Collections have recovered to 80% of pre-COVID levels – INDIAMART

Update on the Indian Equity Market:
On Thursday, NIFTY closed in red at 12,690 (-0.5%). Top gainers in NIFTY50 were HUL (+3.3%), Grasim (+2.9%), and Shree cement (+2.4%). The top losers were SBI (-3.0%), Kotak Bank (-2.8%), and Coal India (-2.7%). The top sectoral gainers were FMCG (+1.3%), REALTY (+0.7%) and MEDIA (+0.6%) and sectoral losers were PSU BANK (-2.3%), BANK (-1.9%), and PVT BANK (-1.8%).

Excerpts of an interview with Mr. Dinesh Agarwal, Founder & CEO – IndiaMART InterMESH Ltd with CNBC dated 12th November 2020:
• IndiaMART’s second-quarter revenue growth is largely similar to the last quarter but margin improvement continues.
• In the months of May to August, they had been seen a week-on-week growth and that has resulted in almost 80 percent of pre-COVID levels in terms of sales and collections both.
• Though they have recovered significantly from the last quarter, the revenue and collection are still slightly below the last year same quarter numbers.
• The markets have opened up, the economy has opened up, but there is a risk of the third wave, so they are looking at it cautiously.
• They have yet not opened any offices and their staff is not able to visit any customers. So post Diwali if they are able to reach out to the market in full swing and that will derive the growth from here on.
• Currently they are following their own plan, so they are neither looking at raising any capital nor looking to sell any stake.
• Their cost base has been running at about Rs 1,200 mn per quarter, in lockdown lot of cost-cutting was planned and done during the quarter and that has resulted in the significant cost going down to almost Rs 800 mn per quarter.
• As the business will open up, as offices will open up half of that cost should come back and some of the cost advantages that they have taken can be permanent.

Consensus Estimate: (Source: market screener and websites)
● The closing price of INDIAMART Ltd was ₹ 4,940/- as of 12th November 2020. It traded at 51x/ 53x/46x the consensus earnings estimate of ₹ 96.3/94.2/108/ for FY21E/22E/23E respectively.
● The consensus price target of INDIAMART Ltd is ₹ 4,348/- which trades at 40x the earnings estimate for FY23E of ₹ 108/-
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