Indiamart Intermesh Ltd Q4 2024 Earnings Call Transcript

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

Question: Vivekanand Subbaraman - Ambit Private Limited - Analyst : This is Vivekanand from Ambit. So my two questions. The first one is on collections. The last two quarters, we have been seeing that the stand-alone collections have been growing at 16% year on year materially below the trajectory, the 20%-plus trajectory that Dinesh you keep highlighting. I understand some of this could be due to churn, which may be temporary, but your aspiration was to grow collections at 20% to 30% CAGR. And now collections is growing at a materially slower pace. So just wanted to get your thoughts on the extent to which the market is penetrated? And are there any other challenges that you see that are perhaps symptomatic of this issue, which is obviously a very big one for investors. The second question is on the margin trajectory. We are seeing that the margins are improving, cost seem to be under control, not growing at the same pace as before. Could you help us think through the margins for the stand-alone business over the next two, three years and the key levers?

Question: Vivekanand Subbaraman - Ambit Private Limited - Analyst : Thank you, Dinesh, for the very elaborate answers. Just pressing a bit further on the collections point, how confident are you to resolve this issue with respect to churn because this is the third quarter that churn seems to be cited as a key issue, and you don't yet seem to have the answers to resolve the elevated levels of churn. And if I may also add, could you help us understand the churn levels in percentage terms across the key customer buckets?

Question: Vivekanand Subbaraman - Ambit Private Limited - Analyst : Sure. All the best.

Question: Nikhil Choudhary - Nuvama Group - Analyst : Yes. Dinesh sir. Sir, my first question is on the collection side, again. I just want to understand, last time when we discussed the commentary by you was that collection, we will go back to 20%-plus in coming quarters. And given the collection slow down further. So while supplier addition part was part of the expectation, I believe. So was there some disappointment even on the ARPU side and that's what led to collection, where they are. Also, while ambition is to get back collection to 25%-plus, 30% growth, any guidelines for FY25 for coming quarters given supply addition continue to remain lower?

Question: Nikhil Choudhary - Nuvama Group - Analyst : Sure, sir. There is further improvement in other few KPIs sir, especially registered buyer entries further, last time you mentioned that it could have increased due to some scrapping or something or web crawling or something. But is this improvement is now a sustainable trend or organic trend? And do you think this will lead to improvement even in purchasing or unique business inquiry increasing because while the unique business inquiry increased 14% YoY from a lower base. It's at a similar level what we have seen in quarter two. So from that level, we haven't seen a material improvement in business inquiry. So is registered buyer can be seen as early indicator there?

Question: Nikhil Choudhary - Nuvama Group - Analyst : Sure, sir. Understood. Sir, last one on margin. Margins were very strong, similar to last quarter, even though you highlighted that wage hike started from December this time. Still on Q on Q basis, the margins were more or less flattish, right, despite of two months of wage hike in quarter four. And clearly, sales and marketing is the one part where there was hardly an improvement on Q on Q basis, despite a general trend, what we have seen in previous years that you pay large bonuses. Is it fair to assume that, that benefit is largely due to lower bonus payment?

Question: Nikhil Choudhary - Nuvama Group - Analyst : Sir I understood, the only point last one I have is regarding the employee addition, which was about 200. Just wanted to confirm, is this addition was for the full quarter or this 200 addition was during the end of quarter just from cost perspective?

Question: Swapnil Potdukhe - JM Financial Ltd - Analyst : First, I wanted to understand on the breakup of the collections growth, which is around 16%, so what I understand, obviously, it is -- it includes the paying supplier base and then the ARPUs. But there is also a third element, which is basically the average tenure or the -- or customers are taking a longer period tenure instead of a one year or monthly plan. So that also supports collections growth, if I'm not wrong. So I just wanted to understand, so if I were to break it down, what would be the collections growth attributable because some of the customers would have taken longer tenured plans within that 16%? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2024 / 11:30AM, INMR.NS - Q4 2024 Indiamart Intermesh Ltd Earnings Call

Question: Swapnil Potdukhe - JM Financial Ltd - Analyst : Has there been a change in the mix?

Question: Swapnil Potdukhe - JM Financial Ltd - Analyst : Okay.

