Q1 20/21

Jul 22, 2020

Good evening, ladies and gentlemen. This is Ravi Gottpal from Churchgate Partners. And on behalf of Indiamart Intermesh Limited, I would like to welcome you all to the company Q1 FY 'twenty one Earnings Webinar. Joining us today from the management side, we have Mr. Dinesh Agawal, Managing Director and Chief Executive Officer Mr. Pijesh Agawal, Full 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 risks 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. Good evening, everyone, and welcome to India March quarter one financial year twenty one earnings webinar. This is the first time that we are doing this through a video conferencing platform, and we are very proud to use a 100% made in India platform called floorby10times.com. This platform is optimized for use by events such as trade shows, board meetings, webinars, investor conferences, and business conferences. This is a completely new product. If we experience any minor glitches, we will request you to please bear with us and support this initiative. This earnings webinar is also being shown live on India Mart's Facebook page and India Mart's YouTube channel. We have already circulated our earnings presentation, which is available on our website as well as on stock exchange websites. I'm sure you would have gone through the presentation, and I would be very happy to take any questions that you may have afterwards. I'm pleased to report that in such a turbulent times, Indiamart delivered a resilient performance with consolidated revenue from operations rupees $1.53 crore in the first quarter, representing a growth of 4% year on year from the last quarter. Since the markets were severely impacted due to the lockdowns, collections from customers stood at INR 96 crores, a decline of 44% from INR 171 crores in the quarter one of FY 'twenty. As a result, deferred revenue growth has also moderated at 3%, closing at INR $6.28 crores. Despite the decline in collections, we have been able to remain cash positive by INR 3 crores. We saw a decline of 10% in our paying customer base. The closing customer count at as of thirtieth June is at INR 133,000 as against one lakh 47,000 in the previous quarter. The churn is on the expected lines as I had shared in the previous earnings call. There are early signs of recovery in the economic activity and Internet adoption. Despite a 50% increase in April 50% decrease, I'm sorry. Despite a 50% decrease in April, our buyer traffic for the complete quarter grew by 6% on quarter on quarter basis. We are running at an all time high buyer traffic currently on a weekly basis. However, uncertainty persists as the pandemic is far from over. With India Mart's strong value proposition, negative working capital business model and a strong balance sheet, we are well positioned to benefit from the opportunities presented by the current environment. 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. Sorry, Prateek. You are on mute. Sorry about that. Thank you, Dinesh, and good afternoon, everyone. Now I will take you through the financial performance for the quarter ending June 2020. Consolidated revenue from operations was at INR 153 crore in the quarter, a growth of 4% year on year in the current economic environment. Our other income increased to INR 34 crore this quarter, largely on account of MTM gains due to interest rate cuts. Consolidated EBITDA was INR 73 crore, representing a margin of 48%. This is primarily on account of 32% quarter on quarter reduction in the cost. 50% of these cost savings were temporary and will come back as the business volumes pick up, and the other 50%, we believe we would be able to sustain. As of 06/30/2020, cash and investments stood at INR $9.54 crore, which is an increase of 28% year on year. Thank you very much. We are now ready to take any questions. Thank you, Pradeep. We will now begin the Q and A session. Participants may use the raise hand option if you wish to ask question. Please make sure that you have allowed microphone access in the settings and kindly introduce yourself along with the name of your organization before asking questions. We will wait for a couple of seconds while the question queue assembles. I repeat, please please make sure that you have allowed microphone access in the settings and use raise hand option to ask question. May I request participants to please raise hand option to your ask questions? Ravi, can you please guide the people on where to click to ask the questions? Participants, there is a raise hand options in the center of your screen. Just click on that and make sure that you have allowed microphone and the camera access in order for you to ask question. Please use raise hand options. But where is the raise hand option there in the right hand call corner on the dashboard? Oh, it's in the center. Okay. We apologize if you were facing any difficulty in in raising your hand. Ravi, people can't raise any hands. Can't see a raise hand option. Just a second. Sorry for the inconvenience. We are working on the same. It will be live in a minute moment. May I may I request all the participants to refresh their browser? Please refresh your browser if you are facing difficulty in finding the raise end option. Hello? First question is from the line of Ayaz Motivala. Please go ahead with your question, Mr. Ayaz. Yes. Afternoon. Thank you for taking my question. I hope you can hear me with the technology glitches we are facing. Is it clear? Yes, can hear Yes, you thank you. Yes, so that the hand signal appeared magically on my dashboard after a while. And so I think, hopefully, the others would do it as well. So my question, sir, was that while it was a little unclear in the comments you made, but going by the last few calls that I've attended, you've talked about the customer churn and the other metrics which are there. And interestingly, you pointed out towards the end that there is a 6% growth Q on Q in terms of your buyer situation. So how would you equate this to the point you had made last time about potential churn, which has actually indeed happened in this quarter of about a 10% to 15% decline in the paying subscribers that you have or paying suppliers that you have? How would you equate the buyer situation with this for us to appreciate your business in a better light? That was my first question, please. Okay. Go on. We'll note down all your questions and then Yeah. So that that was one. And then the second situation is on your your current subscriber base. And, the if the subscribers are opting in for more reduction in the tenure of their commitment, and I. E, going from annual packages to monthly packages, which is, in some sense, reducing your visibility? Is that happening or the exact opposite where you're offering discounts and getting them to commit for a longer period of time? So these are my two questions, please. Okay. So first of all, if you go to the presentation slide number 27 or 28, you will find the how registered suppliers and paying customers and buyer traffic is increasing. See, we are a marketplace where there are 6,000,000 suppliers whose 68,000,000 products and services are listed on our marketplace. There there are one lakh 47,000 paying customers at