IndiaMART InterMesh Ltd

Not Rated

Issue Details IndiaMART InterMesh Ltd (Indiamart) is India’s largest online B2B
Listing NSE & BSE
marketplace for business products and services with approximately 60%
market share of the online B2B classifieds space in India in fiscal 2017,
Open Date 24/06/2019
according to KPMG. Indiamart primarily operates through product and
Close Date 26/06/2019
supplier discovery marketplace. The online marketplace provides a platform
Price Band 970-973 for mostly business buyers, to discover products and services and contact
the suppliers of such business products and services. Indiamart had an
Issue Structure (In %) aggregate of 325.8 million and 552.6 million visits in fiscal 2017 and 2018,
Offer for Sale 17
respectively, of which 204.8 million and 396.9 million comprised mobile
traffic, or 63% and 72% of total traffic, respectively.

Shareholding Pattern (%) As of 31st March 2018, it had 59.81 million registered buyers, and 4.72
Pre Post million supplier storefronts in India. These Indian supplier storefronts had
Promotes 58 53 listed 50.13 million products, of which 75% of goods comprised products
Public 42 47 and 25% were services. It refers to an enquiry placed by buyers on Indiamart
Total 100 100 through telephone, SMS, email or by posting an RFQ as a “business
enquiry”. It counts business enquiries received by a supplier, including each
receipt of the same business enquiry by multiple suppliers, as a business
enquiry delivered. A total of 156.84 million business enquiries were
delivered to its suppliers in fiscal 2017 and 289.98 million business enquires
were delivered in fiscal 2018. For the year ended March 31, 2018, it had 52.59
million daily unique buyer requests, of which 52% were repeat buyers
calculated on the basis of the past 90 days.

❖ Business Overview: -

Indiamart provides a robust two-way discovery marketplace connecting

buyers and suppliers. Buyers locate suppliers on the marketplace, including
both Indian small and medium enterprises, or “SMEs”, and large corporates,
by viewing a webpage containing the supplier’s product and service listings,
or a “supplier storefront”, or by posting requests for quotes called “RFQs”
or “BuyLeads”. The marketplace offers a platform from which buyers can
search for and view product and service listings cover a widespread range
of industries spread across India, rather than relying on a single target
industry or type of geography. As of March 31, 2018, Indiamart had
organized listings across 52 industries. IndiaMART provides an effective
and trusted platform to help businesses leverage the power of the Internet
to increase their market reach and conduct commerce.

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 Online marketplace capitalizes on this opportunity by helping buyers gain
access to a national pool of suppliers, comprehensive product and supplier
150 information in a standardized format and greater transparency in prices.
It also provides suppliers with cost-effective ways to reach new buyers
across geographies. Indiamart is able to deploy analytics to implement
behavioral data based algorithmic matchmaking on its platform, thereby
ensuring much more relevant discovery of products and services. Indiamart
believes this leads to an increase of repeat buyers on platform. For the year
ended March 31, 2018, it had 52% were repeat buyers calculated on the basis
of the past 90 days. In addition, as 42% of the suppliers as of March 31, 2018
on their platform have acted as buyers of other products and services in the
last 12 months, a virtuous cycle of user engagement is established, leading
to a self-sustained traction in trade enquiries.

❖ Key Strategies:

1. Attract larger suppliers and leading brands while growing core SME
segment supplier base.

While Indian small and medium enterprises initially comprised the core base
of the supplier community on Indiamart, larger corporates and leading
brands are a growing supplier segment on the platform. It therefore seeks
to make an engaging and effective marketplace for the larger corporate and
leading brand suppliers, while sustaining the efforts to grow strong SME
supplier base. By continuing to work with large businesses and
understanding their purchasing and sourcing processes, it will be well-
positioned to continue to attract large companies to IndiaMART as both
suppliers and buyers.

2. Enhance buyer experience

Indiamart continues to enhanc buyers’ experience by concentrating on

mission to “make doing business easy”. Along with their efforts to provide
buyers with a comprehensive discovery platform backed by a suite of

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 products and services offered by a large number of suppliers that include
large brands, Indiamart seeks to improve the quality and completeness of
product and service information on the marketplace listings, including price,
photos and videos so as to help buyers shortlist the appropriate suppliers.
It also aim to increase buyers’ satisfaction levels by improving the buyers’
algorithmic matchmaking process with suppliers and ultimately the chances
of fulfilling the buyers’ needs through Indiamart.

