Indiamart Intermesh Ltd Q1 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Manish Gupta - Solidarity Capital - Analyst : Thank you for the opportunity. This is -- I have two questions. First question is for Prateek that if you look at your revenue to collections ratio, FY22 and in FY23, it is about 80%. Is my understanding correct that all your selling cost is written off in the same year because it doesn't show any -- there's nothing in prepaid expenses in selling cost, and therefore, if one will follow the matching principle of selling cost apportioned to revenue proportionately, under IFRS your reported margins will expand by 4% or 5%?

Question: Manish Gupta - Solidarity Capital - Analyst : Yeah, my point was only on selling cost, which is about 20% of revenue. So to the extent that all the selling costs are being recognized upfront, the true profitability is actually higher than reported profitability, right?

Question: Manish Gupta - Solidarity Capital - Analyst : My second question was that our top 10% of customers have approximately 50% of revenue. Is it for -- and you have such extensive disclosures, is it possible to add a disclosure on gross additions and net additions of your top 10% customers? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 21, 2023 / 10:30AM, INMR.NS - Q1 2024 Indiamart Intermesh Ltd Earnings Call

Question: Manish Gupta - Solidarity Capital - Analyst : Yeah, my question is, is it possible to report attrition in that bucket separately?

Question: Manish Gupta - Solidarity Capital - Analyst : Okay. And my last question is that, will we see Busy in a cloud format at some point in time?

Question: Manish Gupta - Solidarity Capital - Analyst : Okay. Thank you.

Question: Manish Gupta - Solidarity Capital - Analyst : Okay. Thank you.

Question: Ruchi Mukhija - Elara Securities - Analyst : Hi. Thank you for the opportunity. I have two questions, firstly, we've seen for IndiaMART platform, the traffic has been static for some quarter, even the unique inquiries has been, I would say, range-bound in the recent quarter. You're seeing that to reach the guidance of about 6,000 to 7,000 quarterly paying vendor additions, we would take some more time. So in that context, the pricing increase in your junior-most category that seems that it carries some risk. So here I just want to understand what is the reasoning behind taking this pricing increase at this point of time?

Question: Ruchi Mukhija - Elara Securities - Analyst : And could you talk about -- was it affected throughout the quarter or it was taken in between the --

Question: Ruchi Mukhija - Elara Securities - Analyst : Mid of the -- and was there any change in the conversion rate after the pricing increase or we saw almost a similar run rate even after the pricing increase?

Question: Ruchi Mukhija - Elara Securities - Analyst : Understood. Now second aspect I wanted a clarity was on the buyback. We've made a welcome announcement. Here, just wanted to get more clarity, we've been announcing dividend at several, I would say, frequency. We've done buyback even last year. So you've been rewarding or distributing cash flow to the shareholder. But is there some thought process where we put commitment and quantify how much on regular basis would we return capital to the shareholders?

Question: Ruchi Mukhija - Elara Securities - Analyst : Understood. That's helpful. Thank you and all the best.

Question: Anmol Garg - DAM Capital - Analyst : Yeah, hi. I hope I'm audible.

Question: Anmol Garg - DAM Capital - Analyst : Yeah, hi. Firstly, congratulations on a good buyback announcement. I had a couple of questions. Firstly, if I look at our paid supplier as a conversion factor then we are at around a 2.7% of the total supplier. Now, historically, this has been in the range of 2.3% to 2.5%-odd. Now given that the paid supplier growth that we're seeing for a longer term, maybe 7,000 to 8,000 kind of paid supplier addition. And given that our total supplier additions has been a little bit softer than that in terms of the growth rate, so we will surpass 3% kind of number on the conversion factor at some time. So do you think that this is a kind of which is sustainable in terms of the if we talk on the overall conversion factor? And what are the factors that or what are the things that we are doing to add on to the new paid suppliers?

Question: Anmol Garg - DAM Capital - Analyst : Sure. Thanks for the detailed answer. Another thing that I wanted to understand is that this year we have added some 280-odd employees. Now last time we indicated that the offer addition of 7,000 to 8,000 paid supplier, we need to add some 120 to 130 employees to service them. Now the paid supplier addition has been a bit lower this quarter. Despite that, the total addition in the employees has been higher. So if you can indicate, do you see that the pace of land additions maybe in the second half of the year will be much higher than 7,000 to 8,000?

Question: Anmol Garg - DAM Capital - Analyst : Sure. And lastly, from my end, just wanted to have understanding on the margin trajectory. How should we look at the margins, particularly for FY24 and beyond as well?

