stock tumble.
What happened here?
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Basically management guidance was to maintain collections growth ~20-30% which started dipping below 20% since Q3’FY24 and they said they were still confident but it just kept getting lower every quarter. The reason for drop was lower net addittion of subscriber due to higher churn rates which the management themselves did not know how to solve. And Q2’FY25 results seem good but collection growth was 6%.
Unless collections growth/net adittion of subscribers don’t improve there is no way stock will go upward. Net adittion of subscribers since last 4 quarters have just been 2K QoQ, it needs to be atleast 5-8K QoQ for performance to improve.
The margins itself were higher just because less customer added so lesser customer acquistion costs, so margins will go down (even mgmt said so) once net adittion improves.
P.S: If you’re wondering why collection growth is important, it is basically a leading indicator for future revenues.
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Can someone explain how exactly do we determine the ROI Indiamart is getting through its investments in various companies as except Busy all are loss making? So if i had to see the ROI on their investments basically how do we do think of this?
@Yogesh_Bhandari @Chandragupta @smanek or anyone else?
IndiaMART Q2 FY2025 Earnings Webinar
Here are some key takeaways from the IndiaMART Q2 FY2025 Earnings Webinar, focusing on areas of concern and potential growth drivers:
Challenges:
- Elevated Churn Rates: The company continues to experience higher than anticipated churn rates, primarily in the silver customer segment. While churn in the platinum and gold segments remains low, the silver segment constitutes a significant portion of the customer base. Management is actively exploring initiatives to address this challenge, including reducing buyer-seller competition and targeting more vintage and evolved customers. However, the impact of these initiatives is expected to take a couple of quarters to materialize.
- Slowing Collection Growth: Collection growth slowed to 5% YoY this quarter, the slowest rate since the company went public (excluding the COVID period). While management attributed this to execution challenges, they are working to reverse this trend and expect to return to double-digit growth. However, they also acknowledged that until the churn issue is structurally addressed, collection growth might be limited to 10%-15%.
- Impact of Reducing Suppliers per Buyer: The company is intentionally reducing the average number of suppliers per buyer from six to four to improve conversion rates. While this is expected to benefit suppliers in the long run, it could lead to a decline in the number of business inquiries delivered in the short term.
Potential Growth Drivers:
- Stable High-Value Customer Segment: The platinum and gold customer segment, which constitutes 50% of the customer base and 75% of revenue, continues to demonstrate low churn rates and stability. This segment remains a key driver of revenue and profitability for the company.
- Focus on Enhancing User Experience: Management is actively working on refining matchmaking algorithms and enhancing the overall user experience to improve engagement on the platform. This focus could potentially lead to better conversion rates and increased customer satisfaction.
- Strategic Investments and Synergies: The company has made strategic investments in several companies, including Busy Infotech, Livekeeping, Vyapar, Bizom, EasyEcom, and M1xchange. These investments are aimed at enhancing their service offerings and creating potential synergies with their core business. While these investments are still in their early stages, they hold the potential to contribute meaningfully to the company’s growth in the future.
- Expansion into the Export Market: The company launched its IndiaMART Verified Exporter program in 2020, marking their re-entry into the export market. While this segment currently contributes a relatively small portion of their revenue, it presents a potential growth opportunity.
Overall, IndiaMART is facing some near-term challenges, primarily related to churn and slowing collection growth. However, the company’s strong position in the B2B marketplace, coupled with their strategic initiatives and potential growth drivers, suggest that they are well-positioned to navigate these challenges and achieve long-term success. Investors should closely monitor the company’s progress in addressing churn and improving collection growth in the coming quarters.
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Are they facing any competition from just dial or anyone else? If they are Monopoly, it appears to be, then why churn is high and growth is low. Has the market matured already for b2b?
- IndiaMart management acknowledges Justdial as a competitor but doesn’t perceive them as a significant threat.
- IndiaMart doesn’t view TradeIndia as a significant competitor either, considering them a “distantly respected competition.” They haven’t observed any notable changes or challenges from TradeIndia.
- IndiaMart recognizes the overarching competition from major players like Meta (Facebook, Instagram, WhatsApp), Amazon (including Flipkart, Zepto, Blinkit), and Google. They consider these giants as competition for everyone and are strategically focusing on finding a niche within the B2B market that these companies haven’t effectively addressed.
- IndiaMart believes the B2B market is a space where neither Amazon, Google, nor Facebook have achieved significant success, both in India and globally. They see this as an opportunity and are confident in their position within this market.
High Churn & Low Growth at IndiaMart
Churn:
- Elevated Churn: IndiaMart is experiencing higher than anticipated churn in its “Silver bucket” customer segment, leading to a net addition of only 2,400 customers in Q2 FY2025, a slight improvement over the previous quarter.
- Churn Breakdown: The churn rate is approximately 1% for Platinum and Gold customers (50% of the customer base and 75% of revenue), 4% for Silver Annual, and 6-7% for Silver Monthly.
- Impact on Collections: The high churn rate is impacting collections, which grew by only 5-6% year-on-year in Q2 FY2025. This is a significant slowdown compared to the 15-20% growth witnessed in previous quarters.
- Hypotheses for Churn: IndiaMart management believes the high churn could be due to:
- Reduced Value Proposition: Suppliers might be receiving a high volume of leads but with low conversion rates, leading to dissatisfaction.
- Buyer Decision Fatigue: Buyers might be overwhelmed with the number of suppliers, making it difficult to choose and leading to a decline in engagement.
- Execution Challenges: Internal issues like sales execution inefficiencies and delays in filling vacancies might be contributing to the churn.
Market Maturity:
- Growth Potential: IndiaMart management believes there’s still growth potential in the B2B market, drawing parallels to Google’s continued growth.
- Monetization Opportunities: IndiaMart sees potential in increasing monetization by implementing tiered pricing based on categories, locations, and demand.
- Focus on Value and Engagement: IndiaMart is prioritizing improving the platform’s value proposition for both buyers and suppliers by focusing on lead quality, buyer-supplier matchmaking, and overall user experience. This suggests they believe that enhancing the core value proposition is key to driving growth in a maturing market.
Summary:
While IndiaMart’s high churn and low growth are concerning, they don’t necessarily indicate market saturation. The company is actively addressing these challenges by focusing on improving lead quality, enhancing user experience, and exploring monetization opportunities.
The sources suggest that the B2B market might be transitioning to a phase where value creation and engagement are becoming crucial for sustained growth.
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