IndiaMART InterMESH shares fall 10% after Q3 results, analysts downgrade ratings and target prices.

IndiaMART InterMESH Shares Plummet 10% After Disappointing Q3 Results, Analysts Slash Target Prices

Shares of IndiaMART InterMESH saw a sharp 10% decline to ₹2,065.40, reaching a 25-month low following the company’s Q3FY25 earnings report. This significant drop in stock price was primarily driven by concerns over declining subscriber growth and weak collections growth, prompting analysts to cut their target prices and downgrade their ratings.

Analyst Downgrades and Target Price Cuts

Following the disappointing Q3 results, several prominent brokerages slashed their target prices for IndiaMART InterMESH, reflecting their concerns over the company’s performance.

  • Nomura, the Japanese brokerage firm, downgraded its rating from “Neutral” to “Reduce”. They reduced their target price significantly, from ₹3,150 to ₹1,900, citing an unexpected decline in the paid subscriber base. Nomura expressed concerns over low gross subscriber additions, persistently high customer churn, and weak collections growth, warning that these issues could continue to drag the company’s growth in the near term. As a result, Nomura also revised its profit estimates for FY25-27 downward by 4-13%.
  • Nuvama, another key analyst, lowered its target price for the stock to ₹1,970 from ₹2,500. They maintained a “Reduce” stance, noting that the decline in subscribers, particularly the first drop since the post-COVID recovery, is concerning. They also pointed to the company’s weak 8% YoY growth in collections, further intensifying worries about future growth prospects.
  • Centrum Broking followed suit, also reducing its target price from ₹3,098 to ₹2,368, while maintaining a “Reduce” rating.

IndiaMART Q3FY25 Performance

Despite the 1.9% QoQ revenue growth (₹354 crore), the overall Q3FY25 performance failed to meet expectations, primarily due to declining paid subscribers and high churn rates in the Silver monthly packages. The company reported a 3.5% increase in annualized ARPU (₹62.9k), which was a positive sign, but it was not enough to offset the 1.8% decline in paid suppliers, which fell to 214,000.

  • Revenue: While revenue grew by 1.9% QoQ, the overall performance was weighed down by a drop in paid subscribers and the slow pace of customer retention. The number of paid subscribers decreased by 4,000 QoQ.
  • Paid Subscribers: The decline in paid subscribers continues to be a key concern, especially as the company struggles with retaining customers in its Silver monthly packages. While IndiaMART remains optimistic about recovery in the coming quarters, it’s clear that subscriber retention remains a major challenge.
  • EBITDA Margin: IndiaMART saw an improvement in EBITDA margin to 39.0%, up by 30 basis points QoQ, aided by lower operational expenses, which dropped by 4.1%.
  • Registered Buyers: The company did see a growth in registered buyers, which increased by 4 million QoQ, bringing the total to 206 million.

Subscriber Decline and Weak Collections Growth

The key concern highlighted by analysts is the weakness in subscriber growth, which was mainly attributed to high churn rates. While IndiaMART is working on stabilizing this churn, especially in Silver packages, it is still too early to predict a recovery in the near term. The collections growth for the standalone business also remained weak, at just 8% YoY, which raised further concerns about the company’s ability to meet future growth expectations.

IndiaMART has guided for less than 10% collection growth in the coming quarters, which is lower than what many analysts had hoped for. As the company focuses on improving subscriber retention and reducing churn, investors are left waiting to see if these efforts will bear fruit.

What’s Next for IndiaMART?

Despite the short-term challenges, IndiaMART continues to maintain a dominant presence in the online B2B classified space, holding a significant 65% market share. Its business model remains robust, requiring minimal advertising, and it remains one of the largest platforms for businesses to connect with suppliers and buyers.

IndiaMART’s management remains focused on addressing the high churn and weak subscriber retention, especially in the Silver monthly packages. While growth may remain muted in the short term, the company is optimistic that it will see a recovery in subscriber retention within the next 2-3 quarters.

Conclusion

IndiaMART’s Q3FY25 performance has raised significant concerns, especially regarding the decline in paid subscribers and weak collections growth. The company’s short-term growth appears to be under pressure, with analysts revising their target prices downward. However, the company’s long-term leadership in the B2B space and efforts to improve retention and churn may provide potential for future growth. Investors will need to monitor IndiaMART’s performance closely over the next few quarters to assess whether the company can turn around its subscriber base and regain growth momentum.

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