Indiamart Intermesh Ltd Q3 2023 Earnings Call Transcript

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

Question: Vivekanand - Ambit Capital - Analyst : Yes, hi. Thank you so much for the opportunity. I have two questions. So the first one is on the operating metrics like traffic, inquiries, and the likes. So what we see is that for the last several quarters, this number -- I mean, I agree that it has increased versus pre-COVID levels, but it has stagnated at a certain level for the last several quarters. So my first question is to understand this data. What's really happening here? Is it an indication that the demand environment is very muted or is it so that we are seeing more competition? I'd like to understand this better. Second question is with respect to the -- related to the first one, which is the collections growth. We have managed to sustain collections growth at a rate higher than our long-term 20% guidance. Just wanted to understand the confidence that you have in growing your collections at the same pace perhaps next quarter and fiscal '24? Thank you.

Question: Vivekanand - Ambit Capital - Analyst : Just one small follow up. Am I right in inferring that the exports market is very sluggish at present given the global prevalence factors? And Dinesh, if you could just comment on the impact of that on our business if any? Thank you.

Question: Vivekanand - Ambit Capital - Analyst : Thank you. I'll rejoin the queue.

Question: Abhishek Bhandari - Nomura Capital - Analyst : Can you hear me? Thank you and happy new year to everyone. Sir, I just had two questions. One, firstly, just on your other income, there is a very abnormal high number on the other income in the consolidated numbers, almost INR100 crore plus. I could not understand the math behind that because the cash balance what we have is only around INR2,100 crores. So if you could, you know, please help me with that.

Question: Abhishek Bhandari - Nomura Capital - Analyst : Okay. Have we sold the entire stake in this company?

Question: Abhishek Bhandari - Nomura Capital - Analyst : Okay. Thank you, sir. The second question is, you know, on the competitive intensity. So you know your (inaudible), which focuses more on the B2C classified business has been talking about aggression on the B2B side with their field staff and hiring plans. If you could share, are you seeing any rise or any threat from any competition of yours particularly on the classified business? I'm not asking about the transaction (inaudible) B2B.

Question: Abhishek Bhandari - Nomura Capital - Analyst : Thank you, sir. And sir, my last question is, you added around 6,200, 6,300 paying subscribers this quarter. Are you happy with this run-rate?

Question: Abhishek Bhandari - Nomura Capital - Analyst : Thank you, sir, and all the best for this year.

Question: Anmol Garg - DAM Capital - Analyst : Yes. So a couple of questions. Firstly, on the margins levers. So we have been waiting for some time on the margin levers, particularly the operating leverage to play out. So when do you think that the operating leverage will start to play out (inaudible)? So that is one. And secondly, I wanted to ask, is the assumption right that the current supply additions that we are doing is more on a monthly basis? And in the past, what we have seen is that the monthly supplies do get (inaudible) over the quarter. So, are you expecting a good amount of (inaudible) increase as well in the upcoming quarters as well?

Question: Anmol Garg - DAM Capital - Analyst : (inaudible) So just one follow up on that. Is the number of customers that we are adding right now, so have the mix changed that more than two-third are being added on a monthly basis as compared to earlier where two-third were being added on a monthly basis?

Question: Anmol Garg - DAM Capital - Analyst : Sure. Thanks for the answers. I'll join back in the line.

Question: Nikhil - Nuvama Wealth - Analyst : I want to understand (inaudible) in terms of disconnect between revenue growth and employee growth. Revenue growth has been in last couple of quarters really good. But if you see in terms of employee (inaudible) since our first quarter of FY '22 when we started hiring aggressively, employee count growth has been much more higher, just comparison to fourth quarter of '22 to fourth quarter of '21, employee count was up 44%. And even outsourcing has been up from 8%, 9% run rate to 14%. So basically what I want to understand is the employee productivity or revenue per employee is definitely from recent historical trend. So are you looking to increase it back to the recent trends we have seen or this is steady state given we are still hiring?

Question: Nikhil - Nuvama Wealth - Analyst : Yes. So basically, number in last six quarters has (inaudible) and faster than revenue growth, and also the outsource growth as a percentage of revenue has increased from 18% to now approximately 13%, 14%.