Question: Swapnil Potdukhe - JM Financial Ltd - Analyst : Okay. I take your point. But if I were to just understand it a bit more. So typically, collections growth -- collections mainly comes from the renewals or people in the Gold and Platinum Tier's, right? Because Silver inherently contributes very less to the collections --

Question: Swapnil Potdukhe - JM Financial Ltd - Analyst : Right? And my sense is like the 80% of the collections comes from the Premium categories versus around 15% to 20% from Silver. So why would a churn -- so my question is, why would a churn in Silver category impact your collections growth. I mean if it contributes just 15% to 20% to your collections, why is your collections growth slowing down then?

Question: Swapnil Potdukhe - JM Financial Ltd - Analyst : Okay. And one more question with respect to the churn itself. Now in the opening remarks, you mentioned that the churn is happening mainly in the first-year Silver monthly customers, right? And I'm presuming they would be onboarded at an average realization of around INR2,500, which was the norm prior to the May hike that we took. So if we are not able to retain these customers who were there at INR2,500 per month, and now we have taken a 20% hike in May, what is the confidence level of you have to keep on adding customers at 5,000, 6,000 that you just mentioned. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2024 / 11:30AM, INMR.NS - Q4 2024 Indiamart Intermesh Ltd Earnings Call Because I would presume that customers were on a lower realization, there would be -- you can retain them far easier than someone who is on a 20% higher realization. And we are seeing this challenge in the low -- yes --

Question: Swapnil Potdukhe - JM Financial Ltd - Analyst : But just -- but what is -- then what is the confidence that we would be able to do 5,000 to 6,000 additions that you just mentioned next year, given that this issue may persist right next year as well?

Question: Swapnil Potdukhe - JM Financial Ltd - Analyst : Okay.

Question: Swapnil Potdukhe - JM Financial Ltd - Analyst : Okay. Got it. All the best.

Question: Anirudh Shetty - Solidarity Advisors Pvt - Analyst : Yes. Am I audible?

Question: Anirudh Shetty - Solidarity Advisors Pvt - Analyst : Just a couple of questions from my side. Sir, just one question is as we aspire to grow collections at 20%-plus, is it fair to assume that the unique buyer inquiries also must grow at a similar pace? Because finally, it's the buyer inquiries that feeds our customer addition growth or ARPU increase over time. And if that's true, then, do you think that the business inquiry growth that we're looking to achieve, which is, say, 93 million going to 100 million, would that be sufficient to kind of drive that growth? So I just wanted to understand how are we thinking about long-term business inquiry growth to kind of achieve our aspirational collection growth?

Question: Anirudh Shetty - Solidarity Advisors Pvt - Analyst : Very helpful. And let's say, if the market is 100 million, we are at 40 million, do you think at some point, advertisement could help to attract more buyers. And from a frequency of transaction perspective, just getting them to do more -- transact more on your platform, what are the levers that we have available there?

Question: Anirudh Shetty - Solidarity Advisors Pvt - Analyst : So my next question is on the gross profit margin. The last couple of years, our gross profit margin seems to have come down. I just want to understand the reasons and going forward, where do you think the gross profit margin could settle?

Question: Anirudh Shetty - Solidarity Advisors Pvt - Analyst : So we should see improvement in -- when you say EBITDA margin can improve by 1%, that's -- is that primarily going to come from gross profit margin improvement? Or we could see...

Question: Anirudh Shetty - Solidarity Advisors Pvt - Analyst : Got it. Got it. Got it.

Question: Abhisek Banerjee - ICICI Securities Limited - Analyst : Hello. Can you hear me now? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2024 / 11:30AM, INMR.NS - Q4 2024 Indiamart Intermesh Ltd Earnings Call

Question: Abhisek Banerjee - ICICI Securities Limited - Analyst : So sorry. No, just trying to understand on the manpower cost a bit, right? The net additions have been low for almost the last 4 quarters. So by now, we would think that manpower should have come off a little bit in terms of additions. So what is your outlook going ahead? And also this quarter, I saw that the outsourced sales cost has actually declined on a sequential basis, right? So is that indicative of a strategic call to not outsource as much anymore because some of the churn was also due to this.

Question: Abhisek Banerjee - ICICI Securities Limited - Analyst : Understood. Understood. So also with regards to the additions -- rate net additions, given that from Q1 FY24 is when you had the problem of churn. And if I think that -- so by this time, probably most of the people who were on the verge would have churned out, right? So that kind of implies that Q1 FY25, the churn numbers should come down pretty sharply. Is there something that I'm missing in this analysis?