the end of thirty first March. As we suggested, that given the lockdown situation and given the economic environment, we may see many of them to face financial crisis either due to credit or due to the demand deterioration. Many industries have seen severe demand deterioration such as hospitality industry or fashion industry. Now commensurate to that, as we have reported that we have seen a decline of 10% in the paying customer base. Having said that, it was very surprising that one third of our categories in the buyer side have given us a very good demand, and that led to traffic on a quarter on quarter basis being 6% higher than the previous quarter. As I had shared earlier, in the month of April, after the lockdown started, our overall traffic was down by 50%. However, it has started to improve week on week and during the month of May and month of April month of June because a lot of people started to look for products on Internet. And secondly, for many of the products such as medical equipments, PPE kits, face mask, face shield, chemicals for disinfection, and food supplies, India Mart was found to be the only destination in hundreds of towns and cities where people suppliers were found. And that led to word-of-mouth where a lot of buyers started to look for the product on India market. So this explains that on one side, the buyer traffic, as I said, on a weekly basis currently is running on all time high. Whereas the supplier side, one third of the categories which are facing severe crunch, they would probably churn down. Having said that, we believe that the worst is behind us in terms of supplier churn. Going forward, we can expect either very little further net customer addition churn or a growth. That would be depending upon how it pans out in the times to come as June and July has been good, but how it pans out in the month of August and September. Now coming to your second question, which is what kind of subscription customers are signing up for. As you remember, if you go to our customer tiering on the silver, gold, and platinum section, you will find that top 10% of our customers used to contribute about 40% of our revenue. And bottom silver monthly customer used to be about one third of our overall customer base. In the 15,000 customers that have been churned in this quarter, we have seen that most of the churn has happened from the silver monthly section. So about 80% of the churn has happened from the silver monthly section, which has led to a overall revenue contribution increasing from gold and platinum from 40% to around 43%. So on a shorter run, if the customer base doesn't increase rapidly, you will see that more and more concentration of about 15,000 customers contributing a higher amount on the revenue from operations. However, we have seen that in the times of uncertainty, many people, instead of opting for a two year, three year subscription, they are looking for a six months, one year subscription. And so however, in the month of May and June, we have seen that most new sign ups, about one third sign ups have happened in the monthly mode, and about two third sign ups have happened in the annual mode. Also, due to monthly mode requires a match form to be signed, and people were requiring urgently our subscription because they were switching businesses to categories which were defined as essential. So and where there was a lot of buyer demand which was coming. So I hope that explains the current MYR or monthly mix. Going forward, we do not see a lot of change happening in the slightly longer period of time in terms of our monthly customer base versus yearly customer base versus multiyear customer base. Thank you, Mr. Yad. Yes. This is very well explained, sir. And just as a follow-up on that, you mentioned two facts on onethree suppliers. You said onethree our buyers came in and really drove the entire sort of growth, especially related to medical supplies, mask, shields, PPE, food kits, etcetera. On the other side, you also talked about one third of the suppliers who are in duress. Is that what I understood correctly? You talked 200 Yes, And these are not the not the real statistical number. These are like, you know, back of the develop calculation. If I divide over 100,000 categories, probably one third are categories where there is a high demand. Probably one third of the category where there is a similar demand as it used to be pre COVID, and one third of the categories where the demand is severely impacted. Right. Sure. And so, sir, 01/1947 to 01/1933 implying some 14,000, 15,000 subscribers having left the platform, which you said 80% of those are from the bottom 30%, the silver package, monthly package kind of subscribers. And with that, you added that you think that bulk of the subscriber churn is now behind the company. Is is that what you said? Right, sir? Yes, sir. We we believe that Yeah. Whatever little churn that we will see in the current months or the coming month, if the situation does not severely deteriorate from here in terms of either pandemic expansion or in terms of lockdown. If this situation more or less remains what it has been in the past four to six weeks, I believe that whatever churn we'll have, we'll be able to make up with the new sales. So if I can ask one quick question still related to subscribers pay paying subscribers. Do you think this pandemic as one of the ways is in some sense, you know, sort of self marketing exercise for a company like you for more people to do business online or do parts of their business online now? Of course, that should be the basic narrative because most of the people have understood. I we have seen that those customers who are engaging occasionally with the platform, they are engaging lot more regularly with the platform. Also, another data point that could be useful out of our overall sales and revenue collection that used to happen prior to this, about two third used to come through our field sales operation, and only one third used to come by way of a telephone based or a online based system. However, given that in the last three months, we had not not a single person had visited our customers on the field. So if you see our current collection, which is now at now now running at about two third of the pre COVID levels, all of that is coming through online and telephone based sources. And almost all of that is coming through the payments by way of payments, by way of online payments. Me too. Sure. No check payments. So if we believe that going forward, I'm not too sure as we will open up the field sales operation, I'm not sure if it will remain two third versus one third. But, yeah, we can expect some increase in the online adoption and people's need for online marketing platform like Indiamer that has been better established than ever before. Okay. Great, sir. Thank you, and I'll come back for more questions. Thank you, Eeyas. Next question is from the line of Pranav Shatria. Pranav, you may go ahead. Hello? Please go ahead, Pranav. Yeah. So my first question is on, you know, this paying customer base. So almost 14,000 decline, which we are seeing. So should we expect that this can be this should come back quickly because these are monthly customers. As