Motilal Oswal Financial Services

Initiating Coverage | Sector: Others

IndiaMART

Buy

BSE Sensex

38,615

S&P CNX

11,408

CMP: INR2,985

TP: INR3,550 (+19%)

IndiaMART: Play on digitizing MSMEs

Network effect playing out for largest B2B Classifieds player



Stock Info

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

INMART IN

86.4 / 1.1

3147 / 952

41/25/151

260

47.7



Financials & Valuations (INR b)

Y/E Mar

2020 2021E 2022E

Sales

EBITDA

PAT

EBITDA (%)

EPS (INR)

EPS Gr. (%)

BV/Sh. (INR)

Ratios

RoE (%)

RoCE (%)

Payout (%)

Valuations

P/E (x)

EV/EBITDA (x)

Div Yield (%)

6.4

1.7

1.6

26.3

5.9

2.2

2.3

37.3

6.9

2.3

2.5

32.7



51.3 79.3 87.3

566.2 54.6 10.0

150.4 257.4 371.2

72.2

71.9

22.7

58.3

50.9

0.3

61.4

61.7

15.1

37.7

38.7

0.4

43.7

17.2

34.3

36.7

0.5



Shareholding pattern (%)

As On

Jun-20

Promoter

52.3

DII

3.8

FII

15.3

Others

28.6

Mar-20

52.3

3.1

12.4

32.2

Undoubted leader in B2B Classifieds space…



IndiaMART is India’s largest B2B Online Classifieds marketplace, with >70%

market share. The platform has more than 6m supplier listings for 68m products

across 100k+ categories from 1000+ cities. A strong network effect, resilience to

supplier ROI, diversified exposure, and robust SEO (Search Engine Optimization)

strength are th e platform’s key differentiation factors.

Monetization happens through priority listings and subscription packages. Buyers’

leads are made visible to suppliers. The channelization of these leads is based on

the package the supplier has opted for.

IndiaMART operates in a sweet spot, wherein high-growth SMEs fuel the top line

and a subscription-based model limits the risk of default. Margins mirror the

positive operating leverage from revenue growth in the business.

In the past three years, the scalability of paid suppliers and RFQ relevancy have

led to a 26% revenue CAGR. Negligible spends on advertising over FY18–20 have

led to turnaround in margins to 23% in FY20 from -19% in FY17. IndiaMART has

shown tremendous resilience on the margin front. Despite a 50% drop in

collections for 1QFY21, the company has been able to increase margins on

significant rationalization in operating cost.

As a result of COVID-19-led lockdown, the number of paid suppliers fell by 10% in

1QFY21; however, going ahead, new additions should compensate for the churn

in the existing base for the rest of the year. We foresee a 7% reduction in the paid

supplier base in FY21, resulting in 7.5% decline in revenues for FY21.

However, we forecast a sharp turnaround in FY22 operations on account of: a)

pent-up demand, b) a stable base of total suppliers, c) the need for out-of-the-

circle buyers, and d) higher Internet penetration.

We value IndiaMART on DCF basis at INR3,550 per share (+19% upside) on an

assumption of 11% WACC and 5% terminal growth rate, implying a one-year

forward multiple of 41x. Initiate with Buy. Risk factors include higher mortality in

supplier base and potential entry of a cash rich global player.

Note: FII includes depository receipts

Stock Performance (1-year)



IndiaMART is a dominant market leader in the online B2B Classifieds

industry. The company banks on increased digital adoption among SMEs,

which constitute the majority of the sellers on the platform. The underlying

market is expected to grow at a 25% CAGR over the next five years.

Offerings beyond simple listings and the maintenance of RFQ quality have

positioned the company well among the digitally penetrated SMEs (~7m). A

comprehensive value structure has led to 100% non-advertisement-based

growth in the past three years.

The scale of a long-term subscription plan enables sustainability in revenue

as well as margin expansion. Deferred revenue (1.1 times the revenue)

offers a cushion for short-term revenue volatility.

Driven by market growth and decent execution, the company has been able

to grow the number of paid sellers at a CAGR of 15% over FY17–20. Also, led

by lower price sensitivity, ARPU CAGR during this period has been at 10%,

adding to the revenue CAGR of 26%.

…with positive operating leverage



19 August 2020

IndiaMART



Cost increase in the past three years has been pegged at 13–18% given zero

advertisement expenses, while revenue growth has always exceeded 20%,

providing long-term operating leverage to the company.

Strong moats shield from disruption



A strong network effect has created circular value addition for the company. A

higher number of buyers has translated into further inquiries, in turn leading to

more suppliers and, hence, higher monetization.

IndiaMART also has a high resilience to supplier ROI. The company has the

ability to offer ~60 leads to every paid supplier, providing enough leeway to add

suppliers even on the current RFQ scale. The lowest cost of marketing (~0.2%) in

any digital marketplace further creates confidence for the platform among

suppliers.

The company’s reliance on specific search requirements and a large portfolio of

products isolate the platform from threats from large horizontals, such as

Google. Better SEO management promises a high ratio of search to landing.

Diversification is high among geographies; two-thirds of the buyer base is from

tier-2, tier-3, and tier-4 towns. 35% of buyers are from tier-1 cities, while 60% of

suppliers come from the top eight metros (where the paying supplier

percentage is higher than 2%).

High FCF yield; strong balance sheet



IndiaMART operates in a negative working capital cycle, led by upfront

collections from sellers on the platform.

The company also has a capex-light model (<1% of sales), indicating negligible

investments required to pump up the business.

This results in positive FCF and high cash generation; net cash of INR9.5b was

reported at the end of 1QFY21, which is expected to expand to INR14b by FY22.

First to recover; initiate with Buy



We forecast a 9% CAGR in paid suppliers, coupled with a 2% CAGR in ARPU over

FY20–23, implying a revenue CAGR of 10% over FY20–23.

The recent drop in collections is primarily attributable to: (1) higher churn in

monthly subscribers, (2) churn in annual subscribers whose payments are due in

the near term, and (3) the extension of payment terms. 1QFY21 saw a 50% drop

in collections.

We expect customers with multi-year subscription packages to continue on the

platform at lower annual fees. Further growth in new suppliers in certain

categories would partially offset decline in its stressed counterparts. We

forecast 25% decline in collections for FY21, weighed by ~50% decline in 1QFY21

collections. In turn, we expect 7% decline in FY21 revenues, coupled with V-

shaped recovery in FY22.

We forecast 8pp margin expansion over FY20–23 on account of the better

management of cost structure and operative leverage in the business. This

implies an EBIT CAGR of 22% and PAT CAGR of 26% over FY20–23.

Our forecast of near-term impact on the company is weighed by closures across

the country. However, we are confident of strong fundamental growth in

operations hereon, driven by: a) high growth in digitization among SMEs (~25%),

19 August 2020

IndiaMART



b) the need for out-of-the-circle buyers, c) a strong network effect, d) >70%

market share in the underlying industry, e) the ability to increase ARPU on

account of low price sensitivity, and f) high operating leverage.

We further allude to the fact that the company has shown high cash conversion,

with OCF/EBITDA at 155% and FCF/sales at 40%. Low capital requirements have

led to ROE of 72% in FY20.

Our DCF-based target price of INR3,550 is arrived with an assumption of 11%

WACC and 5% terminal growth rate. TP implies upside of 19%. Initiate with

Buy.

Risk factors include higher mortality in supplier base and potential entry of a

cash rich global player.

19 August 2020

IndiaMART

STORY IN CHARTS

Exhibit 1: Classifieds industry to reach USD9b

Listing business size ( USD M)

9.4

Exhibit 2: Led by higher buyer engagement and network

effect, IndiaMART is able to consistently inch up volumes and

realization

Paying subscription suppliers (000s)

ARPU ('000)

42.3

37.2

38.4

1.9

32.1

108

FY18

130

FY19

147

FY20

FY18

FY23E

FY17

Exhibit 3: Current base of RFQs sufficient to add more paid

suppliers and lower commissions to increase ARPU

RFQs per paid supplier

Exhibit 4: Revenue grows at 27% CAGR in past five years

Revenue (INR M)

29%

26%

23%

Growth YoY

2460

FY17

FY18

FY19

FY20

FY16

3180

FY17

4110

FY18

5070

FY19

6386

FY20

Exhibit 5: As base is built-in, momentum turns completely

organic…

Advertisement expense

19%

% of revenue

Exhibit 6: …resulting in sharp turnaround in margins

EBIT Margin (%)

16%

23%

11%

-19%

-52%

FY16

FY17

FY18

FY19

FY16

FY17

FY18

FY19

FY20

19 August 2020

IndiaMART

Exhibit 7: Strong PAT margins…

PAT (INR M)

25%

210

1571

2306

2513

3179

-264

FY17

FY18

FY19

FY20

FY21E FY22E FY23E

FY16

FY17

FY18

-273

FY19

PAT Margin

39%

36%

37%

-239

-256

-259

-258

Exhibit 8: …negative working capital cycle…

Working Capital Days

13%

-20%

-1315

-53%

FY16

550

-642

-263

-260

FY20 FY21E FY22E FY23E

Exhibit 9: …and low capex requirements…

3.0%

Capex (INR M)

% of Sales

Exhibit 10: …result in strong FCF generation

FCF (INR M)

3671

2500

2560

2572

0.8%

74.2

FY16

27.0

FY17

1.0%

0.6%

22.9

FY18

51.2

FY19

1768

45.0

FY20

183.1

209.1

252.8

FY16

FY17

FY18

FY19

FY20

FY21E FY22E FY23E

1185

563

FY21E FY22E FY23E

Exhibit 11: Cash generated from operations remains high

OCF/EBITDA

49%

43%

40%

20%

18%

-12%

FY16

FY17

FY18

FY19

FY20 FY21E FY22E FY23E

-109%

381% 304% 155%

54%

113% 125%

37%

43%

FCF/Sales

Exhibit 12: Low capital requirements drive healthy return

ratios

RoE

36.0

RoCE

72.271.9

61.461.7

43.743.7 38.938.9

-34.2

FY18

-26.0

-56.2

FY19

FY20

FY21E

FY22E

FY23E

19 August 2020

IndiaMART

More than Classifieds

Assessing the possibilities



Among the different models existing in the Classifieds category, the B2B Horizontal

and Verticalized B2C models have been shielded from long-term fundamental

disruptions.

