Indiamart Intermesh Ltd Q3 2024 Earnings Call Transcript

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

Question: Anmol Garg - DAM Capital - Analyst : Yeah. Hi. Thanks for the opportunity. So just had a couple of questions. Firstly, just want to understand the gross paid supply additions for this quarter. So has it come to FY23 quarterly levels? Or is there a pain there as well? And if not, then when do you think that it can come back to the previous levels? FY23 levels.

Question: Anmol Garg - DAM Capital - Analyst : Sure. Thanks. And also just on the total paid supply additions. So has there been any change in the strategy for the additions that is happening through channel partners? Are we focusing more towards our own salespeople for paid supplier additions given that we have seen a very strong increase in the sales employees in the last few quarters? I just wanted to understand that strategy.

Question: Anmol Garg - DAM Capital - Analyst : Thanks for the detailed answer. And just last thing, when do we think that we can get back to 6,000, 7,000 sort of paid supplier additions on a net basis? Do you think that maybe one or two quarters down the line, we can achieve this number? 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 18, 2024 / 11:30AM, INMR.NS - Q3 2024 Indiamart Intermesh Ltd Earnings Call

Question: Anmol Garg - DAM Capital - Analyst : Sure, sir. Thanks. That's it from my end.

Question: Nikhil Choudhary - Nuvama Group - Analyst : Hello. Hey. Hi. Thanks for the opportunity. My first question is regarding the collection growth, which is like 16%, 17% this quarter for consol and stand-alone business. This is lower than what we have seen in last four, five quarters, and generally the trend has been more than 25%-plus. So anything to read here? Is it just one quarter downturn, and we expect it to be back to 25%-plus trajectory from quarter four?

Question: Nikhil Choudhary - Nuvama Group - Analyst : Understood, sir. Sir, second question is regarding the buyer -- registered buyer growth or unique business inquiry, which is clearly growing at a much slower pace, single-digit on YoY basis, right? A couple of quarters back, you mentioned that if the registered buyer do not increase materially by end of FY24, then you will be concerned, right? So in terms of business inquiry, we haven't seen much material jump. Where I'm coming from, sir, is that if you see the metrics in unique business inquiry per supplier, that metric is going down and back to pre-COVID. So I just want to understand what's happening there. Any action you have taken to increase the number of inquiry growth per se.

Question: Nikhil Choudhary - Nuvama Group - Analyst : Sure, sir. Very helpful. Good luck for coming period. Thank you so much.

Question: Abhishek Bhandari - Nomura Securities - Analyst : Can you hear me now?

Question: Abhishek Bhandari - Nomura Securities - Analyst : Sorry for that. So I was saying in the last quarter, you had said you had affected the price increase on 10% of your silver monthly user base. What is that new percentage now at the end of third quarter?

Question: Abhishek Bhandari - Nomura Securities - Analyst : Got it. Thank you, sir. The second question is you mentioned you are trying to get some of these third-party outsourced people to your own payrolls for better efficiency purpose. Does it also have any cost advantage to you from a medium-term perspective? 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 18, 2024 / 11:30AM, INMR.NS - Q3 2024 Indiamart Intermesh Ltd Earnings Call

Question: Abhishek Bhandari - Nomura Securities - Analyst : Got it. Got it. And my last question is on your fourth quarter margin outlook, should we expect a similar seasonality in margins as we expect every year, in the sense that you gave on salary increments to your employees?

Question: Abhishek Bhandari - Nomura Securities - Analyst : Thank you, sir. Sir, my last question, if I can squeeze one more. Sir, your experiment of raising price increases on the lower end pack has led to some increased churn. And India being India, where there's so much of sensitivity to prices, do you think longer term in your business model, you should be working more towards higher ARPU increase and worry less about subscriber addition? Or you think, at some point, will -- I mean, what the math you are comfortable with, let's say, you're targeting 20% growth long term. If you could break down what comfort you have on ARPU growth, what comfort you have on subscriber addition growth, more from a medium-term perspective, not nearly next one or two quarters.

Question: Abhishek Bhandari - Nomura Securities - Analyst : Got it. Thank you, sir, and all the best.

Question: Abhisek Banerjee - ICICI Securities - Analyst : Yeah. Am I audible now?

Question: Abhisek Banerjee - ICICI Securities - Analyst : Yeah. Sir, just first question on the productivity bid, right? What is your outlook on that? And recently, one of your competitors actually spoke about using AI tools to do processes which were being done manually until now. So is there any room for you to do something similar?

Question: Abhisek Banerjee - ICICI Securities - Analyst : Okay. So does that mean that going ahead next year, at least, we should see the employee benefits as a proportion of revenues start coming off?

