Q2 19/20

Oct 23, 2019

Good evening, everybody, and welcome to our Indiamart Second Quarter Ending September twenty nineteen Results Conference Call. We have already circulated our earnings presentation, and it is also available on our website as well as stock exchanges website. I'm sure you will have gone through the presentation and would be happy to take any questions afterwards on that. Just to summarize, we are happy to report that Myanmar has received consolidated revenue from operations of INR157 crores in the second quarter. This is about 28% year on year growth in the revenues. However, our deferred revenue has grown by 28% this quarter to INR631 crores, which is much lower than 37% growth that we had in the same quarter last year. So overall deferred revenue growth has slowed down. Net customer addition for this particular quarter has been approximately 4,500, which is higher than the last quarter when we added only 3,300 odd customers and is still much lower below the our long term average of last year's quarterly net customer addition of approximately 5,000 per quarter. We believe that this is primarily due to ongoing pain in the economy. This challenging environment calls for increased effort in our new sales acquisition as well as our upsell and renewal client servicing. And we'll continue to respond to this kind of economical challenge by way of strengthening our sales and service manpower, which may lead to a higher cost in the short run. And this may put our margin expansion under pressure for some time. So while government has taken multiple steps to infuse liquidity in the economy, but I think it will be certainly beneficial for businesses in the long run. Their impact in elevating the immediate term pain still remains to be seen. And lastly, as a strategy, we believe that marketplace has a very good fitment with fintech and software space, and that will play an important role in expanding the reach of online marketplace and make it more useful and sticky for the small businesses. Accordingly, if you remember, we had made an investment in Viapar, an accounting and inventory and invoicing software for mobile for MSMEs. So that's about it. I would like to hand over this call to Prateek to discuss some numbers in more detail regarding taxation and other things. And thank you, and over to you, and I'll come back with your question and answers later. Thank you, Prateek. Thank you, Dinesh, and good afternoon, everyone. As mentioned by Dinesh, our revenue from operations grew 28% year on year to INR157 crores. This is driven by 15% growth in the number of paying subscribers to approximately 137,000 as compared to what it was in the last year and higher realizations from the existing customers. Consolidated EBITDA margins increased to 23% in this quarter as compared to 18% in the same quarter last year, driven largely by better revenues and also adoption of Ind AS 116 on lease accounting. Our tax expense for the quarter was at INR 42 crores, which is significantly higher than previous quarters, primarily on account of onetime impact of INR 31.4 crores related to change in tax rates, primarily restatement of our deferred tax asset to the newer rate and the reversal of MAT credits as the company has opted to move to 25% tax regime as per the option given in the Taxation Amendment Ordinance twenty nineteen. Due to this onetime impact, the consolidated net profit for the period stood at only INR 9 crores as compared to the 23% EBITDA margin. Our cash flow from operations was INR 42 crores, leading to a closing cash and investment of INR $7.80 crores as on September 30 as compared to INR $5.00 3 crores as on September year, representing an increase of 55% year on year. So thank you very much. We are now ready to take any questions. Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. First question is from the line of Sachin Imrani from Perfect Research. Sir, I've got three questions with me. Question number one, if you look at Shopify outside, it keeps coming out with new SaaS based products in order to create more customer stickiness. Is the acquisition of Viapar in the same lines? Sachin, you continue on with your other questions also, we can answer them together there. Okay. Yes. So question number two is, with Odaan now successfully scaling up, don't you think the transactional based business should be started to offer more benefits to customers? Question number three, since our company will be generating lot of cash in the coming future, would we look at investment opportunities outside SME space like InfoEdge desk? That's it. So your first question was Shopify outside providing products on the basis of the SaaS based products, which creates more stickiness. So is the acquisition of Vyapar in the same line? I would not say same line, but similar lines. Shopify has a very do it yourself model, where they only provide technological tools. They do not run a marketplace. They are a website making tool. And in order to add multiple items on the website, such as CRM or payment gateway, other things, they provide different, different apps to do that. Whereas India market is a, by and large, a marketplace. So there is a big difference between Shopify versus India market. Shopify is a website creator, whereas India market is a marketplace of aggregated marketplace. Shopify, you don't aggregate products across multiple suppliers or multiple participants. So I'm sure I'm not sure if that answers your question, but these are the differences. Yes, I was more concerned with the Viapar thought process. Now coming to Viapar, there is one similarity that Shopify tries to find which portion of their core customer is more likely to use other apps. And that's a very similar argument that goes in India market, where we are seeing that India Mart also handles or benefits SMEs and Vapar also benefits SMEs. And accounting is accounting, invoicing, inventory is one of the second most important need beyond lead gen. So we feel that Bepar has done a good job in making it an easier product, which can be handled by the SME by themselves rather than having an accountant who understands debit, credit, balance sheet, profit, receivables and things like that. Now coming to your second question about moving towards a transaction based model or not. So we have a very different approach to going towards transaction. Yes, we should always make it easier for people to be able to go closer to the transaction or close the transaction on the platform. However, we represent a large number of categories, 138,000 different categories are there. There are lot of times B2B sourcing happens where the products are customized between buyer and seller, where the products are non shippable also. So we have products like trucks, products like cranes, products like elevators, JCB machine. So yes, a small portion of the products, which may be readily transacted, we feel that transaction has two, three parts. One is the accurate cataloging of the and pricing being available, which we are continuing to work and make sure that across 138,000 categories, instead of picking up a few categories and going deeper there, we have taken an approach that let's open all the categories for pricing and better cataloging. And over the time, see find out a minimum common denominator, which can work at one of the categories. Second, offering some kind of a payment facilitation. I think at Indiamart, we have taken a Pay with Indiamart payment gateway solution. That particular payment gateway solution helps our seller to receive payment from their buyers. So we are going one step closer there. And