the business open, they should come back? Or you expect that this could be more permanent loss and has to be replaced by a newer customer base? That's my first question. And secondly, can you give some clarity on the cost control measures? You said that this 50% reduction has been temporary and 50% has been permanent. But what exactly has driven that? I mean, should we what your cost structure was almost INR120 crore cost on a quarterly basis. Should we assume that to be INR100 crore on a quarterly basis with the new structure? And what exactly, I mean, are are we because most of the decline has come from the, you know, reduction in employee cost on a per so have you cut down the incentives or have you increased their targets? What exactly is driving this, you know, sharp reduction in the cost per employee? Yes. So let me first answer around the chair. So as I said, about one third of our customer base or one third of the industries, I would say, one third of the industries in the economy are severely impacted, such as hospitality industry, hotels and restaurants, such as automobile industry, or even fashion industry and related industries, obviously. We believe that it may not be a very quick comeback for them immediately. However, given that the two third of other industries are probably going to be more necessity and more more important in nature, we would believe that the sum growth from there would make up for this growth. How many customers of these would come back, that is little uncertain that I can comment upon. If if the economy recovers fully because if you look at SMEs and especially small businesses in India, they are they do not have a choice to go back to either a job or a farming kind of a place. So they they will have to, like, start some of the other businesses. And most of them would find either a newer category or would find some new business avenues within the same category. Having said that, imagine for three months if somebody's business was completely closed, what would be his credit credit related options? Would be his, you know, input credit related options and output credit related options? So there would be definitely general mortality of SMEs for some time to come. And as and when the overall economy will start to improve, I'm sure they will have to find some of the other new businesses. And at that point of time, if they have had a successful stint with Indiamart, if they had benefited from Indiamart, I would assume they would come back post that. Sir, if I can follow-up slightly on that question. You're saying that one third of the industry has been impacted and that may not come back. So is it possible that because your customers were the one who could stop their subscription quickly and hence, you know, that that they have churned out and we might have other customer who might want to churn out over next couple of quarter because their subscription will come up for renewal then. So are we likely to send further churn in that segment? Yes. So I think as as we say as you see our deferred revenue schedule, it is typically about twenty months schedule. Many one third of our customer base was monthly up for renewal. So you are very right. They are the ones who are immediately saying no to no to the subscription. There are another one third customers who are in the annual mode and who probably will fall for renewal in the next six to nine months or or maximum twelve months. Many of them would probably look for a moratorium of two to three months, extension of two to three months if their business was severely impacted and would probably not churn out. Many of them would probably churn out. Some of them not don't necessarily need to churn churn out because they have changed the line of their business. So if they have to change the line of their business, they simply update their product catalog or update their website and start consuming leads of different segment. So we will come to know of all this, how this is behaving in the next three months for sure. But having said that, those customers who have benefited in past with India Mart and have already paid for two to three years subscription, they know that India Mart benefits them, and I hope that there there would be little churn there. So, yes, you can expect some more churn coming from there. But as I said, we should be able to make up with the new sales coming from our telesales operation and our online sales operation going forward. Having said that, as a precaution, though there is some opening up in the market, none of our employees are advised to go to any customer meetings until the it is completely safe to go and go into the market. So as of now, 100% of our business is happening work from home only. There is no not a single office which has opened and no no meetings with the customer are happening face to face. Now coming to your second question on the cost optimization. You are right, we have about we had about 120 crore odd overall cost in the including the manpower and including the other cost and including the rentals, which has gone below the EBITDA level or below the EBITDA level. We and with the natural attrition, because some of the people have gone gone home, some of the people are getting married or other, and some of the people might switch jobs, and we are not hiring as of now. We will start hiring only when the market is fully open, and we are able to go for the full fledged expansion at that point of time. As you can see, our headcount has already decreased by couple of 100 people despite the fact that we have not laid off any person. Now going with the all the assumptions, we believe that this particular quarter, even if we start hiring even if everything becomes back to normal, I will probably start hiring by the end of this quarter only, except for a few positions here and there, which may be very important and where we would have given the offers in the past because campus offers we have given, and we would definitely like to continue with them. For the detailed explanation on the cost, whether it will reduce from INR 120 crores to close to INR 100 crores for the next two quarters, I can say that. And for the detailed explanation, I will hand over to Prateek, who can tell us in the with detail where all we have estimated the cost coming down on a sustained basis. Right. So thank you, Dinesh. Pranav, as you see as you said, right, that our average cost for the quarter has been at around 120 crores, of which approximately INR 90 crores has been manpower and the manpower related cost, and roughly around INR 30 crores has been the all the other cost. What we anticipate that the manpower cost, there would be a savings of around 10%, coupled with the because of the two factors. One, of course, reduction in the headcount due to natural attrition and as well as there are certain other staff welfare expenses, are getting saved because all of us are currently working from home. Our outsourced sales cost, expect, will go down by around 25%. And roughly around 20% reduction should happen on all the other expenses, infra related expenses, travel related expenses, hiring, and all those are contributing to around 20% in the other expenses. And another 