Buy IndiaMART Ltd For Target Rs.3,000 By JM Financial Services
INMART’s consol. collections grew 13% YoY on a like-to-like basis in 1Q (reported growth of 17%), ahead of JMFe of 10% YoY, an improvement over 9% in 3Q/4Q FY25. Growth was led by Busy Infotech (Busy) whose like-to-like billings rose 64% YoY (reported 127% YoY). While standalone collections too improved to 10% YoY vs. 9%/8%/5% in 4Q/3Q/2Q, it was once again aided by strong realisation in the top 10% customers. Standalone subscription adds were marginally better than expected at ~1.5k QoQ vs. JMFe of 1.3k, albeit they remain below historical trends. There was also no respite in above-normal churn rates in Silver tier customers. The company has started doing few performance marketing spends to drive buyer traffic, but immediate gains on subscriptions are unlikely. This means near-term collections growth in the standalone business would be realisation-led, thus limiting meaningful upside to collections growth (JMFe increased to 10% from 9% earlier). We, however, become more constructive on Busy following a sharp uptick in licenses sold (38% YoY) as well as a meaningful increase in realisation. This, along with higher treasury income in 1Q, leads to 7- 14% upgrade in our earnings estimates (mainly top line driven). We roll-forward to Jun’26 for a revised TP of INR 3,000 (implied FY26/27 ex-cash and other income PER of 35x/30x).
* Busy drives positive surprise once again: INMART’s consol. collections grew ~17% YoY to INR 4.3bn, an improvement over ~12%. Adjusted for accounting changes in Busy, collections growth stood at 13% on a like-to-like basis. Billings in the Busy business grew 64% YoY (like-to-like), whereas standalone collections were up 10% YoY (aided by strong realisations in top 10% customers). Standalone business subscriptions too were slightly better than expected at ~1.5k QoQ vs. JMFe of 1.3k, albeit net additions continue to be significantly below the historical average of 4.5k. The management continued to suggest that churn rates remain elevated in the Silver category, which means collections growth in the near term will primarily be realisation-driven. Accordingly, we raise expectations on the realisation side and now build standalone collections to grow 10%. Consol. growth however is likely to better in the near term due to excellent pick-up in Busy billings. Overall, we now build early-mid teens collections growth over FY25-28.
* EBITDA a tad below JMFe in 1Q due to margin miss: INMART’s consol. revenue stood at INR 3.72bn (+12.3% YoY, +4.8% QoQ), slightly above JMFe by 1%. However, EBITDA margin was down ~20bps YoY to 35.9% (-88bps QoQ due to increase in marketing spends), and therefore was behind JMFe by ~120bps. Consequently, consol. EBITDA growth of 11.7% YoY to INR 1,335mn (+2.3% QoQ) was a tad below JMFe by 2.1%. While the management highlighted some more ramp-up in marketing spends (up to INR 100mn per quarter), we expect elevated margin trends to sustain in the medium term.
* Busy drives earnings upgrades, TP raised to INR 3,000: We raise our consol. revenue estimates by 3-8% basis recent uptick in collections trends, especially in Busy. While we broadly maintain margins, earnings have been raised 7-14% due to higher other income expectations. We expect INMART’s stock to re-rate a bit basis Busy upgrades, albeit standalone paid subscriptions trends need to improve to mid-single digit YoY for it to trade closer to historical valuations. We maintain BUY with a DCF-based Jun’26 TP of INR 3,000 (target FY26/27 PER ex-cash and other income of 35x/30x).
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