INDIAMART INTERMESH LTD (INDIAMART) Q3 FY21 Earnings Concall Transcript

INDIAMART INTERMESH LTD (NSE:INDIAMART) Q3 FY21 earnings concall dated Jan. 19, 2021.

Corporate Participants:

Ravi — Investor Relations

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

Prateek Chandra — Chief Financial Officer

Analysts:

Dipan Mehta — Elixir Equities Pvt. Ltd. — Analyst

Manan Shah — Moneybee Group — Analyst

Anmol Garg — Motilal Oswal — Analyst

Sumit Jain — ASK Investment Managers — Analyst

Tejas Mehta — Old Bridge Capital Management Pvt. Ltd. — Analyst

Vaibhav Agarwal — Basant Maheshwari Wealth Advisers LLP — Analyst

Sanjay Ladha — Concept Investwell Pvt. Ltd. — Analyst

Grushneet Kaur — Motilal Oswal — Analyst

Presentation:

Ravi — Investor Relations

On behalf of IndiaMART InterMESH Limited, I’m glad to welcome you all to the company’s Q3 FY ’21 Earnings Webinar.

[Operator Instructions]

Joining us today from the management side, we have Mr. Dinesh Agarwal, Managing Director and Chief Executive Officer, Mr. Brijesh Agarwal, Whole-Time Director, and Mr. Prateek Chandra, Chief Financial Officer.

Before we begin, I would like to remind you that some of the statements made in today’s webinar may be forward-looking in nature and may involve risks and uncertainties. Kindly refer to Slide number 3 of the earnings presentation for the detailed disclaimer.

Now I would like to hand over the call to Mr. Dinesh Agarwal for his opening remarks. Thank you, and over to you, sir.

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

Thank you, Ravi [Phonetic]. Good afternoon everybody and welcome to the IndiaMART’s quarter three FY 2021 earnings webinar. I would like to wish everybody a very, very Happy New Year and hope you or your loved ones are staying safe and healthy.

We are hosting this conference through FLOOR, a platform by our associate company, 10times.com. The earnings webinar is also being shown live on IndiaMART’s Facebook page and YouTube channel. We have already circulated our earnings presentation, which is available on our website as well as our stock exchange websites. I’m sure we would have gone through the presentation and I would be happy to take any questions afterwards.

In the third quarter of this fiscal, we saw a recovery in the economy and business across the board. I’m pleased to report a strong financial report — performance of IndiaMART during the quarter. Our consolidated revenue from operations stood at INR174 crores, representing a growth of 5% on year-on-year basis. Collections from the customers for the period, that is INR179 crore, a sequential growth of 9% quarter-on-quarter, but marginally a decline of 2% year-on-year as compared to quarter three FY ’20.

December ’20 collection better than December ’19 pre-COVID levels. The jump in the bio-traffic was visible in the last quarter and has sustained this quarter as well. Total traffic has grown by 35% year-on-year, reflecting approximately 85 million visits per month. Business enquires delivered increased by 37% year-on-year, to 54 million with our 90-day repeat buyers standing at about approximately 60%.

During this quarter, there were approximate 7,000 clients addition to the net paid subscribers, resulting into 1,48,000 customers at the end of the quarter. Now we are back to March ’20 paid customer levels of 1,47,000. Indian Internet growth has accelerated further after the pandemic, and many new opportunities will emerge in the coming time. Keeping this in view in yesterday’s Board Meeting shareholder resolution to raise funds was approved on 18th January for approximately up to INR1,100 crore. The proceeds will be utilized for organic or inorganic growth opportunities in this special strategy to IndiaMART.

Now I would like to hand over the call to Prateek to discuss the financial performance in detail. Thank you, and over to you, Prateek.

Dipan Mehta — Elixir Equities Pvt. Ltd. — Analyst

Thank you, Dinesh, and good afternoon everyone. I will take you through the financial performance for this particular quarter.

Consolidated revenue from operations was INR174 crore in the quarter, a growth of 5% year-on-year, which was primarily driven by a similar increase in paying subscribers year-over-year and a marginal improvement in our average realizations for supplier. Consolidated EBITDA was INR88 crores, representing a margin of 51%. Net profit for the quarter was INR80 crores. We’ve been able to sustain these margins as our offices stay closed and hiring has recently started.

As and when the business volumes reach normalcy, we expect some of these costs to increase. Cash flow from operations during the quarter was INR77 crores. As of 31st December, cash and investments stood at INR1,143 crores.

Thank you very much. We are now ready to take any questions.

Questions and Answers:

Ravi — Investor Relations

Thank you, Prateek. We will now begin the Q&A session.

[Operator Instructions]

Please go ahead with the question, [Indecipherable]. Please unmute yourself and go ahead with your question.

Next question is from the line of Manan Shah. Manan Shah, please go ahead with your question.

Manan Shah — Moneybee Group — Analyst

Yeah, hi, thanks for the opportunity. My first question was that we had recently signed a case against one of our competitor for IP test. So can you of on this case and like, where is this case right now at? That would be my first question. My second question was that, with the increasing in the competitive intensity, would we start spending on advertising? Because, currently we are not spending anything on advertising.

And my last question was on the recent fundraising. We had already sitting on adequate cash and cash equivalents on our balance sheet. So why is there a need to raise such a huge cash right now? Hello?

