Ready for re valuation of IndiaMart

Could IndiaMART InterMESH be gearing up for a fresh reevaluation?

The stock experienced a remarkable surge during the Covid period, increasing by four times between 2020 and 2021. However, its growth has slowed down since then, with a modest 14% uptick over the past year, lagging behind the Nifty Midcap 100 index. Nonetheless, there’s potential for a bullish scenario for the company.IndiaMART operates as the largest online B2B classified marketplace platform, facilitating the connection between buyers and suppliers, particularly catering to small and medium businesses (MSMEs). Impressively, it currently commands approximately 60% of the market share, boasting 187 million registered buyers, out of which 38 million are deemed ‘active’, along with around 8 million suppliers.IndiaMART operates as the largest online B2B classified marketplace platform, facilitating the connection between buyers and suppliers, particularly catering to small and medium businesses (MSMEs). Impressively, it currently commands approximately 60% of the market share, boasting 187 million registered buyers, out of which 38 million are deemed ‘active’, along with around 8 million suppliers.

What’s driving this potential upswing? Firstly, there are significant positive triggers at play, including what experts term as ‘network effects’. Despite India having over 60 million MSMEs, only a fraction, about 7.8 million, are suppliers on IndiaMART’s network. Analysts suggest that the company doesn’t necessarily need to capture the entire market but rather reach a critical mass, perhaps around 20 million, to solidify its dominance and become indispensable to all players in the ecosystem.
Secondly, the company has ceased offering discounts on its primary subscription services, which is expected to boost its average revenue per user (ARPU). IndiaMART generates revenue by providing sellers with tools to enhance their visibility on the platform. Despite discontinuing discounts, its customer churn rate has not significantly increased, indicating positive retention.
IndiaMART benefited from the Covid pandemic as MSME suppliers and buyers sought new supply chains. However, growth decelerated afterward due to the impact of rising interest rates and inflation. Encouragingly, 2024 is anticipated to witness a decrease in both interest rates and inflation.
In summary, IndiaMART may be on the brink of a new phase of growth. While it may take some time to materialize fully, the company appears to be making strides in that direction. Notably, Philip Capital has set a target price of Rs 3,600 per share, reflecting a potential increase of 33% from current levels.