another one I missed, we have after lead generation, there is a lead management system, which helps you close those leads because you have to find the specification that the buyer is looking for beyond the buy now product. So I think we are slowly, slowly moving in that direction. Do we want to become a courier company to pick up the goods, collect the payment on behalf of the people and do a cash on delivery? I think no. I think we will continue to remain a technology based platform, which will help buyer and seller meet each other, interact with each other, facilitate payment, provide credit financing whenever possible. So we'll continue to move closer towards the transactional route, but in a very different fashion than saying that we will work only for few categories, but we'll do the cash on delivery, pick up the goods as well. Now coming to the third thing, cash on our balance sheet. So we have about INR $7.80 crores of cash on our balance sheet. And we will continue to look for adjacency. And those adjacency, as I said, could be in SME SaaS space, could be in business SaaS space, B2B SaaS space, could be in fintech space and see if we can partner with them by way of financial partnering or strategic partnering. Do I want to go beyond SME, say, something like in a health care or something like I don't think so. We'll continue to focus on our adjacencies to deploy this cash. And in any case, we have a INR $6.75 crores of deferred revenue on our balance sheet. So we need to conserve cash in order to service our deferred revenue for that matter. And third piece is when this year completes, we have already announced a policy for dividend distribution. When the year completes, the Board will take a decision how much dividend to be distributed. Thank you. We can move to the second question. Thank you. The next question is from the line of Pranav Shatria from Edelweiss Securities. Please go ahead. Hi. Thanks for the opportunity. My first question is regarding the employee cost. If we look at I mean, is a sharp acceleration in the employee cost, and I just wanted to know how we should look at it. And more specifically, if I look at the collection for this quarter vis a vis collection for the a year back for the same quarter, collection has increased by around INR 22 crore and similar is the increase in employee cost vis a vis that quarter. So how should we see the unit economics of higher employee coming on board? After this, I'll go to the sixth question. Sure. So Pranav, you are right in saying that the employee cost has increased. In fact, employees and outsourced sales cost combined stood at almost INR 87 crore in this quarter as compared to the number with INR 65 crore last quarter. This increase has happened, one, is on account of the increments whatever we have announced during the year. We have the increments coming in effect from June 1. So this was the first quarter in which the full effect of increment has come in. The second reason of the increase was the headcount increase, which has primarily happened in the sales and the servicing functions. So as compared to last quarter, we had a total workforce of almost 4,200 people. As of now, we have a total workforce of 4,500 people. And the 300 people addition has happened either in the new sales side or on the servicing side. Okay. I think going sequentially, going quarter by quarter, we may not increase the manpower cost significantly. But on a year on year basis, as the economy requires more effort on the new client acquisition as well as requires more effort in collecting higher realization for customer, this year, we can safely assume that overall manpower cost would be higher than what we had in the previous years. No. I mean, my question is more related to RVs. I mean, we are seeing employee cost increase at a faster pace than the revenue. And so I mean, should we The connection. Sorry? Yes, please go ahead, Prunav. So should we see this trend continuing for this year, maybe because of the economic challenges or this quarter is more one off and it should normalize in the coming quarters? It should normalize, but all in all, if you see, we had two portions of the cost. One is the employee cost and second is the other cost. I think the total cost by the year end probably may go up by almost 20 odd percent as opposed to the total revenue increase of what we're looking at a 25% plus. So we would see our cost could be going slightly higher than what we anticipated earlier, but it will not go over and above our revenue growth. Okay. Thank you. Very helpful. Second question is regarding tax rate. Just want to clarify. So on operating income, we should assume 25.2% tax rate. And on the other income, that is income from investment, we should assume around 10% tax. Is that a fair way to compute tax? Yes. So on the business income, you are right that we should assume a 25%. On the other income, depending upon the short term gains or it's a long term gain because the investment is largely in the liquid funds, the taxation may range accordingly. Okay. Any ballpark number for blended tax rate, what we should assume? Overall, if you see, I mean, for the last two quarters, our effective tax rate has been pretty similar, between around 31%. So all in all, this tax rate should certainly come down to more like 20% to 23%. Okay. And last question, how should we see this relatively lower growth in the business inquiry delivered and the traffic have implications on the new customer addition? So Pranav, two separate things. On the buyer side, I think we get I'm not really worried. I think we get enough number of buyers. And if we build the supply side right, we'll be able to service the buyer to his satisfaction so that he returns more frequently. I don't think there is a universe too much universe left, which is not coming to India Mart. We are already touching a good portion of Indian Internet population every month. So I'm not too worried on buyer side even flattening out on the number of inquiries. There is enough unfulfilled inquiries, enough unfulfilled buyer base, which can become a regular buyer to India market if fulfilled properly. On building the supply side, there is a continuous progression that we make that SMEs and SMEs as well as large businesses, they are not adept to the Internet fully. They are habitual of either a dealer distribution based sales mechanism or an inbound call or inbound walk in customer base. This whole generating of lead and doing a lead gen based system, most of the businesses, whether it's small or large, I mean, I have seen small businesses struggling and even the largest of the businesses struggling to deal with this new era of finding a new customer and fulfilling them. And there, we continue to educate and continue to onboard many suppliers and many survive and learn through this whole process of Internet and many say that this is not my cup of tea. So I think the supplier based addition and their maturity and what kind of tool we can provide them to make it easier for them to do a follow-up with the buyer or collect the payment with the buyer and how do we build the trust gap remains the key challenge that we continue to solve for the economy and for the businesses. So just to reiterate, I think I'm not too worried on the buyer side. But supplier side, if we are not able to do at least 5,000 net customer addition, that's a problem. And more so, if we are not able to retain a majority of them over a one or two year period, that's also a problem. Okay. Thank you, This is very helpful. Thank you. Thank you. The next question is from the line of Ankur Pant from