While B2C models may cater to the larger market, higher advertisement cost eats

away at initial profitability. Scale entails high cash burn.

B2B platforms such as IndiaMART have lower risk of disruption from the likes of

horizontal search engines such as Google. Higher organic search determines the

success of the platform. Differentiated features and focus around business

enablement promises long-term sustainability.

Multiple revenue models exist within the digital marketplace, including: a) Listing

Platforms, b) Online Wholesale, c) B2C E-Tailing, and d) BPEM. Most classifieds

companies are pure-play listing platforms. These could be further classified into

three horizontal categories: a) Discovery, b) Marketplace, and c) Business

Enablement.

TYPES OF INTERNET-BASED MONETIZATION MODELS

MONETIZATION

Subscription

Commission

Subscription+ Commission+

Add-on services

MATURITY STAGE:

Low

OYO, Swiggy, Practo, etc.

MATURITY STAGE:

Medium/High

99acres.com,

IndiaMART, Justdial, etc.

MATURITY STAGE:

Low

Udaan, Moglix, Alibaba,

Walmart, Poer2SME

MATURITY STAGE:

High

Amazon India,

Flipkart, etc.

Charge on

positioning of

listings

TYPES OF

PLATFORM

Listing

platforms

Transaction cost

of 2–10%, majorly

GMCG goods

Online

wholesale

Transaction

charge for acting

as a marketplace

B2C

e-Tailing

Business

enablement,

platform becomes

integral part of the

business

BPEM

Source: MOFSL



Share of classifieds is only

4% in the overall digital

marketing spend.



Info Edge’s standalone businesses, IndiaMART and Justdial, largely operate in

the lowermost quadrants. They act as listed platforms, enabling customers to

search for relevant services/products on the platforms.

B2B classifieds operate under three major revenue models. A) Subscription –

B2B classifieds offer various subscription packages to sellers in exchange for

increasing their visibility on the platform. B) Pay per lead – The platforms also

offer certain requirements posted by buyers as ‘paid leads’ to suppliers. These

paid leads can be purchased by the suppliers over and above their subscription

19 August 2020

IndiaMART



packages. C) Advertising – Suppliers purchase space for display advertisements

on the platform.

SMEs are at the center of B2B platforms. While most of the larger companies

have designated supplier contracts that offer lower-than-market prices due to

economies of scale, this is not true for SMEs.

Exhibit 13: Add-on with Discovery has become inevitable

Source: MOFSL, RedSeer

Horizontal B2B model better than B2C Classifieds

Lower advertisement cost in B2B

A higher portion of organic

search leads to the lowest

ad spends for IndiaMART.



There are various structural differences between the two categories. B2C

platforms focus on a large distributed customer base. On the other hand, the

B2B business model is geared toward maintaining relationships with a smaller

number of repeat customers that would likely account for a significant share of

the company’s business. Thus, B2B organizations are currently more likely to

spend a major share of their marketing funds on the offline mode to maintain

relationships with their existing customer base. With the increasing use of the

online medium for marketing and discoverability, the same may change

depending on the value B2B organizations are able to extract out of this

emerging medium.

Exhibit 14: Advertisement expenses vary drastically as business model moves to B2B

Advertisement expense as a % of revenue

16.0%

12.7%

7.5%

7.4%

0.7%

Info Edge

Just Dial

16.1%

FY18

FY19

FY20

0.4%

IndiaMart

0.3%

Source: MOFSL, Company

19 August 2020

IndiaMART

Lower risk of disruption in B2B



While B2C horizontal players have a larger market to cater to, they also have a

high risk of disruption. The search feature remains the key for B2C players; a

platform offering multiple services remains prone to risk from Google policy

changes and players offering specialized services (e.g., Urban Company,

99Acres). On the other hand, in the case of B2B platforms, the search feature,

along with additional services (e.g., RFQ listings) and trust, is responsible for the

traction on a digital market platform.

Exhibit 15: “Interest over time” has seen much faster recovery for IndiaMART

120

IndiaMART

JustDial

**Interest over time- Search interest relative to the highest point on the chart, values in the chart represent deviation from the peak search

(peak search is taken as 100); Source: Google Trends

Two successful models

Increase in traffic has been

much more rapid for

IndiaMART after the easing

of the lockdown.

Within the Classifieds segment, two particular models have been successful thus far:

a) B2B discovery platforms such as IndiaMART and TradeIndia and b) verticalized

B2C platforms such as Urban Company and Zomato. All other models have been

cannibalized by the likes of Google. Other models have to rely on indirect traffic,

leading to a play between advertisement cost and growth in lead generation.

Advantages of B2B Classifieds model



The B2B Classifieds segment lets the buyer find a product through specific RFQ

requirements that give the seller a unique platform to conduct business. This

model has a lower risk of disruption from universal search engines such as

Google.com. Despite having better algorithms, search engines cannot give

product-specific search interfaces as this would make the platforms way more

complex.

Furthermore, our channel checks suggest once a user identifies a platform as

best suited for conducting business, they tend to use mobile applications for the

particular platform rather than universal search engines.

On the supplier front, higher convertible leads fuel more paid subscriptions, in

turn attracting more buyers. Once a category becomes successful on the

platform, SMEs start using the particular platform as a default for the category.

19 August 2020

IndiaMART

Advantages of Verticalized Classifieds model



Usually, a polarized scenario is seen in the case of verticalized platform

providers. Initially, the market is dominated by five or six smaller players, which

is then consolidated to two or three key players. Monetization happens once

consolidation reaches maturity. The initial cash burn witnessed by the smaller

players helps expand the market; once the market reaches an optimum stage,

users start identifying particular platforms for business in the particular

segment. Examples of such platforms are Urban Company, Zomato, and OLX.

Once users identify the platform as a one-stop solution and increase

engagement on the platform, the company can identify other revenue sources

to indulge the user and the listing agent. These include transactions, BPEM, etc.

Zomato, which started off with just listings and restaurant rankings, was the first

to commence transaction services and is now moving toward other sources,

such as cloud kitchens and raw material management services for restaurants.

Mature vertical players are also market makers; these companies command the

pricing on their platforms. In contrast, horizontal companies are price takers

(usually lower than vertical players). E.g., Naukri.com has a realization of

~INR80k per customer, which is a lot higher than posting a job on horizontal

platforms such as OLX.com.

19 August 2020

IndiaMART

IndiaMART: Leader in B2B Classifieds

Measuring scale



IndiaMART is the largest B2B classifieds company with >70% market share. Around 6m

SMEs are part of the IndiaMART platform, accounting for 54% of SMEs with a digital

presence.

The underlying market is expected to grow at a 25% CAGR over the next five years.

IndiaMART would be the primary beneficiary as the rest of the market remains largely

scattered.

Over the past five years, the platform has seen a 40% CAGR in buyers and 27% CAGR in

suppliers. This is despite the 20–25% annual churn in suppliers.



More than 50% of Internet

addressable SMEs are on

the IndiaMART platform



IndiaMART, which began operations in 1999, is the largest B2B Online Classifieds

marketplace, with 70% market share. The platform has more than 6m supplier

listings for 66m products across 100k+ categories from 1000+ cities. The

platform matches 40m+ monthly inquiries. Suppliers are charged for leads and

listing priority, and the platform remains free for buyers.

IndiaMART banks on higher Internet penetration among SMEs, which constitute

the majority of the sellers on the platform. Among the 63m non-Agri SMEs, 11m

have a digital presence and 0.2m make up the market of B2B classifieds

companies. IndiaMART has 133k paid suppliers, implying share of 70%.

According to KPMG, this market is expected to grow at a 25% CAGR over the

next five years. High growth credibility in the market may also be compared to

increased penetration in China. More than 90% of corporations are connected

via the Internet. 1688.com, a B2B classifieds player in China, saw an exponential

increase in the number of suppliers and now has more than 1m paid suppliers.

