We'll start the session now. Good evening, ladies and gentlemen. I'm Ravi Gothwal from Churchgate Partners. On behalf of IndiaMART InterMESH Limited, I would like to welcome you all to the company Q1 FY 2023 earnings webinar. As a reminder, all participant line will be in the listen-only mode, and there will be an opportunity for you to ask question once the presentation concludes. Joining us today from the management side, we have Mr. Dinesh Agarwal, Managing Director and Chief Executive Officer, Mr. Brijesh Agrawal, Whole-time Director, Mr. Prateek Chandra, Chief Financial Officer, and Mr. Kushal Maheshwari, Head of Investor Relations. Before we begin, I would like to remind you that some of the statements made in today's webinar may be forward-looking in nature and may involve risk and uncertainties. Kindly refer to slide number three of the earnings presentation for the detailed disclaimer.
Now I would like to hand over the call to Mr. Dinesh Agarwal for his opening remarks. Thank you, and over to you, sir.
Thank you, Ravi. Hi, good evening, everybody, and welcome to IndiaMART's Q1 FY 2023 earnings webinar. We have already circulated our earnings presentation, which is available on our website as well as, the website of the stock exchanges. I'm sure you would have gone through the presentation, and I would be happy to take any questions afterwards. I'm pleased to report that IndiaMART has delivered a consolidated collection from customers of INR 254 crore and revenue from operations of INR 225 crore this quarter. Consolidated deferred revenue increased to INR 961 crore, and paying subscription suppliers increased to 179,000, representing a net addition of 10,000 in this quarter.
These numbers also include INR 10.5 crores revenue and INR 35 crores of deferred revenue from Busy Infotech business, as the acquisition has been completed in this particular quarter.
Sorry to interrupt, Mr. Dinesh.
Yeah.
Can you speak a little bit louder or closer to the mic? Yeah. Thank you. Good.
In the IndiaMART business, growth in the revenue collections and deferred revenue was primarily driven by improving macroeconomy as well as the result of recent growth investments we have made in product sales and servicing and building the organization. We will continue to make these investments as needed to maintain the growth momentum. Total traffic on the platform and resulting unique business inquiries remained stable at 257 million and 22 million respectively. Our 90 day repeat buyers stands at approximately 54%, which represents the continued trust on the platform. Total business inquiries delivered stood at 115 million for the quarter. As we discussed in the previous earnings call, the reduction in the total business inquiry is an outcome of certain algorithmic changes to increase the efficiency for match-making and improve the relevancy of our tools being delivered to the users.
During the quarter, we have completed the acquisition of Busy Infotech, as well as 100% acquisition of Busy Infotech and 51% of LiveKeeping, resulting into the addition of accounting software segment in addition to the existing IndiaMART web services business. We have done segmental reporting also from now on, and I'm extremely positive about the scaling of this particular segment over the years leading to the augmentation of new revenue streams at IndiaMART. Overall, I believe we have started off the new fiscal year on a positive note on all performance indicators, and we will remain committed to enhance our value proposition and deliver value to the customers, which will help consolidate our leadership position in the industry. Now, I will hand over the call to Mr. Brijesh Agrawal to discuss little bit more details about Busy Infotech.
Thank you, and over to you, Brijesh.
Yeah, thank you. Good afternoon, everyone. The Busy transaction was consummated on sixth of April. Since then, Busy now is a wholly-owned subsidiary of IndiaMART. Being a subsidiary, we shifted the accounting standards from IndAS to IndAS for reporting the financials right from this quarter onwards. In this quarter, we delivered a billing of INR 13 crore and a revenue from operations of INR 10.5 crore. Please note that because of this change to IndAS, the revenue P&L, these numbers may not be comparable with the previous periods. Busy also sold about 9,000 new licenses in this quarter, taking the overall licenses sold to about 3.11 lakh.
This being the first quarter of acquisition, our focus in Q1 essentially was to assimilate people, partners, and bringing the financial system that pairs with the reporting standards that we follow here at IndiaMART. I think we've made very good progress on all of these three counts. Now, over the next two quarters, we would start focusing on expanding the team, expanding the partner network, and improve our penetration in those areas where it is still very under-penetrated. We hope that the next two quarters, once the focus gets on these elements, we should be able to continue to build on the growth momentum that we've achieved in Q1. Now, with this, I'll hand over the call to Prateek, so that he can discuss the financial performance.
Thank you, Dinesh, and good evening, everyone. I will take you through the financial performance for the quarter ended June 2022. Consolidated revenue from operations was INR 225 crores in this quarter, a growth of 24% year-on-year, primarily due to 23% increase in paying subscription suppliers as well as addition of INR 10.5 crores from the accounting software segment. On a like-to-like basis, standalone collections from customers, revenue from operations and deferred revenue were at INR 241 crores, INR 213 crores and INR 935 crores, representing a year-on-year growth of 42%, 18%, and 31% respectively. The company continued making growth investments in increasing manpower across functions, leading to an addition of 163 new employees in this quarter, taking total employee headcount to 3,835.
Consolidated EBITDA for the quarter stood at 29%. We recorded significant decline in other income from INR 30 crore previous quarter to INR 1 crore this quarter, primarily due to mark-to-market losses on treasury portfolio owing to significant increase in bond yields during the quarter. As most of our treasury investments are in high-grade securities and have been done with the perspective of holding two-three years, we believe that this notional loss will reverse in due course. As a result, net profit for the quarter stood at INR 47 crore with a margin of 21%. Cash generated from operations during the quarter was INR 75 crore.