Question: Abhisek Banerjee - ICICI Securities - Analyst : Understood. So if I look at the employee expenses this quarter, right, I see that the churn employees are very high employee per -- employee expense per person. Is that because of the hikes that was taken from first of December? As in if I take --

Question: Abhisek Banerjee - ICICI Securities - Analyst : Got it. But that would also mean that the sequential decline that is characteristic of your Q4 numbers, that will be less sharp this year around, right?

Question: Abhisek Banerjee - ICICI Securities - Analyst : So overall, there is a sequential decline in EBITDA margin in Q4 over Q3, right? That is a trend. Now given you have moved one month earlier, your hike cycle, that would mean that the sequential decline in EBITDA margin (multiple speakers)

Question: Abhisek Banerjee - ICICI Securities - Analyst : Understood. Understood. So that decline will be lesser. Fair enough. And so what was the strategy behind moving forward the increments? Are you trying to do a change in your reporting year -- sorry, I mean employee expenses? Is it going to move forward further going ahead? Or you're going to stay here?

Question: Abhisek Banerjee - ICICI Securities - Analyst : Understood. So now if I talk about gross additions number, right, that I'm guessing would be similar to what -- I mean, at least broadly similar to what it used to be, right? Now where are we seeing this gross addition coming from? As in -- so see, you had spoken about how in Tier 2, Tier 3 cities, you have seen a sharper churn, right, so I'm guessing you would have kind of slowed your gross additions from Tier 2, Tier 3 also, at least from those areas. So I'm just trying to understand what is compensating for that gross additions? 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 18, 2024 / 11:30AM, INMR.NS - Q3 2024 Indiamart Intermesh Ltd Earnings Call

Question: Abhisek Banerjee - ICICI Securities - Analyst : Understood. Now just one thing here. In Tier 3, Tier 4, from the experience of some of your competitors, generally, the churn is high. But it is not like people churn out for lifetime, it is often that they come back after one, maybe six months' time. So are you seeing something like that also happening in Tier 3, Tier 4? Or you have not seen anything like that?

Question: Abhisek Banerjee - ICICI Securities - Analyst : Got it. So the outsourced sales partners will continue to exist for Tier 3, Tier 4. However, they will not be giving you monthly sales customers, where the cost is not making sense as per you as of now.

Question: Abhisek Banerjee - ICICI Securities - Analyst : Yeah.

Question: Abhisek Banerjee - ICICI Securities - Analyst : Got it. In terms of these Tier 3, Tier 4 cities, you, obviously, spoken about some cities/towns, which were a surprise on the negative side, but where some cities or towns which were a surprise on the positive side as well if you could -- if you could talk a little bit on that?

Question: Abhisek Banerjee - ICICI Securities - Analyst : Fair enough. And just one last question for Brijesh. If you have -- could you please explain how things are progressing with Busy and if you are making any additions to your team there?

Question: Abhisek Banerjee - ICICI Securities - Analyst : Understood. That's very helpful sir. Thank you so much.

Question: Vivekanand Subbaraman - Ambit Capital - Analyst : Thank you very much for the opportunity. So my first question is on the elevated churn at silver monthly levels. Dineshji, what exactly is the problem here? Is it because of the acquisition aggression that you did in smaller towns? Are there any specific geography issues? Or is there any servicing issue of the silver monthly users? Could you elaborate on that? Because I couldn't quite understand what the problem is that -- because last time we met in October, you said that you are going back to the drawing board, and I'm sure by now you would have picked up some cues that would help you answer this question better.

Question: Vivekanand Subbaraman - Ambit Capital - Analyst : Fair. I think those observations are very pertinent. Thank you for elaborating. From a servicing standpoint, since you had previously also mentioned that your aspiration was to have that number, the number of paying suppliers to the servicing employees come down so that you could provide better service. But we are not yet seeing -- or rather your company isn't yet seeing the benefits of this investment made in the sales supervising and -- supervision and servicing employees. By when do you think that these employees that you've added for servicing, they start contributing meaningfully, either in terms of getting more upgrades, which will reflect in your collections growth or reduced churn, which will obviously reflect in the net adds?

Question: Vivekanand Subbaraman - Ambit Capital - Analyst : Okay. Thank you for the elaborate discussion and all of 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. JANUARY 18, 2024 / 11:30AM, INMR.NS - Q3 2024 Indiamart Intermesh Ltd Earnings Call

Question: Rahul Jain - Dolat Capital - Analyst : Sorry. I hope I'm audible now?

Question: Rahul Jain - Dolat Capital - Analyst : Yeah. Just one bit on this subscriber addition side of the story. We like your confidence on what growth this platform in this market can deliver. But if you see what -- essentially some of the trend, underlying trend that should support this thing are actually playing out in the market in terms of India as an end market, how we are doing as a country, how we are getting more and more organized, and how more and more digitized we are going into our system and behavior. But why, at least for now, we are not seeing those trends percolating into the -- an outcome that we desire?