Market growth and higher penetration offer an unprecedented edge to

IndiaMART.

Exhibit 16: Classifieds segment to grow at 38% CAGR over

next four years

63m Non

Agri MSMEs

11m- Digital

Presence

Exhibit 17: Full-scale digital engagement still low at 2%

Engaged - 2%

Enabled-15%

Connected-15%

0.2m- Paid

Subscription

Offline-68%

Source: Company, Ministry of MSME

19 August 2020

IndiaMART

Exhibit 18: Listing industry to reach USD9.4b by FY23

Listing business size ( USD M)

9.4

1.9

FY18

FY23E

Source: IAMAI

Exhibit 19:

40% CAGR among registered buyers…

Buyers (m)

102

Exhibit 20:

…with 27% CAGR among sellers

Suppliers (m)

5.6

4.7

3.2

2.3

FY16

FY17

FY18

FY19

FY20

FY16

FY17

FY18

FY19

FY20

Source: MOFSL, Company

Customer additions and ARPU continue to drive 26% revenue growth. Historically,

customer additions have been at 12–20%, while the remainder has constituted

better realization. Even during the lockdown, IndiaMART was able to increase the

overall supplier base. However, due to subdued operations in 33% of the categories

on the platform, the overall drop in paid suppliers was 10% for 1QFY21.

Superior business model



IndiaMART charges suppliers majorly on the number of lead generations.

Packages offered by the company vary on numerous aspects, such as the

number of products, geography catered, count of leads, and individual websites.

Based on the above criteria, packages are clubbed into six categories: a) General

Listing, b) Mini Dynamic Catalogue, c) Maximiser, d) Star Supplier, e) Leading

Supplier, and f) Industry Leader.

Amount

Zero

3k monthly or 30k

annually

~55k annually

~110k annually

~250k annually

~550k annually

Source: MOFSL

Exhibit 21: Details of packages offered by the company

Packages

Storefront

MDC

Description



No leads



Seven weekly leads on monthly packages or 10 weekly leads monthly on annual packages

30 weekly leads, certified test seal, four email accounts

50 weekly leads, flexibility to select and change category-city combinations, Star Supplier label

80 weekly leads, leading supplier label, flexibility to select and change category-city

combinations

100+ leads, listing at the top, all other benefits from other packages

Maximiser



Star Supplier



Leading



Supplier

Industry Leader



19 August 2020

IndiaMART



A single buyer inquiry is

made visible to multiple

suppliers. However, the

matchmaking of leads is

continuously improving

with the higher use of AI

and ML.



A limited number of RFQs enable the supplier to contact the buyer only if there

is high relevancy between the product offered by the seller and the

requirements of the buyer. This maintains the quality of buyers and sellers on

the platform, discouraging spamming on the platform.

According to our channel check, 20–30% of the leads get converted into

purchases. The platform provides an opportunity for local sellers with limited

access to relevant buyers to offer their products across geographies.

Furthermore, it helps sellers understand the market and the changing

requirements of buyers so they can modify their offerings accordingly.

Once the purchase is established, the IndiaMART platform allows the buyer to

either pay through IndiaMART’s own payment gateway or pay to the supplier

directly. IndiaMART does not offer any services related to logistics for the

products.

Exhibit 22: IndiaMART’s business model

CALL

PREMIUM NUMBER SERVICE

ENQUIRY EMAIL / SMS

BUYERS

SUPPLIER

SUBMIT RFQ

RFQ CONSUMPTION

VERIFICATION & ENRICHMENT

Source: MOFSL, Company

IndiaMART typically sells packages in three formats: monthly, annually, and three-

yearly. Most of the buyers (~85%) start out with a monthly package under the MDC

category. However, average annual subscribers (~66%) imply high seller conversions

to annual subscriptions. This, coupled with a lower churn rate on the platform,

justifies the continuity of value addition v/s an exercise to simply add sellers on the

platform.

Exhibit 23:

20–25% annual churn rate

Packages

Monthly

Yearly

Three-yearly

Monthly churn rate

<1%

Source: MOFSL, Company

Far ahead of the competition

While there are several players in the B2B marketplace, only TradeIndia and

ExportersIndia stand out as relevant competitors to the IndiaMART platform. Based

19 August 2020

IndiaMART

on the total number of visits and pages viewed on each visit, IndiaMART is far ahead

of its competition. It has 90% share in the total visits between the three platforms.

Exhibit 24:

Lower churn rate implies high relevancy

Company

IndiaMART

TradeIndia

ExportersIndia

Total Visits

61.2

5.7

2.0

Pages Per visit

4.2

2.2

2.1

Average visit

duration

4.2

6.3

4.5

Bounce

Rate

32%

18%

64%

*Only includes browser-based traffic Source: MOFSL, Google Analytics

Exhibit 25: Traffic consistently expands on platform

While entry barriers are low

for new players, scalability

for new companies is more

challenging as business

growth is led by the

quantum of buyers and

sellers on the platform.

Source: MOFSL, DRHP



Furthermore, our channel checks suggest suppliers that used other platforms

were disappointed with the lead conversion. For the most relevant leads, they

prefer either the IndiaMART platform or offline channels.

Apart from B2B Classifieds, some other companies have established business

models around Transactions and Logistics as well. Some of the prominent names

are Moglix, Power2SME, and Udaan.

Recently, a lot of traction has been witnessed in the B2B E-Commerce space. Of

USD7b raised by e-commerce and consumer Internet companies in 2018, the

share of B2B stood at USD540m, i.e., 7.3% of total investments. Prior to 2018,

the B2B segment had recorded limited deal activity, with the largest deal in the

five years preceding 2018 being worth USD36m.

Amount Raised (USD B)

CY13

35.2

CY14

22.7

CY15

CY16

60.8

CY17

540

CY18

Number of deals

Exhibit 26:

High deal activity seen recently in B2B E-Commerce

Source: MOFSL, VCC Edge

19 August 2020

IndiaMART

Exhibit 27: Companies operating in B2B E-Commerce

Companies

Udaan

Moglix

Power2SME

Founded

2016

2015

2012

Model

Transaction

Subscription + transaction

Transaction

Total Funding raised (USD M)

870

125

Source: MOFSL, Company



In 2019, B2B E-Commerce gained more funding momentum, with companies

such as Udaan raising USD585m at a USD2.8b valuation. Moglix and NinjaCart

raised USD60m and USD89.5m, respectively.

More and more companies are venturing into this domain or gaining scale such

as Udaan, Amazon Business, Reliance, etc. However, led by the scale and

differentiation of business models, IndiaMART faces negligible competition from

new players. In terms of scale, the average product cost on IndiaMART is much

higher than on Udaan and Amazon Business.

19 August 2020

IndiaMART

Strong moats shield from disruption

Buyers satisfaction remains core strategy



IndiaMART has accumulated a robust base of buyers (107m) and suppliers (6.1m). This

establishes a virtuous cycle of continued traffic on the platform.

Even on the current base of buyer inquiries, IndiaMART can offer ~60 leads to every

paid supplier at a 0.2% cost per AOV. This indicates enough leeway to increase

volumes and realization simultaneously.

Despite direct searches lower at 14%, the risk of disruption remains low as organic

searches land on the platform owing to higher listed inventory and better SEO

management.

Paying suppliers on the platform are well-diversified, from various industry segments

and geographies, giving the platform an edge in the matchmaking process.

Resilient network effect



Dual connectivity between

buyers and sellers (being

part of the same value

chain) further strengthens

the network effect.



IndiaMART’s robust supplier base may be compared with the strong database of

resumes on Naukri.com. Similar to Naukri, more and more clients (buyers in this

case) are compelled to use the platform as it provides greater value addition to

clients.

A higher number of buyers translate into more inquiries, in turn leading to more

suppliers and thus higher monetization. Since suppliers on the platforms are

also MSMEs (majorly), they double as buyers too. 36% of IndiaMART’s sellers

are also buyers on the platform. If the cycle slows, the company could move the

wheel faster using advertisements as catalysts.

Exhibit 28: IndiaMART’s self-sufficient model

AD. SPENDS

Buyers

Higher

Monetizat

ion

Business

Enquiries

Suppliers

Source: MOFSL

19 August 2020

IndiaMART

Exhibit 29: 55% repeat buyers and 36% suppliers buying from platform indicate resilience in model

55%

Repeat Buyers

36%

Suppliers are Buyers

102m Registered

Buyers

PRODUCT

BUYER

6m Supplier

Storefronts

44m

Monthly Business Enquiries Delivered

Source: Company, MOFSL

(1)

Exhibit 1: Higher buyers result in…

Buyers (m)

102

Exhibit 2: …higher traffic on the platform

Traffic (m)

553

326

723

748

292

FY16

FY17

FY18

FY19

FY20

FY16

FY17

FY18

FY19

FY20

Source: MOFSL, Company

Exhibit 3: …leading to higher RFQs…

Buyer Enquiries (m)

449

290

157

464

Exhibit 4: …and thus higher sellers…

Suppliers (m)

4.7

3.2

2.3

5.6

115

FY16

FY17

FY18

FY19

FY20

FY16

FY17

FY18

FY19

FY20

Source: MOFSL, Company

19 August 2020

IndiaMART

Exhibit 5: …implying higher paying suppliers

Paying Suppliers ('000)

130

147

108

FY16

FY17

FY18

FY19

FY20

Source: MOFSL, Company

Reliance on sellers’ ROIs



With total GMV at ~INR2t,

the commission charge for

IndiaMART is less than

0.5%.