During the quarter, in addition to cash generated from operations, we have utilized cash in making payments for Bizongo and Finlite acquisitions as well as completing INR 100 crore share buyback and a certain tax and expense of INR 25 crores. As a result, consolidated cash balance stood at INR 1,882 crores as of 30th of June, 2022. Thank you very much. We are now ready to take any questions.
Thank you, Prateek. We will now begin the Q&A session. Please allow camera and microphone access if you wish to ask question once the queue is available on your screen. Right. You may type your question in the discussion panel and we will revert to you if any question remain unanswered. Please restrict to two questions so that we may be able to address questions from all the participants. We will wait for a couple of seconds while the question queue assembles. First question is from the line of Vivek Kumar, Emkay Wealth Management. Please go ahead.
Hi. Thanks for the opportunity. First question is, could you help us understand your distribution model now? How much of the new customer addition is happening via channel partners versus your own employees? Why is the outsource sales cost still rising despite a QoQ decline in collections? Second question is on the competition. We are seeing competition from two areas. One is the new age B2B e-marketplaces like Moglix or even large corporate groups like L&T and Grasim. Secondly, the government is talking about its own ONDC marketplace. Dinesh, we just wanted to understand, is it fair to assess that IndiaMART is focused mostly on SME outreach, which is buyer-suppliers, whereas most of the peers are focused on large enterprise buyers? Thank you.
Thank you. On the new channel versus sales, I think the channel has been developed over a period of last 18 months or so, and we continue to invest in channel development. Currently, I think new sales acquisition is slowly approaching towards
Sorry, can you mute yourself, please?
Yeah.
Slowly approaching towards half and half. Half of them are coming from the people who are completely managed by IndiaMART. They are still on a different third-party payroll. The second part is the channel. Half is starting to come from channel. On your question, why the channel cost is still increasing versus the collection from the last quarter. Collection from the last quarter is Q4 quarter. In Q4, most of our collection comes from existing customers. However, the channel is deployed for the new customer acquisition. If you see, channel cost will probably start to stabilize in some quarter or so. But for now, collection and channel costs are not related for now.
On the competition segment, to some extent you are right that we are more of a marketplace, we are more of a network effects business where buyer and supplier both come. Many of the names that you took are typically focusing on trading of goods rather than you know rather than matchmaking and network effect. To that extent, we are different. However, but after matchmaking also the you know buyers and suppliers transact with each other. From that perspective, we are similar.
None of them are actually solving full discovery issue. Currently, if you look at whether it is price discovery, product discovery, model discovery, supply discovery, I think there is no better platform than IndiaMART with the 70 lakhs of suppliers and about 8 million products.
Sorry, Dinesh. There is some disturbance from your side. If you could just repeat that.
Yeah, perfect. Discovery piece, I would answer IndiaMART. Whether it is 72 million suppliers or whether it is 86 million products, we get a wide variety of the products and suppliers on IndiaMART platform. In that respect, I think we continue to perform better year-on-year over any other platform that you can see right now.
This is very helpful, sir. Just a small follow-up. One is about you know your own employees acquiring new customers versus channel partners. Last I remember, I think you had said that around 500 of your own employees were also acquiring customers. Is that number similar or is that come down now? Secondly, the explanation you gave on competition, just wanted your thoughts on the government's ONDC marketplace, because that comes up for discussion very often.
I mean, like I said, you know, the 500 people that you see on the customer, they are sales supervisor people. They are managers who are overseeing the channel. They are managers who are overseeing the branches. Those are the people on the payroll, and rest everybody is on channel and other party. On the ONDC, it is something as a concept evolving and very early. As and when, you know, more clarity will emerge, we will try and see where to collaborate and where to compete. I think it will be more of a collaboration if at all it becomes positive. It is mostly for B2C consumers. For B2B consumers, I think it is still maybe five years away after we become successful on B2C side.
Great. Thank you. Appreciate it.
Just a minute. Ravi, are we properly audible?
Now you are audible. There was some disturbance in between, but I think it's all clear now.
Thank you. Let's proceed.
Yeah. Next question is from the line of Abhishek Bhandari from Nomura. Abhishek, go ahead with your question. Sorry, Abhishek, we cannot hear you. Please unmute yourself. No, no, still we can't hear you. We can see you, but we can't hear you. We can move on to the next participant. Pranav from Edelweiss. Pranav, please go ahead.
Thanks for the opportunity. My first question is regarding the cost. You know the cost, we typically used to see some decline in Q1 from Q4. This quarter there was an increase. How should we see in the next couple of quarters cost going up? That's my first question. Secondly, if I look at two factors, one is the unique business inquiries and traffic that has sort of plateaued and sort of started decline. Can you give me some more color on, you know, what is happening, if there are any cuts which are actually leading to, you know, decline or, you know, how is the underlying traffic behaving?
Let me address the second part, and then I will hand over to Prateek for the first part. On the traffic and unique business inquiry, they have stabilized. I don't think that there's a 1%-2% decline is of any meaning. Thankfully it is the case because that is what had happened, a lot of distress items were in demand during the COVID times. Thankfully, I mean, whether it is mask, whether it is sanitizer, whether it is medical equipment, whether it is medicine, a lot of that demand has, you know, waned away. The other part is that, you know, in, especially in the month of April, post January quarter, there has been a huge price rise in various commodities.