Question: Anmol Garg - DAM Capital - Analyst : Sure, Dinesh. Thanks for the answers. That's it from my end. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 21, 2023 / 10:30AM, INMR.NS - Q1 2024 Indiamart Intermesh Ltd Earnings Call

Question: Rahul Jain - Dolat Capital - Analyst : Yeah, hi. Hope I'm audible.

Question: Rahul Jain - Dolat Capital - Analyst : Yeah, thanks for the opportunity. Firstly, just want to understand your experience, you shared a little bit about that, but it would be great if you could spend some more time on that, what is the general experience for you for this kind of a price hike impact? Is it on the new additions run rate basis and also increase on the existing monthly plans on the silver basis. So if you could tell in both the aspect that what kind of impact you've observed and what is your past experience and your understanding of how and when it should normalize back?

Question: Rahul Jain - Dolat Capital - Analyst : Right. Yeah, thanks for that color. Just one more question regarding the sales cost, which has also gone up 6% Q-o-Q despite weak net addition, is it that we have also increased our channel partner commission along the lines of price hike?

Question: Rahul Jain - Dolat Capital - Analyst : But if the channel partners are monetized or commercialized based on the conversion, is it higher because our gross addition would have been much higher and the net is lower. So we might have paid for higher addition, but the net impact was lower. Is that the understanding right?

Question: Rahul Jain - Dolat Capital - Analyst : You want me to repeat the question sir?

Question: Rahul Jain - Dolat Capital - Analyst : Sure. And just one clarification to your earlier comment where you said the upsell plan prices are also revised up. Is that what you were trying to say?

Question: Rahul Jain - Dolat Capital - Analyst : Right. So you're saying you would do it after some time or it is already implied but would be relevant as these people progress into that plan?

Question: Rahul Jain - Dolat Capital - Analyst : So the effective date would be what? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 21, 2023 / 10:30AM, INMR.NS - Q1 2024 Indiamart Intermesh Ltd Earnings Call

Question: Rahul Jain - Dolat Capital - Analyst : Yeah, so essentially, what you're saying is that if you take a multi-year plan that longer tenure discount also would have -- that revision would have happened even if I take a two, three year plan versus what I would have taken a two, three year plan earlier.

Question: Rahul Jain - Dolat Capital - Analyst : Yeah, understood. And is there a way to understand what could be the addition to the EBITDA or revenue on a like-for-like basis because of this pricing impact on annual basis?

Question: Rahul Jain - Dolat Capital - Analyst : Right. Okay. I'll take this offline. Thank you, and I'll join back the queue.

Question: Abhisek Banerjee - ICICI Securities - Analyst : Hi, sir. Thanks for your time. Just quickly on the price increases that you have taken, what is now the differential between the silver and the gold plan vis a vis what it used to be earlier?

Question: Abhisek Banerjee - ICICI Securities - Analyst : No, sir, got it. Sir, my question was with regards to, do you think this will lead to your customers upgrading to a gold plan because you're bringing the pricing differential lower? Is that something that you're hoping for?

Question: Abhisek Banerjee - ICICI Securities - Analyst : Got it. Sir, also, with regards to the guidance in terms of adding new subscribers, this 7,000 to 8,000 number, is it with regards to basically the full year as in you want to say that you would add between 28,000 to 30,000 new subscribers for FY24. Is that what you're trying to say because my understanding was that quarterly number was in the range of 8,000 to 9,000?

Question: Abhisek Banerjee - ICICI Securities - Analyst : 8,000 to 9,000.

Question: Abhisek Banerjee - ICICI Securities - Analyst : Understood, sir. That is clear. But now if I look at the margin guidance that you're giving, 28% for the full year. Sir I'm actually struggling to understand given the rate of revenue growth that we are seeing, also you've earlier said that you will not need to hire too many new people, so my model tells me that the margin uplift should be higher, right? So I'm trying to understand, is it that are you building in for more take investment? Are you building in for more investment into CAC? You are going to do SEO. If you could give us some clarity on that, then we'll also understand why the margin uplift will not be as much as it should be, I mean, in a -- when the other expenses have topped out.

Question: Abhisek Banerjee - ICICI Securities - Analyst : Understood, sir. That is helpful. And one last question from my side if Brijesh sir can answer this. Sir, Busy, we're seeing a very, very strong ramp-up, right. Where from -- yeah, so last year your objective was to consolidate what you had acquired. Is this year going to be an all-in -- I mean, all-out growth year? How are you looking at it?