20%, we expect to go down in the rentals because of, again, the infra related savings. So that is how we estimate that all in all, out of 120 crore a quarter, while the current quarter cost has been at around 80 crores, We expect the savings of 40 crores, probably 50% will be able to sustain and 50% with temporary, which will come back. So the cost would be around 100 crores a quarter. So this is, again, till the time we don't start hiring people back. Yeah. I mean, so the the the point is if we go to you know, so if I look at the reduction in number of employees is hardly five to 7%, whereas the cost per employees come down by around 25%. So so, I mean, is the cost per employees gonna stay low is is the question. And in that also, want to understand that, you know, if tomorrow, you know, once things open up, let's say we get back to almost, you know, 200 crore kind of a collection run rate on a monthly basis. Are we in that case also, we are saying that, you know, we could be at a 100 crore kind of a, you know, cost structure or we could be at a No. No, Pronoun. No. No. Not at all. Not at all. That would be too too too ambitious. I'm I'm only and only suggesting until we get back to the normal days, until we get back to the normal days. Okay. You you may expect maybe a 5% overall reduction in the other cost because we have done many automation, and we we have learned how to do work from home. And we will be able to maybe probably save out of the 30 crore, which was other expensive, maybe another 5% or 10% from there. But it would be very wishful thinking Right. On that perspective. Thank you, Pranav. Okay. Thank you so much. Thank you, Pranav. Next question is from the line of Prince Pudra, PM Panesha. Hi. Hi. Please go ahead, sir. Prince? Hi. So my question relates to a little bit on the line for the Prince, you interrupt the place. We cannot hear you clearly. Could you speak a bit louder? Hello? Can you hear me now? Much better. Much better. Okay. Okay. So, Sudhanesh, I think my question was a bit related to what Pranav was asking, actually. So, essentially, you said there will be there will there might be cost reductions in the near term where where in the situation if if the situation does not improve from here on. But if the situation starts improving, then, obviously, there will be hirings back. What my question was is related to the fact that a lot of automation has been done in the past COVID in the past four months, and probably there is a way the sales team is now functioning online in a more effective way. Have you seen any any such situation wherein the sales team is probably saying that earlier we were we were probably handling 100 customers as a person? Now we can handle, like, one twenty, one thirty customers a person because we are doing it online. Is that a case and probably reduce the cost structurally rather than just on a temporary basis? Thank you, Prince. Too early to say that. Yes, it's not that we are not thinking in that direction. We we are looking at how we can whatever learnings that we have got from this work from home thing, how do we institutionalize on those earning those learnings. But it is not something which you can expect on a on an immediate basis because on one side, our growth is impacted. And whenever the and the economy is for a little longer term dent because people have lost jobs, people there is a demand slowdown in the economy. So I would say that as soon as I will get the we would get the opportunity to go out in the market and spend money for acquiring. And also, there is a huge adoption of Internet. We would not like to let that opportunity go from our hand because of the because we want to save one or 2% on the cost side. Right. So I would say that too early to assume on that, but let's say that for the next quarter or two, you can assume that we would be on a slightly constrained cost. But we will our main focus is on retaining the customer, servicing the buyer, making sure our employees are safe, we don't spread the virus, and at the same time, getting back our getting back our revenues and growth back on track. Profitability is not something which is very important for the next two, three quarters. Right. Okay. Got it. That's very helpful. One just last question from me, Dinesh, sir. That in the last four months, many customers have actually used the platform. Some may have been using it because because they had one year one year kind of subscription, some using even the even in the monthly subscription package. Have you had any anecdotal evidence that they are getting good leads? Because because I'm asking this because a lot of buyer traffic has come back to the platform already. And I'm sure these buyers are not just there for any for just window shopping. They are just going there because they have have they have real business with them. So have you got any any anecdotal evidence whether these suppliers are actually getting good leads out of out of these buyers in the last four months? Not only anecdotal. You know, lots of anecdotal. You know, people have been praising us that in these times, we were the only source of their business. Okay. So I think people have been appreciating what we have been able to do. Also from the buyer side, the the buyers were looking for anything in particular. There was no other platform other than India market that would have provided them those kind of items and those kind of supplies. So I think in the last three months, our collections have suffered or our our customer base has suffered. But I think in terms of customer market respect, terms of buyer engagement and seller engagement, we would have definitely gained much higher than what where we we were before this. Absolutely. That's what I meant because in such situations, the market leaders tend tend to become more market leaders in a way, essentially. But have they haven't they seen any problem in terms of logistics considering there has been lot of logistical issues with many suppliers and all? Yeah. I mean, you can read the my some of my interviews that I gave in the early on initial weeks of the April Right. Until probably May 15 Mhmm. We have we have done lot of creative our team has done lot of creative work in trying to solve some of that. Okay. When people said that our transportation is not working or we are not able to do that, we we were invited in meetings of at the highest level of the ministry and the CIO, and we gave them our suggestions, what all items to be opened up and how and you if you see how the logistics were kept out of the lockdown, when the second lockdown was announced, it was only because of that. We also got them instead of a local transporter, how we connect within the national level transported transporter. At many places, when the items like face shield started to become in demand, we our team came up with that creative idea. Why don't we contact the helmet manufacturers? They are they already do face shield on the helmet. Can can they make a face shield along with the elastic band? And many of the helmet suppliers were able to become a face shield supplier in times to come. So I think last at least the first forty five days of the quarter have been really roller coaster