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Business outlook remains strong for FY24

Dominant market share in B2B online classified business with around 70% market share in paid listings. The overall growth in business is led by higher value proposition for sellers and the efficient matching algorithm resulting in higher buyer satisfaction. Enjoys substantial network effect attracting more buyers and sellers to the platform. The strength of business model is visible in the 13.5% CAGR growth in paying subscribers over FY18-23 and 23.2% CAGR growth in the number of registered buyers during the period. The success of business model and its longevity can be inferred from the fact that >50% of the registered buyers are repeat buyers.

• It expects to add around 8k paid suppliers per quarter going ahead. The addition of paid customer was modest in Q1FY24 on account of increase in price of Silver monthly subscription packages.

• ARPU growth to be in the range of 6% CAGR led by migration of customers to higher priced subscription plans and some contribution from price increase.

• Traffic to portal at ~250mn/quarter is sufficient to cater to 3-4 lakh paid customers. Increase in traffic has been modest over last several quarters on account of moderation in covid19 related enquiries.

• The target market for Indiamart is around 1.3mn MSMEs, considering 10% of GST registered 13 mn MSMEs have digital presence.

• Increase in headcount going ahead would be in accordance with increase in the number of paid customers.

• Completely powered by organic traffic with little advertisement expense, resulting in higher operating margin. Marketing related cost would remain limited in near term thus supporting overall operating margin.

• It is well, placed to achieve 30% EBITDA margin by Q4FY24 led by positive operating leverage.

• It operates through asset-light model and benefits from minimal capex requirement (~1% of sales) leading to strong FCF generation.

• Diversified revenue base across industries and geographies helps to lower business risk. The buyer traffic is fairly distributed across the county, but the sellers are mostly concentrated in the major cities (>50% of paying suppliers are from metro cities).

• It is net debt free company with net cash of ~Rs 24bn that offers optionality value and would help it to invest in its platform to provide value added services to suppliers, thereby fighting off any threat from competitors.

• There is huge untapped potential in smaller cities(T2-T4) of India (~1,000 cities), which is expected to pick up due to accelerated adoption of digital channel in the aftermath of covid19 Pandemic

• It remains focused towards realizing business synergy with regard to various acquisitions done during 2021-22. For Busy Infotech, the focus remains on expanding its geographical presence and it has sold around 300k licenses till date.

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