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New customer additions to remain volatile until COVID churn stabilises: IndiaMART

New customer acquisitions and net customer additions at IndiaMART will remain volatile until the industry churn from the pandemic stabilises, Dinesh Agarwal, CEO and managing director of IndiaMART InterMESH Pvt. Ltd. said on an earnings call on Friday. Even with this volatilty, Agarwal said that there are people who understand IndiaMART as a platform and know how to take out value from it. This was reflected in increasing collections and ARPU from customers, both of which increased rapidly when the market was open December 2020 to March 2021. This has been disturbed again because of the second wave of COVID-19, which is more severe.

Agarwal said IndiaMART had to drop 15,000 customers in the first quarter of FY20 due to COVID-19 pandemic. It took the company two quarters to recover from this. 

Highlights from earnings call 

  • 80 million visits every month in FY21, as compared to 60 million per month in FY20
  • 610 million business inquiries were delivered in FY21, growing 31% from FY20
  • Reached pre-COVID level for paying subscribers in Q4, by the end, got 4,000 net additional subscribers, resulting in 152,000 total subscribers
  • Successfully closed QIP and raised Rs 1,070 crore, will be invested in organic and inorganic opportunities. Invested in 3 companies, Legistify (operates Legistrack), Truckhall (operates Superprocure), and Shipway.
  • Consolidated revenue was Rs 180 crore up 6% YoY due to marginal increase in ARPU and paying subscribers

Collections from customers grew 32% YoY to Rs 272 crore in the quarter ended March 31, 2021. When asked about estimated growth in collections over the next few years, Agarwal said internet growth began only in the last couple of years. Revenue from operations has grown 22% in the last six years. “Even if you take 20-30% operational growth, this would lead to anywhere between 5-10x revenue growth in the next 5-10 years. This will depend on how much we can provide access to market and technology. We can’t imagine 5-10 years down the line, anybody doing B2B business not having an online presence. Our first mover advantage and data science work should work in our favour,” Agarwal said.  

Impact of entry of Tata Digital and Amazon in providing digital enablement tools to MSMEs?

An investor asked asked what IndiaMART was expecting from such new entrants, and about news reports that a deal between Tata and IndiaMART failed to go through.

B2B and SME are two very generic words. There can be normal dealer-distribution supply chain. They can be old and new economy MSE and service-oriented ones also. There are multiple businesses operating and they claim to serving some or the other B2B and SME market. There are directory and product catalog businesses like us who help with access with SaaS, access to markets. Theer are companies which are working on access to finance, working in FMCG such as Metro Cash and Carry. There are others which are industry specific such as Bizongo, Jetworks etc. I’m pretty sure when somebody like Tata, Amazon or Alibaba plan.. They definitely have studied a sector properly. Their entry will bring some more innovation, people, and capital to the ground, which will help the entire industry grow.

This will be advantageous for us since the market is not saturated; it’s growing faster than we can chew. So actually it will help develop the market, and being the leader, we should be able to take advantage of the innovation or processes that happen in the market if competitors come in.

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— Dinesh Agarwal

Growth from verticals: Most of the new vertical will happen organically such as through the payment gateway, the need has fallen because UPI has become a P2P payment provider.

“Vyapaar has done well by way of our investment; our internal CRM and lead manager has been doing well and increasing customer ARPU over a period of time. We will continue to invest in small or big companies and integrate them within the company,” Agarwal said.  

Increasing the customer base: The company has reduced entry level fees. It also began selling monthly packages instead of only annual packages, a practice it used to carry out five years ago. It also dropped setup fees and charges only monthly fees now; this helps onboard more customers, Agarwal said. 

MSMEs themselves have been going through a churn since GST, demonetisation, and the pandemic, The company said it had to drop nearly 15,000 customers just when the pandemic hit in Q1FY21. We were just recovering but the second wave of COVID-19 struck, Agarwal said. Platform is useful enough for people to pay for it; existing customers continue to pay higher and higher, he added. 

Need more relationship managers to get more paid suppliers? 

Agarwal said that this was true earlier since most clients used to come onboard after one-to-one meetings, since it was more of a concept sale. This has changed over time; one, because, people have started to come online and on the phone. Two, the company now works channel partners (instead of own employees) who work with on tele-mode or FSF mode to acquire new customers. Around 25% of new customer acquisitions have already started to come beyond the channels which were there pre-pandemic, Agarwal said. 

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We do need CRM people for customer servicing, but as people are getting more adept with using the platform.. Earlier we had to deploy one person for every 50 customers, but now we are at one person for every 100 customers. — Dinesh Agarwal

Every business has an inflexion point for growth but Indiamart’s topline has grown only 6% in the last year. 

The buyer topline has grown at 42% on a quarterly basis, we’re at 250 million visits from 62 million; this is not monetisable since we are free for buyers, Agarwal said. As for the seller side topline, the number of customers on the seller side (which is what IndiaMART monetises) saw significant setback during Q1 and it took two quarters for recovery; 4,000 sellers were added in last quarter. There was also 37% growth in collections last quarter, which will go to deferred revenue and to the operational revenue topline. Operational revenue is 20 month-moving of deferred revenue. 

Earnings Call Video

Read our coverage of the company’s Q4FY21 financials here

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