IndiaMART InterMESH Limited (INDIAMART) Earnings Call Transcript & Summary

On behalf of InterMESH Limited, I welcome you all to the company's quarter 1 FY '27 earnings webinar. [Operator Instructions]. Joining us today from the management side, we have Mr. Dinesh Agarwal, Chief Executive; Mr. Brijesh Agrawal, All-Time Director; Mr. Jitin Diwan, Chief Financial Officer; and Mr. Prateek Chandra, our Chief Strategy Officer. Before we begin, I would like to remind you that some of the statements made in today's conference call may be forward-looking in nature and may involve risks and uncertainties. Kindly refer to Slide #3 of the earnings presentation for the retail disclosure. Now I would like to hand over the call to Mr. Dinesh Agarwal for his opening remarks. Thank you, and over to you, sir.

Thank you, Avijit. Good evening, everyone, and welcome to IndiaMART's Quarter 1 FY '27 Earnings webinar. We have circulated our earnings presentation, which is available on our website as well as the stock exchange website. We are sure you would have gone through the press same, and we would be happy to take any questions afterwards. IndiaMART has delivered a consolidated revenue from operations of INR 414 crores in the quarter 1, representing a year-on-year growth of about 11%. Consolidated collection from customers grew at grew to INR 463 crores, representing year-on-year growth of 8% in the first quarter. Consolidated deferred revenue grew to INR 2,014 crores, representing year-on-year growth of 16%. In quarter 1, unique business inquiries were 26 million. Our total playing supplier base was 2 lakh and 18,000 at the end of the quarter 1, reflecting a net decline of 1,850 suppliers during the quarter. This decrease can be primarily attributed to moderation in the grass addition as well as elevated churn at the silver subscription tier. Our platinum and gold subscribers, which contribute approximately 50% of our customer base and more than 75% of the revenue continued to have good upsell and retention rate. At the platform level, we are embedding elements of trust and safety into the foundation of the marketplace. Our already existing strong seller verification through multilayer [ KYC ] prices trustee verification along with the transparent supplier ratings and review is now supported by seller verification features that helps the buyers to verify sellers before making any payments, further to enhance bar confidence, we have introduced the buyer payment protection program for eligible purchases with [ Casil ] verified suppliers. We continue accelerating our AI evolution incorporating intelligent capabilities into our platform. We have streamlined the discovery process by introducing a standardized cataloging, intelligent matchmaking and the content [indiscernible]. We are also operating one of the largest agent call handling system in the country that autonomously handles over 1 lakh calls per day. All these initiatives work together to create a seamless and efficient experience for both buyers and sellers. Our focus remains on enabling business to unlock sustainable growth through technology that evolves with their needs. Now I will hand over the call to Brijesh to update about [ Busy Infotech ]. Thank you, and over to you, Brijesh.

Good evening, everyone. Data billing of about INR 59 crores in Q1, and this represents a year-on-year growth of 10%. The revenue from operations were at INR 36 crores, which is about a 47% growth. The deferred revenues were about INR 146 crores for the quarter and this shows a growth of 44% year-on-year basis. And the cash from operations were at about INR 16 crores. Now during Q1, we sold approximately 12,000 new licenses. And with this, the total number of new licenses sold count has gone to 4 lakh about 54,000 as has been carried, we have been investing behind improving the product, the overall user experience. And in this regard, we have also gone ahead and launched a new version of [indiscernible], which has a completely revamped UI/UX. And we think that these investments that we are making in -- will create a foundation for the next phase of growth for [indiscernible]. And with this, I will hand over the call to Jitin to discuss the financials.

Thank you. Good evening, everyone. I'll take you through the financial performance for the quarter ended June 2026. Consolidated collection from customers was INR 463 crores in the quarter, representing [indiscernible] growth of 8%. In year stand-alone collection from customers for the quarter was INR 402 crores, registering a growth of 8%. Consolidated deferred revenue stood at INR 2,014 crores, an increase of 16% on Y-on-Y basis. Consolidated revenue from operations was INR 414 crores for the quarter, registering a growth of 11%. Consolidated EBITDA was INR 146 crores for the quarter, representing a margin of 35%. Margins continue to be elevated on account of savings arising from lower customer acquisition and operating leverage. In Q1, consolidated other income for the quarter stood at INR 107 crores. The increase was primarily due to mark-to-market gains on our [indiscernible] portfolio. Consolidated net profit for the year was INR 172 crores and consolidated cash generation generated from operations was INR 163 crores for the quarter. Consolidated cash and treasury balance overall stood at INR 3,523 crores as on June 30, 2026. Board of Directors has approved the creation of a new subsidiary IndiaMART Finance Limited. This entity will serve [indiscernible] further short-term credit requirements. Thank you very much, and now we are ready take any questions.