Prateek Chandra — Chief Financial Officer

Hi. So with respect to the three questions, the first question you asked about the legal proceedings we have initiated against one of the competitors. So it was — its next hearing is scheduled on 25th January and we filed this case sometime in the month of November, wherein we have highlighted to the court about our grievances through which court has granted an interim injunction in our favor. And next date is 25th of January so it will proceed as in those laws.

Manan Shah — Moneybee Group — Analyst

How confident are we on our claims?

Prateek Chandra — Chief Financial Officer

On this one — only one hearing that has happened so far. Sorry, am I audible?

Manan Shah — Moneybee Group — Analyst

Yes.

Prateek Chandra — Chief Financial Officer

In this, only one hearing, which has happened so far in which we have presented our case to the Honorable Court, and Honorable Court has granted that injunction in our favor. The other party is yet to revert their response to our grievances in front of the court. Hopefully by the next time of hearing, they would with their response and then the proceedings will take this accordingly.

Manan Shah — Moneybee Group — Analyst

Okay. And on the ad front?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

On the advertising, if you see, we haven’t done any significant advertising since FY ’17. 100% of our traffic, which is about 80 million visits a month that we get is organic traffic. Even the — last time when we did advertising, between 2015 to ’17, it was our brand building and recalling value. And we feel that currently especially in the last year, the traffic has gone up by 30%, 40%. And also the need for in IndiaMART has been — used by many people. Whereas we don’t feel there is a need for advertising as us now. But if as and when there would be any need for advertising, we will definitely let you know and do the same.

On the cash side, as I said earlier, that Indian internet growth opportunities further accelerating during the last year. And many new opportunities are like to emerge as the transformation progresses. With 700 million mobile phones and step function jump into the SMEs and businesses using it, internet for their purposes, we believe that there will be many more opportunities that will come. We intend to make a long-term organic and inorganic strategy growth opportunity in the area of IndiaMART operation and its adjacencies.

On the cash part, you can see that there is INR633 crores in our deferred revenue, out of the total cash balance we have, which leaves us at a remaining cash balance — cash reserve of INR500 crores. So that is how — and we have seen and met multiple companies and multiple sectors over the last year. And based upon our own in assessment, we feel that a INR1,100 crore kind of fundraise should be necessary to fund our growth ambition for the next few years or so.

Manan Shah — Moneybee Group — Analyst

Will there be like in a controlling stake or would be investment kind of acquisitions that we’re looking at?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

It’s difficult to say, as of now. We intend to make long-term investment in strategy businesses. And we will try for one or two acquisition along with a couple of minority investments and this continue to evaluate proposals and we will let you know as and when anything comes.

Manan Shah — Moneybee Group — Analyst

Okay, thank you. I’ll get back in the queue.

Ravi — Investor Relations

Thank you. Next question is from the line of Anmol Garg from Motilal Oswal. Please go ahead.

Anmol Garg — Motilal Oswal — Analyst

Yeah, hi, good afternoon, everyone. So just — I had just couple of questions. The first is just on the previous question, if you can dwell more on which are that we are targeting for the acquisitions for the fund raise that we are doing.

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

As I said, we intend to make investments or acquisition in the strategic spaces where we can leverage IndiaMART’s ecosystem. So whether it is the reach, or whether it the customer. And it should improve customer experience, engagement and monetization. The broader spaces that you can see, we have always been talking about FinTech and SaaS, and vertical commerce is one such thing which is also very important. We have recently seen a lot of activity in the conversational commerce. And we believe that there could be opportunities. We have done an investment in RevPAR, which is into the accounting and tax invoicing. There are receivables, management, sales and distribution management and we have already done investment. The zone is on the sales and distribution side. And then there are cloud communication, payroll, logistics aggregation and tracking platform. Within fintech, if you see, there could be payment facilitation and credit facilitation. We already have a payment subsidiary called PaywithIndiaMART.com. However, we haven’t yet done any buyer or seller facilitation of the credit on the transaction side. And then there are API banking which we would like to offer to our SMEs. That is another area. Business insurance is another area. So there are multiple areas that we have seen in the past. And within the vertical spaces, there are agricultural there are industrial products. There are items like shoe wholesaler, many other items are available. The basic theme has to be — either it has to be transaction enablement or ease of doing business by way of business process enablement. So I think enable the commerce to how to become one-stop shop and keep it moving our customer, experience, engagement and expanding the network for monetization. That should be the overall theme.

Anmol Garg — Motilal Oswal — Analyst

Yeah. Sure. Thanks for elaborate reply. And secondly, just wanted to ask that have we any plans to increase our pricing of the base packages that we are offering right now?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

So we have been doing price changes multiple times. That’s said in the past also. Last year, we have seen how do we offer shorter duration at more affordable packages because the people were facing tax and we wanted more and more people to come on the platform. You can see that if you go to our deferred revenue slide, you will see that the current portion of the deferred revenue has gone up from [Technical Issues] and similarly on the base package, we have done two changes. One, the base package was initially a INR5,000 setup fee and INR3,000 inclusive of tax on a monthly basis. Now we have made it simplified so that there is a INR3,000 plus tax, which offers two things. One is it’s simplified to sell one kind of package, and second, it lowers the entry price from upfront INR8,000 to now [Technical Issues]. So we have done that.