Question: Abhisek Banerjee - ICICI Securities Limited - Analyst : No. So I'm saying, see, these people -- the people who are churning out were mostly Silver monthly and Silver yearly customers, right. So I would imagine that the people who were churning out -- I mean the less valuable customers would have churned out within a year's time frame, right? Because all their subscriptions would have expired. So from Q1 FY25, we should not see the same problem in -- I mean, that is what it is.

Question: Abhisek Banerjee - ICICI Securities Limited - Analyst : No, that I understand. But just now you also spoke about the first-year customers, right? So obviously, if the net additions have been on the lower side in the last one year?

Question: Abhisek Banerjee - ICICI Securities Limited - Analyst : Great. Sir, also, if I were to try and understand the strategy for monetizing the other part of the supplier base who are not paying anything right now. And I know -- I mean, this is obviously much easier sale than done. But is there something that you're working on? Because see, on one hand, I completely understand the value-added offerings that you are giving for your Platinum customers? I mean for people to be moving to the higher end of the spectrum, right? But at the same time, there is obviously need for a platform to be a place for just converted businesses might -- I mean largely offline businesses to just come online and exist, right, or to create a foothold on the online part. So what is the strategy? Is there any way that some kind of monetization can be worked out here?

Question: Abhisek Banerjee - ICICI Securities Limited - Analyst : Yes. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2024 / 11:30AM, INMR.NS - Q4 2024 Indiamart Intermesh Ltd Earnings Call

Question: Abhisek Banerjee - ICICI Securities Limited - Analyst : Perfect. And in terms of the overall consolidated performance, it was a little surprise to see that Busy on a yearly basis has not really outperformed on the profitability part. Anything that you would like to call out there? And if there any corrective actions that are being put in place?

Question: Abhisek Banerjee - ICICI Securities Limited - Analyst : Understood. Understood. So also, you have very kindly shared a sheet on your CapEx expenditures and all. There I saw some strategic investments which were done in this year to the tune of around I think INR25 crores, yes. So what was this, if you could give us some clarity?

Question: Abhisek Banerjee - ICICI Securities Limited - Analyst : No, that's fine. I was just trying to understand if something fresh you have done or not. Okay. This is very helpful, sir.

Question: Sarang Sanil - RW Investment Advisors LLP - Analyst : Firstly, sir, was there any depreciation, amortization item that has materially impacted this quarter? And should we expect this run rate to continue because we saw quite a jump this quarter?

Question: Sarang Sanil - RW Investment Advisors LLP - Analyst : Okay. So we can expect about INR6 crores to INR7 crores run rate?

Question: Sarang Sanil - RW Investment Advisors LLP - Analyst : All right. Secondly, though in the previous call, you had mentioned that moving outsourced salespeople to permanent payroll of the company does not help us on the cost side. I just want to double check that this strategy has not really aided our margin expansion this quarter.

Question: Sarang Sanil - RW Investment Advisors LLP - Analyst : Sure. So there's no training cost per se when they migrate to permanent payroll, right?

Question: Sarang Sanil - RW Investment Advisors LLP - Analyst : Yes. So in the medium to long-term, it's a lever for margin expansion. Got it. Okay. Best of luck.

Question: Jasdeep Walia - Clockvine Capital Advisors Pvt Ltd - Analyst : Sir, can you hear me?

Question: Jasdeep Walia - Clockvine Capital Advisors Pvt Ltd - Analyst : Sir, what is the growth in the number of Gold and Platinum customers for FY24 and 4Q '24?

Question: Jasdeep Walia - Clockvine Capital Advisors Pvt Ltd - Analyst : Okay.

Question: Jasdeep Walia - Clockvine Capital Advisors Pvt Ltd - Analyst : What was the number at the beginning of the year, 46.9%?

Question: Jasdeep Walia - Clockvine Capital Advisors Pvt Ltd - Analyst : Got it. And sir, what is the growth in revenue of Gold and Platinum customers for the year?

Question: Jasdeep Walia - Clockvine Capital Advisors Pvt Ltd - Analyst : Got it, sir. And sir, is there any change in the churn metrics for Gold and Platinum customers? Or they remain --?