The brokerage said IndiaMART is trading at a premium to multiples of classifieds-based models listed globally and in India, barring Info Edge. But its premium valuations are justified, given a healthy earnings growth outlook, strong cash generating abilities, and superior returns profile, it said.
“The company operates with negative working capital due to upfront collections (average subscription packages of 19-20 months), ensuring robust cash generation,” said Equirus’ analyst Samarth Patel in a note to clients. The brokerage said it expects strong free cash flow (FCF) generation of ₹27 billion over FY23-FY28 led by operating profit growth and low capex.
IndiaMART shares are up 25% so far in 2023 as against 22% gains in the BSE 500 index.
“INMART has evolved from a pure lead-generation discovery platform to a conversational commerce platform,” said Equirus. “Since its IPO, it has invested ~₹12bn to enrich its value proposition to SMEs; complete integration and cross-selling of offerings should lead to further value creation.”