I would like to welcome you all to the company Q3 FY 2021 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 questions 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, and Mr. Prateek Chandra, Chief Financial Officer. 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, over to you, sir.
Thank you, Ravi. Good afternoon, everybody, and welcome to the IndiaMART's Quarter Three FY 2021 earnings webinar. I would like to wish everybody a very happy New Year, and hope you and your loved ones are staying safe and healthy. We are hosting this conference through FLOOR, a platform by our associate company, 10times.com. The earnings webinar is also being shown live on IndiaMART's Facebook page and YouTube channel. We have already circulated our earnings presentation, which is available on our website as well as our stock exchange websites. I'm sure you would have gone through the presentation, and I would be happy to take any questions afterwards. In the third quarter of this fiscal, we saw a recovery in the economy and business across the board. I'm pleased to report a strong financial report performance of IndiaMART during the quarter.
Our consolidated revenue from operations stood at INR 174 crore, representing a growth of 5% on year-on-year basis. Collections from the customers for the period reached INR 179 crore, a sequential growth of 9% quarter-on-quarter. Marginally a decline of 2% year-on-year as compared to quarter three FY 2020. December 2020 collections were better than December 2019 pre-COVID levels. The jump in the buyer traffic was visible in the last quarter and has sustained this quarter as well. Total traffic has grown by 35% year-on-year, reflecting approximately 85 million visits per month. Business inquiries delivered increased by 37% year-on-year to 154 million, with our 90-day repeat buyers standing at approximately 60%. During this quarter, there were approximate 7,000 clients addition into the net paying subscribers, resulting into 148,000 customers at the end of the quarter. We are back to the March 2020 paying customer levels of 147,000.
Indian internet growth has accelerated further after the pandemic, and many new opportunities will emerge in the coming time. Keeping this in view, in yesterday's board meeting, shareholder resolution to raise funds was approved on 18th January for approximately up to INR 1,100 crore. The proceeds will be utilized for organic or inorganic growth opportunities in the spaces strategic to IndiaMART. Now, I would like to hand over the call to Prateek to discuss the financial performance in detail. Thank you, and over to you, Prateek.
Thank you, Dinesh. Good afternoon, everyone. I will take you through the financial performance for this particular quarter. Consolidated revenue from operations was INR 174 crore in the quarter, a growth of 5% year-on-year, which was primarily driven by a similar increase in paying subscribers year-over-year, and a marginal improvement in our average realizations per supplier. Consolidated EBITDA was INR 88 crore, representing a margin of 51%. Net profit for the quarter was INR 80 crore. We've been able to sustain these margins as our offices stay closed and hiring has recently started. As and when the business volumes reach normalcy, we expect some of these costs to increase. Cash flow from operations during the quarter was INR 77 crore. As of 31st December, cash and investments stood at INR 1,143 crore. 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 a question, and use the raise hand option. You may type your question in the discussion panel, and we will revert to you if any question remain unanswered. Please introduce yourself and restrict to two questions so that we will be able to address questions from all the participants. We will wait for a couple of seconds while the question queue assembles. First question. Yeah, hi. Please go ahead with the question.
Please unmute yourself and go ahead with your question. We'll move on to the next participant. Please go ahead with your question. Please unmute yourself and go ahead with your question. Next question is from the line of Manan Shah. Manan Shah, please go ahead with your question.
Yeah, hi. Thanks for the opportunity. My first question was that we had recently filed a case against one of our competitor for IP theft. Can you update us on this case and where is this case right now at? That would be my first question. My second question was that with the increasing in the competitive intensity, would we start spending on advertising? Currently, we are not spending anything on advertising. My last question was on the recent fundraising. We are already sitting on adequate cash and cash equivalents in our balance sheets. Why is there a need to raise such a huge cash right now? Hello?
Yeah. Hi. With respect to your three questions, the first question you asked about the legal proceedings we have initiated against one of the competitor.
Which hearing?
Its next hearing is scheduled on 25th of January, and we filed this case sometime in the month of November, wherein we have highlighted to the court about our grievances, through which court has granted an interim injunction in our favor. Next date is in 25th of January, so it will proceed as it goes along.
How confident are we on our claims?
On this one, it's only one hearing that has happened so far.
Sorry, am I audible?
Yeah.
Yeah, sir. In this only one hearing which has happened so far, in which we have presented our case to the honorable court, honorable court has granted that injunction in our favor. The competitor, the other party, is yet to revert with their response to our grievances in front of the court. Hopefully, by the next time of hearing, they would revert with their response, the proceedings will take place accordingly. Okay. On the ad spend?