3. Improve supplier engagement, services, retention and monetization

Indiamart plans to maximize their engagement with suppliers including

Indian SMEs and large businesses. Indiamart aims to improve content
management systems and further personalize suppliers’ experiences on
Indiamart so that they can fully leverage the platform as a channel to
spearhead their marketing efforts.

4. Continue investing in mobile platforms and capabilities

Mobile platforms will continue to drive the growth of online commerce in

India. The number of internet subscribers is projected to increase from 425
million as on December 2017 to 867 million by fiscal 2022 primarily driven
by growth in the 4G subscriber base, according to KPMG. As of March 31,
2018, 72% of traffic to Indiamart comprises mobile traffic. Since mobile
website and app are largely do-it-yourself tools, increased usage of their
mobile platforms helps to increase the operating efficiency. Indiamart
intends to continue investment in mobile platforms by further developing
and integrating lead management system applications, user interface and
notifications, customer services provided through instant messaging, GPS
location capabilities, voice search technologies and other personalization
features in Indiamart app.

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 ❖ Financial Performance:

Revenue of Indiamart has witnessed a growth of 26% CAGR from Rs. 318
crores in FY17 to Rs. 508 crores in FY19. Adjusted EBITDA and PAT losses
have reduced from Rs. (54) crores and Rs. (64) crores in FY16 to Rs. 82 crores
and Rs. 20 crores in FY19 respectively.

Revenue, Adj EBITDA and PAT

600 In (Rs. crs) In % 20%

500 15%

10%
400
5%
300
0%
200
-5%
100
-10%

0 -15%
FY17 FY18 FY19
-100 -20%

Net Sales Adj EBITDA PAT Adj EBIDTA Margin %

__________________________________________________________________
Source: RHP, Ventura Research

❖ Key Risk and Threats:

1. Stagnation in mobile growth can severely affect commercial operations.

2. Although Indiamart has leading market share and strong competitive

position, the industry is highly competitive and is expected to further intensify
in future.

3. Indiamart will be attractive to buyers and suppliers if it is able to continue to

offer access to an extensive range of suppliers and buyers through
marketplace.

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 ❖ Issue Structure & Valuation:

The proposed IndiaMart InterMESH Ltd. issue is for an aggregate of 48,87,862

shares consisting of offer for sale. This is being offered to the public in a price
range of Rs 970 per share to Rs 973 per share. Minimum bid is of 15 shares
and in multiples of the same thereafter.

Category No. of shares Offered % of Shares Offered

QIB 36,65,897 75
Non institutional Bidders 7,33,179 15
Retail 4,88,786 10
Total 48,87,862

❖ SWOT Analysis

STRENGTH WEAKNESS

➢ Strong network effects and brand ➢ Highly dependent on the mobile and
recognition drives leadership in the E-commerce growth in the
B2B marketplace in India. economy.

➢ Comprehensive, convenient and ➢ The financial operations are still in

reliable platform for buyers. red and could materially affect the
company going forward.
➢ Effective and efficient marketing
platform for supplier.

➢ Deep understanding of online trade

and commerce in India that drives
innovative solutions.
OPPORTUNITY THREAT

➢ The current penetration level of SME ➢ Any negative impact on MSME

business is low and therefore offers business segment would affect the
a huge opportunity in future. company.

➢ The present government is ➢ Inability to compete effectively would

extensively focusing on improving be detrimental to the business and
MSME business and make in India prospects for future growth.

➢ The opportunity for B2B E-

commerce is much larger when
compared with B2C E-commerce
market.

________________________________________________________________________
Source: RHP, Ventura Research

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 Profit and Loss (In Rs.crs)

Particulars FY17 FY18 FY19

Net Sales 317.8 410.5 507.4
Expenses 391.4 486.7 490.3
EBITDA (73.7) (76.2) 17.1
Adjusted EBITDA (54.4) 46.6 82.3
EBIDTA Margin % (23.2) (18.6) 3.4
Adjusted EBIDTA Margin % (17.1) 11.4 16.2
Other Income 14.2 19.0 41.0
PBDIT (59.5) (57.2) 58.1
Depreciation 4.6 2.9 4.1
Interest 0.0 0.0 0.0
Exceptional items 0.0 0.0 0.0
PBT (64.1) (60.1) 53.9
Tax Provisions 0.2 (114.9) 33.9
PAT (64.3) 54.8 20.0
PAT Margin % (2.0) 1.3 0.0
________________________________________________________________
The company has reported a profit in FY18 on account of recognition of DTA
Source: RHP, Ventura Research

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 Balance Sheet (In Rs. crs)

