IndiaMART Shares Fall 10% After Q3 Results

On January 21, 2025, shares of Indiamart Intermesh tumbled by 10%, reaching ₹2,065 in early trading, despite the company posting a 47.6% year-on-year (YoY) increase in net profit to ₹121 crore for the third quarter ending December 31, 2024. 

By 9:20 am, the stock was trading at ₹2,099, marking an 8.5% decline from the previous close on the National Stock Exchange (NSE). Over the last three months, Indiamart Intermesh shares have fallen 9%, indicating a challenging phase for investors.

The company’s operating revenue grew by 16% to ₹354.3 crore, up from ₹305.3 crore in the same quarter last year. Additionally, EBITDA surged 61.4% to ₹138.3 crore, compared to ₹85.7 crore in Q3 FY24, driven by lower sales and marketing costs. 

Despite these positive financial indicators, investor confidence remained weak, primarily due to concerns over a declining subscriber base and sluggish collection growth, which led to a sharp drop in stock price.

Following the earnings report, analysts from Nuvama and Nomura expressed concerns over the company’s performance. Nuvama maintained a "Reduce" rating, lowering its target price from ₹2,500 to ₹1,970. The brokerage highlighted that Indiamart recorded a decline in subscriber numbers for the first time since the COVID-19 pandemic and a weak standalone collection growth of just 8% YoY. 

Additionally, management’s conservative outlook for sub-10% collection growth in upcoming quarters and a lack of improvement in subscriber retention rates could further pressure medium-term growth.

Similarly, Nomura downgraded the stock from "Buy" to "Neutral", reducing the target price from ₹3,150 to ₹1,900. The brokerage raised concerns over a shrinking base of paying subscribers, weak customer additions, and high churn rates, predicting that collection growth would remain subdued. As a result, profit estimates for FY25-27 were revised downward by 4-13%, further adding to investor uncertainty.

Indiamart Intermesh operates in the B2B e-commerce sector, serving as a digital marketplace for businesses. While it has benefited from India’s rapid digital transformation, challenges such as increasing competition from TradeIndia, Justdial, and Udaan, macroeconomic uncertainties, and a subscription-based revenue model that makes it vulnerable to fluctuations in customer retention have made growth more difficult. Additionally, a slowdown in digital ad spending has impacted customer acquisition efforts, adding to revenue pressures.

Amid these developments, the company has appointed Manish Vij as a Non-Executive Independent Director for a three-year term, based on the Nomination and Remuneration Committee’s recommendations. His appointment, which is not subject to rotation, is pending shareholder approval and aligns with the company’s goal of enhancing leadership and corporate governance. With a strong background in digital advertising and technology, Vij is expected to contribute valuable insights that could aid Indiamart’s future growth.

Despite the strong profit growth and cost optimizations, the stock’s recent decline reflects investor concerns about subscriber attrition and weak collection growth. Going forward, the company’s ability to retain and attract new customers will be crucial in determining its growth trajectory. 

Analysts remain cautious, as medium-term growth prospects appear uncertain, and the stock is likely to remain under pressure until there are signs of improved subscriber retention and collection growth.