IndiaMART InterMESH Limited IPO NOTE (Apply)

Review By Rudra Shares & Stock Brokers Ltd on Jun 24, 2019

THE OFFER

       Issue Open : 24 June 2019 to 26 June 2019

  »»  Issue Type:  Book Built Issue IPO

    »»  Total Issue Size:  Rs 475.58 cr

       Δ  Offer for Sale: 4,887,862 Equity Shares @ 10 aggregating up to Rs 475.58 cr 

       Δ  Fresh Issue:     Nil

   

       »»  Face Value:  Rs 15 Per Equity Share 

  »»  Issue Price:  Rs 970  - Rs 973 Per Equity Share 

  »»  Market Lot:  15 Shares 

  »»  Minimum Order Quantity:  15 Shares 

  »»  Listing At:   NSE & BSE

CAPITAL STRUCTURE

The  share capital of Company, is set forth below:-

                                                                                                                   (Amount in Rs except share data)

Authorized Share Capital :-

    30,000,000 Equity Shares @10 Aggregate value  300,000,000 cr

Issued, subscribed and paid up capital before the Offer :-

    28,774,820 Equity Shares @10 Aggregate value 287,748,200 cr

Fresh Issue:-

     NIL 

 

OBJECT OF THE OFFER

The objects of the Offer are:

Δ For the sale of an aggregate of up to 4,288,801 equity shares by the selling shareholders and

Δ  To achieve the benefit of listing the equity shares on the Stock Exchanges

 

COMPANY OVERVIEW

It is India's largest online B2B marketplace for business products and services which primarily operate through www.indiamart.com or "IndiaMART". Company earns revenue primarily through the sale of subscription packages (available on a monthly, annual and multiyear basis) to suppliers, which offer a range of benefits. With minor portion of revenue been earned through advertising, facilitation of payment and sale of RFQ credits.

It had an aggregate of 325.8 million, 552.6 million and 723.5 million visits in fiscals 2017, 2018 and 2019, respectively. During FY19, had 82.70 million registered buyers and 5.55 million supplier storefronts in India with organized listings across 54 industries and more than 50 million products. Which provides an effective and trusted platform to help businesses leverage the power of the internet to increase their market reach and conduct commerce. In addition, provides suppliers with cost-effective ways to reach new buyers across geographies.

India mart's online marketplace is accessible through desktop and mobile-optimized platforms and apps on personal computing and mobile devices. Buyers can make business enquiries on IndiaMART through telephone, SMS, email or by posting RFQs.

During FY19,  had 55% repeat buyers calculated on the basis of the past 90 days. In addition,  39% of the suppliers 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. IndiaMART's product and services are spread across India. Although 36% and 49% of buyers and suppliers, respectively, are derived from the top eight metro cities in India, its marketplace offerings also generate traffic from second and third tier cities representing more than 1,000 cities.

Key competitors

 Tradeindia.com and Alibaba India are the direct competitors while  Just Dial, Google and other search engines, trade show organizers, trade magazine publishers, the yellow pages, classified advertisements and outdoor advertising are some of the indirect competitors. 

 However, India mart is able to differentiate itself from others on the basis of innovative product offerings such as IndiaMART premium number service, TrustSEAL verification program, buyer RFQ's, mobile site and app, high quality service standards, and its management and employees. All these factors make India mart a strong brand with 60% market share in online B2B classified space in India.

 

STRATEGIES  AHEAD

Δ Continue to increase the size of IndiaMART marketplace.

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

Δ Enhance buyers' experience

Δ Improve supplier engagement, services, retention and monetization.

Δ Continue investing in mobile platforms and capabilities.

 

STRENGTHS

Δ Strong network and brand recognition drives leadership in the B2B marketplace in India

Δ Comprehensive, convenient and reliable platforms for buyers.

ΔEfficient and effective marketing platform for suppliers.

Δ Robust mobile platform

Δ Deep understanding of online trade and commerce in India that drives innovative solutions

 

FINANCIAL HIGHLIGHTS

Company delivered robust top line growth for the FY19. On a consolidated basis, operating revenue grew at a CAGR of 26.4% over FY17-19 at Rs 507.42 cr. Income from paid services (subscription charges), formed around 98-99% of the total operating revenue in FY19. While, rest of the revenue is derived from advertising and other services (i.e. RFQ credits and facilitation of payment services). Paying supplier has grown at a CAGR of 16.2% and average realization towards each paying suppliers grew at a CAGR of 10.3% over FY17-19.

For FY17 & FY18, India mart had incurred losses which was mainly on account of non cash expenses (due to conversion of preference shares) of around Rs 200cr resulting to increase in operating expenditure. However, by enhancing its productivity FY19 numbers turned round profitable with EBITDA at Rs 17.08 cr.

Reported PAT of Rs 54.76 cr and Rs 20.04 cr in FY18 and FY19, respectively, with a profit margin of 13.3% and 4%. RoE for FY19 was 12.5%, while ROCE was 3.2%

 

RISK FACTORS

Δ Competition from new and existing companies

Δ Retain existing paying subscription suppliers on or attract new paying subscription suppliers.

Δ Decline in demand for suppliers' products or services

Δ Increased supply and input costs, including rising costs of labour, raw materials and other inputs

Δ Regulatory restrictions, trade disputes, industry-specific quotas, tariffs, non-tariff barriers and taxes

 

INDUSTRY OVERVIEW

The number of internet subscribers in India is expected to increase from 446 million as on December 2017 to nearly 900 million by FY22 primarily driven by growth in wireless broadband services. Moreover, the fall in data prices coupled with increase in availability and affordability of smart phones, has resulted in users increasingly consuming content on their mobile devices. The digital classified market is expected to grow at a 14% CAGR over FY17-22 to reach a size of Rs. 77mn in FY22. The e-commerce market in India was estimated to be around INR 2,350 billion in 2017 and is projected to continue growing to reach INR 5,350 billion by 2020.

Additionally, the B2B digital classified market is estimated to more than double to Rs12bn by FY22, representing a growth of 18.5% CAGR over FY17-22. As of 2017, only 32 percent of SMEs in India were digitally connected69 and 17% used internet for business purposes. There is a huge headroom in terms of getting more SMEs online, which in turn could have a positive impact on the growth of B2B classifieds.

 

 

 

 

 

 


Conclusion / Investment Strategy

VALUATION

Going forward, India mart seeks to increase its revenue by attracting more paying suppliers and achieve better realization per customer through sale of gold and platinum packages. Moreover, with increase in leverage in mobile penetration in India and promoting the use of its mobile website and app will consequently increase the number of active buyers and suppliers on online marketplace. During FY19, 76% of traffic came through the same.

No doubt, in past company incurred losses, which is quite evident in the business model it operates in. As to increase & retain the buyers & sellers requires time. However for FY19, it has started delivering profits & we expect the traction to continue further. Having unique business model with limited peers attract the company. In addition, company has already set up platform in past years in terms of online marketplace and now, can reap the benefits of the same by additional buyers & suppliers at its place without having much expenditure.

Company has turnaround from losses to profit in the current year, which is expected to continue. Moreover, for having a unique business model, one may SUBSCRIBE  the IPO for listing gains.

Reviewer recommends Subscribing to the issue.

Review By Rudra Shares & Stock Brokers Ltd on Jun 24, 2019

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