Question: Abhisek Banerjee - ICICI Securities - Analyst : Got it. Thank you so sir. Congrats on a great set of results. Yeah, we'll catch up with you later.

Question: Amit Chandra - HDFC Securities - Analyst : Yeah, hi. Am I audible? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 21, 2023 / 10:30AM, INMR.NS - Q1 2024 Indiamart Intermesh Ltd Earnings Call

Question: Amit Chandra - HDFC Securities - Analyst : Yeah, thanks for the opportunity, sir. So my simple question is in terms of the growth that we're seeing in terms of the paid subscribers at an overall level, it's around 16% to 18%. But if I see the growth in terms of the various buckets, so in terms of platinum, gold, so how has been the growth there in terms of the absolute number of customers? So is it higher than the overall company level or how is it trending? Because if I see the ARPUs, they're going up. So there is a from monthly to gold, to a platinum. So what is the parameters that will show us that there's a migration going on and also, in terms of what percentage of the customers upgrade every year?

Question: Amit Chandra - HDFC Securities - Analyst : But that is in line with the overall company because every time if you do top ten, then the growth rates for all three buckets is this -- for us, it's the same. But internally, how has been that tracking? So that's what I want to understand in terms of absolute numbers.

Question: Amit Chandra - HDFC Securities - Analyst : Okay. So -- and in terms of the upgrades, how many of the monthly payer suppliers who are there in the platform say for say, like six months, they upgrade to a higher package, so what is that number? If you can give any number that you can share there.

Question: Amit Chandra - HDFC Securities - Analyst : Okay. And sir, in terms of the monthly additions or in terms of the upgrade paid subscriber addition that we're doing, is it all in the like monthly bucket or is it we add some customers to gold, platinum as well? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 21, 2023 / 10:30AM, INMR.NS - Q1 2024 Indiamart Intermesh Ltd Earnings Call

Question: Amit Chandra - HDFC Securities - Analyst : Okay. And sir lastly, on the price hikes that we've announced for the monthly subscribers, what is the price hike that we've taken ever in terms of gold, platinum in the past? And is there any plans to increase price there in gold, platinum?

Question: Amit Chandra - HDFC Securities - Analyst : Okay. And sir, the last question is on the margins. So obviously, we've seen some margin expansion. But if you can throw some light in terms of what proportion of the cost will increase in line with the growth in terms of paid subscribers and what proportion of the cost will be inflation-linked? In terms of overall cost, I'm asking.

Question: Amit Chandra - HDFC Securities - Analyst : No sir, but in terms of total cost, if you can -- in terms of total cost, what is actually going in line with the paying subscribers? And what will -- from here on how do you see that cost structure in terms of[agent] variable.

Question: Amit Chandra - HDFC Securities - Analyst : Okay, sir, thank you and all the best. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 21, 2023 / 10:30AM, INMR.NS - Q1 2024 Indiamart Intermesh Ltd Earnings Call

Question: Sarang Sanil - RW Investment Advisors - Analyst : Hello, thank you for the opportunity. My first question is to Brijesh sir, then I'll come back to IndiaMART's business. Sir, you said that Busy is planning to launch desktop cloud version, but I believe you already have a mobile app version, but I believe you already have a mobile app version, which updates real time and I believe it's through cloud. So why is it so hard to have a desktop cloud there?

Question: Sarang Sanil - RW Investment Advisors - Analyst : Sure, sir. That was helpful. On the IndiaMART business side, sir, is it possible to give a split between metros and rurals? Is it possible to give a volume split and value split? It can be on an overall 2,000 - 208,000 also. And is it fair to assume that the metro side has better margins?

Question: Sarang Sanil - RW Investment Advisors - Analyst : Understood, sir. Sir I just want to understand a little better here. So what is that factor that the paid suppliers are seeing to stick with IndiaMART or the new suppliers are coming at a higher ARPU now, right? Because I can see in the past couple of quarters, the traffic has been flat. So this is regarding on the buyers engagement side, traffic has been flat, registered buyers, which is not material. So active buyers, which is material, that has been flat. Unique business inquiries, that has been flat. So what is that one factor you think you would pitch to a new paying supplier? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 21, 2023 / 10:30AM, INMR.NS - Q1 2024 Indiamart Intermesh Ltd Earnings Call

Question: Sarang Sanil - RW Investment Advisors - Analyst : Understood, sir. So you are not worried on the buyer side. Sir, my last question is, do you think generative AI or any of that application on that side would help in improving the margins on a medium to long term per se?

Question: Sarang Sanil - RW Investment Advisors - Analyst : Got it, sir. That was helpful. Thank you, and all the best.