Indiamart Intermesh Limited - IPO Note

Private Client Research






Indiamart Intermesh Ltd


June 25, 2019

Rating: Aviod

Sensex: 39120.66

CNX Nifty: 11695.25



Price range
Issue Period
24-Jun-2019 to 26-Jun-2019


June 25, 2019



CNX Nifty







Issue details

Face value (Rs.)
Market lot
15 Equity Shares and in multiples thereof
Issue size
475 Crores
Public Issue
Initial Public offer of 4,887,862 Equity Shares (including anchor portion of 2,195,038 Equity Shares)
Market cap post IPO
2782 Cr
Equity Pre - IPO
2.86 Crore shares
Equity Post - IPO
2.86 Crore shares
Issue type
100% bookbuilding

Shareholding (Pre IPO)


Shareholding (Post IPO)


+91 22 6639 3000

It is One of the leading B2B e-Commerce Players in India & its Continued success is substantially dependent on the strength of their brand and their reputation. Company's Strong network effects and brand recognition drives leadership in the B2B marketplace in India. Company has a robust two-way discovery marketplace connecting buyers and suppliers & is well-placed to cash in the opportunities in India's wholesale market. Company being a mere intermediary/aggregator, would not require huge capex, costs associated with upgradation of technological infrastructure and employees are the primary costs incurred thus No capital Investment . In the last three years, at a consolidated level, Company had Zero debt in its books. Of the total suppliers listed on Company, no single industry category accounts for more than 9 percent of the overall supplier list. The top 10 percent clients comprised about 40 percent of the FY19 top-line.

Geographical Diversification:
Company products and services are spread across India rather than relying on a single geography thus making them to further grow their marketplace by attracting buyers across geographies. Company has Precise and user-friendly search and reliable matchmaking service. Company's offerings are well suited to the needs of buyers and enable them to receive comprehensive information on a variety of products and services, and communicate effectively with a large number of suppliers. Companies marketplace offers a comprehensive breadth and quality of listings across a wide spread range of industries & their products and services are spread across 52 industries rather than relying on a single target industry. Companies provide suppliers with a ROI driven and cost-effective method for marketing their products or services, allowing them to attract buyers or expand into new markets. Company allows businesses to create an online presence and share their business and contact details with potential buyers across India, due to which it believes this menu of options provides suppliers with the flexibility to select the cost structures that are fixed and best suit their budget and business requirements such as categories and location of interest.

Subscription Packages:
Company offers monthly pricing schemes for their subscription packages in addition to annual and multi-year subscription models. They offer basic and premium subscription models, which include a set number of RFQ credits (depending on the level of the paid subscription package) that may be used by the suppliers, it also combines certain offerings, such as offering subscription packages that include TrustSEAL verification and a set of complimentary RFQs credits. Their IndiaMART premium number service allotted unique phone numbers to approximately 472,855 suppliers as of March 31, 2018, and connects calls directly to suppliers while also providing them with software-based missed call alerts when a buyer calls so as to ensure that enquiries from interested buyers are not missed. The IndiaMART premium number service, which is operated by their third-party service providers, also provides useful statistics to participating suppliers such as the number of calls received and whether they are being successfully answered or not. With the advent of their IndiaMART mobile app, the lead management system became critical for facilitating suppliers to contact with buyers on their platform. By means of the IndiaMART lead management system, the supplier has access to comprehensive information of the potential buyers and the nature of enquiries received by them in the past. These features help to connect buyers and suppliers by ensuring suppliers do not miss our buyers’ business enquiries, and also enables suppliers to have a complete history of their communications with the buyers. Buyers can also communicate with suppliers efficiently through the IndiaMART lead management system using features such as reminders, templated quotations and predefined template responses.


