IndiaMART InterMESH Limited (INDIAMART.BO) Earnings Call Transcript & Summary

So as I said, to some extent, I think the better gold and platinum monetization led to some better average collection per customer. So maybe 0.5% recovery on the renewal rate and better collection. However, at least let it repeat for 1 or 2 quarters, and then we can say that this is a trend. Otherwise, one-off 14%, I think let's not become very happy about it. But I think we are cautious. We are targeting even JFM quarter to be similar, but let's see.

Got it, sir. Your comment about this higher renewal rate. Does that mean that we saw lower churn in gold and platinum this time compared to previous quarter?

Sir, as I said, it is too little to quantify.

Got it. Got it. Just last one from my side. You made a comment that we might see lower churn from April, May, June. What gives you confidence? Is there some behavior you are noticing in annual supplier? Maybe they are more active on the platform, they are consuming more lead? And second, are you seeing some, let's say, change in churn, especially for silver monthly? Is there is some activity there?

Yes. So monthly is still not recovering, monthly, because I think there is 2 separate behavior that we found: why somebody takes monthly and why somebody takes annual? So one, obviously, somebody takes a monthly because of the affordability reason that he himself has a cash flow problem and wants to pay monthly. And the second is he wants to try the platform and he has not made up his mind that, okay, Internet, I want to jump in. However, somebody who comes in with annual subscription of INR 32,000, he -- one, he doesn't have that kind of a cash flow problem; and secondly, he has made up his mind that he want to try definitely an annual. So in the annual, the churn rates are always a few percentage points lower than the monthly. So we are hoping that the annual retentions would improve a little bit. But in the monthly, we have not seen any respite. If we would have seen, I would have given you indicator that, "Okay, monthly is improving, so will annual improve."

So we have a question from the chat menu. The question is from Mr. Devang Patel. At the margin, some of the buyer traffic is moving from Google Search to AI search. Given our predominant reliance on Google search for traffic, how do we see this as a longer-term threat to our business model? And what are the measures are we taking to tackle it?

See, 2, 3 things. One, every time a newer technology and more pervasive and more useful technology comes, it overall improves the TAM, means if earlier X number of people were only using Google, now the total number of people that will use either Google or Gemini or ChatGPT would be higher than X. So it actually expands the TAM anyway. Now within that, is Google going to -- everybody -- many different publisher companies are facing stagnation in growth of traffic coming from places like Google. More so where there is a lot more research required. I have heard stories around -- where there is more research required, people do go to AI search. However, where there is a transactional unique content discovery, people continue to go to the search. Having said that, if you go to Google Gemini or if you go to Grok, IndiaMART features well even in those searches. However, currently, those are not giving directly blue links, but they are giving like a reference within that -- within the answer, they are giving reference that this answer has come from here. So we are getting links, but this is a general problem. I think we need to rely more on our repeat traffic. And that's what we are working towards. Currently, our repeat traffics are running almost all-time high at 58%, 59%, repeat inquiries.

We can go ahead to the next question, Vikas.

Next question is from the line of Swapnil from JM Financial.

I have 2 or 3 questions. The first one is on the -- can you just quantify the increase in silver category pricing that you have been mentioning? What was it earlier? And what is the latest pricing that you're offering to the suppliers?

Earlier it was INR 3,000 plus tax on a monthly basis and INR 28,500 plus tax on an annual basis. Now it is INR 4,000 plus tax on a monthly basis. And currently, it is INR 35,000, but currently, we are giving some discount of INR 3,000. So it is INR 35,000 minus discount running INR 3,000, so INR 32,000 plus tax on an annual basis.

Got it. My follow-up question to that is like given the quantum of increase is quite steep, do you think it was the right time to take these price hikes, especially at a time when we have not been able to get the proper control over churn rates?

I mean we, as a company, have taken this decision after enough discussion and enough pros and cons. So we obviously think it was the right time after many, many years. And we also discussed that whether we should go from INR 3,000 to INR 3,500 and then INR 4,000. But this is -- given the size of the sales team and the amount of time it takes to absorb whether it is -- and we did a lot of survey in the market. Most people said it didn't matter to them whether it was INR 3,000 or INR 4,000. People said it matters either it works or it didn't work. So I think, yes, you are right, some fence sitters might actually churn out because of that. But in general, those fence sitter anyway will churn out 1 month later. So it was a well discussed and debated step taken by us. So I mean, I'm not sure whether it is right or wrong. I mean it's a very subjective decision to say whether it is right or wrong.