Jefferies. Please go ahead. Hello, sir. Good evening. And thank you for taking my questions. First question is on the payment side. So I understand that you're doing a lot on the payment facility side. So just wanted to know how is the traction there and how do you plan to scale that up? My next question is on realization. How do you see that evolving over the next couple of quarters or the year or so? And on a related note, if you could share anything on the strategy of differentiated pricing across geographies and categories? That would be very helpful. That's it. Thank you. Thank you. So on the payment and payment facilitation side, earlier, we started from an escrow kind of a solution, and then we went on to providing a bouquet of payment facilitation. There are there is too much happening in the payment space in India. There are UPI based payments evolving. There are credit based new payments evolving. Then these are there are wallets and base payments. So I think currently, the market is very confused where to go, where not to go. So initially, we had found some good traction, but we are finding it difficult to scale up on the payment side. We currently do only about 5,000 odd payments transaction every month. And that has been in the product development stage. And these are the early days. We continue to tweak our product on a monthly basis or so to find where is the sweet spot, which will work with the buyer and seller better. So we continue to do a research and but we continue to have a great belief that payment and credit are very important ingredients to a marketplace success. Now coming to the realization of the our average revenue per customer. So as you can see, over the last three, four, five years, our revenue per customer has been inching up slowly, slowly around five odd percent or so. So we were at 33 odd thousand and we are now at 33, 39 or 40 odd thousand on a yearly basis. As most of the customers come at the bottom of the pyramid, their ARPUs are lower. And as the customers age over the period of time and they learn how to do business on Internet, their ARPU keeps on increasing year on year. So an ARPU is not a function of unlike in a telecom, where everybody uses a same ARPU package. Here, the entire customer base is further divided into multiple silver, gold and platinum tiers, and an ARPU is an average of all those. So on one side, we have our lowest level customer, which gives us 30,000. On the other side, top 10% of our customer base, which is about 14,000 customers, they give 40% of our revenue, where the ARPU goes as high as 160,000 or so. So realization will keep on improving over the period of the time for many years, albeit very slowly and more so given the collection being lower nowadays due to economical challenge. Now coming to the differential pricing, we did touch base on this, that this is an opportunity area. However, we need to be very carefully planned and see where we are going to implement and when we are going to implement. We were thinking of doing some pilot in the second half of this year. However, given that there are too many fronts already opened where we are to match up with our earnings presentation on our website, and there is a slide on the deferred revenue. So you can go through that. You would see that it has been pretty much consistent at around 60% for the last good two years. Right. Okay. On your second expense on other cost expenses decline, I believe you're talking about a decline in this quarter with respect to the previous quarter, right? Is it the previous year? So Q2 FY twenty twenty is INR 32 crores and Q2 FY twenty nineteen was INR 34 crores. So a small decline, but nevertheless a decline, which actually helped your margins to some extent. I understand. So on this one, we have actually implemented Ind AS 116 from April 1, which requires all of our rent expense being classified as a depreciation expense and the financial interest expense. So this has been approximately INR 4 crore per quarter. If you see the results that we've uploaded, there is a footnote there, which explains this impact. So the right number to compare with respect to the last quarter is INR 32 crores of other expense in this quarter plus INR 4 crores of the rent expense, so almost INR 36.7 crores as compared to INR 34 crores last year. Got it. Got it. It is just the rent, it's nothing else. It's just the Ind AS 116, which is different. Otherwise, it's nothing else. I mean, this is INR4 crores of expense, which got shifted from the other expense line to the depreciation and the finance cost line. Got it. Got it. Got it. And the last one on new suppliers' addition, how easy or difficult it is to what I mean to ask is basically what kind of sales effort or on ground effort is required to add incremental paying subscriber? SRINIVASAN I have already addressed this earlier. Let me repeat again. Our new customer addition, net new customer addition has been at around 5,000 odd per quarter for the last for the entire last year or so. Now last two quarters, especially the April, May, June, we faced net new customer addition to be only 6,300. And we were anyway in the process of ramping up our sales force and which has held us this quarter, we have been able to get to 4,500 odd net new customer additions. And we given the economy is hard, which cuts across both the side because, one, it becomes difficult to acquire new customers when the productivity falls down on that side two, there it is difficult to retain the customer of which has been onboarded on two accounts: one, customer themselves run out of business or run out of and they shut down their business and second, they do not have enough cash to advertise to spend on advertising. So we believe both of them leads to higher churn. So yes, it is difficult. And in the subscription business like this, acquisition and churn are the two very important parameters, which we continue to work upon every day. I hope that one, economy will improve over the time and two, we will find better ways to engage our customer and sign up our customer And three, it will become easier for SMEs to adopt to Internet based doing business. Currently, as I said earlier, most SMEs and most businesses, not SMEs, most businesses are not habitual of a lead based customer acquisition system. They are either habitual of a dealer distribution based sales or they are habitual of inbound call or a walk in customer based system. It's only service industry, which is more habitual of a lead based customer management system. The product based systems are not understood that way. But I guess, especially in B2B, where the sales cannot happen off the shelf because the customization of the product, because of the unique nature of the product, because of the long tail of the product, people will ultimately have to migrate to a lead based management system. And so I would hope that and these are early days of Internet. And I would say that there is at least next ten, twenty years, which are available for keeping this particular thing in mind, how to increase our net subscriber base and how to make it easier for them to onboard and how to make it easier for them to convert their leads. Perfect. Got it. That's very helpful. Thanks, sir. Thank you. Thank you. The next question is from the line of Sadia Mukherjee from Central. Please go ahead. Yes. Thanks for the opportunity. Few questions. First on muted growth in supplier store fronts and as well as a net addition of paying subscriber base. I thought when we last spoke in Q1 conference call, you said that there was an impact on the price increase and that's