Question: Rahul Jain - Dolat Capital - Analyst : Right. And just -- yeah, yeah. Just one more thing. Like since we have a much lower penetration in terms of registered supplier to paid supplier ratio, and we may be following the activities of potential registered supplier who could turn into a paid supplier given the activity increase that they are seeing at their end in terms of consuming lead and other things. Is it that the action which needs to be done on that part of leveraging that cohort and converting them into paid suppliers, that part needs to be improved to a much better outcome? Is that something that we can work on?

Question: Rahul Jain - Dolat Capital - Analyst : Right, right. My small slight part of the question is not getting addressed here. What I was trying to also understand is that when we are going for the gross addition, this is a much larger universe that we are chasing. But there could be a subset of that universe, a cohort, which may be using our platform far more effectively in an unpaired scenario, and the probabilities of those people benefiting out of a paid subscription would be relatively higher. So is that -- that cohort is something which is fructifying better?

Question: Rahul Jain - Dolat Capital - Analyst : Great, sir. Thanks a lot and congratulations on strong margin improvement. I hope that these trends continue on an annualized basis.

Question: Swapnil Potdukhe - JM Financial - Analyst : Hey. Hi. Thanks for the opportunity. So my first question is with respect to the categories if you can call out where the churn is significantly higher right now. And a follow-up to that is, where do you think the churn to customers are going right now? I mean what are the other alternatives that these guys have apart from IndiaMART? And -- or what else are they doing? That will be the first question. Thanks.

Question: Swapnil Potdukhe - JM Financial - Analyst : Got it, sir. And the second question related to the churn again, is like do you think the limited real estate that we have on the platform could be one of the reasons for this churn? Because typically, when your limited number of suppliers can come on the first page of any search page. And especially for silver category customers, their lead visibility will always be low. And therefore, the ROIs for them may not be meaningful. And that may be one of the reasons that you -- the churn rate for them is quite high. And if that is the case, is it -- yeah, yeah.

Question: Swapnil Potdukhe - JM Financial - Analyst : Just a follow-up question to that. I mean -- and this is basis a limited research of mine. The interaction that I have had with the different category of customers, that suggests that your platinum and gold category customers' ROI is significantly better and they're quite happy. But silver category customers typically tend to be -- they don't -- they do get certain leads, but obviously, the conversion rates and the ROIs for them are significantly poor. And that's a broad feedback that -- I mean --

Question: Swapnil Potdukhe - JM Financial - Analyst : Okay. Got it. Got it, sir. Thanks for the opportunity.

Question: Swapnil Potdukhe - JM Financial - Analyst : If I were just to ask that point again, what happens given that the current year churn is very high. The number of people under silver category, obviously, are not those who can move to the higher categories immediately. Like we said in the past that it takes 1 year, 1.5 years for these guys to move to the higher category. So should that reflect on your premiumization for next one or two years, the impact of the current year's inability to grow the silver customers?

Question: Swapnil Potdukhe - JM Financial - Analyst : Got it, sir. Thanks a lot for the opportunity. Yeah, all the best.

Question: Anirudh Shetty - Solidarity Investment Managers - Analyst : Yeah, hi. Am I audible?

Question: Anirudh Shetty - Solidarity Investment Managers - Analyst : Thanks. Thanks for the opportunity. I have a few questions. So my first question was essentially on this buyer behavior given that fundamentally drives traction on the platform. Given that we have a fairly sizable number of registered buyers, already around 16 crores,17 crores buyers and the number of active buyers has kind of remained flat, so what is your broad sense around the usage of IndiaMART potential buyers in India? Would you say that we're at a fairly mature stage or there's room to go even further? And what is the strategy essentially? Is it to get more buyers on the platform, get them to be more active, get more inquiries for buyer? If you could just share granularity around that given that it's very important to our business.

Question: Anirudh Shetty - Solidarity Investment Managers - Analyst : From the customer's viewpoint, is the buyers looking for products that are very bespoke, very discrete, such that their consumption for such products will be actually very infrequent? Or are they actually more like the repeat type of buyers who kind of needed on a more frequent basis? Just to understand the inquiry within that --

Question: Anirudh Shetty - Solidarity Investment Managers - Analyst : Absolutely. And just one final question. We are exploring Tier 3, 4 cities, towns, and you mentioned it's a long process. But I wanted to understand that finally for the suppliers there, we think that the value proposition for an IndiaMART is strong and their ability to cater to buyers' requirements exists or other constraints around just the infra being underdeveloped, or them being so deep in their intelligence at the logistic cost doesn't make sense. So what are the challenges that you think you could face in these markets that weren't there in the metro Tier 1, Tier 2?

Question: Anirudh Shetty - Solidarity Investment Managers - Analyst : Got it, got it. Thank you for answering the questions.