Okay. I mean, can you help us understand how the churn rates would have moved from previous quarter to this quarter because this was the first quarter of full price hikes and especially for the silver category suppliers. Was there a slight increase...

It doesn't apply to renewals. Renewals continue to happen at previous prices. Only if the next time renewal will come, they will come at the newer prices. So if somebody had taken a INR 2,500 monthly subscription and continues to run, he is still running at INR 2,500 a month. So either somebody breaks the subscription in between, then comes back, that's when the new prices apply. Or if somebody is on the annual subscription, when his next year subscription will come, that's when his new prices will apply.

So will it be fair to say that the full impact of the price hikes are right or wrong, we will get to know maybe 6 to 9 months later. That is when we will be in the actual position to understand whether it worked or not?

Yes, sir.

Okay. Now coming to -- I mean, you said in the past that one of the challenges in increasing the suppliers was the quality of business inquiries that the suppliers used to get and some of them were not happy that led to some incremental churn. But do you think the way our sales teams approach the suppliers, there could be some improvements on that -- needed on that side also? I mean, have you done some analysis on that side? I mean the way our pitch would be to the suppliers and the...

Obviously, there is also some improvement possible. It is -- when it comes to sales, yes, better qualification, better presentation, better convincing helps. When it comes to servicing and churn, more enablement, better CRM, better training also helps. And we continue to work on both sides. As I admitted 5 quarters ago that until 4, 5 quarters, we were actually thinking that it is purely and purely sales and service execution problem. However, when we went -- I myself went to the customer meetings and now I have met almost 100 customers myself, there were small, small things that customers were worried about or they were getting irritated about. And we found few errors also. There were a few blind spots in our product because something which was working, working for a long period of time, we tightened. So I think it has helped. And now I can -- when I go and see and when we see the leading indicators, I think our engagement levels have improved. The BuyLead sold ratio has improved. The irrelevancy feedback has improved. So many of those have improved. Nowadays, more complaint is how do I get more inquiries? I'm unable to get -- catch this BuyLead. So that gives me some confidence that there was some problems. But yes, sales and service can be definitely improved and AI is now helping us put the CRM context. And so we are trying to find if we can help some copilot on the servicing side where the AI can suggest the action of a meeting or action of a call. So I think those are the things that will help us improve the sales. Apart from training and training, how do I enable a normal salesperson? Because having said that we will do training, it's still a high attrition role. Field sales and servicing or telesales and servicing is a high attrition role across the industry.

But my question actually was slightly on the side, like have you considered any changes on the top management side, people leading the sales vertical from that side? I was -- I mean, is that a solution to the problem is one?

No, I don't think so. I mean, if you look at our leadership team, for the last 15 years, they have done a great job. And even this particular quarter, I think -- so I think we have a very good team, and I would encourage any of you to meet our leadership team at different places, regional teams. And there is some performance level rotation, job rotation and churn that continues to happen even at that level. So we do take action if certain particular locations or certain particular verticals are not performing well. But if you are suggesting that a lot of churn at the top level in the business, I don't think that is the problem.

Next question is from the line of Amit Chandra from HDFC Securities.

Sir, most of the questions have been answered, but just to get a clarity, you mentioned about the attrition thing has been stable. But despite of that, we have seen the increase in the collections, which was pretty strong. So is it that the existing customers are opting for more like multiyear packages and expanding their existing packages to more from regional to more wider packages. So that is also leading to kind of collections growth despite the additions being muted? So this is one. And also in terms of the ARPU, is it now the company is getting tuned to more like in the -- like milking the existing customers or enhancing the value for the existing customers only? Or how do you see the overall strategy here?

Yes. So as I said in the earlier answer also, the 13%, 14% collection growth is obviously the number of customers multiplied by the average collection per customer. Now within that, it's everything small, small that works together. At certain places, it is a higher upsell. At certain places, it is the higher multiyear renewal. At certain places, the renewal itself has improved in the gold and platinum. Now coming to your second question, whether we are tuned to higher ARPU and these 2 are -- these 2 go hand in hand. If you need a 20% plus -- if you want to target a 20% plus growth rate, ideally speaking, the company should target 10% coming from customer addition and 10% coming from ARPU addition. I mean it could go from 5% to 15%, but I'm saying anywhere between -- if you want to get all of the growth coming from ARPU, it might get difficult. If you want all of the growth coming from customer addition, it might be difficult. The second part is that each segment plays a different role at IndiaMART. The silver customer brings the buyer side leadership because it gives you the availability of everything and anything on IndiaMART. So that's how you can say [Foreign Language] or any product is available or cheapest price is available. While the ARPU growth at the platinum side, which drives the ARPU growth, that brings all the profitability. So it is -- if you just leave one lever, either you will lose on the top line or you lose on the bottom line. So we have to balance in the long run, both of them. We can't leave it on one side.