Question: Nikhil - Nuvama Wealth - Analyst : Okay. Okay, understood. And one more question on Busy, we are seeing decline in the current quarters at 1,800 basis points. Just want to understand, is there some seasonality or there some organic element as well? And how should Busy will trend in quarter four from seasonality and organic growth perspective? Thank you. That's it from my side.

Question: Nikhil - Nuvama Wealth - Analyst : Understood. Thank you so much and that's it for me.

Question: Swapna - JM Financial - Analyst : So I had two or three questions. First on the traffic and business inquiries (inaudible). As we discussed earlier, the trends have not really changed in the last few quarters. Now, is it possible that you would be compelled to spend toward AMP if those trends do not change in the next few quarters? That's my first question. And the second question is like, we were expecting we were expecting some integration benefits with Busy. I assume that those benefits are not getting captured right now. So if you can, can you give some indication as to when we would see those benefits coming in? That's number two. And number three is with respect to the cash on the books. What are your plans to use that INR2,100 crore of cash that is sitting on our books? How do you plan to utilize that? Thanks.

Question: Swapna - JM Financial - Analyst : Sure. Thanks for taking these questions.

Question: Mukul Garg - Motilal Oswal - Analyst : Dinesh, I just wanted to follow up on the previous question regarding the employee growth. Just a bit confused on how we should look at it. Can you just help us the right way we should kind of look at the implied growth? Should we look at the revenue per employee, collection per employee? Or is there other metric we should kind of think about when we kind of view how the employee growth will happen over next year or two? And how operating leverage can play out in the business based on the current employee base? Because if I look at the the revenue per employee or even collection per employee, you are back to early days of FY '21. And while you obviously had a massive operating leverage gain in the subsequent quarters, but now it has all reverted back. So should it be the case that your employee growth now onwards be in line with the revenue growth? Or should revenue growth actually lead employee growth generating operating leverage?

Question: Mukul Garg - Motilal Oswal - Analyst : Sure. So just to get it right, you are saying on a ongoing basis, you're doing 100, 240 sales person would be required assuming 7,000 to 9,000 customer additions per quarter. And as this kind of plays out, assuming again that you don't get another supply-side shock in FY '24 and given the trajectory of your deferred revenue, how should we view the operating margin next year?

Question: Mukul Garg - Motilal Oswal - Analyst : Great. Thanks for taking my questions. I'll get back into the queue.

Question: Manish Gupta - Solidarity Advisors - Analyst : I had three questions. The first question is, could you talk a little bit about attrition of -- in the number of paid suppliers? So if the target is to add about 8,000, I guess that is a net supplier addition target. Can you talk a little bit about in the first nine months of this year, what is the gross addition and how many have attrited? That's the first question.

Question: Manish Gupta - Solidarity Advisors - Analyst : Yes. My second question is, could you talk a little bit about how big do you think Busy could be in 10 years? How do you see the size of the opportunity? Where is your marketshare? It has been over a year now since we acquired the company. For long-term investors, how do they think about how big Busy could be and the rest of your accounting portfolio in about 10 years?

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

Question: Kushag - Old Bridge Capital - Analyst : Hi. Thanks for the opportunity. A few questions. First to start with, just a follow-up on what the earlier participant asked. So, just wanted to understand this (inaudible) registered by an active buyer. So there was a 5 million jump in the registered buyers right? And I know there has been decent REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 20, 2023 / 10:30AM, INMR.NS - Q3 2023 Indiamart Intermesh Ltd Earnings Call absolute increase in registered buyers for the first nine months as well. But your active buyers have not budged at all. Does this imply that are there is an equal amount of leakage in the active buyers or how should we understand the change in these two particular line items?

