Shares of Indiamart Intermesh tumbled 19 percent to Rs 2,447 in the morning trade on October 21 despite reporting a robust second-quarter earnings report which sparked a cautious outlook from analysts.
The online B2B marketplace reported a substantial 94.7 percent year-on-year increase in net profit, reaching Rs 135.1 crore for the quarter ending September 30, 2024. While the company added 2,390 paid subscribers sequentially, collections growth slowed significantly, dipping to just 5 percent from 14 percent in the same period last year.
Following the development, Jefferies downgraded the company to 'buy' to 'underperform', reducing its target price to Rs 2,540 per share. The international brokerage said that even as the company reported in-line Q2 results, subscriber growth remains weak, leading to a moderation in collections growth to just 5 percent year-on-year, a key negative from the quarter.
Jefferies forecasts collections growth to range between 10-15 percent unless subscriber additions improve. The firm has also cut its estimates by 4-12 percent, citing a continued rise in subscriber churn despite multiple management interventions, which has been a negative surprise.
The company's EBITDA margin improved to 38.7 percent, up from 27.2 percent in the same quarter last year, reflecting operational efficiencies. Deferred revenue also rose, totaling Rs 1,483 crore, marking a 19 percent increase YoY.
Nomura maintained a 'Neutral' stance with a target price of Rs 3,150, pointing to weak collections and low subscriber additions as major factors dampening near-term prospects. The brokerage highlighted that, unlike previous trends, weak collection per customer growth is now coinciding with consistently low subscriber additions, averaging around 2,000 per quarter over the last five periods.
At about 10:20 am, shares of the company were trading at Rs 2,585, down 14.2 percent from the last close on the NSE. Indiamart Intermesh is currently trading way lower from its 52-week high of Rs 3,198.
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