Dinesh Agarwal, CEO, IndiaMart

Dinesh Agarwal, CEO, IndiaMart

In Part 2 of a three part interview, Dinesh Agarwal, CEO of IndiaMart, talks about the companys plans for expansion, how he expects his client base to evolve and how he started out. Interestingly, he also mentioned that prior to raising funds, the B2C part of their business – Indian Gifts Portal – was hived off. Agarwal is not looking at the B2C space…

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 IndiaMart.com 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 Nirulas.com. 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 Indiamart.com and 20-30% direct, while earlier it used to be 10-20% through Indiamart.com 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 Indiamart.com.

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. 

Part 1: IndiaMart CEO Dinesh Agarwal On Why The Upturn Made Him Raise Funds
Part 3 (on Monday): On Competition, Revenue Streams, Thoughts On Other B2B Business Models