Apart from that, in the previous quarter itself, we had introduced the concept of daily buy leads. If you remember, we had — all our packages like silver, gold, platinum, they buy lead packages which were on the weekly basis. Now we have introduced the daily quota as well to make the customers come back on a daily basis as well as a weekly quota. So the overall buyer base has gone up by 40%. We have also increased the weekly quota for silver monthly packages, one every day plus seven per week. And for annual and muti-year, one every day plus 10 per week. Similarly for gold, two per day and 20 to 30 per week, depending up on which year of gold. And platinum, three and four per day, and 50 to 100 depending up on year of gold. So we have done certain changes in the pricing and we have seen very good result. Many of our suppliers, one, because of the pandemic I think they have done good internet-ed option. And they have found useful value in IndiaMART in coming on a daily basis. And we have seen that people who are consuming buy leads [Indecipherable] on say about seven days a week or 10 days — seven days a month or 10 days a month, has gone up to 15 days a month by introduction of these daily expiry buy lead packages.

Anmol Garg — Motilal Oswal — Analyst

Yeah. Sure, Dinesh. And just lastly from my end, is that, so earlier we have talked about that half of the margins will be sustainable on a longer-term basis. So what are the factors that are leading you say that — what on the cost optimization front that we are doing that will be sustainable on a longer-term basis, post we start paying out variable pays to our employees and also start hiring?

Prateek Chandra — Chief Financial Officer

Sure. So Anmol, if you look at our structure in the pre-COVID level was hovering around INR220 crore per quarter. Last year in the same quarter, we did INR122 crores of cost. In this particular quarter, our total cost was around INR85 crores. So there is roughly around 30% reduction in the cost, on an overall. And even if you look at the split of the cost broadly, we had two types of cost. One is the people and people related, which is manpower and outsources. So therein the cost has come down from [Technical Issues] to roughly around INR65 crores in this quarter. The other overhead and G&A, where the cost has come down from roughly around INR30-odd crores to INR22 crores in this particular quarter.

If you see the headcount cost, change has largely been because of the reduction in the headcount or the manpower what we had operating with lesser people. Second is, on the G&A side, since we’re continuing to work from home, our offices are stay closed. So there is lot of savings on the G&A side, we have seen. All in all, permanent basis — so I’m just saying that. And there are certain immediate will cost which was related to the businesses, which we will soon do savings.

Going forward as we come back to our normal levels of business, some of these costs with certainly come back. And the cost, which would not come back would be optimization that we would have done, which is largely in G&A cost to offices. From 80 offices, now we had operating with roughly around 40-odd offices now. Then there are certain automations that we have done on the processes which would also result into some sustained savings. There are certain efficiency improvements which would also be there on the manpower side. So all in all, our estimate was that roughly 50% of these costs would sustain and 50% of these savings would come back.

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

I would add some kind of items that we are seeing. One, I think over the last six months, we have seen that some of the sales can be done using channel sales partners who are tele-based channel sales partner, as well as [Technical Issues]. There, the cost has gone completely variable. We have seen with, today, if there are 500 — if there are 1,000 people who are working on the new client acquisition, which are employed by IndiaMART, [Technical Issues] on fixed cost basis, about 500 people are working as channel sales partner. Second thing, we used to have a lot of BPO and call center operations which were being operated out of physical call centers at [Technical Issues] all those costs were involved. All of that has moved to the cloud telephony based systems. We are seeing approximately 10% of saving perceived on when the agents are working on work from home order. And we don’t plan return those call center-based, BPO-based operation back to the large call center — actual center coming in. So I think there is — we have moved certain products, which we were using in the server end. We have moved to the more open-sourced softwares, and we have seen significant saving coming from their side also.

We have also seen how our meetings can be done on the Zoom or on the video call today. So we believe that whatever travel cost that we were doing, either for investor relation purpose or for sales coordination purpose, at least half o that will look like permanent savings. And now also we are expanding, hiring — out of the hirings that we’re hiring today, we are hiring almost 50% of the people in the work from home operations. There we believe that capital cost and office going and coming, the office per seat cost is much lower. In fact, we are able to pass on some of that cost to the employees and some of the benefit also to the employees. So on one side, we are able to increase their take home. On the other hand, we are able to decrease the overall cost to the company.

So these are some of the cost and that is why I believe that out the INR30-odd crores that we have saved in the cost, we’ll probably get back INR15-odd crores and we’ll probably save INR15-odd crores per quarter.

Anmol Garg — Motilal Oswal — Analyst

Thanks, Dinesh and Prateek. That was very elaborate. I’ll jump back in the queue.

Ravi — Investor Relations

Thank you. The next question is from the line of Sumit Jain, ASK Investment Managers. Please go ahead with the question.

Sumit Jain — ASK Investment Managers — Analyst

Thanks. How do you determine what is the ROI of a subscriber or supplier? Let’s say if I’m a supplier and a subscriber, how much business I get generated through IndiaMART? Because that is crucial to know and to judge eventual stickiness of me with IndiaMART.

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

ROI is very different for different customers. We are a lead generation platform. So the way we measure ROI is how many buy leads a customer is consuming, how days he is coming to the platform and consuming buy leads, how many calls he is receiving and how many inquiries that he is receiving. Nowadays, because our CRM system has also become quite useful and quite daily used, we also come to know how many times people have replied to the inquiries and how many times people have made a callback from our CRM system.