why the growth was small, the net addition was small in Q1. But Q2, beginning July onwards, things started on a good note. If you can throw some light on the monthly trends like how has been July and after that August, September and October, especially in terms of growth in store fronts as well as the paying subscriber base? So first, let me take up the paying supplier base because that number is far more important from the revenue perspective. So yes, in April, May, June quarter, we did say that there could be some impact due to the prices of annual customer base that has been increased from January 1. Our timings of our pricing increase got wrong because the economy sluggishness coincided with that. So from 3,000 customers, which we added in the last quarter, we have improved to 4,500 odd customers this year this quarter. On a monthly run rate basis, I think, again, in the next quarter also, we can assume somewhere around 4,500 to 5,000 odd customer basis. And we'll continue to see how do we reach to our previous normal of about 5,000 customers adds a month. Now coming to the overall supplier store front. So last year or so, we have become lot more stringent in terms of what kind of supplier base to acquire and what kind of supplier base to. So earlier, we didn't have a policy of 100% e mail verification or 100% mobile verification for adding a supplier. Now at least we have said that old ones will keep on doing because they have been accumulated over the last ten years. But at least the new ones, until unless the mobile is verified by an OTP or e mail is verified by an OTP, in order because we have become a large platform today. Any miscreant can cause a lot of disturbance. So we are moving towards a trusted platform. So we are becoming a lot more careful when we sign up a customer base. Also, we didn't have a good very good hang of what are the what is the formal economy. It's somewhere else. Music is coming from somewhere else. So there are about INR one crore of GST registered businesses. There are about INR two crore business people who file income tax return and say that their income was from business or profession. Though there is an SME census, which says that there are about INR six crore SMEs. But if you really see, the formal SMEs are only formal number of SMEs are only INR 1 crore to two crore. And it pays a lot more sense it makes a lot more sense to for a B2B platform like us to be to focus more on the formalized economy. Earlier, we were used to have multiple parameters like Gomesta or business registration certificate from a state on a VAT thing or a Central Excise Registration Certificate or a Service Tax Registration Certificate or even Aadhaar Uddiyog Aadhaar. Now we say that let us focus only on GFC registered businesses. So our overall supplier storefront may seem a lower growth and may continue to seem a lower growth because we have actively taken this approach that we should only and only onboard a supplier with a mobile number and email ID fully verified and focus more on the GST registered businesses. Okay. That's very helpful. Secondly, on the margins, you said that, of course, this quarter, we have been hiring pretty aggressively. And I think we have opened five branches, new territories as well. I see Guwahati being opened up to reach the Northeast part of the country. Any sense on how and how many numbers of branches will be opening in H2 and the employee base that will be required for this opening of branches? So I don't think too many branches are planned, maybe a couple of them in the entire next six months. Yes, in terms of overall employee addition, employees are added for two reasons: one, to support existing customers. So for every set of X number of customers, we need one more service or upsell employee service renewal and for acquisition of customers. As I said that acquisition has become tougher as well as churn has become higher. And also, our overall customer base is increasing. So employee base will increase a little bit more. I think we'll as we are already up from 4,000 to 4,100. Yes, previous quarter, but from the March thing, I think from 4,000 to almost 4,500. So from last six months, I think we have added 500 people, maybe another 200 or more in the next quarter or so. Okay. Lastly, on the on a bookkeeping question. On your balance sheet, I see that PP and E, the property plant and equipment, that has gone down. There has been a decline. Any color on that? Yes. So in the property, plant and equipment, we had a leasehold land, which was earlier showing up as in property, plant and equipment. Since April 1, we have adopted Ind AS 116, which requires us to classify it as a right of use asset. So that land has shifted from the property, plant and equipment to right of use asset, which has been which is a different category than property, plant and equipment. That would be a fair value of INR3 crores, the difference amount that we see? Yes, almost INR3.5 crores. INR3.5 crores, okay. Thank you. Thanks a lot. Thank you. The next question is from the line of Ayaz Motivana from Nirvana Partners Hong Kong. Please go ahead. Yes, good evening gentlemen. Thank you for taking my question. I'll go quickly on two big questions that I have. One is on the people front. You have a segment called outsourced as well. So could you explain the mechanics of how this works in terms of the planned addition on outsourced and in house people and the incentive and the accounting that you do for people who are outsourced to bring in the business of these customers who sign up for subscription services? Sure. So in the terms of our manpower, essentially, we have one sales side and the other is servicing side. The entire servicing team, which caters to our existing customers, is pretty much on road. However, the team that goes out and acquires a new paying customer, which we call it as a new sales team, that is where we take help of the outsourced partners. Essentially, these are the people who are pretty much similar to kind of temp staff, and we work with different partners to build up that particular sales force. In the terms of accounting, they are being shown as an outsourced sales cost. And all the people who are on our payroll, which is the servicing team, the product team and the entire corporate team, is shown as a manpower expense. So we've been guiding since the outsourced sales is also an integral function to combine these two costs together and look at it as a common manpower cost. Right. And what's the breakup in the sales part of it, as you said, which is to add on new paying customers? What's the proportion of outsourced for that versus in house? Outsourced number of staff is already there in your presentation, as I can see. So what is the breakup of that? Currently, we have almost thirteen fifty people on the outsourced side as opposed to a total workforce, including them, is approximately 4,500. Right. But as you explained, the servicing team and the in house product team is not part of that. So in terms of core sales All new sales. In the terms of the new sales What is the yes, what's the breakup of that? Sorry, I didn't get the question. The new sales is thirteen fifty people, which are on the outsourced. Thirteen fifty people on the outsourced. Okay. So the rest will be in house. I'm saying the in house sales number for this equivalent thirteen fifty who do the similar role, what is that number? So if you consider the leaf level people, executive level people, almost all of them are on the now on the outsourced sales roles. Anybody who is a team leader or a manager or a data support person, they are