Analysis of IndiaMart's Q3 Performance: Subscriber Slowdown Coupled with ARPU Growth and OPM Improvement

IndiaMart Intermesh Ltd., a leading online marketplace, has exhibited contrasting trends in its Q3 results. While the number of net subscriber additions has been underwhelming, the average revenue per user (ARPU) has seen an encouraging rise. Moreover, the operating profit margin (OPM) demonstrated healthy growth, according to a recent analysis by Dolat Capital.

Revenue Growth Amidst Subscriber Challenges

The company recorded a revenue increase of 3.6% quarter-on-quarter, which slightly surpassed the forecast. This growth was primarily driven by a 3% rise in ARPU compared to the previous quarter. However, the net subscriber addition did not meet expectations, with only 1,800 new subscribers joining the platform, which Dolat Capital attributes to a high churn rate among Silver monthly subscribers.

Margin Expansion despite Headwinds

On the brighter side, IndiaMart's operating profit margin expanded to 25.3%, up by 89 basis points from the previous quarter. This is attributable to reduced outsourcing costs and happened despite the salary increments that took effect for one month in the quarter. The stand-alone business EBITDA also climbed, marking an increase of 114 basis points to settle at 29.9% quarter-on-quarter.

Strategic Steps to Mitigate Subscriber Addition Issues

In an attempt to counter the sluggish subscriber growth, IndiaMart has implemented several strategic actions. These include focusing on tier-I and tier-II cities, placing greater emphasis on annual packages in tier-III and tier-IV cities, and enhancing the overall customer experience. Despite the hindered subscriber growth, the continued improvement in ARPU and strong macroeconomic indicators have led Dolat Capital to reiterate their positive outlook for the company.

Maintaining their 'Buy' rating, Dolat Capital has set a target price of Rs 3,500 for IndiaMart's stock, based on a discounted cash flow approach. This price target implies a price-to-earnings ratio of approximately 43 times on the company's estimated earnings per share for FY26, or a PEG (Price/Earnings to Growth) ratio of 1.7 times.

IndiaMart, Results, Analysis