So all in all, we are able to measure ROI in terms of number of calls or inquiries or buy leads received by the person, and number of calls and replies being done by the supplier. In terms of the actual ROI will depend largely upon different, different industries and different, different geographies. So we do not know exact transaction volume. Some of the data that we get is where people use our platform for payment service. There also we come to know what kind of transactions are happening on the platform. So these are the some of the ways that we calculate the ROI. And if the engagement level continues to increase or continues to remain there, then we understand that people would invest their time only if they’re getting an ROI, otherwise, they would not be investing their time. These are some of the ways that we measure. Do you want to add something? Please go ahead.

Prateek Chandra — Chief Financial Officer

One of the ways we also go ahead and look at this is what is the overlal number of inquiries that every paying subscriber essentially gets. So we have that number typically ending between about 400-odd [Technical Issues]. The other parameter which becomes important to measure the ROI is at what rate do we see these inquiries getting converted into [Technical Issues]. We have a proxy value around this measure, whereby we receive more than 150,000-plus feedbacks every month from buyers with said inquiries. And using that data, we can articulate that about 40% of these, we have done business with an IndiaMART supplier. If we translate that conversion [Technical Issues] level, we believe that about 6% to 7% of these inquiries is received by suppliers. [Technical Issues] multiplication of this conversion along with the average inquiries received by a paying subscriber actually gives us a good indication of that. Of course, it’s average, so we will have customers having better order values being received versus some customers having lower ROI. But it does give us a good view on where this trend is moving.

Sumit Jain — ASK Investment Managers — Analyst

Is there a way to capture more and more data of conversions of inquiries into sales for the subscriber that will give you early signals as to the stickiness of the subscriber? That was the point.

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

Of course, that is the direction we continue to work upon and in that direction only we introduced preferred number service as first, and then buy lead as second, and the CRM reply and CRM callbacks, and payment facilitations, all are that pertained in that direction. Because as you can understand, B2B is a very different thing. There are thousands of categories [Technical Issues] different geography. And then there are custom products, then there are made-to-order products. There are wholesale products. There are products being borne manufacturer. There are machines which are made to the specification. It is not easy to do a simple buy now kind of a product and the restrict the industries to only [Indecipherable] and off-the-shelf readymade product. So we are trying these different methods to find out more and more ROI. I think the best ROI that we are able to see is the engagement on the platform. If the supplier is engaged on a platform three days a week, we believe that he is getting the ROI.

Sumit Jain — ASK Investment Managers — Analyst

How does one correlate the daily unique business inquiries, which is 25 million in this quarter? Let’s say, as an example, total business inquiries delivered 154 million in this quarter.

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

25 million unique buyers have sent an inquiry, which has been received as a buy lead or inquiry or as a call by total number of 154 million inquiries. So we can imagine that one inquiry, one supplier, one buyer would typically either send an inquiry to two, three different supplier and two, three different suppliers to consumer buy lead of a particular buyer. So one buy converts into almost like six inquiries.

Sumit Jain — ASK Investment Managers — Analyst

And one last question, INR1,100 crores of fund raise. How big is your M&A team? How many prospects do they meet every quarter and their compensation and their reward structures?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

We are in early days of our team. We have three-member full-time team as of now. One very senior person whom you would have interacted. He was earlier taking care of investor relation also. And compensation details are not relevant at this point of time. We meet and evaluate almost like 25 to 30 companies every month. And we do secondary research on another 25 to 30 companies where we do not meet. So all in all, we are able to meet almost like 25 to 30 companies personally, and 25 to 30 companies where we do the research. In the last year alone, I think we would have done almost 50 per quarter. So about 200, 250 — 200 in a year. We have done about 200 in a year.

And I’m sorry, I said per month. It is per quarter, actually. So we do almost like 25 per month personal meeting and 25 secondary research. All in all, we have done almost 200 different company meetings.

Ravi — Investor Relations

Thank you. Next question is from the line of Tejas Mehta, Old Bridge Capital. Please go ahead.

Tejas Mehta — Old Bridge Capital Management Pvt. Ltd. — Analyst

Yeah, hi. Can you hear me?

Ravi — Investor Relations

Yes, we can hear you. Please go ahead with your question.

Tejas Mehta — Old Bridge Capital Management Pvt. Ltd. — Analyst

Yeah, great. Thanks so much. Sir, one question is, taking a lead from the question which was earlier asked. If you could just give us some, maybe some qualitative understanding about — how do you go about — how do you figure out that a customer is right to either of being a paying customer or to move him up to a gold or a platinum level customer? How do you really go about with that process?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

You are asking about our sales process?

Tejas Mehta — Old Bridge Capital Management Pvt. Ltd. — Analyst

Yes, yes. How do you really try and mine your entire supplier base of 6.5 million, as to actually paying subscribers and the stickiness?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

Interesting thing, you asked. This particular year, a lot of significant work has gone that mining of the — because historically, a lot of that work was being done by our field sales force and they would meet the customer and continuously keep in touch with the customer. However, when we faced the challenge of working from home and we could have gone to the customer, we have put a lot of data science towards this particular. So if I tell you how do we convert a free to a paid, we have multiple indicators on industry-based, geography-based, whether he is GST-registered person or not, how many times he has visited our platform in the past, how many times he — how many products he has added, how many buy leads have we seen.