On the advertising, if you see, we haven't done any significant advertising since FY2017. 80% of our traffic, which is about 80 million visits a month that we get, is organic traffic. Even the last time when we did advertising, since 2015 to 2017, it was for brand building and recall value. We feel that currently, especially in the last year, the traffic has gone up by 30%- 40%, and also the need for IndiaMART has been used by many people, whereas we don't feel there is a need for advertising as of now. If as and when there would be any need for advertising, we will definitely let you know and do the same.
On the cash side, as I said earlier, that Indian internet growth opportunity is further accelerated during the last year, and many new opportunities are likely to emerge as the transformation progresses. With 700 million mobile phones and a step function jump into the SMEs and businesses using internet for their purpose, we believe that there will be many more opportunities that will come. We intend to make a long-term organic and inorganic strategic growth opportunities and in the area of IndiaMART operation and its adjacencies. On the cash part, you can see that there is INR 633 crores in our deferred revenue out of the total cash balance we have, which leaves us at a remaining cash reserve of INR 500 crores. We have seen and met multiple companies and multiple sectors over the last year.
Based upon our own assessment, we feel that INR 1,000 crore-INR 1,100 crore kind of a fundraise should be necessary to fund our growth ambition for the next two years or so.
Be like in a controlling stake, or would be an investment kind of acquisition that we're looking at?
It is difficult to say as of now. We intend to make long-term investment in strategic spaces, and we will try for one or two acquisitions along with a couple of minority investments. We'll continue to evaluate proposals, and we will let you know as and when anything comes.
Okay, thank you. I'll get back in the queue.
Thank you. Next question is from the line of Anmol Garg from Motilal Oswal. Please go ahead.
Yeah. Hi, good afternoon, everyone. I had just a couple of questions. First, just on the previous question, if you can dwell more on which are the areas that we are targeting for the acquisitions for the fundraise that we are doing.
As I said, we intend to make investments or acquisition in the strategic spaces where we can leverage IndiaMART's ecosystem. Whether it is the reach or whether it is the customer, and it should improve customer experience, engagement, and monetization. The broader spaces that you can see, we have always been talking about fintech and SaaS, and vertical commerce is one such thing which is also very important. We have recently seen a lot of activity in the conversational commerce, and we believe that there could be opportunities. We have done an investment in Vyapar, which is into the accounting and tax invoicing. There are receivables management, sales and distribution management. We have already done an investment in Bizom, which is on the sales and distribution side. Then there are cloud communication, payroll, logistics aggregation and tracking platform.
Within fintech, if you see, there could be payment facilitation and credit facilitation. We already have a payment subsidiary called paywithindiamart.com. However, we haven't yet done any kind of a buyer or seller facilitation of the credit on the transaction side. There are API banking, which we would like to offer to our SMEs. That is another area. Business insurance is another area. There are multiple areas that we have seen in the past, and within the vertical spaces, there are agricultural, there are industrial products, there are items like shoe wholesale. Many other kind of items are available. The basic theme has to be either it has to be a transaction enablement or ease of doing the business by way of business process enablement.
I think enable the commerce to how do we become a one-stop shop, and keep improving our customer experience engagement and expanding the network for monetization. That should be the overall theme.
Yeah. Sure. Thanks for the elaborate reply. Secondly, just wanted to ask that, have we any plans to increase our pricing of the base packages that we are offering right now?
We have been doing price changes multiple times. As I've said, in the past also, last year, we have seen how do we offer a shorter duration and more affordable package, because people were facing cash crunch, and we wanted more and more people to come on the platform. You can see that if you go to our deferred revenue slide, you will see that the current portion of the deferred revenue has gone up from 60% odd to 65% odd. Similarly, on the base package, we have done two changes. One, the base package was initially a INR 5,000 setup fee and a INR 3,000 inclusive of tax on a monthly basis. Now we have made it simplified so that there is a INR 3,000 plus tax, which offers two things.
One is it simplify to sell one kind of a package, and second, it lowers the entry price from upfront INR 8,000 to now INR 3,540. We have done that change. Apart from that, in the previous quarter itself, we had introduced a concept of daily BuyLeads. If you remember, we had all our packages, like Silver, Gold, Platinum, they had BuyLead packages which were on the weekly basis. Now we have introduced a daily quota as well to make the customers come back on a daily basis, as well as a weekly quota. The overall buyer base since has gone up by 40%. We have also increased the weekly quota for Silver monthly packages, one every day plus seven per week, and for annual and multi-year, one every day plus 10 per week.
