IndiaMART InterMESH Shares Drop 10%: Key Factors Behind the Decline

In the world of stock market investments, stock movements often follow the tides of quarterly earnings, investor sentiment, and market analysis. Recently, shares of IndiaMART InterMESH, one of India’s leading online B2B marketplaces, dropped a staggering 10%, hitting a 25-month low of ₹2,065.40 apiece. This decline was precipitated by disappointing third-quarter numbers for the fiscal year 2025 (Q3FY25), signalling a slowdown in the company’s growth trajectory. The drop also comes after several brokerage firms downgraded their ratings, citing concerns over a reduction in paid subscribers and weak collection growth.

This blog will provide a thorough analysis of the recent developments surrounding IndiaMART InterMESH, exploring the reasons behind the stock’s significant drop, the company’s Q3FY25 performance, and how brokerages have reacted to the financial results. Additionally, we will delve into the broader implications of these developments for IndiaMART’s long-term growth and its position within the competitive online B2B marketplace space.

IndiaMART InterMESH: A Brief Overview

IndiaMART InterMESH, founded in 1996, is India’s largest online business-to-business (B2B) marketplace, offering a platform that connects buyers and sellers. The company provides a wide range of products and services across various industries, allowing businesses to find suppliers and manufacturers for their requirements. IndiaMART has evolved as an essential player in the Indian e-commerce ecosystem, catering primarily to small and medium enterprises (SMEs) and helping them gain visibility and business opportunities in a competitive marketplace.

The business model is subscription-based, in which companies can list their products on IndiaMART’s platform for a fee. This is scalable and very profitable because the company benefits from recurring revenues. The main challenge in maintaining the company’s success lies in retaining customers and expanding the subscriber base, which, of late, has been causing concern.

Recent Stock Decline: What Caused It?

On January 22, 2025, IndiaMART’s share price took a significant hit, falling by 10% to ₹2,065.40, marking a 25-month low for the company. Several factors contributed to this sharp decline, with brokerages slashing their target prices and downgrading the stock after the company released its Q3FY25 earnings report.

• The decline in Paid Subscriber Base: The most significant factor contributing to the stock price decline was the drop in IndiaMART’s paid subscriber base. For the first time since the post-COVID recovery, the number of paid customers declined due to high churn rates. The number of paid suppliers fell to 214,000, down by 1.8% quarter-on-quarter (QoQ). This is a red flag for a company whose revenue model relies heavily on the subscription fees paid by its users.
• High Customer Churn: The decrease in paid customers was largely attributed to high churn, particularly among the Silver monthly packages. Despite the company’s efforts to stabilize churn and improve customer retention, these efforts have not yet yielded the desired results. The company has expressed hope that churn rates will recover over the next 2-3 quarters, but this remains a concern for investors.
• Weak Collection Growth: Collections growth for IndiaMART has been very weak, at 8% year-on-year growth for the standalone business. Further, management has also indicated a muted view of the future by predicting less-than-10% collection growth in the coming quarters. This weak growth, along with declining subscribers, has resulted in investor skepticism over the company’s ability to maintain its growth momentum.
• Profitability Concerns: While the company reported a modest increase in revenue, its profitability has been under pressure. The reported profit after tax (PAT) for Q3FY25 stood at ₹121 crore, which was lower than ₹135 crore in the previous quarter (Q2FY25). The market’s reaction to the decline in profits has been swift, with analysts lowering their target prices for the stock.

Q3FY25 Earnings Snapshot: A Mixed Bag

The IndiaMART Q3FY25 results were mixed. Revenue came in at ₹354 crore, up 1.9% QoQ, driven by a 3.5% increase in annualized average revenue per user to ₹62,900. However, the decline in paid subscribers was a significant weight on the stock.