Based upon this, we prioritize our database and create a hard lead and then we have a complete CRM which is in-house built, which we called mobile-based ERP as well as web-based ERP. Where we have this automatic allocation to our sales team and it comes in the prioritized order whom they should be calling and where there is a chances of conversion is higher and where there is a chances of success for that customer is higher. One is the customer is sticky where the customer is more likely to benefit and the second is the customer is more likely to convert, on the combination of the two we do that. And second part is the upsell part, our upgrade part. If again it happens in two ways, one we come to know based upon the ROI engagement levels that a customer is having on their platform and then again we see that if he’s consuming leads regularly, if he’s using the CRM reply tools and call back tools to manage his customers well, then we are able to ask him whether he would like to upgrade. On the other hand maybe calls inbound come and they want to ask for higher packages, how do I take a premium listing or how do I take a suggestion listing or how do I get a seal badge. So there is a inbound customer request also on which we are able to upsell.

Tejas Mehta — Old Bridge Capital Management Pvt. Ltd. — Analyst

Okay. Sir and the other thing is I wanted to understand how does say two parties negotiate the terms of credit on your platform or is it completely offline for them, once you make them meet your job is over and you do that offline, is that how it works?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

We have a CRM tool which is — which many of the suppliers use for managing their interaction with the buyer. But as I said, we do also offer a payment mechanism. But most of the B2B transactions are of very, very high value in nature. And many a times range into multiple weeks or multiple months. So thereby a lot of those transactions happen offline.

Tejas Mehta — Old Bridge Capital Management Pvt. Ltd. — Analyst

Okay. Okay. Sir the third question is to what extent is Vyapar and Bizom now integrated in your platform and how many customers are actually using those services?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

Vyapar let me first tell you. I think on the Vyapar side they continue to grow well. They are still a small company. I think their current quarterly revenue run rate is about INR3 crore a quarter. And that is a significant improvement from one year back. A number of customers have also gone up significantly. Last I told you probably was about 25,000 customer, now they are closer to like 70,000, 75,000 customers. We are helping them getting leads through IndiaMART. We are also thinking of using our seller data network to further increase that which, but we have not yet fully integrated into IndiaMART. We believe that they still have some distance to cover before we could integrate and I’m also learning more about this new side of the business, how best is to integrate over a period of time.

Coming to the Bizom; Bizom has multiple facets. One is Bizom acts like a sales force management tool for the grants — large grants to manage their sales force and dealer distribution system. And again they have an insight tool where they are able to get some insights on what retailers are asking for. We believe that out of the three systems — the field sales management, distribution management and the insights that we’ve been in any case. I think from the distribution side we would like to work with the brands to see if we can get all their distributors on to IndiaMART platform as well. But that is also is going to take some time. As of now, I think they were badly hit with the lockdown at corona times. They’ve recovered well and I think they contribute to be at a similar level last year in terms of revenue and last year there was revenue of about INR35-odd-crores.

Tejas Mehta — Old Bridge Capital Management Pvt. Ltd. — Analyst

And can I just squeeze in one last question for you? Sir, your number of paying suppliers have now gone up back to 146,000 but your deferred revenue hasn’t really grown much in the last three quarters. It essentially tells me that all these new customers are basically monthly or quarterly customers and they’re not benefit from your paying customer. How do you look at — get back to earlier run rate of growth of the ongoing long duration customer?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

Yeah. So if you see the first quarter of this financial year, the first quarter of this financial year, there was a huge difference between the revenue and the collection. We were on one side where the revenues are coming from the deferred revenue and the collections were heavily dropped in the first quarter. So the most of the deferred revenue loss — decline that you see it’s coming from the first quarter. In the current quarter, there is a INR178 crores of [Technical Issues] from customer and INR178 crores of revenue flowing, so again the deferred revenue has gone up by INR5 crores. I think it times to come it will go up again probably in adjacent quarter. However, if you see I’ve been telling you that we have — earlier we were selling mostly annual and the three year package when it came to gold and platinum subscribers, but during the pandemic, it was our duty to help the suppliers opt for a lower priced package. We couldn’t receive — reduce the actual price of the products, so we reduced the duration of the products. So now those products are being offered in a six monthly, one year and three year packages. Since the six monthly packages have gone up, the deferred revenue has declined a little bit, and the current portion has gone up from 60% to about 65% now.

Tejas Mehta — Old Bridge Capital Management Pvt. Ltd. — Analyst

Okay. Okay, great. And sir, just one last question, you have been adding about 4,000 to 5,000 customers — in customers there on a monthly basis, sorry on a quarterly basis. When do we start seeing more additions at higher RPM levels, because again the number of enquiries have largely been flat for the last many quarters, only it’s in the first three quarters that we’ve seen enquiries going up and thanks to COVID, but one worrying stat — as the situation down sizes would the enquiry levels come off, and then how — what is the trajectory of customer additions?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

See this is very imaginary question. I mean the number of — when the suppliers, number of suppliers increased the number of buyers increase on our platform. The suppliers have been increasing slowly so the virus have been increasing slowly. Now that the buyers have gone up significantly by 30%, the suppliers data will follow in times to come and that also remains on the our ability to sell and the nation’s ability to — with the economy on clearing path and opening up of the — as I said 90% of the categories have started to do business almost like a pre-COVID level. 10% categories are still badly suffered. You can imagine offices like ours are completely closed and there are so many supplies related to the offices, related to hotels, related to the airline industry, related to the railway industry, which are still not recovered.