Similarly for Gold, two per day and 20-30 per week, depending upon which tier of Gold, and Platinum, three and four per day, and 50-100 depending upon the tier of Gold. We have done certain changes in the pricing, and we are seeing very good result. Many of our suppliers, one, because of the pandemic, I think, they have done a good internet adoption, and they have found useful value in IndiaMART in coming on a daily basis. Second, we have seen that people who are consuming BuyLeads or RFQs on, say, seven days a week or 10 days a month has gone up to 15 days a month by introduction of these daily expiry value packages.
Yeah. Sure, Dinesh. Just lastly, from my end is that earlier we have talked about that half of the margins will be sustainable on a longer-term basis. What are the factors that are letting you say that what on the cost optimization front that we are doing that will be sustainable on a longer-term basis post we start paying out variable pay to our employees and also start hiring?
Sure. I'm going to look at our cost structure in the pre-COVID level was hovering around INR 120 crore per quarter. Last year, the same quarter, we did INR 122 crore of cost. In this particular quarter, our total cost was around INR 85 crore. There is roughly around 30% reduction in the cost on an overall basis. Even if you look at the split of the cost broadly, we had two types of cost. One is the people and people related, which is manpower and outsources. Therein, the cost has come down from INR 90 odd crore to roughly around INR 65 crore in this quarter. The other overhead in G&A, where the cost has come down from roughly around INR 30 odd crore to INR 22 crore in this particular quarter.
If you see the headcount cost, the change has largely been because of the reduction in the headcount or the manpower, what we had, we're operating with the lesser people. Second is on the G&A side, since we're continuing to work from home, our offices are stay closed, so there is a lot of savings on the G&A side we are seeing.
Even permanent basis.
I'm just saying that. There are certain variable costs which was related to the businesses which we were seeing the savings. Going forward, as we come back to our normal levels of businesses, some of these costs would certainly come back. The cost which would not come back would be optimizations that we would have done, which is largely the G&A cost of offices. From 80 offices, now we are operating with roughly around 40 odd offices now. There are certain automations that we have done on the processes, which would also result into some sustained savings. There are certain efficiency improvements which would also be there on the manpower side. All in all, our estimate was that roughly around 50% of these costs would sustain and 50% of these savings would come back as the operations are complex.
Yeah.
I would add some permanent kind of items that we are seeing. One, I think over the last six months, we have seen that some of the sales can be done using channel sales partners who are tele-based channel sales partners, as well as field sales force-based, channel based. There, the cost has gone completely variable. We have seen today, if there are 1,000 people who are working on the new client acquisition, which are employed by IndiaMART on an outsource payroll, on a fixed cost basis, about 500 people are working as a channel sales partner. Second thing, we used to have a lot of BPO and call center operations, which were being operated out of the physical call centers, and there were travel and sitting and all those costs were involved.
Now that all of that has moved to the cloud telephony-based system, we are seeing approximately 10% of saving per seat when the agents are working on work-from-home model. We don't plan to return those call center-based or BPO-based operation back to the large call center, actual center coming in. I think we have moved certain products which we were using in the server end. We have moved to the more open source softwares, and we have seen significant saving coming from their side also. We have also seen how meetings can be done on the Zoom or on the video call today. We believe that whatever travel cost that we were doing, either for the investor relation purpose or for the sales coordination purpose, at least half of that will look like a permanent saving. Now also we are expanding hiring.
Out of the hirings that we are hiring today, we are hiring almost 50% of the people in the work-from-home operations. There, we believe that capital cost and the office going and coming, the office per seat cost is much lower. In fact, we are able to pass on some of that cost to the employees, and some of the benefit also to the employee. On one side, we are able to increase their take-home. On the other hand, we are able to decrease the overall cost to the company. These are some of the costs, and that is why I believe that out of the INR 30 odd crores that we have saved in the cost, we'll probably get back INR 15 odd crores, and we'll probably save INR 15 odd crores per quarter.
Thanks, Dinesh and Prateek. That was very elaborate. I'll jump back into queue.
Thank you. The next question is from the line of Sumit Jain, ASK Investment Managers. Please go ahead with the question.
Thanks. How do you determine what is the ROI of a supplier? Let's say if I'm a supplier and a subscriber, how much business I get generated through IndiaMART, because that is crucial to know and to judge eventual stickiness of me with IndiaMART.
Sir, ROI is very different for different customers. We are a lead generation platform. The way we measure ROI is how many BuyLeads a customer is consuming, how many days he's coming to the platform and consuming BuyLeads, how many calls he's receiving, and how many inquiries that he's receiving. Nowadays, because our CRM system has also become quite useful and quite daily used, we also come to know how many times people have replied to the inquiries and how many times people have made a call back from our CRM system. All in all, we are able to measure the ROI in terms of number of calls or inquiries or BuyLeads received by the person, and number of calls and replies being done by the supplier. In terms of the actual ROI, will depend largely upon different industries and different geographies.