all on the India market payrolls. So they are all part of the sales. So if you see, there is a four thirty two people, which are in this sales organization over and above new customer sales organization, over and above these thirteen fifty people, which primarily comprise of team leaders, managers and regional managers and so the entire management chain of the new customer acquisition function and supports the chain of the new customer acquisition function. Yes. And just to clarify, there are another 2,100 people who are part of our servicing team, which are responsible for getting the renewal and upsell of the existing customers. So the entire sales and service network is of around 2,100 on servicing and almost INR 1,700 on new sales. Out of INR 1,700 odd people are outsourced INR and INR 4 100 odd people 32 crores. That's very helpful. Got it. I got that one. That's excellent. Thank you. Second question, sir, is the point that you highlighted about the tough market and the churn, which happens in these type of periods where the business is stretched and they say that this platform turned out to be less effective than what they thought. So in terms of your sales pitch, what are typically customers looking for in terms of fulfilling their sort of innate demand for paying up that INR 40,000, INR 45,000 or INR 30,000 as a basic package? What are the factors that they are looking at in terms of Indiamart delivering to them as a one year payoff or even a two year package, etcetera? So multiple people come from different thought processes. Because all in all, what we provide to a seller as a value proposition, I'll repeat that. So number one, we provide a web presence to a seller, a fully automated web presence where customers' mini website is available on desktop, on mobile platforms, and it is well categorized into 138,000 different categories. Number two, we provide customers so that the buyers can call them or send them an e mail through our marketplace. Number three, we offer as a value added server a priority listing. So if you are a Platinum customer, you will get a priority listing over the Gold customer. If you are a Gold customer, you will get a priority listing over Silver customer. Or if you are even a Payne customer, you will get a priority listing over the free listed customer base in the similar category. Third, what we offer is the number of RSQs per week as an RSQ credits per week. So only paying customers get a certain number of RSQ credits per week, which they expire every week. And at the silver level, they hit about seven RSQs per week, which is one RSQ a day or seven RSQs per week. A gold, up to 21 RSQs per week. And on a platinum, it can go up to 70 RSQs per week depending upon which particular package within Platinum that they have taken. And certain people and then we have a call cloud telephony solution, which we call a premium number service, Indiamart Premium Number Service. Fourth, we offer a CRM package called a Lead Manager. So Indiamart, a lead management system where you could manage the leads that came from Indiamart or you can add your own customer database to do a customer management free, of course. This again works on desktop and mobile platform. And last, the online payment facilitation. Now many of these customers would come with one, two, three objectives to do this in order for them to, at the end of the day, get more orders or get more business. Now many people say that though we got many inquiries, but we could not convert them. Many people say that this is just too much of a many items for me to handle. It is not easy enough for me to devote time for doing this. And for many people, it is not enough ROI, but more so either people are able to get ROI or not get ROI. I haven't seen many people who say ROI. People who are able to understand how it works and how to utilize India Mart as a platform, they are generally their investment versus ROI is in multiples of ten and one hundred. Sure. So is that you shared that traffic and business inquiries, is there a linkage to that, sir? I thought that is what you are trying to link it to. You have a gross traffic number and you have a business inquiries number. Is there some sort of linkage to that, I mean, some 70% REPRESENTATIVE:] number, but do those inquiries translate into business for these SME customers of As I mentioned earlier, we have a lot more buyers, lot, lot more buyers than these suppliers can fulfill. We have acute shortage on the supply side to fulfill those buyers. So we need more suppliers, more engaged suppliers, more variety of suppliers and more suppliers from more number of cities. We have buyers coming from 700 districts and 7,000 countries, but suppliers are still concentrated in certain geographies. So I think there is I think it is not the dearth of number of buyers or number of buying inquiries. Right. Sir, these buying numbers are quarterly, right, just for a housekeeping clarification. So INR 123,000,000 buying inquiries is for the quarter ended September for three months? That is right. And similarly, the business traffic number of INR196 million is for the quarter. Yes. If you see the presentation, the presentation would have both the yearly numbers as well as the quarterly numbers. Yes, yes, yes, traffic. I meant traffic and business inquiries. So yes, that clarified. So the last question, I'm sorry, I've overshot my time, but is from the buyer side who are coming in, you have a huge and you said supply fulfillment is a challenge. Is there a way that you can work to making some money out of the buyer beyond obviously transaction and payments, which we have talked about? It's too early. It's not too early to even think about that. It's like asking Amazon in year 02/2001, is there a prime possible? Fine. I get your point, sir. Thank you very much, and I'll leave it at that time. Thank you. Thank you. The next question is from the line of Arpitsha from Stallion Asset. Please go ahead. Hi there. This is Arpitsha here. So I just wanted to understand, is Indiamart has a platform maturing or something like that? Just going by the presentation, what we are seeing the number of supplier storefronts have not increased considerably, but at the same time, the number of buyers has been increasing at a lot higher space. So is there an impact where you could see a probable reverse network effect? And what's something that we are really proud of is to see a network effect on India mine. So is there a probability that we could see reverse central effect where suppliers could feel that there are a lot number of buyers and inquiries are there which are really not worth for? And another question, what are the other growth avenues since we are looking at this slowing down inquiry numbers, slowing down traffic, so what is the new growth? As you've acquired a portion of Viapar, is there a possibility that we could be integrating the Viapar operations or Vyapar features on the platform? That's my number one question. And then my number two question is, how are we seeing the number of subscribers getting two lakh plus from INR 137,000 right now? So let me answer the third question first because that means in the continuation. As I've been iterating that last financial year, we have had about 5,000 net customer additions per quarter. And we will be fell down to 3,000. Now we have recovered to 4,000. Our endeavor would be to do 5,000 or 5,000 plus customers. Now from going from 140,000 to 200,000 customers, on this kind of a run rate basis, 5,000 to 6,000 customers a quarter, You can assume it will take about six eight about 10 quarters like Okay. Now