IndiaMART assigns a high importance to sellers’ ROIs, which is key to its value

proposition. For most of the genuine sellers, this is a value-plus model. In FY20,

weekly unique business leads per paying customer stood at ~10. However, since

the platform delivers one lead to multiple sellers (~6 sellers for one unique

lead), it has ~61 leads available for each seller each week. Since the company’s

most popular package only promises 10 weekly leads, it has enough leeway to

add more suppliers with the current momentum. Furthermore, the delivery

proposition of the business remains intact.

Most of the sellers that we talked with never had any issues regarding the

number of leads available on the platform. Reasons for non-conversion have

mostly been related to the size of the contracts and geographical logistics. In

general, IndiaMART charges a 0.2% commission for supplier products, which is

very low given the value added by the platform.

RFQs shield from search engine disruptions

After FY17, most of the

traffic on the platform is

obtained organically,

implying 2nd order search is

also high on the platform.



The direct search feature (majorly from Google) has disrupted most of the local

search platforms in the past. Verticalized applications and Google have both

cannibalized the “general” search platforms. IndiaMART’s reliance on specific

search requirements and large portfolio of products shield the platform from

such disruptions.

Data from SEMRUSH shows that direct search remains high on the IndiaMART

platform. Moreover, most of the complex Google searches (coupled with

requirements) for B2B products lead to the IndiaMART platform. According to

SimilarWeb, 99.97% of the times, users land on the IndiaMART page through

organic searches, implying a high relevancy for the platform. This has been

possible due to the strategic use of SEO and the presence of a higher number of

suppliers on the platform.

19 August 2020

IndiaMART

Exhibit 6: Highest quantum of organic searches…

Organic Search (m)

Exhibit 7: …coupled with lowest % of paid campaigns

Paid Search (%)

17.3

0.95

IndiaMart

TradeIndia

3.3

Alibaba

Source: MOFSL, SEMRUSH

0.03

IndiaMart

2.3

TradeIndia

Alibaba

Source: MOFSL, SEMRUSH

Exhibit 8: Top organic results from specific searches

Source: MOFSL, Company

In addition to marketing by field sales representatives, IndiaMART builds brand

equity through targeted digital marketing, search engine advertisements, and offline

advertising. In FY16, the company spent 19% of its revenue on advertising; however,

with more and more organic traffic seen on the platform, advertising expenses have

reduced to <1% of revenue, enhancing the company’s margin profile.

19 August 2020

IndiaMART

Exhibit 9: Higher organic search leads to lower ad expenses

Advertisement expense

19%

% of revenue

468.2

FY16

173.2

FY17

31.1

FY18

21.0

FY19

21.6

FY20

Source: MOFSL, Company

Diversification de-risks from industry-specific risks

Along with RFQs, sellers are

also given information

about past purchases of the

buyer. Description includes

data points around

quantity, geography, and

pricing.



IndiaMART does not depend on any single industry/category. No industry

accounts for more than 9% of the supplier base. Moreover, IndiaMART’s

revenues are well-diversified over 54 industries, 100k categories, and 68m+

products. High diversification shields the platform from any short- and long-

term ups and downs in any industry.

Diversification is also high among geographies; two-thirds of the buyer base is

from tier-2, tier-3, and tier-4 towns. 35% of buyers are from tier-1 cities, while

60% of suppliers come from the top eight metros (where the paying-supplier

percentage is higher than 2%).

Buyers

(%)

Paid Suppliers

(%)

Exhibit 10: Well-diversified across geographies

Cities

Metro Cities

Tier II Cities

Rest of India

Categorization



Delhi NCR, Mumbai, Bengaluru, Hyderabad, Kolkata, Ahmedabad, Pune, and Chennai

Population >500k excluding the cities covered under Metros

Population < 500k

Source: MOFSL, Company

Tuck-in investments leverage strong supplier base

The focus is on small tuck-in

investments related to the

core business. It has no

proposition to venture into

pure-play investing (like

Info-Edge).



For its next leg of growth, IndiaMART has been focusing on leveraging its

supplier base. In the past few years, IndiaMART has invested in six associated

companies to provide services around payment and SaaS.

The company aims to achieve two things through this: a) further increase

engagement with suppliers on multiple channels and b) cross-sell applications to

its SME base given higher market accessibility. While these subsidiaries

contribute less than 3% to the group entity to date, we see value accretion on a

long-term basis.

19 August 2020

IndiaMART

Exhibit 11: Investments and acquisitions thus far

Entity

Tolexo Online Private Limited

Ten Times Online Private Limited

Hello Trade Online Private Limited

Tradezeal International Private Limited

Pay With IndiaMART Private Limited

Vyapar Apps Private Limited

Mobisy Technologies

Description



Cloud-based solution for SME businesses

Discovery of business events

Facilitation of domestic trade and international

business

Facilitation of domestic trade and international

business

Electronic payment facilitation

Provides business accounting software

Sales Force Automation and Distributor

Management System

Operations

Operational

Not

Operational

Not

Operational

Incorporated

May-14

Feb-14

Jul-08

May-05

Feb-17

2016

2012

Revenue INR

M (Latest)

130

280

Interactions with IndiaMART suppliers

For research purposes, we interacted with various IndiaMART suppliers; here are

some of the takeaways:

Shoes wholesaler, Delhi



The IndiaMART platform has been very reliable; it gives 20+ relevant leads every

week.



Cash made is at least double v/s the money paid to the portal.



Leads from other platforms are not reliable.



Conversion of the leads depends on the supplier’s capability to fulfill the

requirement.



Overall, the experience has been very fruitful

Plastic bottle manufacturer, Mumbai



The dealer has been associated with the platform for more than seven years.



The conversion ratio of leads is not that good, but a lot of relevant leads are

available on the platform.



IndiaMART’s customer care personnel are highly approachable in case of any

issues.



Leads are received from across geographies, even outside the country at times.

The platform is not very relevant for sellers wanting to sell locally.



Other platforms were not contactable in the time of need, nor were their leads

relevant.

Hydraulic machine seller, Ahmedabad



The dealer receives more than 10 leads per day, one or two of which get

converted.



Orders are received from all over India.



The dealer has been on the IndiaMART portal for more than 10 years.



No other portal is half as relevant as IndiaMART.

Gear manufacturer, Mumbai



The dealer has not had a good experience thus far.



Of the 10 leads received, one or two get converted; however, these contracts

are very small in size.



Most of the larger sales happen through word of mouth.



The IndiaMART platform is relevant only for small sellers.

19 August 2020

IndiaMART

Return >> risk

Zero default risk on upfront cash collection



While IndiaMART caters to SME clients, the risk of a payment default is negligible

owing to its subscription-based business model. Deferred revenue acts as a cushion to

near-term volatility.

After FY16, the company has not incurred any major advertisement expenses. Traction

on the platform has been organic.

IndiaMART has also been able to increase ARPU despite witnessing a rise in the

number of paid sellers due to lower price sensitivity on the seller front.



IndiaMART is well-positioned in a high-growth market; moreover, it is clearly the

market leader in the segment. While high growth comes with the risk of

payment default, this is not the case with the IndiaMART model.

The majority of IndiaMART’s revenue comes from a subscription-based model,

wherein SMEs are charged beforehand, making the default risk negligible.

Exhibit 12: High-growth target market with zero payment-default risk

Free Listing

Mom and Pop shops

Paid Listing/

Subscription

MSMEs

Google

LMEs

Target

Market

Source: MOFSL

Deferred revenue at 1.1x of

FY20 top line gives visibility

on revenue for yearly and

multiyear subscriptions.



Deferred revenue offers further visibility on near-term growth. The company

collects revenue from suppliers in advance; 60% of this deferred revenue is

realized into the top line within the following 12 months, while 40% is realized

beyond this period. Overall 20–21 months of average deferred revenue is

converted to sales.

Customer additions and ARPU have continued to drive 27% revenue growth in

the past four years. Historically, customer additions have been at 13–20%, and

the remainder has constituted better realization.

To maintain the supplier base, IndiaMART does not change the subscription fees

for customers continuing to subscribe to the platform. However, an ARPU

increase is seen among new customers. We believe the platform adds ~35% new

customers every year (churn rate of ~20%). These customers are liable to pay

increased subscription fees, hence maintaining the increase in ARPU.