[Operator Instructions]. First question is from the line of Kunal Thanvi.

I had 2 questions. One was on this finance subsidiary that we have created. Can you help us understand what is the objective of this? And what is the -- what kind of business we are going to conduct in this facility? Are we going to lend our own balance sheet? Or it could be a partnership with someone else? If you can help us understand that. Second is, is there any plan in terms of monetizing buyers at some stage? And like a related question to that was we've been seeing a number of buyers on our platform going down. If you can help us understand reason for the same? And how should we read into this?

Yes. So let me first answer the wholly owned subsidiary approval, IndiaMART Finance Limited. Our objective is to facilitate transaction financing in order to help improve the marketplace effectiveness. And in that process, we have been saying that credit facilitation during the commerce remains, especially in the B2B commerce, that remains one of the key areas where the commerce happens. And we have been doing various smaller experiments here and there in order to do a better customer experience and do a slightly better partnership. I think we have created a company called IndiaMART Finance Limited, which will work with partnership lenders to create a small, small products and solution for short-term transaction financing. We do not have any plans to lend out of our own balance sheet, any large amount. So it is mainly to do the partnerships and short-term financing. Now coming to the buyer monetization. See buyers are currently being monetized by way of seller inquiry or sell an RFQ, we have been thinking about launching a buyer paid buyer program, which gives certain value-added services. If you go to the IndiaMART website, currently, there is some experiment going on in on paid by our program. As and when something better comes, we will let you know. The second piece is the under monetization is the buyer demonetization. We have various insights on 2 category affinity of the buyer are the turnover affinity of the buyer and all that. And we are able to experiment that with the other audience monetization platform to be able to monetize on the third-party advertising platform through our retargeting mechanism. So those are some of the bio monetization programs that we are happening. We are not directly involved in buyer transaction-based monetization. In terms of buyer inquiry, I think they are typically flattish and plus/minus on here and there. But by and large, there are typically been flattish at unique business inquiries of 26 million, 27 million.

Next question is from the line of Abhishek Banerjee.

Yes. A couple of questions from my side. So on this lending platform, right? So what kind of financing would this be, whether it be invoice discounting or [indiscernible] just working on refinancing? And also Dinesh mentioned something about you have been learning some experiments or [indiscernible]. If you could give us some more color on that, as in what are the earnings, et cetera, what is exciting, that will be really handful. Also wanted to understand, this quarter, the growth in collections in biz has been slightly lower than the trade growth rates? Any particular reason for that? If you could do just [indiscernible].

So until now, we have only mostly experimented with trying to give any lending leads that came to us to the various financial institutions to see if they can mature those leads far further financing them either as a buyer or as a seller. However, in today's scenario of the digital world, I think turnaround time, et cetera, has become quite fast as against -- if you are doing the lead transfer. So lead transfer mechanism. One of the learning is that today's acceptable turnaround times are minutes and hours rather than days of the yesterday world. And that is why we needed particular LSP subsidiary, we said that, okay, we will do. In terms of products, I think mostly, as I said, there will be around helping buyer and seller to strengthen the marketplace for the short-term transaction financing. I do not understand whether it will be the invoice discounting or reversion wise discounting, but somewhere near that. I hope that gives some clarity. And as and when we will do more experiments, we will keep coming back to you every quarter. Now on the [indiscernible], I think --

[indiscernible]. So if you were to look at the Q1 of last year, we actually had about INR 10 crores coming in because of onetime impacts that we have introduced in that particular project. So in fact, the growth in Q1 of FY '26, that growth rate was also significantly higher than the normal. And therefore, if we were to remove that onetime INR 10 crore advantage that we got in that quarter, we would still be growing on a normalized basis at about 30-odd percent. So that's the reason why you see a 10% growth in billings, but in terms of deferred revenues in terms of the revenues recognized the growth change on a more normalized level of 30% to 40%.

Understood. I just got one last [indiscernible] from a number of buyers on the platform. Is there any that you are considering in kind of boosting that up? We have been talking about making more marketing expenses. But that hasn't been pacified in increasing buyer account, et cetera, or revealed business prior that matter. And do you kind of [indiscernible] this in any way with improving quality of inquiries or quality of on the platform? If you could give some current on that [indiscernible].