Question: Kushag - Old Bridge Capital - Analyst : Okay. So if that's the case, I mean, on a nine month basis, you have almost added 15 million registered buyers, right? And, I mean, if I consider that as a churn, that almost means 40%, 45% of the active buyers have churned, right? And you sort of say that 53% of your buyers are repeat buyers. So --

Question: Kushag - Old Bridge Capital - Analyst : Okay. Second question is on now that line item of outsourced costs. So just trying to understand -- correct me if I'm wrong. Is this sort of correct to assume that this INR32 crores of quarterly run rate which you have as outsource costs largely represents the sales handling part through which you sort of expect to add 8,000 to 9,000 paid suppliers? Is that right? And if that's the case, how much capacity is sitting in that INR32 crore line item or INR8,000 crores to INR9,000 crores just like working on the full potential?

Question: Kushag - Old Bridge Capital - Analyst : Okay. So basically if that's the case, does this also imply that INR32 crores represents quarterly revenue represents (inaudible) INR9,000 crores of (inaudible), and hence, the customer acquisition cost for your base comes to around almost INR35,000, INR37,000, which is almost like 80%, 85% of your RPUs. So considering the churn effectively, not much money is made for probably the first two years, and thereafter as and when these customers, you mine those customers, the large part of the OCF is made from those existing paid suppliers, and within that, effectively, the top 10% of the paid suppliers. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 20, 2023 / 10:30AM, INMR.NS - Q3 2023 Indiamart Intermesh Ltd Earnings Call

Question: Kushag - Old Bridge Capital - Analyst : Okay. Got it. Sir, last two questions. One data question with respect to top 10% customer and the top 1% customers. So how much of that revenues from those customers come from buying leads, which is basically, you know, they generally buy leads over and about their assigned package, which forms part of their RPU which forms part of their revenues? A broad range will be helpful.

Question: Kushag - Old Bridge Capital - Analyst : Sorry, I -- so for the next year, if they sort of go for the renewal based on the leads they've bought, it's already packaged in their offering, is it?

Question: Kushag - Old Bridge Capital - Analyst : Okay. And last one from my side. So basically, you generally have commented in the past that you evaluate your investment up to one year and then you sort of see what to do with it, either go ahead and invest more or probably take some more time. So on that, just trying to understand any update on the acquisition, especially those two three takes industry by end channel in Brazil, apart from the accounting ones where you are sort of interested in more. So any plans to offer them with your existing plans or any more rounds of funding to happen now and with respect to industry buying any progress or learnings from that investment because this is almost your second highest investment after the content. So yes, those are the questions from my side. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 20, 2023 / 10:30AM, INMR.NS - Q3 2023 Indiamart Intermesh Ltd Earnings Call

Question: Kushag - Old Bridge Capital - Analyst : Thanks a lot and all the best.

Question: Rahul Jain - Dolat Capital - Analyst : Can you just share some of the initiatives that the company has taken to ensure that there is a reduction in churn rates over time and also improvement upscaling of subscribers from silver plan to much more liquid gold (inaudible)? Can you share any metrics (inaudible)?

Question: Rahul Jain - Dolat Capital - Analyst : Just one or two incremental (inaudible) this question. So why you attributed that the RPU is one metric to measure, I completely agree that RPU is one way to look at it. But I'm sure a lot of your platinum customers that are gone to Platinum because they are very big brands. And I don't think they would have gone to silver to gold to platinum journey, but many of them would have been platinum from day one.. So it's not completely addressed that aspect, but I understand that is not my right to look at it. And so another way to look for revenue and get some low (inaudible) is either you could share some cohort analysis over time that how many of your total user, year one to year five has seen a journey in terms of (inaudible) over a period of time. And if you keep sharing that on a five year basis on your annual report?

Question: Rahul Jain - Dolat Capital - Analyst : I'm sure I've been a user of and I can see how relavent it is. But somehow, the behaviour of supplier on our platform is not reflecting -- (inaudible) the price point is very cheap, which could not be a hinderence for a lot of people to sustain on the platform. And then, we also see how matchmaking, how perfect it is as a consumer when we try to search something as a buyer. This very high chance somehow is not reflecting the true potential (inaudible).

Question: Rahul Jain - Dolat Capital - Analyst : Thank you. That's it for me. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 20, 2023 / 10:30AM, INMR.NS - Q3 2023 Indiamart Intermesh Ltd Earnings Call