The challenges appear to be harsh, as many medium- and small-scale businesses take a hard knock from the lockdown imposed by various states.
The IndiaMART Intermesh stock has fallen victim to such a perception among investors. Analysts say the country’s only listed B2B marketplace player is facing near-term challenges in the face of the dark clouds looming over the medium and small enterprises, who form bulk of its client base.
The stock was listed in July 2019 at Rs 1,302, at a 33.87 per cent premium to its issue price of Rs 973. The stock took off from there to rally some 920 per cent and hit a peak of Rs 9,951 in less than two years. However, it has crashed 35 per cent in last three months to trade at Rs 6,839 on May 14.
Analysts have cut the target price for the stock, highlighting bearish sentiment and see up to 25 per cent downside risk. That is, when the stock trades at a hefty premium of 586 per cent over its issue price.
“IndiaMART added only 4,000 paying suppliers in Q4, lower than the total additions in past two quarters. Strong growth in collections was also a function of higher seasonality in Q4, and Q1FY22 collections could again get impacted by rising Covid cases and the resultant lockdowns,” says IIFL Securities.
The domestic brokerage said the company’s Ebitda margin reflected an increase in employee and outsourced sales costs. “IndiaMART indicated that these margins are not sustainable and would reset at lower levels, as hiring resumes and growth normalises.”
The brokerage has assigned a ‘reduce’ rating to the stock with a price target of Rs 5,000. “We assume a 10-year revenue growth at 16 per cent CAGR, with 45 per cent Ebitda margins. IndiaMART is trading above its historical average. It is pricing in flawless execution and ignoring risks from the rising competition,” IIFL Securities said.
The B2B e-commerce firm posted a 26 per cent increase in consolidated net profit for March quarter at Rs 56 crore against Rs 44 crore reported for the year-ago quarter.
In February, IndiaMART aggregated Rs 1,070 crore via QIP. The company’s board approved allotment of 12,42,212 equity shares to eligible qualified institutional buyers at an issue price of Rs 8,615 per share.
“Strong response from global and domestic investors leading to the successful closure of the QIP in a volatile market environment further demonstrated their confidence in the business model,” CEO Dinesh Agarwal said in a statement.
“During these trying times, we remain committed to employee safety and customer-centric approach, helping businesses grow through online transformation,” he said.
For the year ended March 31, 2021, Indiamart Intermesh posted a 90 per cent increase in consolidated net profit at Rs 280 crore compared with Rs 147 crore reported for 2019-20. Total income increased 7 per cent to Rs 756 crore in 2020-21 from Rs 707 crore in the previous financial year.
The board of directors recommended a final dividend of Rs 15 per share for the 2020-21, subject to shareholder approval.
“IndiaMART’s revenue grew 5.6 per cent in Q4FY21, while Ebitda margins showed an improvement of 1,680 bps and Arpu improved. The adoption of digital platforms, outsourcing of employees and focus on working from home and shift to channel sales partners have helped reduce cost,” Narnolia said in a research report.
The financial advisory firm said renewal subscriptions has gone down by 10 per cent. “There is an uncertainty in collection from customers in the coming quarters due to the pandemic,” it said and gave a ‘neutral’ rating to the stock with a revised price target of Rs 7,102.