That probably led to some tapering of demands. This is very seasonal. We do not have any much worry on those sides. We should be fine on the buyer side. From pre-COVID levels, we are up for almost 33%-40% on the buyer KPIs. If we can maintain this for next couple of quarter and then start to grow slowly at 10%-20% per annum, that should be fine. Prateek, you want to add how the people side and cost?
Sure. Pranav, as I've already spoken about, we continue to invest behind growth.
Therefore, have also added manpower in this quarter. Almost 163 new employees have been added. Because of which if you see the total manpower cost was INR 87 crores last quarter. That's moved to INR 93 crores. Of which like INR 2 crores is on account of this increase, and the remaining is on account of addition of accounting and software verticals into the business. Other than that, the costs have been going up largely in line with the customer additions, whether it is the hosting of the new customers. All the volume
Sorry to interrupt, Prateek, once again. The audio is not very clear. It's breaking up. Can you just double-check connectivity at your end? It's. Is it good?
Sure. Ravi, should I repeat the answer again or you could hear only the part of that what I spoke?
I think we heard half of it, so if you could just repeat last couple of lines.
Just a minute, Ravi. Let us check the connection once again.
Yes, please. Yeah.
Just give us a minute.
Sure. Let me just repeat the answer, Pranav, to your question on the cost. What I was explaining about the cost is that in last quarter we had a total cost of INR 144 crore, which increased to INR 160 crore in this quarter. That again, you see the operating cost increased from INR 87 crore last quarter to INR 93 crore this quarter. Of which, almost four crore has been on account of addition of accounting and software vertical. And the other is because of the normal increase in the manpower of close to 160-odd people in this quarter which we have added. We will continue to make these investments and continue to, you know, add employees, which will be needed for the growth in the business.
On the overall basis, we expect our margins to remain stable at 20%-30% for the next two-three quarters. Every time we continue to be in a growth investment phase.
Okay. I also wanted to ask a bit about Bizongo. Bizongo has shown a good margin. How should we see the growth for this business going forward? Have you started seeing any benefit because of the integration, cross-selling, et cetera, in growth or margin?
Pranav, as I mentioned, you know, the focus in Q1 for us has been that, given that acquisition causes anxiety among people, among the partner network, and we also need to, you know, go ahead and strengthen the basic financial systems. Our focus essentially has been on doing that well. As I said, we've somehow fairly well. We should be able to, you know, start focusing on building up the sales team in Q2, and then start to build up on the partner network, you know, in Q3. I think these two quarters, Q2, Q3 put together I think should give us a very good view on how the business will move going forward.
We should be able to come back to you with a lot more clarity once we sail through this initial period, where it is important to ensure that the acquisition and this whole transition actually happens very well.
Okay, sure. Thank you. Wish you all the very best. I'll come back in the future.
Thanks.
Thank you, Pranav. A reminder to all the participants that you may use raise hand option on your screen if you wish to ask question. Please accept the invite to come on stage and ask the question. Abhishek Bhandari, you can go ahead now.
Hi. This is Abhishek Bhandari from Nomura. Sir, again, really sorry I couldn't hear your explanation on the cost side. Are you saying that manpower cost and outsourced sales cost are going to be in the same? I mean, are they going to be continuing the same trajectory going ahead?
Yeah. What I said was that the manpower cost and the outsource sales cost, both of them will grow in line with our overall, you know, customer growth. What we are anticipating is that as we are continuing to invest in our NB's growth for the next two-three quarters, our overall margin will remain pretty stable where they are. After that it will start improving.
Okay. For the next two, three quarters, they should remain elevated, and then it'll be in line with revenues. Got it.
Yeah. If you are comparing them with the previous year, then obviously.
Yes
They will remain elevated. If you are comparing them from QoQ level, I think, as the revenue growth is now on a standalone basis at IndiaMART is about high 6% QoQ. I would say that similar increase you should assume in the manpower cost and the sales cost. That will be similar 30% margin.
Got it. Do you share any numbers on average order values that your paying customers are seeing? Because I saw a slide on ROI for you. Can you share any metric that paying subscriber is making on your platform?
Yeah, I think many quarters ago I had shared some data around this. Average order value, because IndiaMART is a horizontal platform, is very difficult to say average, but because there are clothing, there are machinery, and there are cranes, and there are raw materials. However, whatever little information that we get from our own survey, we get to see anywhere between $500-$1,000 average order value. Our own payment platform, Pay with IndiaMART, where people use that for smaller orders, remote orders, because for larger orders, they typically do not use any kind of system. There we see an average order value of about INR 25,000. However, the larger orders are not processed through the Pay with IndiaMART.com.
As against certain reports I had read that the order value on Amazon is about $13-$14, versus average order on Udaan was about $60-$75. Our average order value would range almost 10x of that.
Understood.
In terms of ROI is calculated based upon the number of inquiries being delivered per customer and
Sorry to interrupt, Dinesh. Again, your voice is breaking up, so maybe let's take a moment.
I'm sorry, some internet, intermittent internet problem is happening.
Now it's much better.
