Article

IndiaMART InterMESH Ltd. – IPO Note-Not Rated

24 Jun 2019

Issue Opens: June 24, 2019
Issue Closes: June 26, 2019
Face Value: Rs 10
Price Band: Rs 970-973
Issue Size: ~Rs 475 cr
Public Issue: ~0.49 cr shares (at upper price band)
Bid Lot: 15 Equity shares       
Issue Type: 100% Book Building

% shareholding

Pre IPO

Post IPO

Promoter

58.0

53.0

Public

42.0

47.0

Source: RHP

Company Background

IndiaMART InterMESH (IndiaMART), India’s largest online B2B marketplace for business products (75%) and services (25%), connects ~8.3cr registered buyers and 55 lakhs supplier store fronts, as on FY19-end. It’s paying subscription supplier base stood at ~1.3 lakhs as on FY19-end. The company enjoys ~60% market share in the online B2B classifieds space in India. Given the strong brand and network effect, the company enjoys 12 lakh business enquiries/day with 55% repeat buyers. It has witnessed strong traction in growth for number of registered buyers, supplier storefronts and paying subscription suppliers with a CAGR of 45%, 34% and 21%, respectively over FY16-19.  

Objective of the Offer

The issue consists of an Offer for Sale (OFS) of ~14.3 lakh shares by the Promoters, ~33.2 lakh shares by investor shareholders and ~1.4 lakh shares by other shareholders.

Financials

Consolidated Rs cr.

FY17

FY18

FY19

Revenue from operations

318

411

507

EBITDA Margin (%)

(17.1)

11.4

16.2

Adj. PAT

(50)

143

64

Adj. EPS

(17.5)

49.8

22.2

Change (%)

--

--

(55.5)

P/E (x)

--

19.5

43.9

EV/EBITDA (x)

--

60.4

25.7

RONW (%)

--

--

39.9

Source: RHP, 5paisa Research; *EPS & Ratios at higher price band

Key Points

  • IndiaMART has become India’s largest online B2B marketplace for business products and services with ~60% market share of the online B2B classifieds space in India. This is driven by (a) network effects (a large number of buyers on its online marketplace results in more enquiries for suppliers, which in turn attracts more suppliers to register), and (b) community effects (suppliers for one product/service category on the marketplace become buyers for products and services in the same or other categories; 39% of suppliers acted as buyers in FY19).

  • According to a KPMG report, the growing B2C ecommerce market has led to a large number of sellers bringing their businesses online.  The wholesale market in India is estimated to reach USD700bn by FY20E and in order to tap into this potential, B2B ecommerce players have started building platforms for SMEs and traders. Improving internet penetration among Indian SMEs (low at 32%, as of 2017) is a silver lining for IndiaMART. In FY17, only 17% of Indian SMEs used internet for business purposes. While SMEs remain the core business for IndiaMART, company intends to attract larger suppliers and leading brands on its portal.

Key Risk

Although IndiaMART has been able to fend off competition in the past and has been able to create a dominant position for itself, a larger international competitor can easily leverage on its deep pockets and intensify its focus on the Indian B2B marketplace space. This can result in loss of participants, thereby impacting subscription revenue.

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IndiaMART InterMESH Ltd. – IPO Note-Not Rated

24 Jun 2019

Issue Opens: June 24, 2019
Issue Closes: June 26, 2019
Face Value: Rs 10
Price Band: Rs 970-973
Issue Size: ~Rs 475 cr
Public Issue: ~0.49 cr shares (at upper price band)
Bid Lot: 15 Equity shares       
Issue Type: 100% Book Building

% shareholding

Pre IPO

Post IPO

Promoter

58.0

53.0

Public

42.0

47.0

Source: RHP

Company Background

IndiaMART InterMESH (IndiaMART), India’s largest online B2B marketplace for business products (75%) and services (25%), connects ~8.3cr registered buyers and 55 lakhs supplier store fronts, as on FY19-end. It’s paying subscription supplier base stood at ~1.3 lakhs as on FY19-end. The company enjoys ~60% market share in the online B2B classifieds space in India. Given the strong brand and network effect, the company enjoys 12 lakh business enquiries/day with 55% repeat buyers. It has witnessed strong traction in growth for number of registered buyers, supplier storefronts and paying subscription suppliers with a CAGR of 45%, 34% and 21%, respectively over FY16-19.  

Objective of the Offer

The issue consists of an Offer for Sale (OFS) of ~14.3 lakh shares by the Promoters, ~33.2 lakh shares by investor shareholders and ~1.4 lakh shares by other shareholders.

Financials

Consolidated Rs cr.

FY17

FY18

FY19

Revenue from operations

318

411

507

EBITDA Margin (%)

(17.1)

11.4

16.2

Adj. PAT

(50)

143

64

Adj. EPS

(17.5)

49.8

22.2

Change (%)

--

--

(55.5)

P/E (x)

--

19.5

43.9

EV/EBITDA (x)

--

60.4

25.7

RONW (%)

--

--

39.9

Source: RHP, 5paisa Research; *EPS & Ratios at higher price band

Key Points

  • IndiaMART has become India’s largest online B2B marketplace for business products and services with ~60% market share of the online B2B classifieds space in India. This is driven by (a) network effects (a large number of buyers on its online marketplace results in more enquiries for suppliers, which in turn attracts more suppliers to register), and (b) community effects (suppliers for one product/service category on the marketplace become buyers for products and services in the same or other categories; 39% of suppliers acted as buyers in FY19).

  • According to a KPMG report, the growing B2C ecommerce market has led to a large number of sellers bringing their businesses online.  The wholesale market in India is estimated to reach USD700bn by FY20E and in order to tap into this potential, B2B ecommerce players have started building platforms for SMEs and traders. Improving internet penetration among Indian SMEs (low at 32%, as of 2017) is a silver lining for IndiaMART. In FY17, only 17% of Indian SMEs used internet for business purposes. While SMEs remain the core business for IndiaMART, company intends to attract larger suppliers and leading brands on its portal.

Key Risk

Although IndiaMART has been able to fend off competition in the past and has been able to create a dominant position for itself, a larger international competitor can easily leverage on its deep pockets and intensify its focus on the Indian B2B marketplace space. This can result in loss of participants, thereby impacting subscription revenue.