19 August 2020

IndiaMART

Exhibit 13: Strong collections from SMEs

Deferred Revenue

Growth YoY

38%

27%

30%

17%

23%

2460

FY16

3180

FY17

4110

FY18

5070

FY19

6386

FY20

Exhibit 14: Consistently high revenue growth

Revenue (INR M)

29%

26%

Growth YoY

2560

FY16

3250

FY17

4230

FY18

5850

FY19

6850

FY20

Source: MOFSL, Company

Positive operating leverage



Strong revenue growth

despite sharp reduction in

advertisement cost over the

years



Employee expenses, outsourced sales cost, and engagement expenses for

buyers and sellers constitute the three major cost items for IndiaMART. After

FY16, the company has not incurred any major advertisement expenses as most

of the traction on the platform is organic. Advertisement expenses as a

percentage of revenue reduced to less than 1% in FY20 from 19% in FY16. All of

the three costs have cumulatively increased in the range of 10–16% over the last

three years. At the same time, revenue growth has been in the range of 23–

29%, giving the company leverage over margins.

IndiaMART showed strong resilience in controlling cost when collections fell by

50% in 1QFY21. The company was able to reduce operational cost by 28%,

largely by cutting off variable pay. This shows IndiaMART’s ability to pull

operating leverage on higher revenue growth, while at the same time manage

cost in the case of event-based revenue decline.

Led by market growth, the company has been able to grow the number of paid

sellers at a CAGR of 15% over the past three years. Also, ARPU growth during

this period has been at 11%, adding to the revenue CAGR of 26%.

IndiaMART has been able to increase ARPU despite witnessing a rise in the

number of paid sellers due to lower price sensitivity on the seller front. The

platform charges just a 0.2% commission on the total sale of goods, the lowest

among the Internet-based marketplaces. Furthermore, our channel checks

suggest sellers on the platform have no issues with the price point, given the

high value added by the platform. This presents a unique positioning for the

company to increase its ARPU on a gradual basis.

19 August 2020

IndiaMART

Exhibit 15: Lower price sensitivity leads to continued increase in ARPU

ARPU (INR '000)

37.2

32.8

32.1

38.4

42.3

FY16

FY17

FY18

FY19

FY20

Source: MOFSL, Company

Exhibit 16: Strong operating leverage in the business…

Manpower Expense

74%

68% 66%

42%

Outsourced sales cost

Other Expense

Exhibit 17: …leads to continued increase in margins

EBIT Margin (%)

11%

16%

23%

47%

30%

45%

27%

11%

42%

21%

11%

-19%

FY16

FY17

11%

FY18

-52%

FY16

FY17

FY18

FY19

FY20

FY19

FY20

Source: MOFSL, Company

19 August 2020

IndiaMART

High FCF yield; strong balance sheet

Robust cash generation with minimum investments



IndiaMART operates in a negative working capital cycle with over a year of deferred

revenue days.

Along with this, the platform has to invest very little in the core business for on-going

business momentum. Capex as a percentage of sales is less than 1%.

This leads to high cash generation and positive FCF yield of 3%.



Health OCF/EBITDA of 150%

and PAT/FCF of 160%



Cash on the books is at

INR9.5b, equivalent to 14%

of market cap.



IndiaMART has healthy cash flow generation, particularly led by three main

factors: a) high growth in operating profit, b) negative working capital, and c)

lower capital expenditure in an asset-light model.

The company’s operating profit has seen stellar growth. EBIT margins increased

to 23% in FY20 from -52% in FY16. In FY20, EBIT growth stood at 84%.

IndiaMART is a negative working capital cycle business as the company operates

on a subscription-based model, resulting in upfront cash collection that appears

as deferred revenue on the company’s balance sheet. The company saw a 28%

CAGR of deferred revenue over FY16–20. The company’s deferred sales days

exceed a year, while average payable days for the last four years are over a

month. This has led to a strong cash balance within the company.

The company also has a capex-light model: capital expenditure as a percentage

of sales is less than 1%, indicating negligible investments required to pump up

the business. Nevertheless, we do believe the company may use existing cash of

INR9.5b (83% of the balance sheet) for tuck-in acquisitions/investments.

All of the above factors would result in healthy cash generation. As a result, cash

and cash equivalents have grown at a 64% CAGR over the past three years.

Exhibit 19: …result in increasing OCF

OCF (INR M)

2,551

1,791

2,605

Exhibit 18: Over a year of deferred revenue days…

Deferred Revenue Days

415

386

375

368

371

590

150

FY16

FY17

FY18

FY19

FY20

FY16

FY17

FY18

FY19

FY20

Source: MOFSL, Company

19 August 2020

IndiaMART

Exhibit 20: <1% of capex goes into sales

3.0%

Capex (INR M)

% of Sales

Exhibit 21: FCF yield at 3%

FCF (INR M)

2500

1768

2560

0.8%

74.2

FY16

27.0

FY17

1.0%

0.6%

22.9

FY18

51.2

FY19

45.0

FY20

FY16

563

FY17

FY18

FY19

FY20

Source: MOFSL, Company

Exhibit 22: Cash generated from operations remains high

OCF/EBITDA

FCF/Sales

43%

49%

40%

Exhibit 23: Low capital requirements drive healthy return

ratios

RoE

RoCE

36.0

72.2

71.9

18%

-12%

FY16

-109%

FY17

381%

304%

155%

-34.2

-26.0

-56.2

FY18

FY19

FY20

FY18

FY19

FY20

Source: MOFSL, Company

While the company’s cash balance constitutes 80% of its balance sheet size, most of

the cash is parked as deferred revenue or contractual liabilities. Therefore, the

capital allocation policy should only be considered for cash generated from

operations. For FY20, the company had a payout ratio of 23%. We expect a payout

ratio in a similar range for the next three to four years as the company’s focus

remains on investments and acquisitions that could increase its engagement with

suppliers.

Capital allocation

19 August 2020

IndiaMART

Valuation and view

Initiate with Buy



Both collections (10% growth in FY20) and deferred revenue (17% growth in FY20)

growth decelerated in FY20, even prior to the COVID-19 impact. This was led by slower

growth in the overall economy.

The COVID-19 impact led to a 10% reduction in paid suppliers in 1QFY21, leading to a

drop in collections by 50%. New supplier additions in growth categories are expected

to offset the higher churn in impacted verticals. We forecast a 7% fall in paid suppliers

and 25% in collections for FY21.

Our forecast of near-term impact on the company is weighed by closures across the

country. Nevertheless, we are confident of strong fundamental growth in operations

thereon, driven by: a) high growth in digitization among SMEs (~25%), b) the need for

out-of-the-circle buyers, c) a strong network effect, d) >70% market share in the

underlying industry, e) the ability to increase ARPU on account of low price sensitivity,

and f) high operating leverage.

Our DCF-based target price of INR3,550 is arrived with an assumption of 11% WACC

and 5% terminal growth rate. TP implies upside of 19%. Initiate with Buy. Risk factors

include higher mortality in supplier base and potential entry of a cash rich global

player.



Expect 25% decline in

collections in FY21



High growth in digitization among SMEs, a strong network effect, >70% market

share in the underlying industry, and a gradual increase in ARPU on account of

low price sensitivity should maintain the revenue growth momentum in the

medium to long term.

However, given the COVID-19-led lockdown, we foresee a 7% YoY reduction in

the paid supplier base, resulting in a 25% drop in collections and 7.5% YoY

decline in revenues for FY21. We forecast a sharp turnaround in FY22 operations

on account of: a) pent-up demand, b) a stable base of total suppliers, c) the

need for out-of-the-circle buyers, and d) higher Internet penetration.

We expect decline in collections to be largely attributable to: (a) higher churn in

monthly subscribers, (b) churn in annual subscribers whose payments are due in

the near term, and (c) the extension of payment terms.

The company has been able to maintain its ARPU, largely on account of the

higher churn in monthly customers (with lower realization) offsetting discounts

on base packages. Going ahead, we can expect a 5% drop in APRU for the rest of

the year as newer supplier additions are dominated by lower duration packages.

We expect a 9% CAGR in paid suppliers, coupled with a 2% CAGR in ARPU over

FY20–23, implying a revenue CAGR of 10% over FY20–23.