It's better, Dinesh. You can go ahead.
I was saying that in terms of number of inquiries per customer and the conversion and the average order value for that industry altogether will define the overall ROI for the customer. Generally, we have seen that in the last four-five years, our number of inquiries have gone multifold up as compared to the number of customers. Inquiries per customer is already at a quite healthy number, and that is why we are also trying to work more on the relevancy side, so that the relevancy-led improvement can happen. In different industry segments, order value will be different, and typically, customers are able to convert anywhere between 5%-15% of the inquiries that they receive.
That's really helpful. For your Platinum subscriber, right, is there any commission-based charges that you any charge?
Sorry, can you repeat your question? Your voice had broken off in between.
For your premium customers, the Platinum customers, I saw that the average charges that you're getting from them as a realization from them was in the range of 7.28%. I'm guessing that is not a one-time subscription charge, right? Oh, sorry, 7.9%. I'm guessing that is not a one-time subscription charge, right? Is there a commission that you charge them?
Sorry, your-
Getting on the call.
Why, your question is still not, you know, clear. I think,
Can I read the question?
Yeah. I'll do that. I'll read the question.
Just type it. Type it in the question box. We just read out the question whatever you typed. Okay.
All right. Moving on then. The next question, Anmol Garg, please go ahead with your question. Please unmute your line. Yeah.
Hi. Thanks for the opportunity. Just had a couple of questions. Firstly, we added some 226 employees in product and tech this quarter. Will it be entirely related to Busy Infotech, or we have also increased the intensity of our tech hiring? That's one. Secondly, wanted to have a view on margins, that we are giving an estimate of adding 8,000-9,000 paid suppliers every quarter. Just wanted to understand that our sales then, like you said, that our sales and employee cost will increase in that manner. However, can we expect any advertisement revenue also coming through into the company to increase our traffic share? And can that impact our margins as well in the next year or going ahead as well?
That are the two questions from my end.
Let us hear about the product and technology employees.
Sir, your voice is not audible, once again.
Sir, is it any better now?
It's much better. Let's start once again.
Okay. First talking about the product and technology employees. In the last two years, we haven't hired any product and technology employees, and we had given offers to the campus in this entire last year. People had started to join as a trainee from January. Most of these people they completed their examinations and became permanent in this particular quarter. That's why you are seeing a step function jump in the employee count. We have actually built up our product and tech team knowing that the market is going to be tough for product and tech. We need more people. We have expanded multifold into different products.
As you can see, our CRM has become quite mainstream, and we are also trying to do experiments around various more engagement features on the relevancy improvement, category-based improvement, as well as trying to experiment more on the payment and billing side. On the BizE also, I think, 180 total employees have been added.
There are total 181 as of 32.
Mm-hmm.
The entire addition of product and tech team that you see here is on account of people who've joined IndiaMART. This is not on account of people at Busy.
The second question was around the margin.
Sorry, Dinesh. Not you. Sorry to interrupt once again. So maybe you can now start answering the second question, please.
Yeah. The second question was around margins. As we guided that, margins will remain in the range of 30-odd%, as we are adding these new customers. These new customers are added at the lowest ARPU in the entry-level segment in Silver annual. As these customers will move up the value chain over the years or so, that will improve the margin. As the customer base increases, the margin particularly start lower. As the customer moves up, becomes older, then the margins improve. As you can see, the top 10% customers' ARPU is around INR 220,000, and top 1% customers' ARPU is around INR 790,000.
However, the overall ARPU is about INR 46,000, while the Silver monthly ARPU is about INR 2,500 per month, which is about INR 30,000.
Just a follow-up on that. Just wanted to understand that can we expect IndiaMART to spend more on advertisement as well in coming years?
Yeah. As we have always guided, if at all, we decide to do any advertisement, it will be to the tune of, you know, INR 30 crore-INR 40 crore per annum. However, we feel that, last couple of years there's, I think, more buyers than sellers. We are trying to build more supply on the platform. I think, current year or so, we don't plan to spend anything on the brand-building advertising for buyer acquisition. Our 100% buyer acquisition remains organic, and we believe that, it will remain so for the next year or so. If at all, there are any advertising plan, we'll let you know in advance.
Thanks for that.
Anmol, next question is from the line of Ratik Gupta, Guardian Asset Management. Ratik, please go ahead.
Yeah. Hi, sir. Good evening. My first question is on the supplier front. Although we are seeing a 10,000 increase in the supplier front for this quarter, do we have a number if we have lost any?
Lost?
Which one? Net or gross?
Yes. You know, if you are asking about the churn, we give the churn numbers quite frequently in every call. The top Gold and Platinum customers, the churn remains less than 10% per annum. In the Silver annual segment, the churn remains around 25% per annum. In the-
Sorry, sir, your voice is breaking up.
As I said, the churn in the gold and platinum segment, the churn remains at less than 10% per annum. In the Silver annual segment, the churn becomes about 20%-25% per annum. In the Silver monthly segment, the churn is about 5% per month.
Okay. My second question is, sir, on the current scenario, what we see is that the focus has been towards the manufacturing sector and the product sector. Are we looking forward to move towards the service sector as well as IndiaMART service?
Yeah, I mean, on a large macro side, dividing that into manufacturing, I think many, many service providers are our customers also. We go by small category by category. So business services, construction services, that kind of it. I think we continue to expand into more and more categories to monetize better, and we will continue to do that. Are we going to go into B2C services? I don't think so. We will continue to remain B2B services.