We do not know exact transaction. Some of the data that we get is where people use our platform for payment service. There also we come to know what kind of transactions are happening on the platform. These are some of the ways that we calculate the ROI. If the engagement level continues to increase or continues to remain there, then we understand that people would invest their time, only if they are getting an ROI. Otherwise, they would not be investing their time. These are some of the ways that we measure. You want to add something? Brijesh, go on.
One of the ways we also go ahead and look at this is what is the overall number of inquiries that every paying subscriber essentially gets. We have that number typically ranging between about 400 odd per query every month. The other parameter which becomes important to measure the ROI is at what rate do we see these inquiries getting converted into orders. We have a proxy value around this measure, whereby we receive more than 150,000+ feedbacks every month from buyers who've sent inquiries. Using that data, we can articulate that about 40% of these buyers essentially have done business with an IndiaMART supplier, which if we translate that conversion on a per supplier level, we believe that about 6% - 7% of these inquiries received by suppliers would get converted into an order.
A multiplication of this conversion along with the average inquiries received by a paying subscriber actually gives us a good indication of that. Of course, it's an average. We'll have customers having better order values being received versus some customers having lower ROI. It does give us a good view on where this trend is moving.
Is there a way to capture more and more data of conversions of inquiries into sales for the subscriber? That will give you early signals as to the stickiness of the subscriber. That was the point.
Of course, that is the direction we continue to work upon. In that direction only we introduced Preferred Number Service as first, then BuyLeads as second, the CRM reply and CRM callbacks, and payment facilitation. All of that effort is in that direction, because as you can understand, B2B is a very different thing. There are thousands of categories and 100,000 categories and different geography. There are custom products, there are made to order products, there are wholesale products, there are products being bought from manufacturer, there are machines which are made to the specification. It is not easy to do a simple buy now kind of a product and then restrict your industries to only shippable and off-the-shelf readymade product. We are trying these different methods to find out more and more ROI.
I think the best ROI that we are able to see is the engagement on the platform. If the supplier is engaged on a platform three days a week, we believe that he's getting the ROI.
How does one correlate the daily unique business inquiries, which is 25 million in this quarter, let's say as an example, to total business inquiries delivered 154 million in this quarter?
25 million unique buyers have sent an inquiry which has been received either by BuyLead or either inquiry or as a call by total number of 154 inquiries. You can imagine that one buyer would typically either send an inquiry to two, three different suppliers, and two, three different suppliers would consume a BuyLead of a particular buyer. One buyer converts into almost six inquiries.
One last question. INR 1,100 crores of fund raise, how big is your M&A team? How many prospects do they meet every quarter, and their compensation and their reward structures?
We are in the early days of our team. We have a three-member full-time team as of now. One very senior person whom you would have interacted, he was earlier taking care of investor relation also. Compensation details are not relevant at this point of time. We meet and evaluate almost 25 to 30 companies every month. We do secondary research on another 25 to 30 companies where we do not meet. All in all, we are able to meet almost 25 to 30 companies personally and 25 to 30 companies where we do the research. In the last year alone, I think we would have done almost 150 per quarter, so about 200. 200 a year. 200 in a year, yeah. 40 calls per quarter. We have done about 200 in a year. I'm sorry, I said per month.
It is per quarter analysis. We do almost 25 per month personal meeting and 25 secondary research. All in all, we have done almost 200 different company meetings.
Thanks.
Thank you. Next question is from the line of Kshitij Mehta, OldBridge Capital. Please go ahead.
Hi, can you hear me?
Yes, we can hear you. Please go ahead with the question.
Yeah, great. Thanks so much. Sir, one question is, again, taking a lead from the question which was just asked. If you could just give us maybe some qualitative understanding about how do you figure that a customer is right to either be made a paying customer or to move him up to a Gold or a Platinum-level customer? How do you really go about that process?
You are asking about our sales process?
Yes. How do you really try and mine your entire supplier base of 6.5 million into actually paying subscribers and the stickiness of that?
Interesting that you asked. This particular year, a lot of significant work has gone into that mining. Historically, a lot of that work was being done by our field sales force, and they would meet the customer and continuously keep in touch with the customer. However, when we faced the challenge of working from home and we could not have gone to the customer, we have put a lot of data science towards this particular. If I tell you how do we convert a free to a paid, we have multiple indicators on industry-based, geography-based, whether he's a GST-registered person or not, how many times he has visited our platform in the past, how many products he has added, how many BuyLeads has he seen.