19 August 2020

IndiaMART

Exhibit 24: We expect a 10% revenue CAGR over FY20–23

Y/E March

Income from Operations

Registered buyers (m)

YoY Growth (%)

Indian supplier storefronts (m)

YoY Growth (%)

Paying subscription suppliers (000s)

YoY Growth (%)

Paying Supplier/Total Supplier (%)

Annualized revenue per Paying

customer(ARPU)

Revenue

YoY Growth (%)

Revenue / Buyers

FY18

60.00

53.8

4.70

108.00

12.5

2.3

37,246

4,110.00

29.2

68.5

FY19

83.00

38.3

5.50

130.00

20.4

2.4

38,373

5070

23.4

61.1

FY20

102.00

22.9

6.00

147.00

13.1

2.5

42,300

6386

26.0

67.0

FY21E

122.40

20.0

6.30

136.71

-7.0

2.2

43,208

5907

-7.5

51.7

FY22E

159.12

30.0

7.06

162.29

18.7

2.3

42,814

6948

17.6

46.6

FY23E

206.86

30.0

8.33

191.50

18.0

2.3

44,683

8557

23.2

46.1

Source: MOFSL, Company

Exhibit 25: We expect a 9% CAGR for paid suppliers…

Paying Suppliers ('000)

33%

13%

20%

13%

-7%

19%

18%

YoY Growth

Exhibit 26: …implying a revenue CAGR of 10%

Revenue (INRm)

29%

26%

23%

YoY Growth

18%

-8%

6,386

5,907

6,948

8,557

23%

FY16

FY17

108

FY18

130

FY19

147

FY20

137

162

191

2,460

FY16

3,180

FY17

4,110

FY18

5,070

FY21E FY22E FY23E

Source: MOFSL, Company

FY19

FY20E FY21E FY22E FY23E

Source: MOFSL, Company



Led by high operating leverage in the business, lower price sensitivity on

supplier additions, and the optimization of sales cost / other expenses, we

forecast an 8pp margin expansion for the company over FY20–23. This implies

an EBIT CAGR of 22% and a PAT CAGR of 26% over FY20–23.

We further allude to the fact that the company has shown high cash conversion,

with OCF/EBITDA at 155% and FCF/sales at 40%. Low capital requirements have

led to ROE of 72% in FY20.

Unit economics work in favor of IndiaMART. Assuming a lifespan of five years for

a customer and annual churn of 20%, the ratio of the lifetime value of a

customer to the total cost of acquisition amounts to 6:1 (for FY20). We expect

this ratio to increase as the platform adds more customers, strengthening our

assumption for gradual margin expansion.

19 August 2020

IndiaMART

Exhibit 27: Favorable unit economics

LTV(INR '000)

Cost of acqusition ( INR '000)

8.9

186

6.1

192

217

6.1

Ratio

FY18

FY19

FY20

Exhibit 28: Cost projections

Cost of Operations

Employees

Net Adds

Cost per employee '000

Wage Hike

Manpower Cost

YoY Growth

Outsourced field sales representative

Net Adds

Outsourced field cost per employee '000

Wage Hike

Outsourced sales cost

Total Sales Rep

Outsourced sales rep. as a % of total sales rep

YoY Increase

Other Expenses

as a % of sales

Total Expenses

FY18

2609

-165

747

-1%

1950

-7.1%

979

447

449.4

-11%

440

2921

34%

11%

1250

30%

3640

FY19

2995

386

765

2290

17.4%

1067

534.2

19%

570

3316

32%

14%

1370

27%

4230

FY20

3307

312

811

2670

16.6%

1374

307

551.9

724

3929

35%

18%

1310

21%

4704

FY21E

3150

-157

716

-12%

2266

-15.1%

1365

-9

380.2

-31%

524

4266

32%

913

15%

3703

FY22E

3400

250

814

14%

2718

20.0%

1740

375

414.2

705

5438

32%

27%

1251

18%

4674

FY23E

4000

600

875

3265

20.1%

1940

200

438.1

817

6063

32%

11%

1540

18%

5623

Source: MOFSL, Company

Exhibit 29: We expect EBIT margin expansion of 230bp over FY20–23

EBIT

Margin (%)

11%

-19%

-1290

-52%

-590

440

16%

23%

22%

23%

1536

25%

2129

800

1475

1209

Source: Company, MOFSL

19 August 2020

IndiaMART

Initiate with Buy; TP of INR3,550



We value the company using DCF; we have assumed a 20% revenue CAGR and

25% EBIT CAGR over FY24–34. For every 1 pp change in EBIT CAGR, TP changes

by 4%.

Longer term margin performance should coincide with the likes of platforms

such as Naukri.com, which has shown a 10pp increase in margins in the last 10

years on high operating leverage. This would only be possible if IndiaMART is

able to increase its supplier base without incurring large spend on advertising.

We believe the company would be able to do so, given the network effect in the

business.

Note that the company has reported a revenue CAGR of 27% in the last four

years and turned around margins to 23% in FY20 from -52% in FY16. IndiaMART

is trading at 35x FY22 EPS; for FY20–23, we expect a revenue/EBIT/PAT CAGR at

10%/22%/26%. Our DCF-based target price of INR3,550 implies upside of 19%.

We foresee near-term impact on the company, weighed by closures across the

country. However, we are confident of strong fundamental growth, driven by: a)

high growth in digitization among SMEs (~25%), b) a strong network effect, c)

>70% market share in the underlying industry, d) the ability to increase ARPU on

account of low price sensitivity, e) high operating leverage, and f) high FCF yield.

Exhibit 30:

DCF assumption

Year

Suppliers (m)

Growth (%)

Paid Suppliers ('000)

% of Total Suppliers

Revenue (INR m)

RPU (INR'000)

RPU Gr (%)

EBIT (INR m)

EBIT Margin (%)

Tax ( INR m)

ETR (%)

EBIT (1-Tc)

Depreciation

Dep as % of sales

FY19

5.5

17.0

130

2.4

5970

3.0

800

13.4

350

62.5

300

0.7

FY20

6.0

9.1

147

2.5

6386

10.2

1475

23.1

558

26.2

1088

207

3.2

-1022

-16.0

1.0

2254

2030

FY21

6.3

5.0

137

2.2

5907

2.1

2041

34.6

810

26.0

1511

163

2.8

230

3.9

1.0

1385

1124

FY22

7.1

12.0

162

2.3

6948

-0.9

2085

30.0

890

26.2

1540

189

2.7

-1188

-17.1

1.0

2847

2082

FY23

8.3

18.0

191

2.3

8557

4.6

2701

31.6

1126

26.2

1994

233

2.9

-1863

-21.8

1.0

4005

2638

FY24

10.0

20.0

240

2.4

4.6

3538

31.6

303

26.2

2612

325

2.9

-2440

-21.8

112

1.0

5265

3125

FY25

12.0

20.0

288

2.4

4.5

4436

31.6

379

26.2

3276

408

2.9

-3060

-21.8

141

1.0

6602

3530

FY26

14.4

20.0

345

2.4

4.4

5558

31.6

475

26.2

4104

511

2.9

-3833

-21.8

176

1.0

8271

3984

FY27

17.3

20.0

414

2.4

4.3

7095

32.2

595

26.2

5239

639

2.9

-4797

-21.8

220

1.0

4537

FY28

20.7

20.0

497

2.4

4.2

9138

33.2

744

26.2

6748

799

2.9

-5999

-21.8

276

1.0

5187

FY29

24.9

20.0

597

2.4

4.1

34.2

929

26.2

8682

998

2.9

-7149

-20.8

344

1.0

5806

FY30

29.1

17.0

698

2.4

4.0

35.2

1131

26.2

1215

2.9

-8280

-19.8

419

1.0

6332

FY31

33.2

14.0

796

2.4

3.9

36.2

1339

26.2

1439

2.9

-18.8

496

1.0

6726

FY32

36.8

11.0

883

2.4

3.8

36.2

1543

26.2

1658

2.9

-17.8

572

1.0

6834

FY33

39.8

8.0

954

2.4

3.7

36.2

1728

26.2

1857

2.9

-16.8

640

1.0

6747

FY34

41.7

5.0

1002

2.4

3.6

36.2

1880

26.2

2020

2.9

-15.1

696

1.0

6368

11208 14054 17607 22037 27555 34422 41885 49611 57161 64018 69638

11758 14736 17978 20714 23199 25236

10881 13275 15295 17130 18634

Change in working capital

-1686

Change in working

-28.2

capital as a % of sales

Capex

0.52

Capex as a % of sales

FCF

0.0

2026

-9312 -10157 -10735 -10510

10455 13270 16485 19957 23529 26538 29082 30467

19 August 2020

IndiaMART

Exhibit 31: Target Price: INR3,550; Upside: 19%

WACC (%)

Terminal Growth rate (%)

Total PV (m)

Terminal Value

Cash (m)

Total Value

Total shares (m)

Per share Value (INR)

CMP (INR)

Upside (%)

11%

69075

23291

9540

101,906

3550

2990

Exhibit 32: Sensitivity analysis

WACC/g

3,550

10%

11%

12%

13%

14%

3.0%

3,769

3,273

2,901

2,610

2,376

Sensitivity analysis

4.0%

5.0%

6.0%

4,232

3,550

3,074

2,724

2,454

4,627

3,762

3,198

2,801

2,504

Exhibit 33: For every 1pp change in EBIT CAGR, TP changes by

7.0%

5,279

4,076

3,369

2,901

2,567

-1SD

EBIT CAGR

PV (INR B)

Terminal Value (INR B)

Total Value (INR B)

24%

3420

Assumption

25%

3550

+1SD

26%

105

3680

3,964

3,393

2,978

2,661

2,412

Source: MOFSL, Company

Exhibit 34: PE chart

P/E (x)

Min (x)

19.1

Avg (x)

+1SD

35.8

33.2

28.4

23.6

35.8

Max (x)

-1SD

Exhibit 35: PB chart

11.0

9.5

8.0

6.5

5.0

6.2

P/B (x)

Min (x)

Avg (x)

+1SD

9.8

8.6

7.4

Max (x)

-1SD

9.7

Source: MOFSL, Company

19 August 2020

IndiaMART

Key risks

Higher business mortality among suppliers

IndiaMART has indicated a 20% loss in its supplier base. While the company claims

that most of these suppliers are still on the platform, opting for free services, risk

persists from the viewpoint of business mortality due to the current lockdown

situation. Higher business mortality would have a permanent impact on the paid

supplier base and, consequently, the company’s revenue profile.