Not specifically to B2B or B2C, sir. I'm talking about the services, the service segment sector. As we are focused towards the manufacturing sector like industrial plants machinery or the construction or the machinery parts, are we focusing on the service segment as well? Supposedly IT services or the financial services segment.
Yeah. Not much on IT services and financial services, but you will see software, many software companies. You will see many call center companies. You will also see many consultants. You will see many chartered accountants and logistics service providers, transportation, that kind of services.
Okay. Yeah. That was my question. Thank you, sir.
Thank you, Ratik. Next question is from the line of Amit Chandra, HDFC Securities. Amit, please go ahead. Amit, please unmute.
Yeah. Hi.
Yeah. Yeah. I'm audible now? Yeah.
Yes, you are audible. Please go ahead.
Yeah, sir. My first question is on the, you know, on the customer addition that is mostly on the, you know, mostly on the monthly, you know, the subscribers. What percentage of the monthly subscribers get converted to maybe a long-term engagement with us? If you can provide some colors on that, whether, you know, how many of them that we add that remain with us, because you have mentioned that the churn is coming down. You know, what kind of impact is this going to have on our ARPU over a longer period of time? And also in terms of the addition that if I see the incremental ARPU, that is obviously on the lower side.
Obviously, are we providing some kind of discounts to, you know, get suppliers on our platform or the pricing remains the same?
First let me answer the easier one first on the long-term ARPU growth. On the long-term ARPU growth, we have guided in the past also. Typically, we try to take anywhere between 5%-6% CAGR ARPU growth. That has been the past also, and that will remain, you know, similarly. Yes, you're right. First of all, about two-thirds of customers come in the monthly mode and one-third of the customers come in the annual mode. From the Silver customers, many customers upgrade to the Gold and Platinum over a period of time. Approximately, I know for sure that approximately 20% of the customers typically upgrade in a year's time. If you look at the cohort wise, some customers upgrade in six month, 12 month, and so on.
Approximately 20% in a year's period. That is how the ARPUs increase over a period of time.
Probably
Yeah. Currently, because the monetization is going to happen on the Silver side. In the near term, ARPUs will remain, you know, flattish or even could be muted for some time. Over a long period of time, they will increase by way of upsell and by way of upgrades. Are we giving discounts? I think that there are no on the Silver side. We have fixed price product. When it comes to the Platinum side, we definitely offer customized packages for larger customers.
Okay. Sir
Sorry to interrupt, Amit. Your voice is not audible.
In terms of commissions, how the commissions are there, is it mostly?
Amit, can you repeat your questions, please?
Can you hear me? Hello? Hello?
Maybe, Amit, you can turn off your camera. It will save some bandwidth. Repeat your question then.
Am I audible?
Yeah.
Yeah, you're audible.
My question is on the channel partners. You know how the channel partner economics actually work, you know, in terms of commissions that we're giving the channel partners, because you know what I'm seeing is that you know as you have mentioned that the cost will actually go up in line with you know the supplier addition. Is it that most of the sales that is coming or sales like I mean in terms of customer additions that is coming is mostly through the channel partner ecosystem? Or our in-house sales is also adding you know
Yeah, as I said earlier, about 50%, more than 50% of the sales currently come from in-house sales channel. Our endeavor is to keep it at 50/50%. The cost on the employee front will rise because our cumulative customer base is increasing, and we need client servicing and renewal and upsell employees. Those are 100% in-house employees. We have not yet tried a channel partner there. We will probably start to think about those, especially in the Tier 3 towns. How the commission works is very like many standard DSP mechanism which you see in the banking sector or which you see in telecom sector.
Sorry, Dinesh, your voice is breaking up.
The commission on the sales is to the channel partners are per sale basis and is arrived at based upon the historical cost we have had at IndiaMART.
All right. I think Amit have left. We'll move on to the next participant. Manish Gupta from Solidarity Advisors. Please go ahead, Manish.
Yes. Thanks for the opportunity. I'm sorry, I'm coming back to a question other participants have also raised. You know, you made a statement, I hope I've understood that right, that employee cost will stay roughly proportionate to how your revenue increases. That's kind of, you know, very counterintuitive because of two reasons. One is, one would expect that there would be some productivity of the sales force over time. And secondly, you know, you do mention that people come in the lower tier and then they upgrade to higher revenue per supplier as they move into the Gold and the Silver and the Platinum programs. It's very counterintuitive why your employee to revenue ratio, just for the standalone business, should not decline over time.
Yeah. See, can you see the current slide on the up there?
Yeah.
On a long-term basis.
Sorry, Dinesh, I can't hear you. Dinesh, it's a very bad line. One request is just to see whether this is an issue of bandwidth or it's an issue of the software platform you're using. 'Cause this is really a terrible line. You know, this one has been barely able to understand anything on this call.
Are we audible now?
Yes. Yes, it's audible now.
It's a bandwidth issue. We have used a new conference room. I think that there's something wrong with that.
Yeah.
If you can see the slide, on a long-term basis, the margins will improve, and they have been improving. It is only in the last two years where the margin is at one exception.
Sorry to interrupt, Dinesh . It's a very bad line. Not able to hear you at all.
The problem is not my voice.
