Indiamart Intermesh Ltd

NSE:INDIAMART

Earnings Call Transcript 2022-Q2

[Ravi Gothwal]

Good evening, ladies and gentlemen. This is Ravi Gothwal from Churchgate Partners. And on behalf of IndiaMART InterMESH Limited I would like to welcome you all to the company Q2 FY '22 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; Mr. Prateek Chandra, Chief Financial Officer; Mr. Puneet Gupta, Vice President, Strategic Planning and Investor Relations. 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 certain risks and uncertainties. Kindly refer to the Slide #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, Founder, CEO, MD & Director]

Thank you, Ravi. Good evening, everyone, and welcome to India Mark's Quarter 2 FY 2022 Results Conference Call. As you may have noted, that we have circulated our earnings presentation, which is available on our website as well as the stock exchange's website. I'm sure you would have gone through the presentation, and I would be happy to take any questions afterwards. As the nation is emerging out of the second wave of COVID-19 and the business activity is picking up, we are also seeing a broad-based recovery. For the quarter, our revenue grew by 12% to INR 182 crores and deferred revenue by 20% for INR 756 crores. As the collections from customers for this quarter is stood at INR 223 crores, representing a 36% growth year-on-year. On the paying customers front, we have added about 4,500 paying subscribers in the quarter, leading to our total paying customers of about 150,000 paying customers as on [ 30th ] September 2021. We believe that as the economic recovery continues, we should see improvement in the customer's churn as well as the new customer acquisition, leading to a higher net customer addition going forward. On the biometrics, our traffic grew to 284 million in the quarter 2, leading to 26 million unique business enquiries during the quarter. We are further improvising our matchmaking using the AI/ML-based capabilities that we have developed over the period of time to increase the buyer fulfillment with lesser number of matchmakings. Therefore, while the unique business enquiries will remain unaffected and will continue to grow at their regular pace, the total business inquiries delivered are the total matchmakings that we report would reduce over the next couple of the quarters.On the strategic investment front, we have taken a 26% stake in [ Air Chain ] and Air Chain is offering a SaaS-based solution to automate procurement operations for businesses, this is AI/ML and mobile. We have also made a follow-on investment of INR 10 crores in the Mobisy technology that offers Bizom, a Salesforce automation and distributor management system. Post this around our investment ownership in Mobisy will stand at about 16%. And all these investments are aligned and augment our strategic focus to make doing business easier for businesses through various SaaS-based and commerce-based solutions. Overall, we remain optimistic about the improving macroeconomic environment, and we'll continue to focus and make right investments to strengthen the value proposition for our customers. Now I would like to thank you and hand over the call to Prateek for financial performance in detail. Thank you, and over to you, Prateek.

[Prateek Chandra, Chief Financial Officer]

Thank you, Dinesh, and good evening, everyone. I will take you through the financial performance for the quarter ending September 2021. Consolidated revenue from operations was INR 182 crores in the quarter. a growth of 12% year-on-year, driven by both increase in ARPU and paying subscribers year-over-year. Consolidated EBITDA was INR 83 crores, representing a margin of 46%. Net profit for the quarter was INR 82 crores with a margin of 38% and cash generated from operations during the quarter was INR 99 crores. As of September 30, 2021, cash and investments balance stood at INR 2,466 crores. Thank you very much. We are now ready to take questions.

[Ravi Gothwal]

[Operator Instructions] Please introduce yourself and restrict to 2 questions so that we may be able to address questions from all the participants. [Operator Instructions] The first question is from the line of Mihir Damania, Ambit Investment Advisors.

[Mihir Damania]

When we're looking at all the acquisitions we've made, where do we see the most progress? And I think programs have been integrating them with IndiaMART and then potentially providing software-as-a-service. And where do we think -- what would be an estimated time line of when do we expect to start providing software-as-a-service in addition to what we're already doing?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

Thank you. Out of the investments that we have I think the first investment that we made was in Vyapar app. It is a mobile-based user-first accounting software. And when we invested in that company, Simply Vyapar, they had less than 10,000 paying customers by them. Now I think they are closer to 100,000 paying customers. Their revenue has also grown significantly, as you can see in our annual report for the year FY '21. I think to your question that -- which one is the most promising startup which we have invested so far. Vyapar remains that one. The other investments have been done very, very recently and mostly are the smaller level as of now. The second question you asked is what kind of SaaS-based services IndiaMart already provides. And what is the addition that we would want to do on that. So as you can see, IndiaMART provides the Content Management System, the Website Making Solution, the BuyLeads our Customer Relationship Management, Lead Management Solution. Those kind of solutions are already as part of the bundled program of IndiaMART advertising subscription. We continue to add more and more offerings on that. For example, payment-based solutions are even inviting and inventory-based solutions. So I think we will continue to add more and more solutions on the SaaS platform slowly and slowly.