Yes. So we did cut down on some of the non-quality buyers that I have highlighted some 4, 5 quarters earlier. So -- but you are right that in the last 3 quarters or so, as we are spending per quarter on the advertising, that is primarily has shifted the buyer base from whatever organic decline that we had exited the base to be [indiscernible] more higher ARPU buyers. I mean, the categories where we are able to monetize because we do not advertise across the category or across the geography. We advertise specifically in those top 10% categories where exactly we know how to monetize that buyer better. So we -- so while on an overall number, you are seeing that the overall number of buyers are stagnating, -- but we are feeling only those buyers where we are -- we have a very strong monetization from the seller side. So if I look at internal metrics, where I look at the more monetizable buyer versus the less monetizable buyer. I think -- we are happy with the monetizable buyer growth. On the -- on the overall decline of the buyer, because currently, we are experimenting more with Google -- and since our primarily source of new buyer acquisition was Google. So there is some kind of a cannibalization. As we expand our advertising to Facebook or Meta Instagram or YouTube. I think we will be able to get additional set of buyers currently because -- the problem was that in the Google, there are a lot of blocks of names were coming, nonlinked [indiscernible], the popular products, Q&A, sponsored link those kind of things were coming. So I think despite the fact that we were -- we are first [indiscernible] organic, -- but on a mobile device, you are probably not visible in the first fold itself. So current endeavor was to experiment and remain at the top of the screen. So that's where we are. I think as we scale up, you will see increase in the business inquiries, unique business inquiries.

Next question is from the line of [ Pratik Kothari ].

So one question. So last quarter, as we have spoken about now shifting our focus more towards quality of buyers or the trust that the platform can provide. So if you just talk about how is that endeavor way?

I think I highlighted already in my opening, maybe you missed, I'll just repeat that. So earlier on the -- on the trust piece, we used to have a verified seller. On the verified seller [ Bayer ] was only required to do a full number-based identification. Now we are slowly moving to 100% OTP verification for the buyers also, because I also highlighted the benefit of moving that there because currently, there is too much of AI-based agent [indiscernible] going on. And if I move behind it again, I'm able to save some of my unnecessary parsing that is happening. Secondly, we are now deploying from phone number and GST to further identify verification of the buyer. And there are APIs and there are self-declared buyer things. Third, currently, there are -- there are many times when IndiaMART introduces a buyer to a multiple supplier while Bayer has selected only to initial one or 2 suppliers on the platform, the other one or 2 got introduced to him because of IndiaMART. Then buyer wants to see the detailed profile of the seller. So we have launched a noose or a seller verification page where they can put any particular number of our GST number or e-mail ID, and it will display the seller trust profile. Another thing that we are trying now is the payment protection program. So that currently, when you are receiving a QR code or an [indiscernible] instruction on the WhatsApp, because the sellers employee might have sent it to you or somebody might have sent it to you. You want to reverify that into the verified accounts. So for every seller, who is the IndiaMART trustee seller, IndiaMART paid seller. We are also verifying their bank accounts now. So that while making the payment, you can actually do the verified transfer only. Apart from all of this, we are also offering now for all the [indiscernible] buyers. I mean, the buyers of all the trustee sellers with the payment assurance of INR 5 lakh to INR 5 lakh. So these are some of the things that we are improving to improve the trusted ecosystem on IndiaMART.

Second one, this -- I mean, so currently, we're not adding gross paid suppliers because I mean we intend to kind of solve for this [indiscernible] in terms of what I'm using it. When do we kind of except maybe the business structurally how the profile has changed and this higher churn stays and the mix now start focusing on adding gross customers. I mean we might have just added more gross customers because the leakage might be higher or the churn might be higher. Or do we think this is a solvable problem for now?

I mean I can't really answer that for sure because we are trying various methods and various ways. You never know which one is the -- has fixed the real leakage because earlier, the complaint was that the quality of inquiry or the quality of conversion was not good enough, and we fixed that actually. We fixed that, and we came back to you and we showed that. And even when I -- when we do seller service, sellers are very happy with the quality of inquiry and all that. Now there is a shortage of impact. So this is something that we have started to face recently only because the quality of inquiry is too good. Now there are shortage of by leads or shortage of inquiry. Now for the shortage of inquiry, we are trying to work on the repeat by a framework or new buyer acquisition framework. On the other hand, there is also Google is also a little bit under pressure from ChatGPT and others. So effectively, we are trying to manage 2, 3 things. As we do multiple experiments, we will come to know which one helps us either increase the buyer increase [indiscernible] time or buyer repeat [indiscernible]. In the meantime, I think, as I said, our golden platinum seller bucket, which is about 50% of the customers, they are very happy and they continue to upgrade. While we continue to see the areas where we are leaving the money on the table. So there are a lot of areas where category-based pricing is required and we touched a little bit on your 3-tier pricing system for the category. So for -- in the [indiscernible], how to charge according to the return on investment based upon the value of the product or based upon the number of by us in every product. Having said that, we can keep trying. When does it start to result into a net growth that only time can tell.