Yeah. No, Dinesh, I think it's just the conference room that
Yeah. We'll talk about it internally and see if
Yeah. Otherwise, I'm happy to do a call offline with Prateek or something.
Yeah. That's for you.
Yeah. What I heard you say was that over time, the reduction in employee benefits, we should continue to see that over time. Is that what you said?
Yes. Only for the next two quarters or so it will grow in line with revenue.
Okay. Clear. Thank you. Thank you.
Right. We'll move on to the next participant then. Amit, are you there?
Yeah.
Yeah, Amit, we can hear. Please go ahead with your question.
No, actually, my line got lost. On the cost part of it, a lot of questions have been, you know, asked on the cost aspect. The adjusted EBITDA margins that you have given, so that is excluding the ESOP cost, and if I'm not wrong. If I exclude the ESOP cost and if I include, you know, the acquisition impact, then the margins come to around, you know per side. What we are seeing here is that, the investments that you're planning and you're targeting 30% margin because the margins of, like, this is on the higher side, right? Typically it should have a, you know.
How do you see the cost aspect, and also the ESOP cost, and what will the cost look full year, if you can give that? On standalone basis, how the cost will move up or it will be, you know, stable at these levels.
Sure.
One clarification. When we said about 30% margin, that was on EBITDA and not adjusted EBITDA. That was at least including the stock comp expense.
If you can tell what is the ESOP-
Regarding the ESOP, as to how we see this cost. This cost is primarily on account of the grant that we took in the month of January. For first year, this cost will stay high. In next two, three quarters it will stay high. After that, depending upon the amortization schedule, it will start come down slowly. It will come down to around first quarter in 2020 for the next.
Next three quarters.
Okay. My last question is on the-
On the Bizongo side, you know, Bizongo is a very new and very small business as compared to the overall business. We will make investments in product and technology and sales. Bizongo, while you are seeing the current profitability as 40%-50%, I think our immediate target on Bizongo is not about you know, margins, but about expanding the sales and making the product available on mobile and cloud and all those things. I would say that INR 5 crore would not have a larger impact on the operating margin on the consolidated basis.
Yeah, yeah. Now again, on the Bizongo side, sir. Obviously, you know, the run rate that we are, you know, showing it's indicating around INR 40 crore, like full year for the next year. But when we acquired also, the revenue was actually higher. Are we seeing a YoY kind of a decline for Bizongo or there is some accounting changes that impacting that and or in terms of of how we are recognizing the revenue for Bizongo? And also in terms of longer term, like targets, you know, how do you see the like revenue growth for Bizongo and you know in terms of cross-sell you know how the opportunity is panning out?
Amit, two things. One, the earlier financials, if you will see, were based upon Indian GAAP. From this quarter onwards, we have shifted to Ind AS, and therefore the whole policy of revenue recognition is now as per Ind AS. When you look at a comparable number, last year based upon the-
Yeah, Brijesh, let's just wait for a few seconds.
Sure.
The line is really bad. We're not able to hear you, sir. Most of the answer we're not able to.
Maybe try Brijesh now.
Sorry. Is it better now, Ravi?
Better, better. Please go ahead.
Amit, if on a you know like-for-like comparison basis, if you look at last year, the revenues were based upon the billing. The billing in Q1 is at INR 13 crore, which means it will be at a run rate of about INR 52 crore higher than the revenues which were there last year. Now, having said this, you know, when we look at the focus that we are having on the Busy business, as I mentioned, the first focus is to make sure that the people and the partners right, they continue to stick with the business and do not get alarmed by this change in management that has happened.
We would be able to go ahead and, you know, start focusing on growth from Q2, Q3 onwards as we start to invest behind growing the team and growing the partner network. In the last call, we had mentioned that in this year would be double the rate of growth, potentially used to be about 10.5% this financial year.
Yeah. Just a minute, yeah. Could you just repeat the last statement?
Yeah. As we had shared in the last quarter, our, you know, top three priorities in this financial year would be, one, to double the rate of growth, you know, from the erstwhile 10%-12% to about 20%-25%, in this financial year. Second, is to increase the overall number of new licenses which are being sold, you know, because that would be forming the foundation for accelerated growth in the years to come. Third would be to go ahead and invest behind building the team and improving the overall awareness of the product so that we can ensure better penetration in markets all across India. These would be the three priorities in this financial year for us.
Okay. Okay, sir. Thank you and all the best for the financial year.
Thank you.
Thank you, Amit. Next question is from the line of Ajay Modi, Piper Serica Advisors. Ajay, please go ahead.
Thank you, Ravi. Prateek and Dinesh, quick question. Are we saying that our quarterly employee plus outsourced manpower expense run rate is, which is now roughly about INR 120-odd crore, will go higher further? That's my first question.
Yes. As we discussed in the past that since we are adding manpower across
I think we should.
Sorry to interrupt once again. Let's wait for, you know, 5 seconds or so.
Is there an option I can move my audio instead of this video?
No, you can try and turn off your video, Kushal. Maybe try turn off your video, and let's see if it is, better.
Yeah. We've switched off our video, and we'll continue with the presentation.
I think it's better. Let's please go ahead.
Yeah, actually.
Maybe is this better?
Yeah, it's better. Kushal, your presentation, it's not visible at the moment, so if you can just share your.
One minute.