So the channel sales effort that we have started to do and people’s affinity to purchase our B2B product online has gone up only recently. So we believe that in times to come this will slowly and slowly inch up and as it will happen, we’ve seen that this current quarter also, we have done almost like 7,000 net additions, whereas only 1,500-odd came from the — came from the previous recovery, about 5,000-plus came from the — and when most of our sales people are working from home or working remotely. So as we are able to open offices, as the economy goes back on, I’m — I certainly believe that there should be a growth of — similar growth like buyers in the supplier trend also. But let us wait for that to happen.

Tejas Mehta — Old Bridge Capital Management Pvt. Ltd. — Analyst

Okay. Thank you so much. Thank you.

Ravi — Investor Relations

Thank you. Next question is from the line of Vaibhav Agarwal, Basant Maheshwari. Please go ahead with your question.

Vaibhav Agarwal — Basant Maheshwari Wealth Advisers LLP — Analyst

Sir, thanks for taking my question. Sir, we are raising around INR1,100 crores through QIP. So this is a result in a sharp drop in our ROEs. So by when do — when can we expect the return-on-equity to get back to the normal levels, like what are the — like, it can get back to the current levels exactly and what timeframe do we expect that?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

Yeah. So Vaibhav it’s a good question. Right now, the board has approved the fundraise plan for the shareholder approval or they have recommended for the shareholder approval. Once we get to — once we receive the shareholder approval we will look at as to at what time, what could be the opportune time in which we’ll look at doing the fundraise and completing the fundraise activity, because the approval would be valid for a period of one year from the date of AGM or the date of the approval. So the ROI, ROE and all those repetition will also depend upon that particular timing. But overall if you look at it historically we’ve been able to improve our margins and improve the profitability. So hopefully if the similar trend continues then it will affect lesser piece than what we’ve shown in the last nine months. Hopefully, we should be able to cover up for whatever the dilution that may happen as a result of this fundraise activity. And more so as over a longer period as this fundraise or whatever the funds will be raised will gets deployed in the different businesses, I’m sure we would also generate returns and create value from this fund itself.

Vaibhav Agarwal — Basant Maheshwari Wealth Advisers LLP — Analyst

So do we have a ROE target internally like in three years or two years where are we supposed to be?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

I don’t think we have gone into that level of ROE targeting. What? I’m sorry. Could you repeat the question please?

Vaibhav Agarwal — Basant Maheshwari Wealth Advisers LLP — Analyst

I’m just asking you do we have any internal targets with regard to the ROE like in two to three years what kind of ROE target we have.

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

I think currently the target is to create value, to create a stickiness for customer, to create a meaningful platform which can be monetized in longer duration and how to make it easier to do business. I won’t be worried about the short term ROE percentage going up or down by a few percentage points so I think we will continue to create value and look for long term.

Vaibhav Agarwal — Basant Maheshwari Wealth Advisers LLP — Analyst

Okay, okay. Thank you.

Ravi — Investor Relations

Thank you. Next question is from the line of Dipan Mehta, Elixir Equities. Please go ahead with your question.

Dipan Mehta — Elixir Equities Pvt. Ltd. — Analyst

Yes sir. Congratulations on a very good set of numbers. From what I understand and what I’ve been observing I think it’s the vision of the company to be a end-to-end service provider for the SME which means you may provide payment services, maybe accounting services, logistics. So if that in fact is the goal then have we done some beta testing or have we done some experimentation as to how the whole process can be done and any timeframe by when we can offer all these adjacent services to your large database and then try and enable them on those various platforms and service as well and perhaps trying to get more revenue from them?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

Yeah, so if you see all the efforts have been going in that direction only. The current slide which may be visible to you, we patted with the CRM tool that was completely build in-house and today that CRM tool is very effectively being used. We also formed a subsidiary called Pay With Indiamart.com Private Limited. And that is working and facilitating payments albeit slowly because B2B payments are generally done over multiple tranches by way of finance the RTGS traditional methods, but still we are able to do some portion of that experiment on the platform.

We have also invested into the Order Management System on the — in our subsidiary called Pooraa where we are developing and manufacturing order management system. We have invested in the Vyapar where they are providing a voice seek and accounting based software. Bizom, we talked about that does — Bizom we talked about that does a dealer distribution management and sales force automation. So, I think slowly and slowly we are trying to build the jigsaw puzzle. In the last quarter, you see, we have added reviews and ratings onto our platform also. I think we are slowly and slowly building; there is no one day where all of it will start to happen. We continue to build pieces of this and hopefully all of that will come together at times to come.

Dipan Mehta — Elixir Equities Pvt. Ltd. — Analyst

Okay, sir. Thank you, and all the best with your endeavors.

Ravi — Investor Relations

Thank you. [Operator Instructions] Next question is from the line of Manan Shah. Please go ahead with your question.

