Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IndiaMART InterMESH Ltd (BOM:542726, Financial) reported a consolidated collection from customers of INR366 crores in Q1 FY2025, representing a year-on-year growth of 14%.
- Deferred revenue grew by 23% to INR1,474 crore on a consolidated basis.
- Consolidated revenue from operations increased by 17% to INR331 crore.
- Unique business inquiries grew to 25 million, representing a year-on-year growth of 15%.
- The company has onboarded Mr. Jitin Diwan as the new Chief Financial Officer, indicating a strengthening of the management team.
Negative Points
- The company continues to see higher-than-anticipated churn in the silver customer base.
- New supplier acquisitions were slightly lower this quarter compared to previous quarters, resulting in only 1,500 new paying suppliers added on a net basis.
- The churn in the silver monthly and silver annual buckets remains stubborn, affecting overall customer retention.
- The company is facing challenges in controlling churn in major cities like Delhi and Mumbai.
- Despite the growth in revenue and collections, the company is cautious about committing to specific net addition targets for paying subscribers due to ongoing churn issues.
Q & A Highlights
Q: Wanted to understand a bit more on EBITDA margin. Is there any one-off associated with that? Should we consider this as a steady state EBITDA margin going ahead?
A: (Jitin Diwan, CFO) EBITDA margin is 37% for the current quarter. About 2% to 3% was due to operational leverage. We also realized savings from cost optimization initiatives. However, as customer growth picks up, the margin will normalize to around 33%-34%.
Q: Do you try to ascertain if the pricing is acceptable to your clients? Would it make sense to reduce pricing to drive net adds?
A: (Dinesh Agarwal, CEO) Most ARPU growth is from the top 10% of customers, while churn is from the bottom 50%. There has been no price increase for silver monthly or annual customers since pre-COVID. The assumption that price reduction would help reduce churn seems incorrect.
Q: Are your categories getting saturated, and what are the growth levers for you?
A: (Dinesh Agarwal, CEO) Our top categories have not significantly changed in percentage terms. We continue to see potential for growth in less penetrated cities and new categories. We are also increasing our monetizable categories and cities each year.
Q: Why are you cutting on selling and marketing costs despite churn issues?
A: (Dinesh Agarwal, CEO) We have cut down on areas with high churn and focused on more promising regions. This has resulted in some natural leverage. We will reinvest in sales and marketing once we have better control over churn.
Q: What is causing the higher churn in silver customers, and what steps are you taking to address it?
A: (Dinesh Agarwal, CEO) Feedback indicates difficulty in converting buyers and increased price sensitivity. We are reducing competition by limiting the number of suppliers matched to each buyer. We are also making product adjustments to better meet market expectations.
Q: What is the growth in gold and platinum subscribers, both in terms of number and sales?
A: (Dinesh Agarwal, CEO) Gold and platinum customers now constitute 50% of our customer base and 75% of revenue. The number of gold and platinum customers has grown by 8,000 in the last year.
Q: Are there any risks or opportunities from ONDC for IndiaMART?
A: (Dinesh Agarwal, CEO) ONDC could be an opportunity if it becomes popular in B2B categories. Currently, it is focused on B2C categories like taxi and food. We will consider joining ONDC when it gains more traction in B2B.
Q: Have you done any analytics to understand the deeper cause of subscriber churn?
A: (Dinesh Agarwal, CEO) We are conducting case studies and statistical analysis. Common feedback includes difficulty in maturing buyers and the presence of retail buyers on the platform. We are working on reducing competition and better matching buyers and suppliers.
Q: What is the sustainable growth in ARPU for FY25 and FY26?
A: (Dinesh Agarwal, CEO) The effectiveness of relevant matchmaking is increasing, especially for gold and platinum subscribers. We are able to push more relevant inquiries to these customers, which helps in better lead conversion. This should support sustainable ARPU growth.
Q: What is the churn rate in silver, gold, and platinum categories?
A: (Dinesh Agarwal, CEO) Churn is less than 1% per month for gold and platinum customers. For silver monthly, it is about 6% per month, and for silver annual, it is about 3%-4% per month.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