Based upon this, we prioritize our database and create a hot lead, and then we have a complete CRM, which is in-house built, which we called a mobile-based ERP as well as web-based ERP, where we have this automatic allocation to our sales team, and it comes in the prioritized order whom they should be calling and where there is a chances of conversion higher, and where there is a chances of success for that customer is high. One is the customer is sticking, whether customer is more likely to benefit, and the second is the customer is more likely to convert. On the combination of the two, we do that. Second part is the upsell part or upgrade part. Again, it happens two ways. One, we come to know based upon the ROI engagement levels that a customer is having on the platform.
Then again, we see that if he's consuming BuyLeads regularly, if he's using the CRM reply tools and callback tools to manage his customers well, then we are able to ask him whether he would like to upgrade. On the other hand, many calls inbound come, and they want to ask for higher packages. How do I take a premium listing, or how do I take a search listing, or how do I get a TrustSEAL badge? There is an inbound customer request also on which we are able to upsell.
Okay. Sir, the other thing is, I wanted to understand, how does, say, two parties negotiate the terms of trade on your platform? Is it completely offline for them? Once you make them meet, your job is over, and they do that offline. Is that how it works?
We have a CRM tool, which many of the suppliers use for managing their interaction with the buyer. As I said, we do also offer a payment mechanism. Most of the B2B transactions are of very high value in nature, and many times range into multiple weeks or multiple months. Thereby, a lot of those transactions happen offline.
Okay. The third question is, to what extent is Vyapar and Bizom now integrated in your platform, and how many customers are actually using those services?
Vyapar, let me first tell you. I think on the Vyapar side, they continue to grow well. They are still a small company. I think their current quarterly revenue run rate is about INR 3 crore a quarter. That is a significant improvement from one year back. Their number of customers have also gone up significantly. Last I told you probably it was about 25,000 customers. Now they are closer to 70,000- 75,000 customers. We are helping them getting leads through IndiaMART. We are also thinking of using our seller data network to further increase that reach. We have not yet fully integrated into IndiaMART. We believe that they still have some distance to cover before we could integrate. I'm also learning more about this new side of the business, how best is to integrate over a period of time. Coming to the Bizom.
Bizom has multiple facets. One is Bizom acts like a sales force management tool for the large brands to manage their sales force and dealer distribution system. Second, they have a insight tool where they are able to get some insights on what retailers are asking for. We believe that out of the three systems, the field sales management, distribution management, and the insights, that is BI and analytics, I think from the distribution side, we would like to work with the brands to see if we can get all their distributors on IndiaMART platform as well.
Yes.
That is also going to take some time. As of now, I think they were badly hit with the lockdown and corona times. They have recovered well, and I think they continue to be at the similar level last year in terms of revenue. Last year, their revenues were about INR 35 odd crores.
Can I just squeeze in one last question over here? Your number of paying suppliers have now gone up back to 148,000. Your deferred revenue hasn't really grown much in the last three quarters. It essentially tells me that all these new customers are basically monthly or quarterly paying customers. They're not multi-year paying customers. How do you intend to get back to your earlier run rate of growing to the longer duration customers?
Yeah. If you see the first quarter of this financial year, there was a huge difference between the revenue and the collection. We were on one side where the revenues are coming from the deferred revenue, and the collections heavily dropped in the first quarter.
Correct.
The most of the deferred revenue last decline that you see is coming from the first quarter. In the current quarter, there is INR 178 crores of deferred revenue and INR 173 crores of revenue flowing. Again, the deferred revenue has gone up by INR 5 crores. I think in times to come, it will go up again, probably in JFM quarter. However, if you see, I've been telling you that earlier we were selling mostly annual and three-year package when it came to Gold and Platinum subscriber. During the pandemic, it was our duty to help the suppliers opt for a lower priced package. We couldn't reduce the actual price of the product, so we reduced the duration of the product. Now those products are being offered in a six-monthly, one-year, and three-year packages.
Since the six monthly packages have gone up, the deferred revenue has declined a little bit, and the current portion has gone up from 60% to about 65%.
Okay, great. Just one last question. You have been adding about 4,000- 5,000 paying customers on a quarterly basis. When do we start seeing more additions at higher ARPU levels? Again, the number of inquiries have largely been flat for the last many quarters. Only it's in this first three quarters that we've seen inquiries going up and thanks to COVID. One worry is that, as the situation normalizes, would these inquiry levels come off and then what is the trajectory of customer addition that happens?
