Broker’s call: Indiamart (Buy)

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Target: ₹3,950

CMP: ₹3,058.60

IndiaMart InterMesh has a dominant market share in B2B online classified business with around 70 per cent in paid listings. The overall growth in business is led by higher value proposition for sellers and the efficient matching algorithm resulting in higher buyer satisfaction.

Enjoys substantial network effect attracting more buyers and sellers to the platform.

The strength of business model is visible in the 13.5 per cent CAGR growth in paying subscribers over FY18-23 and 23.2 per cent CAGR growth in the number of registered buyers during the period.

The success of business model and its longevity can be inferred from the fact that over 50 per cent of the registered buyers are repeat buyers.

It is best placed to benefit from rising digitalization of SMEs. It benefits from huge network effect that will continue to drive increase in the number of paid suppliers. The value proposition for MSMEs is attractive that it requires little need of advertising and thus benefits from optimum cost structure.

Positive operating leverage would continue to drive improvement in margin. Low price sensitivity offers it pricing power and enable migration of customers from basic to premium packages that would drive growth in ARPU.