And in the last -- some of the calls, you mentioned that change in attrition in the silver monthly or annual bucket might lead to increase in the collections. So is it fair to assume that, say, like if the attrition level comes to normalized level maybe in the next 1 or 2 quarters, maybe we can see 5% to 6% more increase in terms of the collections growth from the current 14% to maybe 17%, 18%, which we were seeing 2 years back when the attrition was normalized. So is the math still similar? And the second question is that obviously, you mentioned about the sales thing that we have been trying to do and in terms of training. So apart from the sales, another very important aspect is the technology because from that, we have -- obviously, it is getting upgraded. But do you think that the platform needs a very severe upgrade in terms of the way the things are handled in terms of business inquiries or in terms of -- in terms of the interaction it is having with the buyers and the sellers that actually lead the series upgrade...

Of course, yes. There's a huge opportunity today in terms of upgrading the platform in many ways, whether it is user interface, whether it is user experience, whether it is multimodal, whether it is multilingual, whether it is instead of search, a chatbot. Also, I think the -- earlier, the trust was -- trust indicators were mostly direct. Now with AI, you can do a lot of indirect ways of creating internal trust score, preventing any kind of suspicious activity. So I guess, content moderation -- every aspect today, given the technology has taken, and technology has enabled very, very nicely in the last year, especially. It has become within reach of everybody. I mean, just take an example of voice AI. Today, almost 80% of our buyer interaction, which used to happen on a normal call have already been gone to AI voice bot. And they are performing better in terms of quality and better in terms of productivity. So I guess whether it is off-platform, whether it is content, whether it is user experience, everywhere -- world over, every technology platform, every UI platform will require significant upgrade. And we are cognizant of that fact, and we have always been ahead -- a very good user of the technology. We started Internet portal in 1995. So that will give you some glimpse of future that we can see.

No, no, sir, that has been really a great journey. But why I'm asking is this because for several years, we have seen the user interface typically being the same, right? We have not seen a very major upgrade. So where we are in terms of the upgrade journey, if you can give some idea. And also in terms of the internal technology team, how the internal technology team functions and things.

So there are 2 things. One is the look and feel that you see. Maybe look and feel feels a little dated, and I take that feedback. I mean, if you really look at the Microsoft Excel in 1992 and today, they are the same, but there's great functionality. So there is nothing much that has changed on Google or Microsoft Excel in last 20, 30 years. It is the substance that gets changed. Having said that, feedback taken. We will upgrade and uplift the design and feel. However, the technology slide is in front of you. You can see there is a lot of changes currently going on, and we are very proud of our own technology platform. You just see the site speed that we open and the complexity of the things that we do, we are very proud that -- and we do benchmarking with our technology. Our technology platform is equivalent or faster similar to Amazon.com. Our security levels are 96%, which is even 1 point higher than Amazon. So I think we continuously benchmark ourselves with Google and Amazon of the world.

Next question is from the line of Shubham Sehgal from Securities Investment Management.

My first question is, could you share the typical progression of the paid suppliers from silver to gold or platinum tiers? And additionally, I just want to understand how has this trend changed in the recent 1 or 2 years compared to the past years. So due to the churn, how this trend has changed? And if you could just share the typical progression on an annual basis, how many suppliers we expect from the silver category to get upgraded?

Yes. So typically, historically, 15% to 20% customers from silver move to gold. From gold, another 15% customer typically move to platinum -- no, 10%, I think. So nowadays, ever since the renewals have dropped, most of the upsell has dropped. So 80% of drop will come from the upsell because if they were to -- if the renewal was higher because most of the upsell happened at the time of renewal. When the people come up for renewal, that's when the upsell happened. Since the renewal itself has dropped by 10%, 15%, I think the upsell itself is currently trending at 8%, 9%. So from 17%, 18% upsell, which used to trend anywhere between 15% to 20%, that is now trending at 5% to 10% depending upon the different industries and different buckets.

Okay. Got it. My next question was in the previous calls, you had mentioned that there is still a significant headroom for ARPU expansion among the enterprise customers that we have, given the large marketing budgets. So could you help me quantify this potential? And what is the estimated ARPU seen for this segment, the enterprise segment over the next 2, 3 years? And currently, what would be the percentage of IndiaMART's current revenue or paying supplier base, which would be made of these enterprise customers?