Yeah.
Is it visible now, presentation?
Visible now.
Thank you.
Please go ahead.
Okay. Coming back to the question on the employee front, as we discussed, recently, right now, that we will continue to add people, and as the people will get added, this cost will increase. However, as a percentage of revenues, it's likely to stay same because the revenues will also grow quarter-on-quarter.
Understood. Prateek and I think Dinesh can come in here. Our expenses, which were largely flat, we did not do any large hiring, didn't increase team size back in 2020 and 2021, which we've started doing now. My question here is, shouldn't we be sweating these employees more? Shouldn't the growth rate be higher? I mean, for example, you just said that target is to do 25% kind of IR, IRR for or CAGR for Busy. For a INR 40 crore sales, 25% growth is about INR 10 crore, which is way too small for a company of our size, right? What my understanding that I'm trying to seek here is, what is stopping us from higher growth?
Right now, we are at 179,000 active users in the IndiaMART platform compared to 7.2 million storefronts, which is roughly about 2%-2.5% paid to overall subscribers. What is I mean, if we have money, if we are spending, if we are hiring, what is stopping us from saying that, "Look, I will drop my ARPU lower, and I will increase my subscriptions far, far, far higher." I mean, we are the market leaders, so why are we not cleaning out this market completely?
Let's look at the leading indicators of the growth. There are two leading indicators of the growth. One is the number of customers, and the second is the collections. If you look at FY 2021, we neither added customers nor added any collection. If you look at the collection of FY 2021 versus FY 2020, it was a flat collection. If you look at the number of paying subscriber, it was a flat years. In the FY 2022 also, the first half was marred by COVID. It was only whatever growth has happened in the second half of the year. Now, if you look at the current trend, so from, we have tried to double our customer growth from 20,000-22,000 per annum.
Now we are saying that we will go to 35,000 odd per annum at about 8,000-9,000 customers per quarter. I think we are investing behind growth. Now, why can't we go even higher? That limits my ability to manage due to people's adoption of internet and businesses adoption. I think we remain committed to a profitable growth business. As we said earlier also, even before the pandemic, our revenues used to grow at 25%-30%. Costs used to grow at 15%-20%, and that is what resulted into margin expansion. I think for now, given that we have not done any investment in the last two years, currently the margins will remain flat at around 30%.
However, as we achieve a higher trajectory, we will again start to focus on margin expansion.
Understood. Quickly, Dinesh Agarwal, so you said that, why can't we go higher? That limits your ability to manage. My question is that, look, for example, we acquired Busy. Busy has a revenue of what? INR 40 crore. I mean, for doing a 25% growth, INR 10 crore doesn't even move the needle for IndiaMART as a platform. Specifically for Busy, why are, I mean, at what point would we expect a little more aggressive growth here?
Busy
As I mentioned, we would be able to come back with a, you know, much better view on the overall, Busy business, from next year onwards. Because we would have seen through this entire time of, integration and assimilation of people and partners. We will build visibility, on acquisitions and revenue growth going forward.
Okay. Understood.
I think I've already repeated this multiple times during the Busy acquisition process itself that first year, my entire focus would be to make sure that we do not go bust with the acquisition. You know, so I think the most important factor is that this year, let us focus on retaining the revenue, retaining the employee, retaining the partners, retaining the customers, understanding the business inside out. Next year onward, let's put the focus on growth.
If I were to ask you, what is a three or five year view with this business? I mean, what size should it become? Not can, but what size should it become?
I've given a long-term, my own expectation that over a period of time, over the next 10 years, can this become a INR 500 crore business instead of a INR 50 crore business.
Okay. Thank you.
Thank you, Ajay. Next question is from the line of Vivek Kumar. Vivek Kumar do you have a follow-up question?
Yes, Ravi, I have two follow-ups. One is on the investments. There are several startups where IndiaMART's stake is less than 20%, like M1xchange or Bizongo. Do you see an opportunity to increase your stake in these companies anytime soon? Also, in the next 12-18 months, how do you envisage the utilization of cash? Will there be any major new investments or material follow-on rounds that you expect? Second question is on the shift to weekly salary payout. Is that having any bearing on attrition? Is there anything else to call out in terms of attrition? Thank you.
On the weekly salary, it has been received very well, and I believe that the kind of you know things that we are hearing in the market about attrition, we are not that badly affected. You know, I don't think this can be the only reason. Maybe if we had a monthly salary, the attrition would have been 1% higher. I think everything adds up to the attrition. On the minority investment side, you're right that we wanted most of the investments to be around 26%. In many cases, we found it probably either too early to go 26% or the availability to be less than 25%-26%.
In Bizongo over time, we have increased our share. In Vyapar also, we started with 26, now we are at 27.5. In Legistify also, we started with 10, 11 percent, now we are at 15 %. As and when we continue to assess businesses and as and when there are any things, we will continue to look for opportunities to increase our size. In nine out of the 14 investments that you see here are about 25% or more. Specifically about M1xchange, it's an RBI-controlled regulated entity, and no single entity can take more than 10%, being an RBI-controlled banking exchange. We are only allowed to take up to 10% there.
We already have 7.7%, and as and when we will find the opportunity, we will increase it to 9.9%.
Thank you. Just one last follow-up. Any updates on Vyapar and how the uptake has been and how you are thinking about it now alongside Busy?