P artic u lars FY1 7 FY1 8 FY1 9

EQ UITY AND LIABILITIES
Sh areh o ld er' s Fu n d s
Share Capital 9.2 10.0 28.6
Other Equity (399.2) (331.2) 131.3
Non controlling interests 0.03 0.05 -
To tal Sh areh o ld er' s Fu n d s (3 9 0 .0 ) (3 2 1 .2 ) 1 5 9 .9
No n -c u rren t Liab ilities
Share buyback obligation 246.1 372.9 -
Other financial liabilities 0.5 0.3 0.3
Provisions 1.7 5.9 9.6
Deferred revenue 121.3 166.1 229.8
To tal No n -c u rren t Liab ilities 3 6 9 .7 5 4 5 .2 2 3 9 .7
Cu rren t Liab ilities
Trade payables 30.2 41.9 45.0
Other financial liabilities 0.02 0.02 0.05
Provisions 4.0 4.8 5.3
Deferred revenue 171.8 225.9 356.2
Other current liabilities 35.2 46.1 14.6
To tal Cu rren t Liab ilities 2 4 1 .2 3 1 8 .7 4 2 1 .2
To tal Eq u ity an d Liab ilities 2 2 0 .9 5 4 2 .7 8 2 0 .8
ASSETS
No n -c u rren t Assets
Property, Plant and Equipment 7.5 7.3 8.5
Capital Work in Progress 0.2 0.2 0.2
other Intangible assets 1.233 0.78 0.581
Loans 0.2 0.1 0.1
Bank deposits - 30.2 -
Other financial asset 4.0 3.5 3.6
Deferred tax assets (net) - 115.6 85.8
Other non-current assets 1.2 0.7 0.7
To tal No n -c u rren t assets 1 4 .2 1 5 8 .3 9 9 .4 6
Cu rren t assets
Investments 136.3 311.1 607.4
Trade receivables 0.5 0.7 0.6
Cash and cash equivalents 17.7 46.7 40.2
Bank deposits 23.0 37.5
Loans 1.5 6.3 1.7
Other financial asset 3.6 4.1 15.8
Current tax assets 8.3 9.1 10.6
other current assets 15.8 6.4 7.5
To tal Cu rren ts assets 2 0 6 .7 3 8 4 .4 7 2 1 .3
To tal Assets 2 2 0 .9 5 4 2 .7 8 2 0 .8

____________________________________________________________________
Source: RHP, Ventura Research

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 Cashflow statement (In Rs. crs)

Particulars FY17 FY18 FY19

Cashflow from operating activities
Profit/(loss) before tax (64.1) (60.1) 53.9
Adjustments to reconcile profit/(loss) before tax to net cashflow:
Depreciation and amortization 4.6 2.9 4.1
Interest Income (2.3) (2.8) (3.0)
Gain from business transfer agreement - - (0.7)
Fair value change in investment (10.0) (8.9) (32.2)
Fair value change in share buyback obligation 19.3 122.9 65.3
Gain/(loss) on disposal of PP&E 0.0 (0.1) (0.1)
Share based payment expense 2.0 3.7 9.5
Gain of disposal of investments (1.9) (7.3) (5.1)
Allowances for doubtful debts and advances 0.5 - 0.1
Operating profit/(loss) before changes in working capital (52.0) 50.3 91.8
Changes in working capital 52.6 129.7 168.5
Cash generated from / (used in ) operations 0.6 180.0 260.3
Income tax paid (1.2) (1.0) (5.2)
Net Cash generated from / (used in ) operations (0.6) 179.1 255.1

Cashflow from operating activities

Purchase of PP&E (2.7) (2.2) (5.1)
Purchase of mutual funds (7.4) (165.9) (266.4)
Interest received 2.3 2.8 2.6
Advances paid, recoverable from shareholders - - (6.9)
Net cash used in investing activities (7.8) (165.3) (275.8)

Cashflow from financing activies

Proceeds from issues of preference shares
under buyback obligation 7.3 4.0 -
Acquistion of non controlling interest - - (0.3)
Proceeds from issue of equity shares on exercise of ESOP - 11.3 14.4
Net cash from financing activities 7.3 15.2 14.1
Net increase/(decrease) in cash and cash equivalents (1.1) 29.1 (6.5)
Cash and cash equivalent at the beginning of year 18.7 17.7 46.7
Cash and cash equivalent at the end of year 17.7 46.7 40.2
____________________________________________________________________
Source: RHP, Ventura Research

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Corporate Office: 8th Floor, ‘B’ Wing, I Think Techno Campus, Pokhran Road No. 02, Off Eastern Express Highway, Thane (West), 400 607
SEBI Registration No.: INH000001634

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