IndiaMART shares tumble 8% as two major factors overshadow healthy upselling in Q1

Shares of IndiaMART InterMESH Ltd. fell as much as 7.6% on Wednesday, July 22, after the company's June-quarter earnings met analyst expectations, but a third consecutive quarterly decline in paying subscribers and slower collections growth weighed on investor sentiment.

The online B2B marketplace reported a 12.2% year-on-year increase in consolidated net profit to ₹172.2 crore for the June quarter, while revenue from operations rose 11.4% to ₹414.4 crore.

Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) increased 9.4% year-on-year to ₹145.9 crore, although the EBITDA margin edged lower to 35.4% from 35.8% a year ago.

Customer collections rose 8% year-on-year to ₹463 crore, marking the slowest growth in five quarters. Collections had grown between 10% and 17.5% in each of the previous four quarters.

The company also generated ₹163 crore in cash flow from operations during the quarter.

A key concern for investors was the continued decline in paying subscribers. IndiaMART ended the quarter with 2,18,000 paying subscribers, down from 220,000 in the March quarter, marking the second consecutive quarterly decline.

During the earnings call, management attributed the moderation in subscriber additions to lower gross additions and higher churn in the Silver customer segment. However, it said Gold and Platinum customers, which contribute around 75% of revenue, continued to witness healthy upselling and retention.

Management also said the 4-5% decline in unique business enquiries during the quarter was due to the implementation of OTP-based buyer verification, a measure aimed at improving platform trust and lead quality.

Average revenue per paying subscriber (ARPU) increased to ₹69,000, up 7.8% from a year earlier, supported by improved realisation from paying suppliers.

Separately, the board approved the incorporation of a wholly owned subsidiary, IndiaMART Finance Ltd., subject to regulatory approvals. The proposed entity will operate in the financial services sector and is intended to help business users meet short-term working capital requirements while strengthening engagement and retention on the platform.

Despite the near-term moderation in subscriber additions, management reiterated its focus on sustainable growth, platform trust and AI-led enhancements to improve user experience and long-term value creation.

Why Is Nomura Bearish On IndiaMART?

Nomura has a "reduce" recommendation on IndiaMART with a price target of ₹1,810, citing the woes in the company's paying subscriber addition.

The brokerage said that product evolution is critical to improve subscribe subscriber addition in the medium to long term.

It also went on to add that subscriber addition has to turn meaningfully positive for the stock to rise significantly from here.

Jefferies Also Bearish on IndiaMART

The brokerage has an "underperform" rating on the stock with a price target of ₹1,650, stating that the decline in paid supplier base was a key negative surprise.

Jefferies said that the continued weakness in subscriber addition can disrupt the network effects historically enjoyed by the platform.

As a result, Jefferies has cut its financial year 2028-2029 Earnings per Share estimates by 1.5% to 4% respectively.

Shares of IndiaMART Intermesh are trading 5.1% lower on Wednesday, having made an intraday low of ₹1,773. The stock is down 17% so far this year.