Look, both operate in a very different segment. While Busy operates at more of a small and medium businesses, Vyapar operates mostly at a micro and small businesses. Vyapar, less than 50% of the Vyapar customers are GST registered businesses. In Busy, I think more than 80% or 90% customers are GST registered, and not only GST registered, but I think with good turnover. Vyapar and Busy actually solving very different needs for very different customer segment. Busy probably is more to do with Tally kind of a market, whereas Vyapar is very self-accounting software or DIY accounting software.
Right. That's all now.
Thank you. Moving on to next participant. Ajay Modi, do you have a follow-up question?
Yeah. Thanks, Ravi. Dinesh, a quick one. You have a very large exposure now to accounting. We have LiveKeeping, RealBooks, Busy and Vyapar. Can you just throw some light on what is your long-term thought process with all these and while I understand which pieces of the puzzle do they fit in, what are we looking at from a longer term? I mean, what is the opportunity size that we're looking at?
Opportunity size, if you look at today's market about INR 2,000 crore is what the customer pays. About INR 1,000 crore is what the company's revenues are, because most of the companies have been working on box model, box license model and on the transfer pricing model. From the customer side, the. I'm not talking SAP and other, you know, only the small business accounting. That's about INR 2,000 crore rupees market. This market has grown rapidly in the after GST. In the GST year, this market actually tripled from being at a INR 300-400 crore market to INR 2,000 crore. Ever since then, it has been, you know, growing.
Now with mobile and cloud, we believe that this market can become a billion-dollar market over the next 10 years or so. Out of that, if you look at major market share has been with Tally, and Tally has been primarily an accountant-led, desktop-only accounting software. Our take is that that is going to change. Vyapar came from a mobile-only and DIY accounting, and now slowly started to offer a hybrid cloud onto desktop as well as mobile. RealBooks is a multi-branch, multi-location simultaneous accounting system. Busy though it has a historically box-based pure desktop model, but I think our vision is to convert that over a period of time into a mobile and multi-location cloud-based model.
We believe that this is a good business model like stickiness. Customer stickiness is there. It has a recurring revenue stream. Earlier it was in the name of AMC or upgrades. Now, I think over a period of time, as we have seen, most of the software is moving into a recurring revenue system. I think we are looking at currently 1 million businesses within IndiaMART ecosystem are using our software. Vyapar is being used by almost half a million people. Busy is being used by 3 lakh licenses have been sold. Many people have two, three firms being operated on the same license. Similarly, Tally.
Tally, as per published resources, are about 5 million users on Tally. I think this market is going to only grow. It's been there for almost 50 years now. This market is going to grow only.
Have we, I mean, are we already seeing the kind of adoption here, as in, from an expert point of view, what you would have expected in terms of adoption?
Yeah.
Are you seeing that already?
In Vyapar, when we first saw Vyapar in the year, you know, somewhere in the middle of 2019, it had less than 10,000 customers. Now we are just three years from then, you know, if it's July 2019 versus July 2022, we have already 120,000 odd customers. They have added 1 lakh plus customers in three years.
Okay. Okay, that's all from my side. Thank you.
Thank you, Ajay. I'll now read out a couple of questions from the discussion panel. First question is, do you charge commission as a percentage of sales from your Platinum subscribers, to understand the ARPU of 7 point-like subscribers?
No, we don't.
Okay. Now moving on to the next question. What is the registered supplier versus paid supplier ratio? What is your current conversion rate from the free supplier to the paid supplier?
about 2 lakh, 1 lakh 70,000 paid customer and about 70 lakh free customer, so that makes about 2.5% of the customer base which is paid. You know, if you look at worldwide classifieds, they typically have anywhere between 2%-5% penetration. Whether you look at Alibaba, whether you look at many other, you know, 2%-5% penetration. In our case, being B2B in certain, we looked at GST data. Out of the GST data, you know, about 12 million people, there should be about more than 1 million possible customer base over a long period of time.
Okay. Just a follow-up, sir, on this. What would be the strategic focus area or how do you plan to improve this, you know, conversion? You know, apart from advertising, what would be the key drivers to improve this conversion rate?
We continue to expand, you know, make it easier for people to do DIY as well as continue to expand our touchpoints, whether it is online, telephone-based or field-based. Now we have expanded through channels also. We'll continue to do that. I would say one of the most important factors in this free to paid conversion is people's own ability to take out value from an internet-based business. There are within the same category, within the same geography, some people in the same geography, same industry, are able to take out better value from IndiaMART, and some people are not because of the way they have they are adapted to internet.
As and when more and more people are adopting, more and more businesses are adopting, that is also going to improve over a period of time. We have seen it's been only five-seven years when this mobile phone has become quite popular. I think it will continue to improve over a period of time.
Thank you very much, sir. Maybe, and now I would like to hand over the call to you know, for the closing remarks.
Ladies and gentlemen, thank you very much for joining our quarter one FY 2023 conference call. I'm sorry about the internet disturbance that we have had. In case you have more queries, please feel free to reach out to our investor relations department, and we'll be happy to answer your queries one on one. We will try to have a better, tested connectivity next time. Thank you very much. Have a great day, and have a great weekend.
Thank you, sir. Thank you, all the participants. On behalf of IndiaMART, we now conclude this webinar. Thank you. You may disconnect your lines now.