IndiaMART InterMESH shares surge 8% after launch of QIP issue

The board may offer a discount of 5 per cent on the floor price at its discretion, the company said

Shares of IndiaMART InterMESH, on Thursday, surged up over 8 per cent to Rs 9,298.90 in intra-day deals on the BSE after the company launched its qualified institutional placement (QIP) issue in order to raise funds.

In an exchange filing on Wednesday, the company said, "The Fund Raise Committee of the Board ("Committee"), at its meeting held on February 17,2021, has decided to open the Issue today i.e. February 17, 2021, for receiving bids". The floor price of the issue is set at Rs 9,065.61 per share, a 5.92 per cent premium to Wednesday's closing price, it said. 

"The board may offer a discount of 5 per cent on the floor price at its discretion. The issue price will be determined by the company in consulation with with the book running lead managers appointed for the issue," the company further said.

At 9:40 AM, the stock was trading 6.66 per cent up as compared to 0.1 per cent gain in the benchmark S&P BSE Sensex. Over 74,000 shares have changed hands on the NSE and BSE combined, so far.

The B2B e-commerce firm had posted a 29 per cent year-on-year (YoY) rise in its consolidated net profit to Rs 80 crore for the third quarter ended December 31, 2020. Its revenue from operations stood at Rs 174 crore in the third quarter of 2020-21, up 5 per cent from Rs 165 crore in the corresponding period last fiscal.

The company attributed this growth to "marginal improvement in realisation of existing customers and increase in number of paying subscription suppliers".

In a post-results note, Motilal Oswal said that apart from the strong recovery in paid suppliers, collections, and revenue

growth, IndiaMART had shown higher resilience on the margin front. 

"While we concur that margin at current levels are not sustainable, the company would see positive benefits from cost optimization and operating leverage. We increase our FY22E/FY23E EPS estimate by 17%/16% to factor in a robust operating performance. We remain confident of strong fundamental growth in operations, led by: a) high growth in digitization among SMEs (~25%), b) the need for out-of-the-circle buyers, c) a strong network effect, d) over 70% market share in the underlying industry, e) the ability to increase ARPU on low price sensitivity, and f) high operating leverage," the brokerage said.

The brokerage reiterated its 'BUY' rating on the stock with a target price of Rs 9,000, which the stock has already achieved..

In a note, dated February 3, Anand Rathi said that they find value in IndiaMart for its network-driven pricing power, healthy cash-flows (on high operating-profit growth), negative working capital and less capital expenditure in an asset-light model. 

"We believe that the longer- term margin performance should converge with those of platforms such as Naukri.com, where margins (around 55 per cent) have expanded around 1,000bps in the last 10 years due to high operating leverage. We retain our Buy rating with new target price of Rs.9,200 (Rs.5,670 earlier) valued on a DCF basis on assuming an 10.5% WACC and a 5% terminal growth rate," it said.