for our team. They were trying to move everything to work from home. They were trying to make sure that the business continuity remains. We were never a work from home company. We were a 180% work from work from customer premises company rather than office. So I think we have had a huge learning curve, and we believe that this whole huge learning and our team has done wonderful job in terms of, you know, working at a home in the conditions where they did not have domestic help available. They were cooking at home. At the same time, they were answering customer queries because a regular call center could not be operated. So I think a lot has gone into this new change word that we will emerge after the pandemic is over. I'm sure many such innovations will keep coming. All the best to you guys. That that's all from my side. Thank you. Thank you, Prince. Next question is from the line of Venkatesh Balasubrami. Please go ahead with your question. Yes. Hello, sir. Sorry if this question is a little bit on the simplistic side. Is it possible for you to explain very simply that when a typical subscriber takes subscription on your website, how do you account for it in terms of revenues, and how do you account for it in terms of deferred revenues? Can you please explain the accounting process? That is the first question. And the second question is, I as as shown in your presentation, the collections have fallen, like, 50%. I understand that would be because of COVID. So is there a split in your customers? How much of your customers pay the subscription fees online and how much of them actually you go and collect checks from their offices? And if you could quantify something some data to prove that how collection, if they have improved in the month of July, These are these are these are the two questions. So let me first answer your second question first, and then I will pass on this to Prateek to explain you the accounting process. Now coming to your second question, earlier online payment versus check payment. So earlier, as I said earlier also, about two third of our money used to come when our people visited customer premise, when they used to go do a face to face meeting with the customer. And within those meetings, half of those customers would probably play pay online, and half of those customers would probably give a check. And one third of the business was always happening on a telephone and a pure online manner. So so two third of the payments were coming online, but two third of the business was happening offline for us. Now now that we are at, you know, 55% of the overall quarter collection, it would be safe to assume that over 90% of this collection has come purely online. You know, purely online by way of NEFT, RTGS, UPI, debit card, credit card kind of modes. Only 10% of this collection would have come because in the March, we would have collected many postdated checks that would have gone there. In the in the last three months, we would have collected less than 1% or 2% money by way of checks where the customer deposited the check directly into our bank account because we have not done any meetings. So now since these two questions are answered yeah. You were asking about how is the collection number? Yeah. No. As I said, when when we met in when we met in the May, I had shared that April collections were about 30% of the pre COVID collection, which is about one third of the pre COVID collection. I can happily share with you that overall, it has been 55% of the collection for the quarter. And for the month of June, we had about two third of the collections. So if if average collection on a monthly basis, except for January, February, March, which are a very significantly higher collection month, if you look at the November, December, October, November, December quarter, we typically had about 60 to 65 crores of collection. We are in the month of June, we did about approximately 40 crores of collection. And given that last fifteen, twenty days, occasional closure here and there are happening, and the market cannot be opened fully. I we expect that the July collection to be in the on the similar lines as June, maybe a little bit better in case the markets open up completely. Now Prateek, can you explain the process of how collection goes into deferred revenue and how then how the revenue recognition happens? Sure. So, Venkatesh, to your question, we have three different tiers of memberships, silver, gold, and platinum. Typically, people in gold and platinum tier pay us annually. There is no option to pay monthly. The silver package is available in a monthly mode or an annual subscription or a multiyear subscription. We collect entire money in advance, whether it is in monthly subscription or it's in twelve month subscription or it's a twenty four or a thirty six month subscription. The way we do it is that the moment we collect the money, we we book it in the deferred revenues and recognize the revenue out of this deferred revenue only over the period of the contract. So, hypothetically, if a person has taken a three year subscription, in the year one, only one third of that subscription will come into revenue, and two third of that subscription money will continue to be shown as a deferred revenue as a liability on my balance sheet. So that is how we are accounting for the entire subscription. I I hope that clarifies. Yeah. Yeah. Thanks a lot, and all the very best. Thank you. Next question is from Paras Bhotra. Please go ahead. Yeah. Thank you for the opportunity. My question was also on the similar lines with regard to the cash flow document which was presented. And over there, that cash from operations was roughly around 5 crores. And the collections, as you said, that it is at around 94 odd crores for the quarter. So if I'm trying to understand that, can you please explain why the cash flows have been so on the lower side? And what has been the accounting procedure for this quarter as well? Sure. So, Paras, let me take that question. To explain how the cash from operations has been computed in the books, essentially, it has two parts. One is the cash from operation, and second is a working capital movement, which is essentially the movement between the liabilities as of thirty first March and thirtieth June. So you are right that if you simply take the collection done during the quarter and the expenses, probably we'll be able to compute the cash coming in from pure operations. Then there is in working capital movement, which is certain provisions, certain liabilities, which were existing as of March and we would have paid. So for example, annual in April, we typically pay out our annual incentives that get reduced as a cash outflow but will not be booked as an expense in the P and L because it was taken in the March financial year as a provision. So that is why you see the difference between the collection minus expenses and the difference between the cash, which is coming from the statutory books. So there there was also one big item of around INR 61 crore. So what it is exactly? Can you please explain the contract and other liabilities part? The 61 crore is a reduction in the deferred revenues. If you if you see while we have collected 