IndiaMART InterMESH IPO – Should you Invest or Avoid?

IndiaMART InterMESH IPO ReviewIndiaMART InterMESH IPO Review


India’s largest B2B Online Market Place, IndiaMART InterMESH is coming up with an IPO next week. IndiaMART InterMESH IPO (IndiaMart IPO) would open for subscription on 24th June, 2019. Its revenues grew by 2.9x in the last 5 years. There is lot of IPO craze in India as it would give quick profits post listing of the shares. After 2 months there is one more mainline IPO came now subscription. What are the various positive factors an investor should consider before investing in IndiaMART InterMESH IPO? What are the hidden factors in this IPO? Should you invest in the IndiaMART IPO or avoid?

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About IndiaMART InterMESH Limited


They are India’s largest online B2B marketplace for business products and services with approximately 60% market share of the online B2B classifieds space in India in fiscal 2017, according to the KPMG Report. They primarily operate through its product and supplier discovery marketplace, www.indiamart.com or “IndiaMART”. Its online marketplace provides a platform for mostly business buyers, to discover products and services and contact the suppliers of such business products and services. IndiaMART had an aggregate of 325.8 million, 552.6 million and 723.5 million visits in fiscals 2017, 2018 and 2019, respectively, of which 204.8 million, 396.9 million and 550.3 million comprised mobile traffic, or 63%, 72% and 76% of total traffic, respectively

IndiaMART InterMESH IPO Issue details


IndiaMART InterMESH IPO RHP Prospectus can be downloaded at this link

What are the Objects of the IndiaMART InterMESH IPO?


The objects of the Offer are to achieve the benefit of listing the Equity Shares on the Stock Exchanges and for the sale of an aggregate of up to 4,887,862 Equity Shares by the Selling Shareholders. Further, the Company expects that listing of the Equity Shares will enhance its visibility and brand image and provide liquidity to its Shareholders. Listing will also provide a public market for the Equity shares in India. Company will not receive any proceeds from the Offer and the entire proceeds from the Offer will go to the Selling Shareholders, in proportion to the Equity Shares offered and sold by the respective Selling Shareholder in the Offer for Sale.

Who are the Company Promoters?


The Promoters of the company are Mr. Brijesh Agrawal and Mr. Dinesh Chandra Agarwal.

How company is doing in terms of Financial Performance (Reinstated-Unconsolidated)?


1) Company’s revenue increased from Rs 184.7 Crores for the year ended Mar-15 to Rs 533.2 Crores for the year ended Mar-19.

2) The company incurred losses for Rs 18.9 Crores for the year ended Mar-15 and recorded profits of Rs 12.5 Crores for the year ended Mar-19.

3) Its EPS for FY2019 is Rs 4.87 and 3 years average EPS is negative as it incurred losses.

IndiaMART interMESH IPO - Financial Summary -FY2015-2019

What are the key strengths of IndiaMART InterMESH Limited?


Every investor should understand companies key strengths so that one can compare with its competitors to know how unique is such company. Investors decision would change based on these facts.

1) IndiaMART’s strong network effects and brand recognition drives leadership in the B2B marketplace in India.

2) Comprehensive, convenient and reliable platforms for buyers.

3) Efficient and effective marketing platform for suppliers.

4) Deep understanding of online trade and commerce in India that drives innovative solutions.

5) Robust mobile platform.

6) Experienced Management Team and Large Sales and Service Representatives Team with Proven Track Record of Performance.

What are the various strategies of IndiaMART InterMESH Ltd?


Company strategies would help investors to know what company is intending to do in the future and whether these strategies would help in revenue or margin growth. Such information would help for investors to decide whether to invest for short term, medium term or for the long term. Here are the company strategies.

1) Continue to increase the size of IndiaMART marketplace.

2) Attract larger suppliers and leading brands while growing its core SME segment supplier base.

3) Improve supplier engagement, services, retention and monetization.

4) Continue investing in its mobile platforms and capabilities.

Positive Factors to invest IndiaMART InterMESH Limited IPO (Indiamart IPO)


1) It shown strong revenue in the last 5 years where its revenues increased by 2.9x.

2) It is the largest B2B Online Market Place in India that has good brand.

Major risk Factors to consider before investing in this IndiaMart IPO


These risk factors can impact company revenue and margins which would affect its share price.

1) They had incurred significant operating losses in the past and they may not be able to improve its financial position or generate sufficient revenue to achieve a positive net worth.

2) If they are unable to maintain a critical mass of suppliers and buyers on its online marketplace, the perceived usefulness of its services may decline, and its business, revenue and prospects could suffer.

3) Competition from new and existing companies may reduce demand for its services or cause us to lose visitor traffic, market share or paying subscription suppliers, any of which could adversely affect its business, financial condition and results of operations.

