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Mixed Quarter; Margin holds Firm amid Soft Demand

INMART delivered a mixed quarter, with revenue growth remaining resilient despite continued subscriber weakness, driven primarily by better supplier monetisation and ARPU expansion, while margin surprised positively on lower customer acquisition costs and operating leverage. The management maintained its quality-first strategy, prioritising retention, trust and product-market fit over aggressive customer acquisition, delaying subscriber recovery. AI-led marketplace enhancements, IndiaMART Finance and buyer monetisation initiatives provide medium-term growth optionality, although near-term growth is expected to remain ARPU-led amid elevated churn, softer buyer enquiries and evolving LLM-driven search dynamics. We retain our ‘ADD’ rating but lower our multiple to 20x (earlier 22x) to arrive at a TP to INR 2,060, as a meaningful re-rating is contingent on sustained improvement in subscriber additions, buyer traffic and marketplace activity.

Revenue Slightly Misses; EBITDAM Beats Estimate; PAT Surges on High Other Income

* Revenue for Q1FY27 came in at INR 4.1 Bn, up 2.5% QoQ and 11.4% YoY (vs CIE est. of INR 4.2 Bn).

* EBITDA for Q1FY27 came in at INR 1.5 Bn, up 10.5% QoQ and 9.7% YoY (vs CIE est. of INR 1.4 Bn). EBITDAM was up 235 bps QoQ but down 55 bps YoY to 35.4% (vs CIE est. of 33.0%). * PAT for Q1FY27 stood at INR 1.7 Bn, up 243.0% QoQ and 12.2% YoY (vs CIE est. of INR 1.2 Bn). PAT surged on MTM gains from the treasury portfolio.

Quality-led Shift Continues; Subscriber Revival Deferred

INMART reported a steady revenue growth of 11% YoY, primarily driven by improved realisation from paying suppliers despite continued weakness in subscriber addition. Paying suppliers declined by ~18,500 during the quarter due to elevated Silver-tier churn and moderated gross adds, as the management prioritises customer quality over aggressive acquisition. The company continues to focus on improving product-market fit, enquiry quality and retention economics, avoiding low-quality customer acquisition which could increase CAC and reduce LTV. INMART is enhancing its marketplace through trust infrastructure, AI-based matching, payment protection, pricing initiatives and diversified buyer acquisition. Overall, we expect the company to focus on improving marketplace quality before reigniting subscriber growth, with churn stabilisation, higher buyer activity and supplier recovery driving growth re-acceleration. New initiatives such as IndiaMART Finance and buyer monetisation offer long-term potential but remain at an early stage.

Margin Expansion Driven by Operating Leverage

EBITDAM expanded to 35.4% in Q1FY27, supported by operating leverage and lower customer acquisition cost, offsetting softer supplier addition. Margin gains were aided by disciplined sales and marketing spend, though management noted that sustainable operating leverage depends on subscriber growth recovery. Near-term profitability continues to be supported by premium monetisation, cost discipline and investments in AI and marketplace quality.

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