95 crores during the quarter, our revenue has been around 100 and crore. So the differential between the two is getting reduced from the deferred revenue, which is a liability reduction, and that is why it is showing up in the cash flow as that. Okay, fine. Thank you so much. That's from my side. Thanks. Thank you, Boris. Next question is from the line of Saviashi Mukherjee. Yes. Hi. Am I audible? Yes. Please go ahead with your question. Sure. So, you know, first question is on the average revenue per subscriber, we have witnessed that, you know, it has been on the same level. But but, you know, if we look at the traffic or or the business inquiries delivered, we have clocked in a healthy growth. I mean, 416%, respectively, Y o Y growth. Are we seeing free transactions, free suppliers transacting more in in in last three three or four months? Has that been a trend? So, miss, Achi, we are not a transactional platform. It it is not that buyers, when they come and then they send inquiry, it is a subscription platform. It is a like a fixed subscription platform. So so for example, if you watch more TV, you don't pay more t more more. The for me, The way it works, if more people are watching TV, I think the more advertisers would come in the long run. So I think our increase in the customer base may happen in the longer run. But given the fact that there are one third of the categories which are under severe impact due to the general corona related lockdown and impact such as hotels are closed, airlines are more or less closed, railways is closed, you know, restaurants are closed, most of the fashion events are not happening. So I think it will take a little longer for us to be able to so the buyer traffic comes first, and then we will be able to monetize over over a period of time. Hope that explains. What I meant actually was, you know, we continue to see traffic. We continue to see, you know, inquiries getting delivered, but our paying subscriber base has gone down. As you rightly mentioned that, you know, there has been churn on the monthly subscriber base. So what is worrying is that, you know, in coming days or coming quarters, if we continue to see, you know, churns higher than addition of new subscribers, then, you know, and, of course, it will affect our deferred revenue and and and it will affect our long term revenue prospects as well. So I'm coming from that background as Yes. So I think, as I said earlier, that the though in the in the May call, I had said that we would probably be vulnerable to a churn of ten to twenty percent of the subscriber base depending upon how severe India is impacted and how severe corona pandemic fans out or affects us. However, we have been lucky. We have been blessed with by the god that we have had the least number of casualties in our country, though the number of infected people are higher from but we have had the least number of casualties. And due to that, probably, we are not seeing as severe impact as some of the horror stories that we have heard from the other cities or countries in the world. Given that only 10% of the total customer base has churned. But, yes, we put we had also thought that corona is probably one to three months thing, but it is not yet going to go away anytime soon. So what has happened that we have been able to flatten the curve in the true sense and lesser but we will have the pain for a slightly longer period of time. As I said earlier, given that a bulk of churn has happened, I do not see any additional negative negative growth in the customer base going forward on a significant basis. We can still have one or 2% here and there, but I do not see another 10% going down if we remain more like June and July. If if the April like situation or a May like situation doesn't appear again. Second portion is the average revenue per customer because the customer base the average revenue per customer is nothing with the revenue divided by overall customer base. So you see that it is being maintained because the 10% of the customer base has been wiped out from the denominator itself. Now as soon as the customer base would start to increase up, we would also see a slight decline in the average revenue per you per customer also. Because the collection has fallen by almost 50% in this quarter, it cannot happen that the revenues will continue to remain in the similar range. So you can expect anywhere up to 5% or so decline in the average revenue per user also for the next two, three quarters and depending upon how the situation improve. Are you looking for any kind of discounting on on on the package system? Yes. We are doing discounting on the package system. Okay. Any any outlook? Any any guidance? What kind of what is the amount? I mean, it's been mostly between five to 10%, know, on a minimum side, five. On a maximum side, 10%. Okay. Okay. So so safe to or or is it fair to assume that FY '21 average revenue per subscriber would be somewhere around 40,000 from current 45,000 level? I don't I can't say that given that there are uncertainties and we continue to do I mean, given the month of June and if if things continue to improve, I would like to, you know, not have that kind of erosion in the average revenue per customer. But, yes, as I as I guided over the next three to four quarters, you can assume a 5% reduction in the ARPU if things remain at this level only. Okay. Okay. And this 14,000 churn on the absolute basis on the on these paying subscriber, is it fair to assume that the bulk of this churn happened in April and May and and June and July has been, you know, on on a net net basis, we are kind of a flat level? No. This is this is the number for the April see, in April and May, we haven't yet touched any any customer to even ask for any revenue or renewal. So whatever has happened is has happened in the month of June. So the bulk of it has been within the month of June. And in the July, we are we are hardly fifteen days into July. Okay. Okay. Okay. Lastly, on the on the, you know, mortality side that you are saying that SME mortality has been very high. Obviously, being the case where, you know, there is credit, you know, availability and or there is liquidity constraint. Are you helping your clients in providing or arranging credit facilities? No. We are not. Sadhgisaki, I think there are many people in the queue. Let us move on to the other questions also. Sure. Oh. Thank you. May I request participants to restrict question two participant so that we can allow more participant to ask questions? Also, Ravi, you can have at least two two people already in the queue online so that we we don't spend time on this. Okay. Next question is from Lancelot. Please go ahead with your question. I don't I I can bring on to next participant. You should bring three participants at a time so that one one one and one at a time can ask. Next question is from Sanjay Letha. Please go ahead with your question. Yeah. Hi. Good evening, sir. Thank you for giving me the opportunity. I'm audible? Yes. Please go ahead. Yeah. Thank you. So so I have two question. So during this pandemic period, what are the changes we have done on our product side and also in our digital and innovation side? And so how we are