This is very imaginary question. I mean, when the number of suppliers increase, the number of buyers increase on our platform. The suppliers have been increasing slowly, the buyers have been increasing slowly. Now that the buyers have gone up significantly by 30%, the suppliers'---. That also remains on our ability to sell and the nation's ability to get the economy on the right path and opening up. As I said, 90% of the categories have started to do business almost like a pre-COVID level. 10% categories are still badly suffered. You can imagine offices like ours are completely closed, and there are so many supplies related to the offices, related to the hotels, related to the airline industry, related to the railway industry, which are still not recovered.
The channel sales effort that we have started to do and people's affinity to purchase a B2B product online has gone up only recently. We believe that in times to come, this will slowly inch up. As it will happen, you have seen that this current quarter also, we have done almost 7,000 net addition, whereas only 1,500 odd came from the previous recovery. When most of our sales people are working from home or working remotely. As we are able to open offices, as the economy goes back on, I certainly believe that there should be a similar growth like buyers in the supplier trend also. Let us wait for that.
Okay. Thank you so much.
Thank you. Next question is from the line of Vaibhav Agarwal, Basant Maheshwari. Please go ahead with your question.
Sir, thanks for taking my question. Sir, we are raising around INR 1,100 crores through QIP, this will result in a sharp drop in our ROEs. When can we expect the return on equity to get back to the normal levels? Like, it can get back to the current levels exactly. In what time frame do we expect that?
Yes, Vaibhav, to your question. Right now, the board has approved the fund raise plan for the shareholder approval, or they have recommended for the shareholder approval. Once we receive the shareholder approval, we'll look at as to at what time, what would be the opportune time in which we'll look at doing the fund raise and completing the fund raise activity, because the approval would be valid for a period of one year from the date of the EGM or the date of the approval. The ROE and all those computation will also depend upon that particular time. Overall, if you look at it historically, we've been able to improve our margins and improve the profitability.
Hopefully, if the similar trend continues, and even if at a lesser pace than what we've shown in the last nine months, hopefully we should be able to cover up for whatever the dilution that may happen as a result of this fund raise activity.
Will also deploy.
More so is over a longer period, as this fund raise or whatever the funds will be raised, will get deployed in the different businesses. I am sure we would also generate returns and create value from this funds itself.
Do we have an ROE target internally, like in three years or two years, where are we supposed to be?
I don't think we have gone into that level of ROE targeting.
Do we have a background?
What. I'm sorry. Could you repeat the question, please?
No.
Do we have a background?
I'm just asking you, do we have any internal targets with regard to the ROE? Like in two to three years, what kind of ROE target we have?
I think currently the target is to create value, to create a stickiness for customer, to create a meaningful platform which can be monetized in longer duration, and how to make it easier to do business. I won't be worried about the short-term ROE percentage going up or down by a few percentage point. I think we will continue to create value and look for long-term.
Okay. Thank you.
Thank you. Next question is from the line of Dipan Mehta, Elixir Equities. Please go ahead with your question.
Yes, sir. Congratulations on very good set of numbers. From what I understand and what I've been observing, I think it's the vision of the company to be a end-to-end service provider for the SME, which means you may provide payment services, maybe accounting services, logistics. If that, in fact, is the goal, then have you done some beta testing or have you done some experimentation as to how the whole process can be done and any time frame by when we can offer all these adjacent services to your large database and then try and enable them on those various platforms and services as well, and then perhaps trying to get more revenue from them?
If you see, all the effort has been going in that direction only. The current slide, which may be visible to you. We started with a CRM tool that was completely built in-house, and today that CRM tool is very effectively being used. We also formed a subsidiary called Pay With IndiaMART Private Limited, and that is working in facilitating payments, albeit slowly, because B2B payments are generally done over multiple tranches by way of NEFT, RTGS, traditional methods. Still, we are able to do some portion of that experiment on the platform. We have also invested into the order management system in our subsidiary called Pooraa, where we are developing a manufacturing order management system. We have invested in Vyapar, where they are providing invoicing and accounting-based software. Bizom, we talked about that, does data distribution management and sales force automation.
I think slowly and slowly we are trying to build the jigsaw puzzle. In the last quarter, you see we have added reviews and ratings onto our platform also. I think we are slowly and slowly building. There is no one day where all of it will start to happen. We'll continue to build pieces of these. Hopefully all of that will come together in times to come.
Okay, sir. Thank you and all the best with your endeavors.
Thank you.
A reminder to all participants that you may use raise hand option on your screen if you wish to ask questions. Next question is from the line of Manan Shah. Please go ahead with the question.
Yeah. Hi, thanks for the opportunity again. Earlier we had plans of having differential pricing across different geographies and across product category.
