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    IndiaMART looks to grow customer addition: Earnings call Q4FY23-24

    E-commerce marketplace IndiaMART InterMESH Ltd. saw a consolidated collection growth from customers at 16% in Q4 for the Financial year 2023-2024, according to its financial results. However, in its earnings call, Chief Executive Officer Dinesh Agrawal said, “My aspiration… continues to be 20% to 25% in the collection growth.” Agarwal noted “Out of the 16 % or 17 % collection growth that we are getting, only 6% is coming from the new customers, while most of the other 10% is coming from ARPU [Average Revenue per user] growth per customer.” He said, “The number of customers (net customer addition) has not been growing for the last four quarters or so, and that is putting a pressure on the collection coming from the ARPU [Average Revenue per user].”

    Yet, Agarwal had a positive outlook, “now that world has gone back to the physical world.” He said, “We saw a very little drop in Unique Business Inquiries in FY 23 and FY 24. We are almost back at FY 21 and FY 22 numbers. So effectively, now we are consistently doing 23-24 million per quarter. So I’m confident that next year we will comfortably be looking at 100 million plus unique business inquiries.”

    Financial Highlights

    Consolidated growth from Q4 FY2023 to Q4 FY2024

    • Revenue from Operations:  Rs. 315 Crore from Rs. 269 Crore with 17% YoY growth
    • Collections from Customers: Rs. 484 Crore from 418 Crore with 16%  YoY growth
    • Deferred Revenue: Rs. 1,440 Crore  from Rs. 1,162 Crore, 24% YoY growth
    • Net Profit: 100 Crore, 25% Margin with 79% YoY Growth
    • EBITDA: 88 Cr, 28% Margin with 34% YoY growth

    Indiamart standalone growth in Q4

    • Revenue from Operations:  Rs. 299 Crore, 17% YoY growth
    • Collections from Customers: Rs. 465 Crore, 16% YoY growth
    • Deferred Revenue: Rs. 1,395 Crore, 23% YoY growth
    • Net profit: Rs. 92 Crore, 27% Margin, 37% YoY,
    • EBIDTA: Rs. 90 Crore, 30% Margin, 35% YoY

    Busy Infotech growth in Q4

    • Revenue from Operations : Rs 14 Crore, 24% YoY growth
    • Collections from Customer: Rs 18 Crore, 24% YoY growth
    • Deferred Revenue: Rs. 43 Crore, 59% YoY growth
    • Net Profit: Rs.11 Cr, 17% Margin, 4% YoY
    • EBITDA: Rs. 0.9, 6%, 21% YoY

    Operational Highlights

    From Q4 FY2023 to Q4 FY2024

    Unique business enquiries: 24 million from 23 million, 14% YoY growth

    Supplier Storefronts: 7.9 million from 7.8 million, 5% YoY growth

    Paying suppliers: 214K from 212 K, 6% YoY Growth

    Traffic: 269 million from 272 million, 7% YoY Growth

    Registered Buyers: 194 from 187, 14% YoY Growth

    ARPU: 55.9K from 55.1K, 10% YoY Growth

    Buyer Demographics:

    Metro Cities: 30%

    Tier II Cities: 25%

    Rest of India: 45%

    Paying Suppliers Demographics:

    Metro Cities: 54%

    Rest of India: 19%

    Tier II Cities: 27%

    Points discussed in the earnings call

    Issues of churn in the silver category

    IndiaMART offers 4 subscription-based revenue models- Silver Monthly, Silver Annual/Multi-Year, Gold, and Platinum. Gold and Platinum combined users contribute to approximately 50% of its customer base and 75% of revenue, according to Agarwal. These categories exhibit very low amount of churn or loss of consumer interest.

    However, Agarwal noted that it continued to see “more than anticipated churn on first-year silver customers.” Detailing this churn he said, “In the platinum customer, our churn is 0.5% per month or 6-7% or 7-8 % per annum. On Gold, we continue to have 1% per month or 12 to 14% per annum. On the Silver side, on a Silver monthly, we see 7% to 8% per month, and on the silver annual, we are running at about 40% per annum.”

    While Gold and Platinum customers have a higher impact on the revenue, Agarwal pointed out that the churn in silver customers can have significant implications on collections because, “if there is a continuous low growth in the customer base, our ability to upsell from the silver to gold to platinum also gets limited.” Thus, affecting revenue growth.

    Impact of the churn on collections

     Agarwal said that the lack of customer additions has an impact on collections, saying,If the customer addition for four, five quarters going to be affected, then it will start to show up in collection first.”

    Adding that if the, “number of customers for 365 days has not been adding up to the expectation, the collection will start to slow down. If the collection starts to slow down, a deferred revenue would start to slow down. And if deferred revenue would start to slow down, the revenue would start to slow down.”

    He observed this by noting IndiaMart’s financial performance, “Collection last quarter was 17% growth, and revenue was still growing at 21%. This quarter collection growth has also come down to 16%, and revenue growth has also come down to 17%”

    Reason for churn

    When asked about the reasons for the fall in paid subscribers, Agarwal said,It is not because of the less number of buyers that we are reducing. It is because of the type of buyers that a supplier is looking for or the location in which a supplier is looking for, that is not happening.” He claimed that suppliers are not able to adequately convert buyers into paid subscribers. “They say that, “you have enough leads, but we could not convert them because the buyer was asking for too much of a discount or we did not do enough follow-up.” Those are one of the important pieces of churn”, he said.

    Additionally, IndiaMart returned to its original entry-level subscription at Rs. 3000 after a temporary reduction of Rs. 500 during the pandemic, in 2023. A speaker on the call asked if this price increase was the reason for churn in customers, especially those who were originally onboarded at a lower price point. While Agarwal acknowledged this he said, “ It is the entry-level which is more problematic”

    He added, “It is purely and purely affordability item. It has nothing to do with a conversion item or stickiness item.” He expanded on the statement, saying that customers who found value in the service were highly likely to continue using the service. “Reducing the price won’t help”, he concluded.

    Options for monetization

    A speaker suggested a strategy for monetizing the non-paying supplier base as a way to increase collections.  Agarwal deliberated that “the cost of sales is too high”.

    However, he acknowledged the merit of this and said, “We will try once again to see if there is something that we could sell for Rs. 1000 a year.”

     


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