Why IndiaMart stock fell 18% despite nearly 100% jump in Q2 profit? Details

IndiaMart InterMesh' profit after tax for the second quarter stood at Rs 135.13 crore, up 94.7 per cent year-on-year from to Rs 69.4 crore a year ago

IndiaMart Intermesh shares fell 18.4 per cent in Monday's trade on the BSE to register an intraday low of Rs 2,461 per share on the BSE. The selling pressure in the stock came after the company reported its Q2FY25.

At around 11:57 AM, IndiaMart InterMesh shares were down 16.05 per cent at Rs 2,533.25 per share on the BSE. In comparison, the BSE Sensex was down 0.26 per cent at 81,012.65 around the same time. The market capitalisation of the company around the time stood at Rs 15,193.92 crore. 

IndiaMart InterMesh announced its Q2 numbers on Saturday, October 19. The company reported a healthy financial performance for the quarter. However, its paid customer growth remained muted, with 2,000 new customers added quarter-on-quarter (Q-o-Q), taking the total number to 218,000, which implies a growth of only 1 per cent, as per Centrum Broking.

"The muted growth of paid users is a concern," the brokerage firm said.

"The paid customer addition has slowed and it will take a few quarters to show some recovery," it added.

Meanwhile, the company's profit after tax (PAT) for the quarter under review stood at Rs 135.13 crore, as compared to Rs 69.4 crore a year ago, which implies a rise of 94.7 per cent year-on-year (Y-o-Y).

It posted an 18 per cent rise in consolidated revenue from operations, at Rs 348 crore, compared to Rs 295 crore in the corresponding quarter of last year.

The company's collections from customers grew by 6 per cent to Rs 356 crore for the quarter, as per its filing. 

Centrum Broking has maintained a 'Reduce' rating on the stock with a revised target price of Rs 3,098, from  Rs 3,154  per share earlier. 

Similarly, as per reports, Jefferies has downgraded IndiaMart InterMesh from 'Buy' to 'Underperform', and reduced its target price to Rs 2,540 per share. 

As per Jefferies, even as the company reported in-line Q2 results, subscriber growth remained weak, leading to a moderation in collections growth to just 5 percent Y-o-Y, a key negative from the quarter.

The global brokerage firm has cut its estimates by 4-12 percent, citing a continued rise in subscriber churn despite multiple management interventions, which has been a negative surprise.

Conversely, Jefferies maintained a 'Buy' rating on the stock and gave it a target price of Rs 3,252 per share.

"IndiaMart continues to make investments in strengthening their organisation to leverage the growth opportunities. Growth will be driven by new sales, service and marketing head, focus on tier 1 and tier 2 suppliers and ARPU growth in gold and platinum segment," the brokerage firm said. 

In the past one year, IndiaMart InterMesh shares have gained 12 per cent, compared to the BSE Sensex's rise of 26 per cent during the period.