Yeah. We did implement it at the top tier of.
Now audible.
We did implement differential pricing at the top tier of our service at the Platinum level called IM Industry Leader product. However, when we were planning to do it for the Star Supplier and Leading Supplier packages in the Platinum, by that time the pandemic had set in, and I don't think this is the right time for going with the differential pricing. We wanted to make the product far more affordable during this time. I think, let us wait for 6 months. Let everything be stabilized, and then we will start experimenting on those sides again, because on one side, the entire workforce started to work from home, and we needed a lot more training and rationale on that side to be trained because we have been selling a one-size-fit-all product for a long period of time, and that is what our customers and sales have understood.
Incidentally, only last quarter, we have also started to take out export-based BuyLeads, and started offering it to exporters separately from one-size-fits-all. We are slowly working. Export-based BuyLeads are differentially priced, you can say so now. We'll be working on more such products in times to come, but as of now, going little slow on that. I think as of now, we want to go with the acquisition side better because we feel that a lot of people have favored digitization during the last year, and probably the time is right for us to double down on the digitization of the SMEs at the bottom of the pyramid.
Okay. Earlier, you used to guide for a net addition of around 5,000 subscribers per quarter. However, in the past two quarters, as is visible, and also due to more affordable products available, we have been able to add 7,000 to 8,000 net subscribers per quarter. Should we expect this run rate to continue going forward? Also, if you could provide, what was the gross subscribers that were added, or rather, what was the churn during the quarter?
Providing the churn information would not be adequate at this point of time because, as I said, we had gone through the moratorium of a lot of subscribers. A lot of subscribers had taken a temporary off from the platform. We are not able to calculate the exact churn numbers as of now. In terms of the net subscriber addition, last time when we had 7,000, I had told you that only 3,500 or so came with the new subscriber addition, whereas the 50% came from the recovery of the moratorium subscribers. Similarly, this time when we added 7,000 subscribers, again, about 15%-20% came from the recovery of the moratorium subscribers, and about 5,500 came as a new addition. We believe, yes, new addition has gone up from 5,000-5,500. We believe next quarter it should be anywhere between 5,000-6,000 for sure.
Okay. Are we still offering any discounts for gaining back our old subscribers?
Yes. If they would like to come back, they can still come back at INR 3,000 inclusive of tax price.
Okay. Thank you.
Thank you. Next question is from the line of Sanjay Ladda, Concept Invest Wealth. Please go ahead with your question.
Yes. Thank you so much, sir, and congratulations on a good set of numbers, sir. My first question will be on, since we are targeting the vision for two year, can you throw some guidance as to what growth we are planning? Can you share a ballpark range as to +25%-30% growth? Anything of that sort, sir?
No, sir, I'm not allowed to do any.
Okay. Sir, my next question will be, could you throw some color on as to what changes taken place in this year in terms of technology or in terms of business or in terms of planning? What changes we have done?
Yeah, I think there are a lot of items to share. This year, 50% of the time we have done these technological changes only and process-related optimization and efficiency only. I suggest you please go through the new updated investor presentation, which is available on our website as well as on the stock exchange's website. You will see multiple new things. One, I talked about the more deeper use of artificial intelligence and data analytics, whether it is in sales, whether it is in matchmaking, whether it is in language detection, whether it is in translation, whether it is in the banned product detection or reserved keywords. We have also done a lot of progress on the CRM tool and conversational commerce and payment side. Today, all the debit transactions are available for free on our payment gateway if you are a paying customer.
We have also seen a significant adoption of the Vyapar accounting software going up only on mobile as well as on the desktop side. We are continuing to build a cloud-based product on that side. Multiple process-related optimization, multiple cost-related optimization, and multiple technology-related breakthroughs have been achieved in this particular year. We believe all of these together should poise for a better adoption of our products and services in time to come.
Sir, my last question will be on acquisition front. Sir, is my voice audible or no?
Yes, you're audible. Please go ahead.
Sure. My question will be on acquisition front as to, previously before IPO came, we make a goodwill acquisition or goodwill write-off in our books. How we are making sure that this will not happen in our books right now? Can you please throw some light on that?
To your question, the goodwill that you're referring to was pertaining to our Tolexo business that we started in 2014, and sometime around in 2017, we merged that with our business. Tolexo was 100% subsidiary of us since day one. If you look at from a consolidated financial standpoint, there is no goodwill write-off because these expenses were in any way part of consolidated, were part of that year P&L itself. It's only in the standalone books wherein this business was showing up as an investment. When we merged this business, as part of that merger, the goodwill was generated and was subsequently written off before we decided to go public as a part of the cleanup exercise. If you look at it was more of an accounting adjustment rather than.