[Mihir Damania]

Okay. Also a follow-up on that. We have almost INR 1,700 crores of free cash in our books. So you already hinted in acquiring 1 or 2 major assets, major companies. Where do we stand right now? Because it's almost -- it's almost been like 7, 8 months, since we've raised a PRP and you've not acquired any large company [indiscernible] as such only minor investments in some of the investments which are already made. So any progress on that?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

As said earlier, there are about -- it's been -- yes, you are right about 6, 8 months, but we have also gone through the COVID 2.0 wave. And we have done, I think, 5 investments since then. And we keep meeting companies depending upon their size and our liking and their availability. We continue to look for larger opportunities as well, as and when something will come up, we'll definitely let you know.

[Ravi Gothwal]

Next question is from the line of Anuj Sehgal, Manas Asian Equities Fund.

[Anuj Sehgal]

I just wanted to understand on the business model. So you have a subscription-based business model. And I think in the past, you did try transaction-based business model, but that did not do well. Maybe you were ahead of the time then. But what are your thoughts on a transaction-based business model for IndiaMART. And the reason I ask is, as we see globally and also in India, a lot of other players and your competition is moving in that direction where they are trying to take a commission of the transactions that happen on their platforms. So just want to understand how you view this both as an opportunity and as a threat.

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

Thank you. I think we've learned a lot from our Tolexo experiment. We did learn many things regarding the cataloging, regarding the pricing and regarding the use of customer reviews and ratings through that platform. We found that doing 100% pure; buy-now-order-now-pay-now may not be the right thing for a pure B2B platform, which has a variety of categories ranging from components, to material, to the finished goods. And we implemented some of those learnings into IndiaMART. Currently, as you can see on the screen, from discovery, we have moved to the conversation phase and slowly and slowly, we are adding pieces which will take us closer to the transaction. We already have a Pay With IndiaMART platform. We are also trying to add few logistics and tracking platforms like Shipway is there. We have also made an investment into Super Procure and Air Chain. Also, we have started to evaluate certain transaction financing, but we haven't had much success on that. Going forward, I think it will be a combination of subscription plus maybe closer to the transaction, the way probably Shopify does there in U.S. or the way probably 1688.com does there in China. So I think we will continue to move in that direction, but will our goal be to take a large cut of the transactions, like 10%, 20%, 30%. I don't think that is what we are destined to, but we'll definitely try to make it easier to do business here in India, and cheaper to do business here in India rather than becoming a commission agent of a larger portion of the transaction going forward.

[Anuj Sehgal]

Okay. And if I may just follow-up. So are there -- in your experience, because as you rightly mentioned, you've gone through this experience and you learnt a lot. Are there certain categories which are more amenable to a transaction-based model and certain which you think are totally a no-go, and therefore, you will continue to focus on a subscription-based model? Just if you could maybe highlight some examples that would be helpful.

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

We started with the industrial MRO supplies, and MRO supplies are -- we thought that those were more enable to -- because they were ready-made items, could be screws, could be bearings, could be safety shoes kind of products. So those are the products which are probably can be bought off the shelf. They are more easier to be done as a platform. But if you start to add a lot of logistics into the B2B, every category has a very different logistics challenges. And we were finding that we were not adding much value in doing a B2B -- disrupting a B2B logistics. I think we need to find a new way of doing that. As I have mentioned a few times, sir, we are trying to see if we can get into the conversational commerce kind of a platform through our lead manager and through our CRM, where after certain conversations, people can place order directly to the supplier. That would be the our endeavor. Many categories like high-value categories or mini categories where customization is required, those categories may not be ready or may not be ever ready for buy-now-pay-now kind of a transaction.

[Ravi Gothwal]

[Operator Instructions] So next question is from the line of Amit Chandra, SDFC.

[Unknown Analyst]

So my first question is on the cash collections. So we have seen quite a significant improvement there in the cash collection. So that is despite the paid supply addition, which is actually lower than what we're expecting. So has there been a rise in the customers which are longer-duration customers and how that has changed in the mix. So that is first. And if you can highlight the churn that is there in the various -- churn in the like monthly, yearly packages. And how that churn has increased or decreased over the last few quarters. So that would be the second question. And third would be the total business enquiries delivered has come down despite there is increase in the traffic. So has there been any change in the like conversions or the ROI for a seller?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

Thank you. Let me answer one by one. First, yes, there has been a good recovery in terms of the collection from customers. And despite the fact that the number of net customer addition has been only at around 4,500 or so. The collections improvement typically tell that the customers who were earlier satisfied with IndiaMART, they were waiting for markets to open up. And now they have started to upgrade into higher services or either higher tiers. So some of customers have moved from silver to gold and some customers who would have moved from gold to platinum. Also longer-duration packages have become better. As you can see, in terms of the mix, not much of a change has happened. But if you compare that change from 1 year ago or so, we were at about 66% current deferred revenue versus currently running at about 63% current deferred revenue. So not much of a change, but in terms of duration. But I think in terms of the actual service upgrade, there has been a good change. Also, as I said, during both the COVID waves, the churn really went very, very high. And we have seen a consistent recovery in churn over the last 2, 3, 4 months. Especially in the month of September, I can say that we are just a couple of notches below the churn, which we achieved at the pre-COVID levels. In terms of numbers, I think it would be -- let's wait for one more quarter before I can start to give you monthly churn and annual churn and multiyear churn. The third question was?