My actual question was on net growth is a function of gross minus 10. So while you are solving for the churn we have let go of gross, say, over the last 2, 3 years until we sold for. My question was to be, at some point, except that we were trying different things that churn maybe this is a structural way as to stay and then we just add more gross, which is also the net addition also.

That will happen only for 2, 3 quarters. I mean if I go and acquire larger, and you might have seen that happening with many other subscription players. So I mean, I can go one more round more Tier 2, more Tier 3 or more weekly, monthly kind of a payment system but that will come back again with that. So once we get the product market fit right, we will know internally that, okay, the customers are renewing because if the customers are not renewing acquiring same customer with double the intensity will make the cash go higher and the LTV go lower. So the cash LTV will never work on that piece. So we have to be cognizant of the fact that there's no point acquiring a very low-end customer. So we have to [indiscernible] that before pressing pattern on the growth.

Next question is from the line of Vivekanand.

Two questions. So number one is for being churn, you decided to change the, let's say, model of customer acquisition, focusing on certain areas, you increased prices you also introduced more checks and balances at an early stage. Now I'm just trying to understand this better in terms of the initiatives that you're taking to curb churn and improve the quality of the new gross adds. What else are you doing which could perhaps yield better results in the next 6 to 12 months? And that is my first question. The second one is now that there is a considerable amount of traffic that is moving to the LLMs and not to search engines. How do you ensure that the LLMs are also looking at the results that are there on the platform in the same light as perhaps Google does with SEO? Are there any initiatives that you have taken that help LLMs surface your platform's results on top so that whenever anyone ask questions on the LLMs regarding any product that -- where IndiaMart has very good quality suppliers, the LLM surfaces your link instead of just giving an answer.

Yes. So on the initiatives, on one initiative is that have a better quality of supply. The second initiative is do a better curation and cataloging and digitization and category mapping and better specifications on the marketplace. Number third initiative was that have only a better quality of buyers, better quality means, better quality of the inquiry fill-rate, so that inquiry have quantities and specification and things built up. Our fourth initiative is which we are trying through the financial service also to improve the -- build the credit into a transaction so that if there is conversion not happening because of the core transaction because many of the B2B transactions do require credit to happen. And credit also brings some transaction visibility and some certainty to the delivery. So these are some of the things that we are trying other than basic sales process modification. Now coming to the bigger question, which the -- everybody in the world asking whether these LLM will become the searching [indiscernible] are these LLMs will [indiscernible] and that it will become private. And so that question is difficult because one thing is for sure that LMs would try to answer as much of the things at their own rather than transferring the control back to deal because nowadays, there is hardly anything which is hidden from the copyright. I mean they're protected by the copyright because you could read the entire content and answer it in your own words. Now it is a 2-way short because if I stop completely my [indiscernible] the LLM, then I the complete emission from that LLM, which gives me a few links here and there. And if I give the -- expose the entire data, they will probably read everything and give you very little sector. So -- and if you go and read about this on Internet there's a huge debate that is going on in the past 6 months or so, whereas open was more of a given tech economy where you gave the content Google gave you back billings. And while LLMs are more of they consume all the information that is available and they try to retain a lot of traffic with themselves and which, to some extent, works well with the users as well. So it has to be seen because if that is the case, then entire Internet business models will have to be reversed. It will have to go back to more private. So I can't comment on that, what would be the final destination of this particular debate or this particular. My hope is that over the time, Google and there's a hybrid of a Google or Gemini, that will emerge over a period of time.

Okay. That's very interesting. Thanks, Dinesh, for sharing this. Are there any regulatory guardrails in India that will prevent this from happening where let's say, we then are at the mercy of these walled gardens as you call it, [ VLMs]. Are there any guardrails which will perhaps come in play later on? Or are there any discussions with the government where something like this could be introduced?

It may not be right for me to answer that. -- that has been personally my opinion. I would suggest that you read about this topic on the net or ask the LLM themselves.

Next question is from the line of Anirudh Shetty.. I guess there is a connection issue. So next question is from the line of Samarth Patel.

I have a couple of questions. So first one is, last quarter, you mentioned that silver monthly churn was about 7%. So any update on silver churn number as of now? And also, you had talked about initiatives, which we were taking in terms of GST verification, bank account verification and some sort of a turnover-based qualification. Any of these initiatives has improved the retention metric? Apart from that, is there a churn which is spreading over the older cohorts and not contain to, let's say, first 12-month cohort. So any cohort-wise flavor in terms of silver change that you can provide would be really helpful.