Recommendation From Miscellaneous Sector

Recommendation From Miscellaneous Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year. 

Indiamart Intermesh Ltd. : Creating Platforms Of Profit

HERE IS WHY
✓  Strong brand recall
✓  Robust financial performance
✓  Diversified marketplace

Indiamart Intermesh is the largest online B2B marketplace in the country for business products and services, where it provides a robust platform for businesses to discover products and services of their choice and helps them connect with relevant suppliers of such products and services. As of September-end 2021, it had about 13.8 crore registered buyers and 67 lakh suppliers, listing 72 million+ products organised across 97,000+ categories and 56 industries spread across the country. Its supplier base is diversified across categories such that no specific category accounts for more than 8 per cent of suppliers.

The company reported net sales of Rs 669.6 crore in FY21 compared to Rs 639 crore in FY20. That is a growth of nearly 4.78 per cent. Growth in revenue from operations was due to marginal growth in the number of paying subscription suppliers and better revenue realisation per supplier. Total business enquiries grew to 61 crore in FY 2020-21 from 46.4 crore in FY 2019-20 at a growth of 31 per cent. The EBIT was recorded at Rs 398.7 crore in FY21 as against Rs 216 crore in the previous year. That is a growth of over 84.5 per cent. The operating profit, which stood at 23.13 per cent in FY20, jumped significantly to 46.61 per cent in FY21 which was mainly driven by cost control measures adopted by the company.

Also, the PAT stood at Rs 282.4 crore while it stood at Rs 149 crore in FY20 which witnessed a high growth of 89.5 per cent. The company’s liquidity improved as the cash flows from operating activities increased from Rs 260.6 crore in FY20 to Rs 322.5 crore in FY21 by 23.75 per cent. Also, it had successfully raised Rs 107.02 crore through QIP to fund its expansion and growth plans. Net sales for the quarter ended September 21 stood at almost Rs 182.4 crore. That’s a slight growth of 0.44 per cent on QoQ basis and a growth of 11.76 per cent on YoY basis. Better realisations from existing customers and increase in number of paying subscription suppliers led to a strong revenue generation.

It also witnessed a traffic growth of 10 per cent YoY to 28.4 crore. The operating profit was Rs 114.6 crore which saw a decline of 2.88 per cent QoQ but a rise of 15 per cent YoY. The net profit number stood at Rs 84 crore, a decrease of 6 per cent QoQ but a rise of 20 per cent YoY. During the quarter it has acquired a stake of 26 per cent in Agillos E-Commerce which under the brand name of ‘Aerchain’ offers SaaS-based solutions for automation. This e-commerce giant has delivered exceptional returns for its stakeholders. The key returns ratios like ROE stood high at 30.29 per cent while the ROCE was even higher at 42.3 per cent. The company is debt-free and is trading near the PE ratio of 64.4.

The company’s revenue model is based on selling subscription packages. Up to 95 per cent of its revenue is generated through subscriptions. It also earns by allowing advertisement space on its online platform. The company recorded a modest performance with the pandemic accelerating digital adoption. A strong digitization drive in the nation augurs well for the company. This online player has been in the business for two decades now. In this time, it has gained rich experience and has earned a competitive edge through its innovative solutions and strong network. By virtue of all these factors, we recommend our reader-investors to BUY the scrip.

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