Shares of IndiaMart InterMesh jumped 14 per cent on the BSE after it posted strong results for the quarter ended December 2019. The stock, which opened at ₹2,220, jumped to a high of ₹2,477.65 (which is also its life-time high), on the BSE before settling at ₹2,381.65. However, low deliverable volume of 14 per cent, indicates high intra-day dealing in the counter.

The Indian e-commerce company that provides B2C, B2B and customer to customer sales services via its web portal has posted a net profit of ₹62 crore for the quarter against ₹22.9 crore reported in the same quarter previous year. The profit was aided by a tax credit of ₹8.8 crore on account of certain timing differences pertaining to the earlier years.

IndiaMart reported a consolidated total revenue from operations of ₹165 crore, up 23 per cent y-o-y primarily due to increase in number of paying subscribers as well as higher realisation from existing customers.

According to Dinesh Agarwal, CEO, the company has a subscription fee-based revenue model with negative working capital cycle. IndiaMart collects money from the suppliers in advance for monthly, annual and multi-year contracts.

This has resulted in accumulated deferred revenue of ₹649 crore as on December 31, 2019, with an average age of 20 months, he said.

“Our revenue growth too has been declining sequentially in the last three quarters due to economic condition,” he admitted.

“We will look for inorganic route too, if there are good companies or business models where either we will invest or acquire completely,” he said, and added “but we will take our own time and not pursue aggressive strategy.”

Macro headwinds

According to JM Financial, IndiaMart’s business model is asset-light, with negative working capital cycle and mirrors typical classified models which benefit from high operational leverage once they reach profitability. This is primarily driven by a strong network of suppliers and buyers on the platform, along with a high market share, which has so far provided strong topline growth.

“However, macro headwinds leading to a slowdown in SME space is likely to impact the company’s growth momentum and pace of margin expansion going forward,” it said, while initiating coverage with a ‘hold’ rating on the stock and one-year forward target price of ₹2,130.

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