1. Revenue and ARPU: The company reported 1.9% revenue growth, with the ARPU having increased by 3.5%. This was a positive indicator that IndiaMART could still drive some growth through improved pricing for its services.
2. Paid Subscribers and Customer Churn: The decline in paid subscribers, coupled with high churn, is a major concern. The company’s management acknowledged that the churn issue, particularly in the Silver monthly packages, is a critical area that needs to be addressed in the coming quarters.
3. EBITDA Margin: IndiaMART’s EBITDA margin improved by 30 basis points to 39% QoQ, supported by a reduction in other expenses. This was a silver lining in an otherwise difficult quarter.
4. Live Product Listings and Registered Buyers: IndiaMART’s platform saw an increase in live product listings (up to 115 million from 113 million in Q2FY25), and registered buyers increased by 4 million QoQ to 206 million. These numbers suggest that while the company faces challenges in subscriber retention, its platform remains highly attractive to buyers.
5. The Brokerage Downgrades: Nomura, Nuvama, and Centrum Broking
   The market reacted quickly to IndiaMART’s disappointing Q3 results by downgrading their ratings and revising the target prices for the stock.
6. Nomura’s Downgrade: Nomura, one of the largest brokerage firms, downgraded IndiaMART’s stock from “Neutral” to “Reduce” and slashed its target price from ₹3,150 to ₹1,900. The downgrade was primarily due to the unexpected decline in paid subscribers, which Nomura attributed to weak customer additions over the past five quarters. The brokerage also cited concerns over low gross additions, persistently high customer churn, and weak collections growth.
7. Nuvama’s Revision: Nuvama, another major brokerage, lowered its target price for IndiaMART to ₹1,970 from ₹2,500. Nuvama also maintained its “Reduce” rating, pointing out that the company had seen a decline in subscribers for the first time since the post-COVID recovery.
8. Centrum Broking’s Outlook: Centrum Broking also joined the chorus of downgrades, revising its target price to ₹2,368 from ₹3,098. The brokerage noted that while IndiaMART’s business model remained strong, the company needed to focus on improving subscriber retention and reducing churn to ensure sustainable growth in the future.

Medium-Term Outlook: A Slow Recovery?

The medium-term outlook for IndiaMART’s stock remains unclear. The efforts put in by the company to curb churn and increase retention, particularly with Silver packages, will take time. Brokerages are projecting this period to be one of slow growth with subscriber numbers and collection growth staying under pressure.

However, there are still positive factors that could drive the company’s recovery. IndiaMART has a dominant market share in the online B2B classifieds space, holding 65% of the market. Its business model remains solid, and its platform continues to attract both buyers and suppliers. If the company can stabilize churn and restore subscriber growth in the coming quarters, it could return to a more favourable growth trajectory.

Long-Term Prospects: A Dominant Player in the B2B Marketplace

IndiaMART’s long-term prospects remain promising, despite the current challenges. As India’s largest online B2B marketplace, the company is well-positioned to benefit from the growing digital transformation in the country’s SME sector. With a market share of 65% and a vast network of suppliers and buyers, IndiaMART is a crucial player in India’s e-commerce ecosystem.

In the long run, if the company can address its subscriber retention issues and maintain its dominant market position, it could continue to deliver solid growth. The increasing digitization of Indian businesses and the growing adoption of online marketplaces could further strengthen IndiaMART’s position in the market.

Conclusion: A Tough Road Ahead for IndiaMART

The recent performance of IndiaMART InterMESH has been marred by significant challenges in terms of paid subscriber retention and collections growth. Though the company remains a dominant player in the online B2B space, the market reaction to its Q3FY25 results reflects investor concerns about its ability to maintain growth in the near term.

As brokerages downgrade their ratings and revise their target prices, IndiaMART faces a tough road ahead. However, with its strong market position, the company could bounce back if it successfully addresses its subscriber churn issues and stabilizes its growth trajectory. Investors should keep a close watch on the company’s next few quarters to see if it can regain momentum and reaffirm its leadership in the online B2B marketplace.