strategically moving ahead, if you can throw some light on that. And the other one is what are we doing differently to get back our growth growth trend and more importantly, our paid subscription, which we have lost? If you can throw some light on that side, and one question will be on account keeping side. So what are what we have seen in that there is a increase in other income by more than 100%. So if you can throw some light on other income as well. Thank you. Yes. I think we are doing many innovations in terms of product engagement. We have seen as in the past, I have talked about how do we use behavioral matchmaking to to to increase our matchmaking relevancy. We have also increase seen how our CRM or a lead manager being used very effectively nowadays, I'm very happy to announce that almost 100,000 of the individual SME providers, individual SME businessmen are now using India Mart lead manager as their CRM or messaging platform, and there has been significant improvement on that. On the artificial intelligence and machine learning side, we are slowly and slowly getting a hang of it. And, you know, whatever automation that you see that we are able to do, a lot of that is attributed on that side also. We are able to process the emails faster. We are able to process the calls faster because of the AIML initiatives. Today, you can search 300 spellings of jewelry, 300 different spellings of jewelry. You will still get the search results of jewelry. And that's again been possible with the misspelled identification, use of artificial intelligence, and machine learning. We have trained our data because India is a very diverse country when it comes to languages, and we always mix English into every language. So people have very different notation about so we are improving our search. We have seen our app downloads have been increasing, and and the rating has been maintained at 4.7. So I think we'll continue to make multiple attempts to improve our product and technology time to time. Coming to your, you know, increasing growth of the customers, think let us wait for another few months when we have a clear visibility on how the economy is going to open up. Because currently, I think it is very important that whatever is the current customer base, we engage them better, and we continue to, you know, serve them better rather than trying to go after acquiring new customer in a full steam method. And that may not be very cost efficient as well. Many of may but having said that, in the last three months, if we have churned on a net basis 15,000 customer, I'm sure you can assume that at least 50% of the new customers would have signed up. So we would have churned actually far more higher. It is only and we have been able to sign up customers not because of the cold calling or any or any cold cold telephone call. It is all all of it is probably inbound calling where customer have called us and they wanted a subscription, and we have been able to guide guide them through our subscription. So we are doing few things. Let's see how it emerges, but I think our most important area of focus would remain the retaining the current customers, serving the current customer, whether it is buyer or seller, and keeping the safety in mind. You had some accounting related question. Prateek may ask may I answer that one? Yes. So Sanjay, the third question you had asked was on the other income. And as I said in my opening statement that this quarter's other income has increased largely because of mark to market gains that happened at the end of the June. And typically, these MTM gains would be adjusted in the subsequent quarter yields because the entire investments, cash and investments of INR $9.54 crores that we have are actually parked in the mutual funds, largely debt based mutual funds. You can see the details of these investments in Note eight in the financial statements that we have sent on the stock exchange. So you can see the details of these schemes wherein we have invested these funds. And Prateek, you can also tell some of the rent reversal that was below EBITDA line, which has gone into other income. Yes, correct. In this quarter, we have seen some rent reversals to the tune of close to INR 1.5 crores, which is also represented in the other income. So out of a total INR 34 crores of other income, INR 1.5 crores is coming in on account of rent reversals, and all the other gains are coming in largely from the mutual fund based investments. These rent reversals are typically the credits which has been given to us in the intervening period by the landlords. And the since as a part of accounting standards, these rents typically show up as a liability and as in bright ROU asset. When you don't pay the rent or you or your rent has been waived off, typically, that liability gets reversed out. So that's where you see 1 and a half crores of liabilities written back and roughly around 31, 32 odd crores of the mark to market gains. Thank you, sir. Sir, if I can follow-up on the previous question, there is so in the CRM tool, if you can throw some light on, like, if one of the acquisition which took place in through Viapad, how we are doing on that side, if you can throw some light on. Yeah. I you know, but, yes, we would you like to answer that question regarding the apart? Right. So, you know, we've seen that the apart continues to do extremely well, you know, despite the lockdown happening here. In fact, you know, when we look at some of the key KPIs for the business, you know, looking at revenues, for example, they saw almost like a 260% plus Y on Y growth in FY twenty from as compared to FY ninety. You know, despite the lockdown, they initially saw a a slight in the total number of active users, but then, you know, they were back up again very, very quickly by May. And I think their current active number of free as well as paying subscribers, both is probably at their best ever levels, and they continue to do very, very well. In fact, if you really see their current operating, which is a 4.7, I think it's one of the highest that you get to see in this category, with more than 1,000,000 downloads that they carry in their app. Also, when we look at from a, you know, board perspective, you know, I I I'm sure you could look at the numbers In our consolidated financial statements that we've shared with you. You know, it has sort of looked at 35 lakhs for this 26% stake that we really carry there. So I think they've they've done extremely well even on this particular side while they continue to grow the business. And they have about 30 crores of cash is still on their balance sheet. And we had only invested about $31.32 crores. And they had raised a total of 35 crores plus another $5.06 crores. So in in all, they have been able to build this business in less than 10 crores so far. Thank you so much. Thank thank you, Sanjay. Please restrict to two questions so that we may be able to address questions from all the participants. Next question is from the line of Mr. Sangeetha. Please go ahead with your question. Yes. Good afternoon, and congratulations for the very resilient result in such a difficult time. I had basically two questions. One is you mentioned that the collections