IndiaMART InterMESH shares slide 10% to 25-month low after Q3 numbers; analysts cut target price

Stock market today: Shares of IndiaMART InterMESH, an online B2B marketplace, tumbled 10% on Wednesday, January 22, hitting a 25-month low of ₹2,065.40 apiece. The sharp decline came after brokerage firms slashed their target prices following the company’s December quarter performance (Q3FY25), which showed a drop in its paid subscriber base.

Japanese brokerage firm Nomura downgraded its rating on the stock from "Neutral" to "Reduce" and slashed its target price to ₹1,900 from ₹3,150. The brokerage cited an unexpected decline in the paying subscriber base, which it attributed to weak additions over the past five quarters.

Nomura highlighted low gross additions, persistently high customer churn, and weak collections growth as key concerns. It added that collections might remain subdued in the near to medium term until churn reduces, gross additions improve, and net subscriber additions recover. Consequently, Nomura revised its FY25-27 PAT estimates downward by 4-13%.

Similarly, Nuvama lowered its target price for the stock to ₹1,970 from ₹2,500, maintaining its "Reduce" rating. It pointed out that subscribers have declined for the first time since the post-COVID recovery.

Collection growth for the standalone business remains weak at 8% year-on-year, and the management has guided for less than 10% collection growth in the coming quarters. While lower sales and marketing costs could provide a short-term boost to profitability, the brokerage noted a lack of meaningful improvement in subscriber retention.

It also warned that medium-term growth is likely to remain under pressure. In addition, domestic brokerage firm Centrum Broking also maintained a "Reduce" rating and revised its target price for IndiaMART InterMESH shares lower to ₹2,368 from ₹3,098 apiece. 

Q3 earnings snapshot

The company reported in-line numbers for the December quarter on Tuesday, post-market hours. However, the decline in paid customers quarter-on-quarter (QoQ) due to high churn remains a matter of concern. Revenue grew by 1.9% QoQ to ₹354 crore, driven by a 3.5% QoQ increase in annualized ARPU (to ₹62.9k) and a 1.8% QoQ decline in the number of paid suppliers, which fell to 214k.

The drop in paid customers was primarily due to high churn in Silver monthly packages. Management remains focused on retention and expects a recovery in churn within the next 2-3 quarters.

The EBITDA margin improved by 30 basis points QoQ to 39.0%, supported by lower other expenses, which declined by 4.1% QoQ. The number of paid subscribers decreased by 4k QoQ to 214k, while registered buyers increased by 4 million QoQ to 206 million. Live product listings rose to 115 million, compared to 113 million in Q2FY25.

Collections grew by 2% year-on-year (YoY). Reported PAT stood at ₹121 crore down from ₹135 core in Q2FY25. Centrum Broking noted that the company is focused on improving retention and stabilising churn, particularly in Silver monthly packages, before aiming for higher-paid customer additions. It continues to have a dominant presence in the online B2B classified space.

According to the brokerage, the company’s business model remains strong, supported by a compelling value proposition that requires minimal advertising. It holds a 65% market share in the online B2B classified space. While paid customers have declined, a recovery is expected within 2-3 quarters as churn stabiliss, it noted. 

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.