coming to the Viapar, it's just we have seen that this is early stages of adoption. Mobile based software itself is a very new thinking that has come in. Until recently, mobile was primarily a communication and entertainment device. Now it is seriously being used for business. Even in India Mart, we have seen SMEs using mobile app. Almost 80% of our customer base uses mobile app on a weekly, monthly basis and almost 50% of our customer base uses our mobile app almost on a daily basis. So that's a serious business usage by small businesses. So we by learning this particular thing and by trying to find a Kali kind of an equivalent, we came across Yaphar. And we have just invested two months ago. I think our endeavor would be to nurture them and to mature them as a business over the next two, three years. And then see what are the possible features that we can integrate. Currently, we will try and promote them to grow independently. Okay. The third one, whether we have raised saturation point and reverse network effect, I think it's a very hypothetical question whether Internet has reached its saturation with half 50% of Indian Internet population there. I think just to scratch the surface, there is a lot to be done. There is a lot to be done on the relevant matchmaking. There is a lot to be done on cataloging of the accurate cataloging of the product. I think it is not that the how many more buyers can come in, it is more of how many more times these buyers can come in and complete their requirements. So I think there is enough I mean, definitely see a decade long growth trajectory, and that is why we have done the IPO. So I'm sure the Yes. If I can just put in one more question there. I believe you are interacting with a lot of SMEs out there. So what is really happening if the businesses are slowing down in an economy? Wouldn't they be looking for newer opportunities to grow? And would EnyaMath be in platform to grow that? And the guys have already been there on the platform, would they be renewing? And like what kind of renewal rates do you all typically have in a good year and in a value? So both kind of behaviors are found. When the bad times come, many people who have not been advertising are forced to look at options like media and advertising and this and this. But less of so, Advertising is always considered to be more like a discretionary spending. And when people face the cash crunch So cash crunch is different than a slowing down. Most of the time, every slowdown has a cash crunch. And when the cash crunch times, the churn definitely increases. So when good times happen, our overall annual churn rates come down below 20%, say, between 1718%. And in the bad times, they start to trend 22%, 23% on an annual basis. So that's the fluctuation that you see. And depending upon how the platform functions over the period of time and where has it stabilized. And then there are monthly customer base, which are sometimes seasonal in nature and sometimes more coming from a trial perspective. There, you see anywhere between 4% or 3% on the lower side and 5% on the higher side on a monthly churn. Okay, okay. That was enough. That was thanks for those things from me. Good luck and best of luck. Thank you. Thank you. The next question is from the line of Sangeetha Purushwatam from Cogito Advisors. Please go ahead. Yes, hi. Good afternoon. I had two questions. One is that in the presentation, you've mentioned that there has been a 15% increase in the subscriber base for Q2 year on year, but the revenue has increased by about 27%. Now through the call, you've mentioned about how the new customers tend to come in at the lower levels in terms of the revenue per subscriber because of the churn that happens. So I just wanted to understand that how what explains this 12% difference? Is it price increases? Is it a mix change? If you could just help me understand what's really going into it. The second question that I had is that as is clear from your numbers, you have invested more in your sales force in this quarter, and therefore, the margins are a little lower than the margins in the first quarter. They're about 24% versus 26%. Now is that is there a certain margin number which is likely to be a stable state margin number for this business? If you could just help me understand how the margin trajectory is likely to move over the medium term, which is, say, two to three years? Okay. So to your first question on the revenue increase, the 15% growth is coming in from the subscribers, and the remaining remaining 12% is coming in from the average realizations, which have improved. Now this realization is a factor of two things: one, the price increases that we have taken in the past because as we were discussing, we sell our subscriptions on annual and the multiyear basis. So the price increase become effective for those customers only on the renewals. So if we announce price now or any price increase if we announce right now, the real impact will come in after two, three years as and when the renewals of those suppliers for the same service start So one is, of course, there is a better realization coming in because of the price increases that we had taken in the past. We had different tiers of subscription, silver, gold and platinum, trying to upsell from silver to gold and gold to platinum. So six of the customers would also impact the average realization on the overall basis. So So these are two this 12%, how much of it is coming from price increases and how much is coming from mix change? Do you analyze that? Yes. That becomes very difficult to quantify because most of the upsells that happen, that happens only at the time of the renewals. It becomes very difficult to quantify as to how much is it the price increase and how much is it the upsell. The way we see it is that what is an overall improvement in the realization per customer. Okay. Because given that the impression you gave during the call is that it's quite hard to take the price increases. But when we have seen the numbers on the ground, this 12% impact coming from price from a price effect, not just increase, is actually fairly substantial. Let me explain it the other way around. It is actually harder to get net customer increase. Once you have a customer who has been there with you for a year or two, it is easier for you to upsell that customer a higher price package. So now why on a quarter on quarter basis, you see because our long term average is that we have about 18% on an average CAGR based increase in the customer base and about 10% coming in from the mix and price change. So mix change is different than price change. Right, right, right. So mix change is relatively stronger in a sense, right? Yes. And more so when the bottom of the pyramid customer base is going slower. Right. Because Then the more effect you will see, which is coming from this. And as Prateek had explained earlier, most of our revenues are a driven revenue from what is coming from the deferred revenue. Right. But I think a lot of what has happened over the last eight quarters in terms of price and in terms of mixes, that will reflect in the current quarter, not the current quarter number. The current quarter number is only the end customer number, which we divide by the revenue to arrive at the average realization. So if the current quarter addition is higher, suddenly the realization per customer will look lower. Right, right, right. Okay. And on the margins, could actually just comment? Because at a certain level, given that your the reason I'm asking this is that, theoretically, it looks like your margins could