The Indian economy is primarily service based with the service sector contributing more than 62% to the GDP. This contribution has been gradually increasing over the past 5 years while the contribution of manufacturing sector to the GDP has remained constant at around 17-18% over the same period. Internet growth in India, The number of internet subscribers in India is expected to increase from 446 million as on December 2017 to nearly 900 million by FY22 primarily driven by growth in wireless broadband services. Wireline broadband services are expected to grow at a comparatively gradual rate due to constraints around high initial investment in deployment of fixed line infrastructure and increased user preference to use internet on the go. Mobile internet the primary driver for overall internet growth, driven by smartphone adoption ,the number of wireless internet subscribers is projected to increase from 425 million as on December 2017 to 867 million by FY22 primarily driven by growth in the 4G subscriber base. The Government’s focus on being 5G ready bodes well for the future. India may see an early arrival of 5G services in tandem with global rollouts, unlike 2G, 3G and 4G services which were launched much later in India compared to global adoption of these technologies.More than 40 percent of the large enterprises with an annual turnover in excess of US$ 1 billion listed in India are investing in emerging technologies while 20 percent of such billion dollar companies are already under way on their digital transformation journey. The spending on digital transformation by these listed billion dollar companies in India is expected to cross US $360 million by 2020 as government initiatives like Digital India, Smart City and Make in India create numerous opportunities across different industries Advertising revenues expected to grow driven by Digital advertising gaining prominence & the advertisement market is forecasted to reach INR 595 billion in 2018 growing at a rate of 12 percent over 2017. In the long term, the advertisement market is estimated to grow at a CAGR of ~16 percent from 2018 to 2021 to reach INR 934 billion. While overall ad spend is growing, the distribution across different channels is seeing a significant shift. Digital has been the major contributor to the growth in global ad expenditure with a double digit growth while the other channels have experienced single digit or negative growth. The digital classifieds market in India is a combination of horizontal and vertical players. The horizontals offer listing across a host of goods and services, ranging from real estate, home services, pet care, used goods to medical suppliers. On the other hand, the vertical players focus on a single product/service category such as matrimonial, recruitment services etc. The growth in the digital classifieds market from FY2017 to FY2022 is estimated to be driven by the growth in B2B, Automotive and Real Estate classifieds, with Horizontals also continuing to maintain robust growth


Competition from new and existing companies may reduce demand for their services or cause them to lose visitor traffic, market share or paying subscription suppliers, any of which could adversely affect their business, financial condition and results of operations. Company have been subject to allegations and lawsuits or negative publicity claiming that items listed and content available on their online marketplace are pirated, counterfeit or illegal. Companies business is highly dependent on the growth of mobile Internet penetration and supporting infrastructure in India, and the steady emergence of mobile technology as a viable medium for transacting business. In the midst of the ongoing industry-wide slowdown in India, MSMEs have been the worst-hit owing to funding constraints, stressed working capital cycles and weak demand. These challenges could lead to a drop in subscriptions and/or renewals till sentiments revive. Company's business, financial condition, results of operations and cash flows would be materially and adversely affected if they are unable to retain existing paying subscription suppliers on or attract new paying subscription suppliers to IndiaMART. Company's future operating results will depend on numerous factors affecting the development of online commerce, which may be beyond their control. These factors include the rate of growth of personal computers, tablets, mobile devices, Internet and broadband usage and penetration, extant laws, regulations and policies governing online commerce, consumer confidence in online commerce, media publicity regarding online commerce, concerns on online data privacy and general economic conditions globally and in particular India. Company relies on telecommunications and information technology systems, networks and infrastructure to operate their business and any interruption or breakdown in such systems, networks or infrastructure or our technical systems could impair their ability to effectively operate their marketplace or provide their services. Additionally, systems and software that are developed internally may contain undetected errors, defects or bugs, which we may not be able to detect and repair in time, in a cost-effective manner or at all. Company have made certain issuances and allotments of our Equity Shares which were not in compliance with section 67(3) of the Companies Act, 1956. Company have incurred significant operating losses in the past and have a negative net worth as of March 31, 2018, and they may not be able to improve their financial position or generate sufficient revenue to achieve positive net worth.

Company Description

Indiamart Intermesh Limited (IIL) incorporated in 1999 is India’s largest online B2B marketplaces for business products and services with approximately 60% market share of the online B2B classifieds space in India. Company provides 82.70mn registered buyers with access to 5.55 million supplier storefronts in India, which list 60.73mn products and services across 54 industries. It provides a robust two way discovery marketplace connecting buyers and suppliers. Buyers locate suppliers on its marketplace, including both Indian small and medium enterprise or “SMEs” and large corporates, through a webpage containing the suppliers product Listings. It provides an effective and trusted platform to help businesses leverage the power of the Internet to increase their market reach and conduct commerce. Company has deployed analytics to implement behavioral data based algorithmic matchmaking on their platform, thereby ensuring much more relevant discovery of products and services which will lead to an increase of repeat buyers on their platform. For the year ended March 31, 2018, it had 52% were repeat buyers calculated on the basis of the past 90 days. In addition, as 42% of the suppliers as of March 31, 2018 on their platform have acted as buyers of other products and services in the last 12 months, a virtuous cycle of user engagement is established, leading to a self-sustained traction in trade enquiries. Company's online marketplace is accessible through desktop and mobile-optimized platforms and apps on personal computing and mobile devices.Their IndiaMART mobile website, together with their IndiaMART mobile app, accounted for 59%, 63% and 72% of total traffic to IndiaMART for fiscal 2016, 2017 and 2018, respectively. Buyers can make business enquiries on IndiaMART through telephone, SMS, email or by posting RFQs. Also, as on March 31, 2018, 62% of their paying subscription suppliers were active on their mobile app in the last 30 days. In fiscal 2016, 2017 and 2018, substantially all of their revenue from operations was earned through the sale of subscription packages, and a minor portion of their total revenue was earned through advertising, facilitation of payment and sale of RFQ credits. IndiaMART had an aggregate of 325.8 million and 552.6 million visits in fiscal 2017 and 2018, respectively, of which 204.8 million and 396.9 million comprised mobile traffic, or 63% and 72% of total traffic, respectively