during this period were about crores, and that was some 40 odd percent lower than in the comparable period. Now I just wanted to understand what this number means. Does this really INR94 crores, is it the value of the new business that you have booked in this quarter? And therefore, how does that reconcile with the numbers number of subscribers having fallen by 10%? My second question is that we're talking about number of paying subscribers having dropped by about 14,000 or, that is the next subscriber base, which has dropped. Could you give some color into the number of gross subscribers, you know, who, went out of the system, the new subscribers who came in? And what kind of people are these? Were it, you know, was it mostly people who were monthly subscribers who went out or did the annual ones go up? And what kind of new business are we getting? Some color on that. Thank you, Sandeep Sangeetha. First of all, let me explain again how the collections work and how collections are different than how collections are different than revenues. The way it works is I'm getting noise from Sahil. Can you pre mute yourself for a while? Yeah. Thank you. The way it works is collections is the cash collected from new customers, new sales, plus cash collected from the renewals, plus cash collected on any upsell that we do. And as you know, we are in a subscription business. We collect money in advance for the entire period of subscription. So if we are selling, say, somebody a two year subscription new or renewing a two year subscription or upgrading from a monthly subscription to a two year package Yeah. That we would collect all of that money upfront, and that is what is called collection in our parallels. And this collection immediately goes into the deferred revenue because we have not yet provided the service. And from deferred revenue, every month, as as and when the service is live, every month, the the prorate amount goes into the revenue from operation. So we have collection, and then we have deferred revenue, and then we have a revenue from operation. You can you can say the collections are like a monthly monthly moving average and, you know, you know, deferred revenues are the buffer, and then the revenues are twenty month moving average. That explains. Yeah. In terms of subscriber base, I I said earlier on the call itself that 80% of the loss that we had we have had out of this 15,000 were from the monthly customer base. I would not be able to provide you any color on the gross edition and the net edition, at least until the situation is normal. Because currently, we are seeing all kind of requests coming in. Some people are saying, please extend my subscription by two months. We can't recognize revenue for that. Some people are saying, please close it down, and we will come back again. Some people are saying that I want to try it for six months. So I would not be able to provide any color on gross additions and net and gross churn. I can only provide you with the net addition number. Alright. Okay. Thank you. Just just a clarification. So coming back to this number of 94 crores, actually, from an incremental business point of view, how the business is moving, is this the most critical number to really watch out for? That how are our quarterly collections moving? Because they are going to reflect in a sense how the business actually comes back in terms of renewals as well as new subscriptions. You can say that, but I think that you can't look any of these numbers similarly. I think the number of customers, collection, deferred revenue, and the deferred revenue breakup in terms of current and non current, as well as the expenses. These are the supplier side monetization number. And then you look at the buyers are the leading indicator, How buyers are coming. If the buyers are coming and engaging more with the platform, if they are giving a higher rating to the platform, you can imagine that the advertising and collections will follow. So I think the first number is how many buyers are coming on the platform. Then what is the overall seller listed on our platform. Then out of that, how many customers are paying customers on our platform. And then looking at the collection that we get from those customer, and then looking at the deferred revenue, and then finally looking at the revenue, and then looking at the cost basis, and then the profits. Right? This is how we look at the funnel. Right. Right. So if there's 94 crores, suppose it remains at levels of, say, 94 to 100 for the next three quarters, then we will be actually booking revenue from the deferred revenue. And the pool of deferred revenue going into next year would then reduce unless and until this collection number picks up. Right? Yes. You are correct. You are correct. Right. Okay. Great. Thank you. Thank you, Sangeetha. Thank you, Sangeetha. Next question is from the line of Sahil Desai. Please go ahead. Yes. Hi. Thank you for the opportunity. Can you talk a little bit about how you are looking at branding or marketing? For example, I I think over the last three years, our spends on that side have been negligible because we're seeing a lot of organic traffic and growth. But given the opportunity for digitization, accelerated digitization that, you know, this whole COVID has brought about, how are you looking at that marketing and branding? So, Sahil, when we look at marketing and branding, I think we've shared initially also that since it does not necessarily have a direct impact on the traffic or the number of subscribers, and it it it necessarily impacts the brand value that we have in the market. Whenever we feel there is a need for us to really go back and improve the overall, you know, the the the brand perception that people have, I think that's the time that we would want to go back and do it. We don't think that there is currently, you know, the requirement that we have for it. And therefore, we would still wait for the right time before we get into doing any kind of a brand marketing. Okay. Understood. Thanks. That's all. Ravi, we can yeah. Thank you. With this, we come to an end of the q and a session. And now I hand over the call to the management for closing remarks. I think Siddharth is already on the line. I'll let him ask the last question. Yes. My question was just asked by Mr. Sangeeta about the cash revenue. So I think you can end it. Thank you, Sida. Thank you. Thank you very much for for your patience on this new platform. And I believe these face to face meetings can be done better. We we are able to do a presentation, and I'm I'm able to see overwhelming number of participants. And sorry for initial inconvenience in raising hands. In case you have any follow-up questions, you are always welcome to write us write to us on our Investor Relation website, and our Investor Relation team would be more than happy to answer any of your questions. I would have once like to answer everybody's question, but in the limited time, this is what we could do the best. Please, everybody, please keep safe, and hope to see you soon in person as well. Thank you very much. Thank you, everyone. On behalf of Indiamart, that conclude this webinar. You may disconnect your lines. Thank you.