keep expanding for a while as long as your revenue growth is, say, above 25% because your costs on an average have been growing at about 20% plus. So is there a limit, a sort of stable margin that you will reach at some point in time? And what is that point in time likely to be? I mean I would love to be closer to Facebook and Nogri, which are at 55%. Currently, we are half of that, not even half of that. But that would depend a lot on our capability to innovate on product side and capability to execute. On a medium term, yes, I can say that we will try and make sure that our costs do not increase beyond 20% and our revenue do not decrease beyond 25%. But Right. So basically, are you saying that there is considerable quarter or two leaving aside a quarter or two, which may happen or maybe three or four quarters if the economy continues to be slow. But over the medium term, are you therefore saying that there's a substantial REPRESENTATIVE:] headroom for margins to grow? So Sangeema, if you look at last call that we had in the last quarter, the guidance that we gave was that the margins will continue to expand over the next two, three years if, of course, the macroeconomic situations do not change dramatically negatively. And this entire margin expansion, we are absolutely confident that if we leave aside what we see in the current scenario, then if you look at from the last two years, that trend should continue for the next few years also. Okay, okay. All right, great. Thank you very much. Thank you. The next question is from the line of Deepa Kotar from Saphyra Capital. Please go ahead. Hello. SRINIVASAN Yes, please go ahead. SRINIVASAN you very much for the opportunity. Now question now first question is regarding your credit financing that you spoke about. So how we want to scale up that business financing to your clients? How big can be the opportunity in that particular space? As I said, this is a bigger opportunity, but we don't know how to execute. We don't even have a background on that. We have started with the payment gateway. We have started to aggregate all kinds of credit based payment options on the payment gateway. The idea is that as you go to a matured e commerce marketplace like a BookMyShow or something, you have multiple payment options where you could utilize your credit beyond your Mastercard and Visa card credit card. You can use e Pay later, you can use LazyPay or JustMoney or a Bajaj Finserv card to pay for that. And many more such credit options are emerging in the economy in the new economy. The idea is that if we could utilize that same credit on these 140,000 merchants, instead of asking credit from these merchants, this could be a good value add. Similarly, we would try and work with NBFCs to see if we can expose them to the kind of transactions are happening on India Mart and if they would like to do any kind of a transaction financing. But all of this will take a lot more time and a lot more patience. I think it is more of a belief that we should have. There are success stories in the world across China, America and South America, where marketplaces have been able to do well along with the fintech offerings, be it payment, be it escrow, be it transaction financing or be it the business lending. But for us, it is a very early starting point. Over the next three, five, ten years, we'll definitely try various things and see how big it can become. Okay, okay. So currently, the road map is not formed, we would be going towards that direction. Is that what Understood we that. And regarding this VAPAR, are we planning to integrate it with our platform? Like how do we want to use their platform? I've already said this in response to the earlier question. It is just two months into India Mart investment. Next two, three years, we'll continue to nurture them and make them grow independently. And once they achieve certain size and scale, we'll see what kind of features are good for integrating within India Mart. Understood. And regarding your revenue and cost, you mentioned that you want to grow revenue by 25% plus and cost by about 20%, right? Yes. Yes. So if I kind of plug that number, so overall EBITDA margin, I am getting roundabout close to 20%, whereas in the first half, we have done EBITDA margin in the range of 23% to 24%. So how where is the disconnect basically in that? So we'll not be able to comment on the specific numbers here. But as we said that on the revenue side for this year, we're looking at a growth of 25% plus and the expenses at around 20%. Correct. And that should give you the resultant number. Yes. So that's what I'm getting, ground over close to about 20, 20.5%. So ideally, your second half has to be much lower in terms of your EBITDA margin to meet whatever kind of indication you are giving. So it's yes. No. But I hope you are adjusting the Ind AS oneone 116 impact of rent expense, which has gone below EBITDA line post April 1. Fine. Yes, I am basically. Because of that, you would see the last quarter and this quarter, the 2% to 3% EBITDA margin has kind gone up only because of the fact that the rent expense, which used to come in the other expenses line earlier, has moved to the depreciation line now. And quarter four is almost lowest. Yes. And what about quarter four you mentioned? Sorry, what's that? So there was something that you mentioned about quarter four. No, we were looking at the previous quarters. So typically in Q4, we have a slightly higher cost as compared to the other three quarters. So this is what we were discussing. Thank you. The next question is from the line of Sonal Minas from Crescent. Please go ahead. Hi, this is Sonal Minas. I would like to know what is a sustainable cash flow from operations that the business can generate. I've seen the number this half year. And I think the EBITDA is up, but the CFO is flat. So I just wanted a little bit of management commentary on that. That's the first one. Second, I just wanted to understand what channels do you use to acquire new customers? I know there's a field strength. But if you could give, let's say, a pie of if 100 customers are coming, which channels are they coming from? And I think the third one would like to know like given the macros, are there discounts to customers or let's say any freebies for the customer factored in the P and L or they're part of the sales pitch to acquire new customers? So just getting the flavor of these three. Okay. So for your first question on the cash flow side, so with respect to the last year, our cash flow from operations for this particular quarter has slightly gone down. The reason being, as we've been discussing that the expenses have gone up. However, we have seen certain pressures on the billings and the collection side. Because of that, the deferred revenue addition has been slightly muted. So because of that, there are higher expenses. The collections or the billings have grown almost 15% to 16% year on year as compared to the expenses, which have been growing at around 20% plus in this particular quarter. So that is resulting into a lower cash flow. Okay. Okay. Just a question on this one, like how do you is this related to a more credit given to people in the channel? Or and that's why we see your cash flow number dipping here? Look, cash flow is the resultant of the expenses and the collection. So as our manpower expense has increased, we've been discussing in the call that our effort in acquiring the new customer has certainly gone up because of which we have added almost 300 people 200 people in the new sales side and 100 people in the customer servicing side, which has led