We have about 100 to 200 odd customers in the enterprise segment. And depending upon -- and when I'm saying 100 to 200 means those who are platinum and enterprise both, because there might be certain platinum customers who have been using our gold service or using our silver service. Now from there, if you see the top 1% of the customer, you will see 2,200 customers currently are paying INR 11 lakh per annum. So top 2,200 customers. And within that, if you see the [ Pareto ], this can -- at the highest level, we have customers who end up paying even upwards of INR 50 lakh. So this is the average of top 2,200, INR 11 lakh. So if you see the median and above, you will see that it is ranging from INR 5 lakh to INR 50 lakh or so.

Okay. So just a follow-up on this. So like -- and actually regarding the ARPU growth, so you mentioned that the normal growth that we expect is around 6% to 8%. But in the past few quarters, when we were getting accelerated ARPU growth, you had mentioned that it is due to the new categorial and differential pricing that we have involved in our system. So I just wanted to know like either that categorial pricing difference, has it just normalized in the system, that's where now the ARPU growth will normalize as well. Or could we again see the accelerated periods of ARPU growth?

ARPU is driven by revenue and revenue is coming from deferred revenue, which typically reflects 3-quarter-ago collection trend. So if you want to see the current quarter ARPU -- so if 3 quarters ago, my collection was 9%, so is ARPU was -- out of that, 3% was customer growth, 6% ARPU growth, that ARPU growth, you are seeing today. So either you see customer and collection and average collection per -- because average collection per user is not a standard metrics in the market. Otherwise, if you see the ARPU, it will always be a 15 months moving average ARPU.

Okay. Got it. Just last question. So on our platform, we do have different tags for different industries like tag known as industry leader or leading supplier, and that's for the specific categories of the searches. So is there like a cap on the number of these tags that we have, the industry leader and leading supplier? And if there is a cap, does this help in retaining the customers because if they might go off with a tag or like remove the tag, that tag would be handed over to someone else. So is there a cap? And does it help in retaining any leaving customer?

It comes at both -- if I have limited number of tags, then I limit my TAM because there is a limit to what a single person can give. But if I have unlimited -- so initially, when we launched the industry leader program, I think we had 3 maximum thing. But over the time, the demand in the market was that I can't pay you INR 30 lakh for it being an industry leader, but there are 3 people who are willing to pay or 5 people who are willing to pay. So we did -- I think we have only one product, which is the category leader or something, which is not visible there as a tag. But other than that, all the products are available with the demand/supply kind of thing.

So we have one last question from the chat menu, which we can take probably. This is related to accounting products. This question is from [ Mr. Vaibhav Jha ]. In our accounting products, can you throw some light on how the products are different from each other or how they complement each other as part of the stack? And what is the value addition in comparison to competition like Tally Zoho Books, et cetera?

So if we look at the 3 major companies within the accounting portfolio that we have: one is, Busy; second is Vyapar; and third is Livekeeping. Each of these companies essentially have a very different target segment. So, Busy, for example, starts to do very well in the small and medium-sized business segment. These are businesses typically who will have a requirement of managing inventory apart from doing basic sales, who would want to do GST filing. When we come to Vyapar, Vyapar essentially will focus more on the micro size businesses. These are businesses where billing is essentially the most primary requirement. And these are businesses which are smaller in size, they want to go ahead and work upon billing through mobile app more than just rely upon a desktop-based software. When we look at Livekeeping, Livekeeping exclusively focuses on existing customers of Tally who would want to have a browser-based and an app-based access to the data and work upon that. So Tally does not offer you those opportunities currently. And therefore, Livekeeping become extremely useful to about 2 million of subscribers of Tally who essentially would want to access data on browser, on using a mobile app online. So each of these companies are targeting different sets of customers altogether. And as a whole, therefore, we see that we will be able to have a significant play in the overall accounting industry segment altogether, right?

Thank you. This was the last question for the day. I would now like to hand over the call to Dinesh Agarwal for his concluding remarks. Over to you, sir.

Thank you, ladies and gentlemen, for joining our quarter 3 FY '26 conference call. We have tried to address your queries in the time available. But if you still have any questions, please feel free to contact our Investor Relationship team. Thank you, and good evening -- good night.

On behalf of IndiaMART, we thank everyone for joining us on this webinar. You may now disconnect your lines. Thank you.