IndiaMART Jumps 9.5% Despite Poor Q3 Earnings; Brokerages Cut Targets

Shares of B2B marketplace IndiaMART InterMESH jumped almost 9.5% to INR 2,706.45 during the early trading hours on Friday (January 19) a day after the company posted a weak Q3 FY23 earnings.

IndiaMART on Thursday reported a 27.4% decline in its consolidated net profit to INR 82 Cr, largely hurt by a muted paid subscribers growth. Its operating revenue jumped 21% YoY to INR 305 Cr in Q3 FY24.

The company’s paying subscription suppliers grew 9% YoY as it added 1,826 such suppliers during the reported period. 

Following the earnings announcement, its shares dipped on Thursday but regained momentum on Friday. By 2.15 PM IST, IndiaMART’s shares were trading 6.2% higher at INR 2,626.6 on the BSE.

Meanwhile, Nomura has upgraded its rating on IndiaMART to ‘neutral’ after the company shared its revised business strategy during the Q3 FY24 earnings call.

After the weak Q3 results, IndiaMART said it would stop offering silver monthly packages to proprietorship firms in Tier 3/4 cities. The company will also shift employees currently on a third-party payroll to its own payroll, to enhance retention, which would lead to a shift from outsourced sales costs to employee expenses.

Besides, IndiaMART said that it would also focus on increasing traction and business enquiries using social media.

JM Financial has retained its ‘buy’ call on IndiaMART but cut its price target (PT) to INR 3,150 from INR 3,300 earlier, which currently implies an upside of 27.4% to its last close. 

Taking a long-term stance, the brokerage said that it expects the company to report about 20% revenue CAGR over the FY23-26 period, aided by a strong build-up of deferred revenue at INR and collections growth.

“While we trim our paid subscriptions estimates for FY24-26, we expect collections to grow in a respectable range of 16-17% (management estimate of about 20%) aided by improving realisation. Strong deferred revenue built-up also provides high earnings visibility,” JM Financial said.

However, Kotak Institutional Equities has a ‘sell’ rating on IndiaMART while the brokerage cut its fair value on the stock to INR 2,400 from INR 2,700 earlier, implying a downside of 2.9% to the stock’s last close.

The brokerage said that its revised stance on the stock is based on earnings cut and long-term margin cut, as it believes IndiaMART would need to make continued investments to keep the value proposition relevant to the SME base.