to the increase in the expenses. Got it. Okay. Is there a churn data you can share on a regular basis with the larger audience? Is that something which you can add to the disclosure going further? Like if there are 100 customers being added, how many what percentage of your base is basically moving out? Is there a number you track, which you can share publicly on this one? There are a lot of numbers that we internally track. But in the terms of churn, the churn depends upon a couple of factors. One is how old is the customer because we have seen that churn improves significantly or the renewal turns out to be significantly better as the customer becomes a tenured one. So typically, you would see our first year renewals would be lesser as compared to the second year renewal and the third year renewal. Second factor, which also impacts the churn is the level of or the tier the membership tier that the person has taken. So typically, we have seen our platinum customers are the one where we've seen the lowest churn, whereas on the silver customers, the churn is comparatively higher as compared to gold. So there could be the different metrics, which makes this entire churn data slightly more complicated. Though on an average, what we have seen is broadly, if we try and bucket our customers on the two aspects, one third of our customers operate on a monthly subscription and two third of the customers operate on annual and a multiyear subscription. On the annual and the multiyear customers, we've been seeing on an average around 20% churn. And on the monthly side, we are seeing on an average 5% churn per month. So that is the churn what we've been seeing. Thank you. The next question is from the line of Dhruv Patia from AUM Fund Advisors. Please go ahead. I'm sorry, seems the line is on hold. We'll move to the next question. That is from the line of Manan Shah from Mani B Group. Please go ahead. Yes, sir. Thank you. You already answered my question. My first question is on the churn and the bifurcation of our subscribers in how many of them are monthly versus annual versus multi annual? My next question is, as you said that our buyers are data is very diverse. I wanted to know how do we use that data like, do we use that data to deploy our sales force to acquire suppliers from those areas where we don't have or like do we use that data in some way or the other? So we use data in various ways. Buyer data, we use for forecasting demand of buying inquiries coming from certain areas. Now that can be used to upsell when suppose when a tractor customer, Mahindra, says that I want to sell tractors, which are different cities and I should take a premium listing, we can use our buyer demand data to guide them to these are the top categories top cities that you should take it from. Or sometimes when they say that I want to increase my presence in Northeast, which are the particular cities where there is a lower demand and higher demand and a lower supply. So we use that data in while upselling premium listing premium customers. Also, we use that as an unfulfilled demand from buyers. So if there are buyer demand coming from a certain sector or a certain geographical sector and if we do not have suppliers matching there, then we use supplier data. So for example, we know exactly which supplier who belongs to Delhi also deals in Lucknow and Kanpur and Agra, whereas another supplier who deals in who is based in Delhi also deals in Jaipur and Jodhpur and Udaipur. So then we are able to redirect those suppliers to these suppliers who are dealing in these particular categories. So we are using multiple ways, this data, to improve our matchmaking. And that is where we say that this is a behavioral matchmaking based upon suppliers' RFQ consumption based data. So we use suppliers' behavioral data to improve buyer matchmaking relevancy. Right. But this buyer data that we provide to our suppliers, do we charge anything to that? Or do we share that only with our platinum customers? Or this data is shared with all the customers? Or is it is there a way how we can monetize this data as well? Yes. We have discussed internally a couple of times. Is there can we do our own CMI index? Can we do our own things like that? But I think it's a long way to think about that. Yes, someday, that data could be useful for different brands to do a targeting and other things. Right now, we haven't done any thinking around that. Thank you. The next question is from the line of Dushar Sarta from Athena Investments. Please go ahead. Thank you for the opportunity. I wanted to understand couple of things. One is, which categories of buyers and sellers are there on the website? That information is not there in the presentation. Which is the main category which gets traded, top four, five categories? So if you look at our DRHP or RHP or an annual report, in the annual report, you will find distribution of the categories. We do not release that category based data on a quarterly basis. But if you look in the annual report, you will find the no single category is contributing more than 10% of our supplier base. And even within those categories, our within those industries, our categories are 138,000. So we are fairly diversified. But if I have to tell you the top five categories, they will be industrial, electrical, industrial supplies, yes, building construction, pharmaceutical and medical and chemical. So those are the naturally five, seven industries. But I would say you could go on to our website and see the how they are ranked. And then they are typically ranked in the order of demand and supply. And also refer to our annual report. Okay. Thank you. And my second question was, there were some questions about your website facilitating transaction and all, right? So there is this JEM platform of Government of India, which facilitates buying from SMEs for government departments. So do you have any kind of integration or your suppliers go through you or directly or something like that on that platform? I mean, is or do you conduct auctions for buyers? Currently, we do not have any institutional connect with JEMPortal. We do not intend to have any institutional connect with JEM portal. I have seen a lot of time, anecdotally, people who are sellers on JEM portal acting as buyers on India Mart portal to source the same things from India Mart and finally sell it or supply it as a contractor or as a tender on the GEM. But that is anecdotal, completely anecdotal. Okay. And my last question is, if I want to learn more about the company, whom do I contact? Do you have an Investor Relations agency or something? We do have an Investor Relations agency, and we do have an Investor Relations person in house. They will I mean, you can reach out to us and we'll definitely connect back with you. Okay. Thank you very much. Thank you. Ladies and gentlemen, due to time constraints, that would be our last question for today. I now hand the conference over to the management for their closing comments. Thank you, and over to you. Thank you, ladies and gentlemen. I think this was overwhelmingly thirty minutes over call, and I can still see more than 50 participants active. So thank you for your interest and participation shown in the company, and we'll continue to interact with you through various platforms as well as our website and exchanges website. In the meantime, if you have any further questions, please do reach out to our Investor Relations team. The contact details of Investor Relations is given on our website. Thank you very much once again. Have a good day and Happy Diwali to you guys. Thank you very much.