In the current situation, the company has been providing pricing discounts and

delayed payment terms on a case-by-case basis. Given the economic conditions,

SMEs may not opt for regular pricing once the situation normalizes. Moreover, it

may prove challenging for sales employees to convince SMEs to revert to the

original pricing.

IndiaMART has been increasing the pricing for new customers who are joining the

platform. The current situation may limit the platform’s power to sign up customers

at increased subscription prices.

Pricing power

The company has been a part of various lawsuits in the past, largely related to

In the event that alleged counterfeit or infringing products are listed on the

marketplace, or alleged infringing contents are made available through the

platform, the company could face claims and negative publicity related to these

activities or for its alleged failure to act in a timely or effective manner in response

to the infringement or to otherwise restrict or limit these listings.

A US Trade Representative (USTR) has already placed IndiaMART under notorious

marketplaces in 2018. Given the company’s large SME base and even larger product

listings, it becomes difficult to monitor every single product. If some discrepancy is

found, IndiaMART contacts the supplier to inquire about it; if there is no response

within a certain time period, the IndiaMART platform has the authority to de-list the

supplier.

Cases and legal charges

Venturing into Transactions and Logistics

Previously, the company had ventured into the Transactions space through its

subsidiary Tolexo. After several unsuccessful attempts, IndiaMART’s investment

value in the subsidiary was reduced by INR468m. If and when the company plans to

add new subsidiaries to extend its arm beyond the Classifieds space, it may incur

higher investments that may or may not be successful. Given the higher competition

and large VC-backed players in the B2B E-Tailing space, the company would have to

incur cash loss in initial years to set up these businesses.

19 August 2020

IndiaMART

Since the company’s main business is carried out through a platform, technology

becomes the key essence of the business. The company’s failure to keep up with the

pace of technological change or a lag in adding new product features to its platform

(v/s competitors) could lead to erosion in market share and profitability.

Furthermore, the platform’s functioning depends on external factors, such as

network- and cloud-based servers; any issues in the same could have a temporary

impact on business operations.

Technology curve

Business of scale

IndiaMART is able to attract more buyers and sellers on the platform owing to the

availability of a massive list of products on the platform, including almost all

components in the production value chain. Any platform that could replicate this by

adding more suppliers on discounted pricing may be able to steal the momentum

away from the IndiaMART platform. The network effect would automatically result

in a higher supplier base going to a bigger platform.

19 August 2020

IndiaMART

Bull and Bear Cases

Bull Case



In our Bull Case, we factor a much faster recovery in the supplier base following

10% decline in 1QFY21. We factor a 3% increase in the supplier base for FY21

and a 21% increase in paying suppliers in FY22. This would lead to a revenue

CAGR of 13% over FY20–23.

On account of non-payment of variable cost, we expect decline in operational

cost by 20% in FY21. We expect an increase of 30% in FY22 on account of wage

hikes, higher employee additions, and higher variable cost. We expect a 31%

increase in EBIT over FY20–23.

As a result, our PAT would increase by 32% over FY20–23.

Based on the above assumptions, we arrive at a DCF target price of INR3,700,

implying upside of 26%.

Bear Case



In our Bear Case, we factor slower recovery in the supplier base following a

decline of 10% in 1QFY21. We factor a 12% reduction in the supplier base for

FY21 and a 17% increase in paying suppliers in FY22. This would lead to a

revenue CAGR of 5% over FY20–23.

Furthermore, we expect a drop in realization to the tune of 1% over FY20–23 on

account of lower pricing power in a distressed demand environment.

We still expect a 5% increase in EBIT over FY20–23 on account of strong cost

rationalization.

As a result, our PAT would increase by 6% over FY20–23.

Based on the above assumptions, we arrive at a DCF target price of INR2,320,

implying downside of 22%.

SCENARIO ANALYSIS – BEAR CASE

SCENARIO ANALYSIS – BULL CASE

FY21E

Revenues (INR m)

YoY Growth (%)

Operating Expenses (INR m)

YoY Growth (%)

EBIT

Margin (%)

PAT (INR m)

YoY Growth (%)

EPS (INR)

DCF TP

6158

-4

3746

-20

2242

2455

3700.0

Source: MOFSL

FY22E

7864

4839

2811

3049

106

FY23E

FY21E

5621

-12

3655

-22

1811

1947

2320.0

FY22E

6131

4527

1437

1568

-19

FY23E

7310

5399

1713

1866

9301 Revenues (INR m)

18 YoY Growth (%)

5757 Operating Expenses (INR m)

11 YoY Growth (%)

3291 EBIT

35 Margin (%)

3614 PAT (INR m)

19 YoY Growth (%)

125 EPS (INR)

DCF TP

Source: MOFSL

19 August 2020

IndiaMART

Key management personnel

Mr Dinesh Agarwal established the company in 1999 following his stint as a

computer engineer in the US. He has been a Director on the company’s board since

its incorporation. His experience spans Hindustan Management and Technical

Services, HCL America, Inc., HCL, HCL Hewlett-Packard, Centre for Development of

Telematics (C-Dot), and CMC. He is a Charter Member of The Indus Entrepreneurs

(TiE), a global network of entrepreneurs and professionals. He is also a member of

the governing council of the Indian and Mobile Association of India. Mr Agarwal

holds a Bachelor’s degree in Technology (Computer Science and Engineering) from

the Harcourt Butler Technological Institute, Kanpur University.

Dinesh Agarwal, MD and Founder

Mr Brijesh Agrawal has also been a Director on the company’s board since its

incorporation. He expertizes in Internet, networking, and systems development.

Previously, he worked with H N Miebach Logistics India Private Limited. He is also a

Charter Member of The Indus Entrepreneurs (TiE). Mr Brijesh Agrawal holds a

Master’s degree in Management Science from the University of Lucknow and a Post-

graduate Diploma in Business Management from Northern Institute for Integrated

Learning in Management, New Delhi.

Brijesh Agrawal, Whole-time Director / Co-Founder

Prateek Chandra, CFO

Mr Prateek Chandra has been the company CFO for five years now. He has a

Bachelor of Commerce degree from Shri Ram College of Commerce, University of

Delhi, and is a qualified Chartered Accountant. Prior to joining IndiaMART, he has

served at exlService.com, Bharat S Raut & Co, and HT Media.

Mr Gulati has been associated with the company since 2012. In the past, he has

served in various sales and strategy roles for companies such as Jenson & Nicholson,

Bharti Airtel, Kodak India, Reliance Infocomm, Indian Express, and Swan Telecom.

He holds a Bachelor’s degree in Chemical Engineering from Kanpur University and an

MBA from FMS Delhi.

Dinesh Gulati, COO

Amarinder S Dhaliwal, Chief Product Officer

Mr Amarinder Dhaliwal joined the company in 2016. He has done his B.Tech from IIT

Delhi and MBA from IIM Ahmedabad. In the past, he has served at Micromax, BCCL,

Times Internet, and SBI Capital Markets.

19 August 2020

IndiaMART

Company overview

IndiaMART is India’s largest B2B marketplace, with market share exceeding 70%.

The company operates a desktop-based and an app-based platform that matches

the buyers with the appropriate suppliers.

Revenue is generated primarily through the sale of subscription packages to

suppliers (available on a monthly, annual, and multi-year basis). These offer a range

of benefits, including the listing of the supplier storefronts on a priority basis, access

to a lead management system, integrated access to third-party online payment

gateways, and access to requests for quotes (RFQs).

Typically, a buyer on the platform may either search for a specific product on the

search bar or post his requirement in the form of an RFQ. The RFQ is then shared

with the suppliers based on the subscription package they have opted for.

IndiaMART also collects RFQs and buyer information through phone calls to buyers

once they have searched for a product or service on the platform. IndiaMART

remains free for buyers and for suppliers who do not wish to get RFQs from buyers.

Buyers that submit an RFQ online receive a list of suppliers that, based on a behavior

data-driven matchmaking algorithm, are relevant to those specific requirements.

Suppliers on the platform can create storefronts where they are able to list down

their products and other specifications. IndiaMART uses PNS (premium number

services), which is basically a phone number allotted to each seller that can connect

the seller’s multiple phones with the same number. Along with relevant leads,

IndiaMART provides information about potential buyers that search for the similar

type of product through its platform.

The platform has more than 6m supplier listings for 68m products across 100k+

categories from 1000+ cities. Buyers and suppliers are both well-diversified in tier 1,

2, and 3 cities. A total of 448m and 464m business inquiries were delivered to

IndiaMART’s suppliers in FY19 and FY20, respectively.