Manan Shah — Moneybee Group — Analyst

Yeah. Hi. Thanks for the opportunity, again. Earlier we had plans of having differential pricing across different geographies and across product category [Technical Issues]?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

Yeah. So we did implement at the top tier.

Manan Shah — Moneybee Group — Analyst

Hello? Am I audible?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

We did implement differential pricing at the top tier of our service at the platinum level per industrial leadership product. However, when we were planning to do it for this start supplier and leading supplier packages in the platinum by that time the pandemic had settled. And I don’t think that is — this is the right time for going with that differential pricing. We wanted to make the product far more affordable during this time. I think let us wait for six months. Let everything be stabilized. And then we will start experimenting on those sites again because on one side the entire workforce has started to work from home and we needed a lot more training and rationale on that side to be trained because we have been selling one-size-fit-all-product for a long period of time.

And that is what our customers and sales have understood. Incidentally, only last quarter, we have also started to take out the export-based by leads and started offering it to exporter separately from one-size-fit-all. So we are slowly and slowly working in the — so export-based by leads are differentially priced you can say so now. So we will be working more such products in times to come but as of now going slow — little slow on that. I think as of now we want to go with the acquisition side better because we feel that a lot of people have favored digitization during the last year. And probably the time is right for us to double down on the digitization of the SMEs at the bottom of the brand.

Manan Shah — Moneybee Group — Analyst

Okay. And earlier you used to guide for a net addition of around 5,000 subscribers per quarter. However, in the past two quarters as visible and also due to more affordable products available, we have been able to add 7,000 to 8,000 net subscribers per quarter. So should we expect this run rate to continue going forward and also if you could provide, what was the gross subscribers that was added or rather what was the churn during the quarter?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

So providing the churn information would not be adequate at this point of time, because as I said, we have gone through the moratorium of lot of subscribers, lot of subscribers had taken a temporary off from the platform. So we are not able to calculate the exact churn numbers as of now. In terms of the net subscriber addition, last time, when we had 7,000 subscribers, I had told you that only 3,500 subscribers or so came with the new subscriber addition, whereas the 50% came from the recovery of the moratorium subscribers. Similarly, this time, when we added 7,000 subscribers, again about 15% to 20% came from the recovery of the moratorium subscribers, and about 5,500 came as a new addition. So we believe, yes, new addition has gone up from 5,000 to 5,500, we believe next quarter it should be anywhere between 5,000 to 6,000 for sure.

Manan Shah — Moneybee Group — Analyst

Okay. And are we still offering any discounts for gaining back our old subscribers?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

Yes, the — if they would like to come back, they can come back — still come back at INR3,000 inclusive of tax price.

Manan Shah — Moneybee Group — Analyst

Okay. Thank you.

Ravi — Investor Relations

Thank you. Next question is from the line of Sanjay Ladha, Concept Investwell. Please go ahead with your question.

Sanjay Ladha — Concept Investwell Pvt. Ltd. — Analyst

Yes, thank you so much sir and congratulation on a good set of number sir. So my first question will be on since we’re targeting the growth vision for two year, can you throw some guidance as to what growth we’re planning, can you share ballpark range as to plus INR25 crore, INR30 crore growth anything of that sort sir?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

No sir. I’m not allowed to do any of that.

Sanjay Ladha — Concept Investwell Pvt. Ltd. — Analyst

Okay and sir, my next question will be, could you through some color as to what changes taken place in this year in terms of in terms of technology or in terms of business or in terms of planning what we are – what changes we have done.

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

Yeah I think there a lot of items to share, this year all 50% at the time we’ve done is technological changes only and process related optimization and efficiency only, I suggest you please go through the new updated investor presentation which is available on our website as well as on the stock exchange’s website, you will see multiple new things when I talked about the more deeper, more deeper use of artificial intelligence and data analytic, whether it is in sales, whether it is in matching, whether it is in language detection, whether it is in translation, whether it is in the bank product detection or reserve keywords.

We’ve also done a lot of progress on the PRM tool and conversational commerce and payment side. So today all the debit transactions are available for free on our payment gateway, if you’re a paying customer, We have also seen significant adoption of the Vyapar Accounting Software going up in — only on mobile as well as on the desktop side. And we are continuing to build a cloud-based product on that side. So multiple process-related optimization, multiple cost-related optimization and multiple technology related breakthroughs have been achieved in the particular year. And we believe all of these together should poise for a better adoption of our products and services and tax book on that.

Sanjay Ladha — Concept Investwell Pvt. Ltd. — Analyst

Sir, my last question will be on acquisition front. As we know that on the — sir is my voice audible or?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

Yes, you are audible, please go ahead with your question.

Sanjay Ladha — Concept Investwell Pvt. Ltd. — Analyst

Sure. Sure. Sure. So my question will be on acquisition front as to previously before our IPO came, we make a goodwill acquisition or goodwill write off in our books to how we are making sure that this will not happen in our books right now. Can you please throw some light on that?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

Yeah. So to your question the goodwill that you’re referring to was pertaining to our Tolexo business that we started in 2014 and sometime around in 2017 we merged that with our business. Tolexo was an 100% subsidiary of us since day one. So if you look at from a consolidated financial standpoint, there is no goodwill write down, because these expenses were immediate part of consolidated — part of that year P&L itself. It’s only in the standalone books wherein this business was showing up as an investment, when we merge this business as part of that merger the goodwill got generated and was subsequently written-off before we decided to go public as a part of the clean up exercise. So if you look at it was an accounting judgment rather than any — something it has been between the holding company and the subsidiary company, 100% owned subsidiary company rather than any particular business and being written-off on account of any particular business. So they didn’t have any financial implications as such on that year P&L.