Revenue Profile
The company earns revenue primarily by selling the subscription packages which are available for a month, year and multi-year. This package offers the following benefits to the suppliers: Listing of the supplier storefronts on online marketplace based on priority, Access to lead management system, Integrated access to a 3rd party online payment gateway, and Access to Request For Quotations In addition, the company also generates revenue by advertising, sale of Request For Quotation Credits and payment facilitation service. It also allows sellers to list without subscribing and is free for buyers.

Profit & Loss Statement:- (Consolidated)

(Rs. Crores)

Income Statement (Rs in Crores) FY17 FY18 FY19
Revenue from operations 318.00 411.00 507.00
Total revenue 318.00 411.00 507.00
Employee benefit expenses 210.00 195.00 230.00
Net loss on financial liability designated at FVTPL 19.30 123.00 65.30
Other expenses 162.50 169.00 195.00
Total Operating expenses 391.00 487.00 490.00
EBITDA -73.70 -76.20 17.10
Depreciation and amortisation expense 4.60 2.90 4.10
Other income 14.20 19.00 41.00
PBT -64.10 -60.00 53.90
Current tax 0.20 0.20 0.10
Deferred Tax charge - -115.00 33.70
Total tax expenses -64.30 115.00 33.90
Profit for the Period/ Year -64.30 54.80 20.00
Diluted EPS -22.00 19.00 7.00
Source: Stockaxis Research, Company Data


IndiaMart’s earnings per share for 2018-19 is close to Rs 7. At the upper end of the price band, its price-to-earnings ratio stands at 140 times, By EV/Ebitda (FY2019), however, the issue price indicates a valuation of 25.7 times. Based on FY20E and FY21E earnings per share, the stock is valued at P/E (price-to-earnings) multiples of 35.1x and 25.9x, respectively, which is at a premium to the peer average of 21.5x and 15.3x. Considering the overall industry environment, we give an “Avoid”. rating on this issue IPO

Key Information:

Use of Proceeds:
The objects of the Offer are to achieve the benefit of listing the Equity Shares on the Stock Exchanges and for the sale of an aggregate of up to 4,288,801 Equity Shares by the Selling Shareholders. Further, Company expects that listing of the Equity Shares will enhance their visibility and brand image and provide liquidity to their Shareholders. Listing will also provide a public market for the Equity shares in India. Company will not receive any proceeds from the Offer and the entire proceeds from the Offer will go to the Selling Shareholders, in proportion to the Equity Shares offered and sold by the respective Selling Shareholder in the Offer for Sale.

Book running lead managers:
ICICI Securities Limited, Edelweiss Financial Services Limited and Jefferies India Private Limited

Dinesh Chandra Agarwal, is the Managing Director of our Company. He holds a bachelor’s degree in technology (computer science and engineering) from Harcourt Butler Technological Institute, Kanpur University. He has experience in the field of internet, networking and systems development and consulting. He has worked with Hindustan Management and Technical Services Private Limited, HCL America, Inc., HCL Limited, HCL Hewlett-Packard Limited, Centre for Development of Telematics (C-Dot) and CMC Limited. He is a charter member of The Indus Entrepreneurs (TiE), a global network of entrepreneurs and professionals. Brijesh Agrawal, is a whole-time Director of our Company. He holds a master’s degree in management science from University of Lucknow and a post graduate diploma in business management from Northern Institute for Integrated Learning in Management, New Delhi. He has experience in the field of internet, business management and supply chain. Previously, he worked with H N Miebach Logistics India Private Limited. Dhruv Prakash, is a non-executive Director of our Company. He holds a master’s degree in science (chemistry) from Meerut University and a post graduate diploma in business management from Indian Institute of Management, Ahmedabad. He has experience in the field of management consulting, finance, manufacturing and chemicals. Prateek Chandra, is the Chief Financial Officer of our Company, appointed with effect from February 16, 2015. He holds a bachelor’s degree (honours) in commerce from University of Delhi. He is a qualified chartered accountant and has experience in the field of finance.