19 August 2020

IndiaMART

Financials and valuations

Consolidated - Income Statement

Y/E March

Total Income from Operations

Change (%)

Employees Cost

Outsourced sales cost

Other Expenses

Total Expenditure

% of Sales

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income

PBT bef. EO Exp.

EO Items

PBT after EO Exp.

Total Tax

Tax Rate (%)

Minority Interest

Reported PAT

Adjusted PAT

Change (%)

Margin (%)

(INR M)

FY18

4,110

29.2

1,950

440

1,250

3,640

88.6

470

11.4

440

1,230

190

-600

-1,150

191.7

550

-185.7

13.4

FY19

5,070

23.4

2,290

570

1,370

4,230

83.4

840

16.6

800

650

410

560

350

62.5

210

-61.8

4.1

FY20

6,386

26.0

2,670

724

1,310

4,704

73.7

1,682

26.3

207

1,475

683

2,129

-99

2,030

558

27.5

1,472

1,571

648.1

24.6

FY21E

5,907

-7.5

2,266

524

913

3,703

62.7

2,204

37.3

163

2,041

1,076

3,098

-4

3,094

810

26.2

2,284

2,288

45.7

38.7

FY22E

6,948

17.6

2,718

705

1,251

4,674

67.3

2,275

32.7

189

2,085

1,318

3,404

890

26.2

2,513

9.8

36.2

FY23E

8,557

23.2

3,265

817

1,540

5,623

65.7

2,934

34.3

233

2,701

1,604

4,305

1,126

26.2

3,179

26.5

37.1

Consolidated - Balance Sheet

Y/E March

Equity Share Capital

Total Reserves

Net Worth

Other Liabilties

Total Loans

Deferred Tax Liabilities

Capital Employed

Net Fixed Assets

Goodwill on Consolidation

Capital WIP

Other Assets

Total Investments

Curr. Assets, Loans&Adv.

Account Receivables

Cash and Bank Balance

Loans and Advances

Curr. Liability & Prov.

Account Payables

Other Current Liabilities

Provisions

Net Current Assets

Appl. of Funds

E: MOFSL Estimates

FY18

100

-3,312

-3,213

5,393

-1,247

933

345

3,111

642

467

168

3,247

419

2,720

107

-2,604

934

FY19

286

1,313

1,599

2,300

-964

2,935

6,450

657

402

250

4,308

450

3,709

149

-3,650

2,936

FY20

289

2,462

2,751

3,312

-536

5,527

1,514

8,719

401

169

215

5,166

179

4,682

305

-4,765

5,527

FY21E

289

4,419

4,708

3,358

-556

7,510

1,514

9,219

1,671

1,380

275

4,969

161

4,493

315

-3,298

7,514

FY22E

289

6,500

6,789

3,842

-576

10,055

1,514

11,219

2,983

2,629

335

5,757

193

5,238

325

-2,773

10,059

(INR M)

FY23E

289

9,247

9,536

4,589

-596

13,529

112

1,514

14,219

4,637

4,219

395

6,957

232

6,389

335

-2,320

13,532

19 August 2020

IndiaMART

Financials and valuations

Ratios

Y/E March

Basic (INR)

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)

P/E

Cash P/E

P/BV

EV/Sales

EV/EBITDA

Dividend Yield (%)

FCF per share

Return Ratios (%)

RoE

RoCE

RoIC

Working Capital Ratios

Fixed Asset Turnover (x)

Asset Turnover (x)

Inventory (Days)

Debtor (Days)

Creditor (Days)

Leverage Ratio (x)

Current Ratio

Interest Cover Ratio

Net Debt/Equity

FY18

28.6

-175.6

0.0

104.5

-17.0

13.9

121.3

0.0

92.0

-34.2

36.0

30.5

56.4

4.4

0.2

0.4

1.1

FY19

7.7

87.4

0.0

388.3

34.2

16.0

96.6

0.0

91.7

-26.0

-56.2

-9.1

59.8

1.7

0.2

1.2

-4.3

FY20

51.3

150.4

10.0

22.7

58.3

19.9

13.4

50.9

0.3

89.2

72.2

71.9

-29.4

122.8

1.2

0.1

50.9

-3.2

FY21E

79.3

257.4

11.9

15.1

37.7

11.6

14.5

38.7

0.4

34.5

61.4

61.7

-46.7

82.0

0.8

0.3

104.3

-2.3

FY22E

87.3

371.2

15.0

17.2

34.3

8.1

12.0

36.7

0.5

82.0

43.7

-44.7

75.5

0.7

0.5

-2.0

FY23E

110.4

521.3

15.0

13.6

27.1

5.7

9.6

27.9

0.5

118.7

38.9

-45.8

76.4

0.6

0.7

-1.9

Consolidated - Cash Flow Statement

Y/E March

OP/(Loss) before Tax

Depreciation

Interest & Finance Charges

Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

Others

CF from Operating incl EO

(Inc)/Dec in FA

Free Cash Flow

(Pur)/Sale of Investments

Others

CF from Investments

Issue of Shares

Inc/(Dec) in Debt

Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc/Dec of Cash

Opening Balance

Closing Balance

FY18

-601

-28

-10

1,297

687

1,103

1,791

-22

1,769

-1,586

-44

-1,653

152

291

177

467

FY19

539

-30

-52

1,684

2,183

368

2,551

-51

2,500

-2,591

-116

-2,758

144

-3

141

-65

467

402

FY20

2,114

211

-186

1,022

3,194

-589

2,605

-45

2,560

-2,047

-233

-2,325

-199

-333

-513

-233

402

169

FY21E

3,116

163

-810

-230

2,258

-1,072

1,185

-183

1,002

-500

1,072

389

-18

-346

-364

1,211

169

1,380

FY22E

3,404

189

-890

1,188

3,890

-1,318

2,572

-209

2,363

-2,000

1,318

-891

-432

1,249

1,380

2,629

(INR M)

FY23E

4,305

233

-1,126

1,863

5,274

-1,604

3,671

-253

3,418

-3,000

1,604

-1,649

-432

1,589

2,629

4,219

19 August 2020

REPORT GALLERY

RECENT INITIATING COVERAGE REPORTS

IndiaMART

19 August 2020

IndiaMART

Explanation of Investment Rating

Investment Rating

Expected return (over 12-month)

BUY

>=15%

SELL

< - 10%

NEUTRAL

< - 10 % to 15%

UNDER REVIEW

Rating may undergo a change

NOT RATED

We have forward looking estimates for the stock but we refrain from assigning recommendation

*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within

following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.

Disclosures

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).

Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the

Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial

products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are

available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a

registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and

National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National

Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance

Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.

Details of associate entities of Motilal Oswal Financial Services Limited are

available on the website at

http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf

MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and

buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other

compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have

any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the

specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even

though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report

MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report

should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific

merchant banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the

website at

https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx

A graph of daily closing prices of securities is available at

www.nseindia.com, www.bseindia.com.

Research Analyst views on Subject Company may vary based on Fundamental

research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated

from MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.

Regional Disclosures (outside India)

This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability

or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.

For Hong Kong:

This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong

Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst

Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of

research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity

to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these

securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not

located in Hong Kong & are not conducting Research Analysis in Hong Kong.

For U.S.

Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under

applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers

Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any

brokerage and investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is

intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as

"major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which

this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration

provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange

Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-

dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this

chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.

registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public

appearances and trading securities held by a research analyst account.

For Singapore

In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets

services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and

Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL

in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,

of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the

SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and

inform MOCMSPL.

Specific Disclosures

1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.

2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company

3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months

4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report

5 Research Analyst has not served as director/officer/employee in the subject company

6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months

8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months

9 MOFSL has not received any compensation or other benefits from third party in connection with the research report

19 August 2020

IndiaMART

10 MOFSL has not engaged in market making activity for the subject company

********************************************************************************************************************************

The associates of MOFSL may have:

financial interest in the subject company

actual/beneficial ownership of 1% or more securities in the subject company

received compensation/other benefits from the subject company in the past 12 months

other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on

the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL

even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.

acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the

company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)

received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.

The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report

Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not

consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from

clients which are not considered in above disclosures.

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the

research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

Terms & Conditions:

This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and

may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent

of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in

nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,

representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The

report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial

instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as

customers by virtue of their receiving this report.

Disclaimer:

The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or

distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for

informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing

in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.

The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment

objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this

document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this

document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views

expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade

securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of

the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and

should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make

modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from

time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to

perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a

separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of

information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or

may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,

directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or

entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law,

regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in

all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost

revenue or lost profits that may arise from or in connection with the use of the information.

The person accessing this information specifically agrees to exempt MOFSL or any of its

affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such

misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,

expenses that may be suffered by the person

accessing this information due to any errors and delays.

Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;

Website www.motilaloswal.com.CIN no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,

Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.

Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:

INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company

Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth

Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is

a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.

Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.

Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no

assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance

Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.

* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National

Company Law Tribunal, Mumbai Bench.

19 August 2020