Shares of IndiaMART InterMESH continued their northward movement, hitting a new high of Rs 4,189, ralling 9 per cent on the BSE in the intra-day trade on Wednesday on expectation of strong earnings outlook.
The stock was trading higher for the third straight day in an otherwise weak market. The company on Tuesday announced that it has disinvested 70 per cent stake in equity share capital of 10times to Mayank Chowdhary and Atul Todi for Rs 21.17 lakh. Consequent to the said partial disinvestment by way of sale of equity shares, Ten Times Online Private Limited has ceased to be a wholly owned subsidiary and is now only an Associate Company of Indiamart Intermesh which continues to hold 30 per cent of the stake in the said Company, it said.
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.
In the past two months, the stock has zoomed 98 per cent after reporting a strong operational performance for the quarter ended June 2020 (Q1FY20). The company’s consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) margins increased to 48 per cent in Q1FY21 from 25 per cent in Q1FY20 primarily driven by various cost optimization measures leading to sustained and temporary rationalization of expenses.
Total revenue from operations during the quarter grew 4 per cent year on year (YoY) at Rs 153 crore, primarily driven by marginal improvement in realization of existing customers. The number of paying subscription suppliers were same as last year due to the challenging economic and market conditions amidst the Covid-19 pandemic.
With small and large businesses increasingly adopting digital means to support business growth, the management foresees a higher demand for B2B online classifieds. "As micro, small and medium enterprises (MSMEs) face huge challenges in transacting with offline counterparts, owing to a highly fragmented and unorganised B2B market, coupled with an under-developed commerce infrastructure, the market potential of this service is significant," the company said in FY2019-20 annual report.
While business has been impacted by external factors in the previous fiscal and will very likely remained subdued in FY 2020-21 following the Covid-19 contagion, the company foresee eventual recovery and significant success because digitization of trade and transactions is an unstoppable phenomenon.
In FY 2019-20, the Government of India planned to increase the contribution of MSME to 50 per cent of India’s GDP over the next five years, close to double from 29 per cent at the time, and make the MSME sector a space for creating 150 million jobs. IndiaMART sees this as a roadmap to the very promising destination of India becoming a $5 trillion economy. The sector growth would undoubtedly be driven by digitalisation.
At 10:59 am, the stock was trading 7 per cent higher at Rs 4,102 on the BSE, as compared to 0.22 per cent decline in the S&P BSE Sensex. The trading volumes on the counter more-than-doubled with a combined 214,000 equity shares changing hands on the NSE and BSE till the time of writing of this report.