4) Its business, financial condition, results of operations and cash flows could be materially and adversely affected if they are unable to retain existing paying subscription suppliers on or attract new paying subscription suppliers to IndiaMART.

5) This Red Herring Prospectus contains information from KPMG Research which they have commissioned.

6) They earn most of its revenue from Indian suppliers purchasing paid services on IndiaMART. Factors that adversely affect such Indian suppliers could have a material adverse effect on its business, financial condition, results of operations, cash flows and prospects.

7) Despite its intent and efforts to have genuine items listed/content available on its online marketplace, they have been and may continue to be subject to allegations and lawsuits or negative publicity claiming that items listed and the content available on its online marketplace are pirated, counterfeit or illegal.

8) They acquire a significant portion of its suppliers on IndiaMART through the unsolicited creation of supplier storefronts and such suppliers may refuse to consent to their information being made publicly available on its online marketplace, which may negatively affect its business and may subject us to various legal claims.

9) For complete internal and external risk factors, you can refer the RHP of the company.

IndiaMART InterMESH IPO Schedule


Offer Opens – 24-June-2019

Offer Closes – 26-June-2019

Finalization of Basis of Allotment – 1-July-2019

Unblocking of ABSA and Initiation of Refunds – 2-July-2019

Credit of shares to Demat Accounts – 3-July-2019

IPO Shares Listing Date – 4-July-2019

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IndiaMART IPO – Should you Invest or Avoid?


If we consider its unconsolidated last year EPS of Rs 4.8 on the higher price band of Rs 970, the P/E works out to be 200x. P/E cannot be computed based on last 3 years average EPS as it is negative as a company has been incurring losses. There are no listed peers to check whether the issue price is highly priced or under priced.  However, considering 200x of P/E is very high.

The company’s revenue grew at 2.9x in the last 5 years. It has been incurring loss in 4 out of 5 years. This company turned into profits only last year. The issue price is highly priced. Investors may or may not get listing gains. Personally, I would like to avoid such high priced IPOs that just turned into profits last year. In future if such profits continue and such company shares are available at discounted price, I would like to invest in such companies. Currently, it is clearly AVOID.  

Disclaimer: The information in this article is for information only. This is not a recommendation to invest in this IPO. Please consult your investment advisor before you invest in such high risk IPOs.

If you like our IPO analysis, please share it with your friends through email, on Facebook or on Twitter. This would help us to reach a larger audience and we can provide more and more meaningful analysis in the coming IPOs.

Suresh

IndiaMART InterMESH IPO – Should you Invest or Avoid

13 comments

  • Rajat Kumar

    Its straight from their past earnings ratio that there is high risk in this IPO. We should AVOID this.

  • BHAVIN PATOLIYA

    This analysis need to Improved. I am in senior management with this company.
    Only financials and profitability should not be considered for such .COM industry.
    Every analysis should be considered with EPS and PE basis.

    Do you know how much market size will increase? 1 cr GST registered SME in india and 1.3 lacs Clients indiaMART have currently, which is approx 1% only.

    Revenue increases from 5 years and in future high marketshare (65%) company can Increase pricing of products as well as in Increases customer base.

    My analysis: with Clients are increases and through pricing power, ARPU( average revenue per unit or Client) increases.
    This business is Monopoly in India with increases ARPU.

    • Bhavinkumar R Patoliya

      I mean every analysis should not be considered with PE & EPS basis.

      • Hello Bhavinkumar, Thanks for your comments. Every stock is analysed considering revenues, profits, EPS and P/E (whether issue price is under priced or over priced). Why do you say investors should not consider these points. Yes there could be business potential, but at what cost? Investors cannot pay high share price. Yes, one can buy if these are available at cheaper valuations.

        • Bhavinkumar R Patoliya

          Kya huva Suresh ji, indiaMART be to listing gain Diya. PE to or high ho Gaya, EPS to aana suru huva he…..

          Every analysis can’t be done through PE & EPS basis..

          • Bhavin, This is all stock market game. Yes investors would have felt there could be potential in thi stock though it is highly priced

  • punit negandhi

    Suresh Sir,

    Very clear analysis as usual.

  • Husain

    It makes me sick that you don’t even know the company’s correct name hence hard to believe on your analysis of it’s IPO. BTW Its IndiaMART InterMESH Ltd.

    • Hello Hussain, Sorry for the inconvenience caused. We checked after the article went live and corrected it. You might be still seeing cached version of page. can you please your browser cache and recheck it.

      • R Ramakrishna

        What is there in a name?A rose is a rose is a rose.Whenever I read IPO Analysis, the face of Anil Ambani flashes before me warning me not to be duped by people like Anil.He prefixed Reliance before Repower and defrauded investors thousands of crores.Do not touch the subject IPO even with a barge pole

  • R Ramakrishna

    100% correct analysis.AVOID.

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