stock analysis: IndiaMART InterMESH sees opportunity in Covid crisis & Dalal Street is cheering it on


Mumbai: The Covid-19 pandemic has not derailed the momentum for this internet-based business, as the stock continues to scale new highs. Some analysts feel the stock has the ingredients to be a potential multibagger.

Amid a dearth of internet-based listed stocks in India, existing ones are in high demand and IndiaMART InterMESH is no exception.

IndiaMART is India’s largest online B2B marketplace with a market share of around 60 per cent in online B2B classifieds. The company operates a product and price discovery platform, facilitating interactions between suppliers and buyers, and has benefitted as more and more businesses move online in the wake of the pandemic.

To be sure, the company has been impacted by the disruptions caused to the small and medium enterprises, which form the bulk of its customer base.

“The entire Covid-19 situation has helped them get more business. The anti-Chinese sentiment has also worked in their favour,” said Abhimanyu Sofat, head of research at IIFL Securities.

“Post their listing, they have consistently delivered strong earnings, and profitability has improved considerably. This trend might continue, and the stock should continue to do well,” he said.

Sumeet Nagar, MD of Malabar Investments, says people are willing to pay a price for IndiaMART’s business process that provides the ability to businesses to generate demand. “I think the importance of IndiaMART in the mind of its customers has only gone up,” he said.

“While there would be some impact in the current quarter or current financial year, but in the medium term the opportunity should only grow bigger and that is essentially what we are looking at,” he said in an interaction with ETNow.

The stock with the offer price of Rs 973 was listed on July 4, 2019. It witnessed strong listing gains of 33.87 per cent. The stock hit a record high of Rs 3,146.80 on August 7, and is up more than three times from its issue price, with recent gains coming in from robust June quarter earnings.

On Tuesday, the stock traded at Rs 2,949.

On July 21, IndiaMART InterMESH reported a more than two-fold jump in consolidated profit for June quarter at Rs 74.1 crore, backed by strong operating performance.

“The ongoing adverse market conditions had an anticipated impact on our customers, revenue, deferred revenue and cash flow from operations,” CEO Dinesh Agarwal said in the earnings release.

“Given the overall uncertainty of how long this continues, our strong balance sheet and a resilient business model will help us navigate the ongoing crisis. As businesses realise the need to migrate online, our strong value proposition will help us get back to growth soon,” he said.

The stellar performance and potential has attracted long-term investors. On July 23, the Government Pension Fund Global or Norway’s Oil fund bought a stake in the company.

At last count, the stock had 2 ‘strong buy’, 1 ‘buy’, 1 ‘hold’ and 1 ‘strong sell’ ratings on the publicly available Reuters Eikon database.

On July 23, JM Financial raised its rating on the stock to ‘buy’ from ‘hold’.

“While we have always liked IndiaMART’s asset light, negative working capital cycle and strong network effects business model, we were till-now a bit cautious due to the strong macro headwinds,” JM Financial analysts said in a note.

The brokerage said after back-to-back positive surprises that demonstrate the management’s ability to smoothly march through tough periods and very strong beat on the brokerage’s numbers, it revised its EPS estimates upwards over FY21-23 by 84 per cent, 42 per cent and 30 per cent respectively.

On July 22, Edelweiss Financial Services said the all-time high business enquiries would be a key driver of revenue growth and subscriber addition for IndiaMART.

“Although SMEs are under stress due to lockdown, they will have to incrementally depend on a platform like IndiaMART as business moves online,” Edelweiss analysts said while maintaining buy rating on the stock.

Deven Choksey, group managing director, KR Choksey Investment Managers is upbeat on the prospects of the stock. “For IndiaMart — the B2B activity is gaining traction. The entire segment under proper supply chain logistics arrangement is on the threshold of further growth, and that’s where this company is favourably placed,” he said. “I would think the momentum in the stock is going to grow from here,” he said.





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