Between the subsidiary.
Accounting adjustment between the holding company and the subsidiary company, the 100% owned subsidiary company, rather than any particular business and being written off on account of any particular business. No financial implications.
It didn't have any financial implications as such on that year's P&L.
That was most tax-efficient way.
Okay. Thank you. Thank you so much.
Thank you. Next question is from the line of Mrs. Ishpreet Kaur, Motilal Oswal. Please go ahead with your question.
Hi, sir. If you could just throw some light on your thought process on transaction-based platform versus the subscription-based platform.
We pioneered the zero-commission marketplace, and we believe that subscription brings stability to our revenue and gives a lot of visibility of our services to the customers also. There could be some areas where transaction-based pricing could be applicable. For example, payment is one area where there is a transaction-based pricing is applicable. Our intent is not to increase the cost of transaction by charging on every transaction a commission fee. We are not a commission agent; rather, we are a business enabler, and we would like to make it easier and cheaper to do business in India. We would continue to offer more subscription-based services and less transaction-based revenue. Even if these are going to be transaction-based, they are going to remain one or 2% transaction charges rather than going into 10%, 20% transaction charges.
Is there any unit economics in mind for a subscription-based platform?
Can you please repeat your question? We are getting a lot of echo.
Is there a unit economic-based calculation or something for the preference for subscription-based platform?
Yes. If you look into our standalone financials, there is a gross margin calculation which is there. It is available in the detailed financials. Any of the quarterly financials you can see, and there is a notes to account. Within that, you will find the entire unit economics and how our gross margins have gone up over a period of time. If you refer to that, you will come to know. In case you need any more understanding, you can please get in touch with our investor relation team and they'll assist.
Just one last thing on my end. Since the deferred revenue for now is roughly flat and a lot of the revenue accounting happens from the deferred revenue, would the next year revenue growth be flat to a marginal kind of a growth because the deferred revenue is flat this year?
I've been guiding this time and again. Our average age of our deferred revenue is about 20 months. If we continue to do badly on collections for multiple quarters, obviously, the revenue, it will be visible on revenue. As you can see, as I have guided you, by the month of December, our collections were even higher than the previous year December, and we believe that we should be able to beat our last quarter numbers. I think, in case the collection remains subdued for a longer period of time, as of now, I won't be able to give you any guidance on revenue.
Okay. Sure, sir. Thank you.
Thank you. We will now take a couple of questions from the discussion panel. I'll read out the question for the management and audience. Can you please outline current business scenario for companies IndiaMART has invested in, that is the SaaS company. How this investing model will evolve, and how we see these investment tying up with the customer base through at least the cross-selling potential.
As I said, we would like to offer services of business enablement and marketing to our customer base. Some of it we are providing on our own. You can see the Preferred Number Service, the cloud telephony service. The order management system is being developed by one of our subsidiary. The payment services are done by one of our subsidiary. For certain use cases, we believe that there are other entrepreneurs who are better off solving those issues, and we are better to take a minority or a significant minority investment. Over the period of time, we would like to integrate them from our customer base and their customer base overlap method. I think I've already explained the similar rationale in one of the other questions.
Okay. Thank you, sir. One last question. How has been the renewals in the shorter duration packages? The long-term packages will also come up for the renewal first time post-COVID. What has been the renewal and churn there? Are we planning to focus on providing customer protection which is more of a capital-intensive model?
Yes. As I said, the last year has been very transformative and so many ups and downs for different kind of SMEs in different industries and different geographies. It continues to be on a higher side and will continue to be on a higher side until the economy settles down to a better for good. Currently, a lot of people's businesses are being transformed into completely new businesses. As I told you in the first quarter earnings call, many more subscribers came in especially for face mask and safety products and hygiene products. Many of them could sustain, and many of them could not sustain.
Similarly, you rightly said that many of the longer-term renewals will come to know, and as and when their renewals will come, we will come to know if they have migrated to a different business or their current business has survived and thriving. That pain would be known in this particular year over a period of next nine months or so.
Right. Thank you, sir. With this, we come to an end of the Q&A session. Now I hand over the call to the management for their closing remarks. Over to you, sir.
Thank you very much, ladies and gentlemen, for joining our earnings webinar. If you have any further questions, please feel free to reach out to our investors team either on email or on WhatsApp. Thank you, everyone. Stay safe. Very happy New Year to you all. Thank you. Bye-bye.
Thank you, everyone. On behalf of IndiaMART, that concludes this webinar. Thank you.