Prateek Chandra — Chief Financial Officer

And that was most tax efficient way.

Sanjay Ladha — Concept Investwell Pvt. Ltd. — Analyst

Okay. Thank you. Thank you so much.

Ravi — Investor Relations

Thank you. Next question is from the line of Mrs. Grushneet Kaur, Motilal Oswal. Please go ahead you’re your question.

Grushneet Kaur — Motilal Oswal — Analyst

Hi sir. If you could just throw some light on your thought process on transaction based platform versus a subscription based platform?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

So we pioneered the difficulty marketplace and we believe that subscription brings stability to other revenue and gives a lot of visibility of potential to the customers also. There could be some areas where transaction based pricing could be applicable. So for example, payment is one area where the transaction based pricing is applicable. But our intent is not to increase the cost of transaction by charging on every transaction a commission fee. We are not a commission agent for other business enabler and we would like to make it easier and cheaper to do business in India and we would continue to offer more subscription-based services and less transaction-based revenue. Even if these are going to be a transaction based, they are going to be written 1% or 2% transaction charges rather than going into 10%, 20% transaction charges.

Grushneet Kaur — Motilal Oswal — Analyst

Is there any unit economics [Technical Issues] preference for a subscription-based platform?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

Can you repeat your question? We are getting a lot of echo from you.

Grushneet Kaur — Motilal Oswal — Analyst

Is that a unit economic based calculation or something for the preference for subscription-based platform?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

Yes. If you look at into our standalone financials, there is a gross margin calculation which is there. It is available in the detailed financials. So any of the quarterly financials, you can see and there is a notes to account. Within that, you’ll find the entire unit economics and how our gross margins have gone up over a period of time. So if you refer to that, you will come to know. And in case you have — you need any more understanding, you can please get in touch with our Investor Relations team, they’ll help you with that.

Grushneet Kaur — Motilal Oswal — Analyst

Okay. Just one last thing on my end. Since the deferred revenue for now is roughly flat and a lot of the revenue accounting happens from the deferred revenue. What’s the next year revenue growth be like to a marginal kind of growth because the deferred revenue is flat this year?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

Depends on — guiding this time and again that our average age of our deferred revenue is about 20 months. Now, if we continue to do badly on collections for multiple quarters, obviously the revenue — it will be visible on revenue. But as you can see, as I had guided you by the month of December, collections were even higher than the previous year, December and we believe that we should be in a good — we should be able to beat our last quarter numbers. So I think, in case the collection remains subdued for a longer period of time, this will definitely help. But as of now, I won’t be able to give you any guidance on revenue.

Grushneet Kaur — Motilal Oswal — Analyst

Okay. Sure, sir. Thank you.

Ravi — Investor Relations

Thank you. We will now take a couple of questions on the discussion panel. I’ll read out the question for the management and audience. Can you please outline current business scenario for companies IndiaMART has invested in, that is the SaaS company? How this investing model will evolve and how we see these investment kind of the customer base product [Technical Issues] at least the cross-selling potential?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

So as I said, we are — we would like to offer services of business enablement and marketing to our customer base. Some of it we are providing one of our own. So you can see the preferred number service, the cloud telephony service — on our own, the order management system is being developed by one of our subsidiary. The payment services are done by one of our subsidiary. For certain use cases, we believe that there are other entrepreneurs who are better off solving those issues and we are better to take a minority or a significant minority investment and over the period of time, we would like to integrate them from our customer base and their customer base over that method. So I think I’ve already explained the similar rationality in one of the other questions.

Ravi — Investor Relations

Okay. Thank you, sir. And one last question, how has been the renewals in the shorter duration packages, also the long-term packages will also come for the renewable first time post-COVID. So what has been the renewal and churn there? Also are we planning to focus on providing customer protection which is more of a capital intensive model?

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

So, yes, as I said the last year had been very transformative and very — so many ups and downs for different kind of SMEs in different industries and different geography. So churn is going to be on a higher side. It continues to be on the high side and will continue to be on the higher side until the economy settles down to a — to a better for good. Currently lot of people are — people’s businesses are being transformed into a completely new businesses. So as I told you in the first quarter earning call, many more subscribers came in especially for face mask and safety products and hygiene products. And many of them could sustain and many of them could not sustain. Similarly you rightly said that many of the longer-term renewals will come to know and as and when their renewals will come, we will come to know if they have migrated to a different business or their current business has survived [Indecipherable] so and so that pain would be known in this particular year over a period of next nine months or so

Ravi — Investor Relations

Thank you sir. With his we come to an end of the Q&A session and I now hand over the call to management for their closing remarks. Over to you sir

Dinesh Chandra Agarwal — Managing Director & Chief Executive Officer

Thank you very much ladies and gentlemen for joining our earnings webinar. If you have any further questions please feel free to reach out to our investors team either on email or on WhatsApp. Thank you everyone. Please stay safe and very Happy New Year to you all. Thank you. Bye-bye.

Operator

[Operator Closing Remarks]