[Unknown Analyst]

Has the churn -- sorry to interrupt -- has the churn changed either in the positive direction in the last few months?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

That is what I'm indicating. So that churn was deteriorated heavily during the April and May and June quarter. It has improved by certain notches, but it is still below by certain notches from the pre-COVID levels.

[Unknown Analyst]

And sir, also in terms of the recovery that we have seen. So is -- was the recovery there for the full quarter? Or it was mostly back ended and -- are we happy with this 4,000 numbers? Or we can see this accelerating to 6,000, 7,000 which was a normal number pre-COVID?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

So normal number, pre-COVID was 5,000 to 6,000. And as I have guided earlier also that by December quarter, we should be reaching there. What happens after that is anybody's guess, how economy fares and how SMEs fare. But as of now, the 5,000 to 6,000 numbers looks doable in the immediate quarter. To your question, whether the recovery was mostly back ended, no, recovery was pretty broad-based during the quarter. Yes, there was a definite betterment in the month of September.

[Unknown Analyst]

And then in terms of the cash collection, we have the healthy improvement that we have seen. So is that fair to assume that the next year would be pretty strong in terms of in terms of numbers, at least 25% growth if we assume the existing cash collection, there to continue. So is that the thing? And also, if we maintain our debt levels and in terms of the costing if you are at INR 100 crores, INR 110 crores of quarterly expenses, then there is a fair bit of chance that we can expand on our EBITDA margin from here on. So what is your take on that?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

So on the EBITDA margin, as I said, we were at 28% pre-COVID. We were increasing that EBITDA margin every quarter by 1-odd percent, and we were slowly and slowly increasing that. During the COVID first wave, there was a lot of uncertainty, and we did a lot of automation, which actually made our EBITDA jump despite the fact that the collections were negative because the revenues comes from the previous collection. So that's why the revenues were actually flowing in, while the expenses were immediately stopped. So that is why you see a jump to that 48% kind of EBITDA margin. As I have been guiding that half of that would come back so I think it would be fair to assume that we will probably be trending at around 38% kind of a EBITDA margin going forward.Now again, we have seen that the collections, which were negative for almost the first 3 quarters of the pandemic have started to now grow. But during the first 3 quarters of the pandemic, we have enjoyed the benefit of that deferred revenue which resulted into better revenue. Now that the collections have started to improve, the revenue will follow through, whether it will immediately start to mimic the 30%? No, it will have a mixed 0% collection growth that we had 3 quarters ago and 30% collection growth that we have today. So it will be probably mix to anywhere between 15% to 20%.

[Unknown Analyst]

Okay. And sir, the last question from my side. As I asked earlier, the total business enquiries has actually come down in terms of delivery. What is driving that? And is there any change in seller ROI or the traffic conversion to business enquiries? Why that is coming up?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

As I said in my opening remarks, that we now have the capabilities to do a better matchmaking. And -- so if you see the unique business enquiries, they have remained same, unique business enquiries last quarter was also about 26 million, and this quarter is about 26 million. So unique number of buyers who are coming and posting an enquiry on IndiaMART platform that has remained consistent. Given that now we have slightly better capabilities on doing the matchmaking, so that the conversion ratio can improve for buyer as well as seller both without doing too many matchmakings, that is why we are making certain changes into the algorithm. And I've already guided that this will not affect the unique business enquiries, but it will continue to have a negative impact on the total business enquiries or total matchmaking stuff.

[Unknown Analyst]

Okay. And sir, lastly, what is our strategy to increase the conversions in the sense that the total number and all is free listing to paid listing. So are we investing in that area in terms of technology to accelerate that? And will that result in higher like conversions and like better additions?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

I think let this economy stabilize. It's been -- we were -- we started to do far better in January, February, March last year -- I mean this year only. And then the second wave happened. Again, we have only got one more -- 1 quarter to say that, okay, the economy has stabilized. Once the economy stabilizes -- because you see the medium and large enterprises, they recover faster. But the smaller enterprises, a 3 months dip in their business takes a very long toll on them. So until and unless there is a 3 quarters of continuous improvement in the economy. I cannot comment on that side. On the technology side, in fact, imagine just 1.5 years ago, all of our sales used to come from people going to the these businesses and doing face-to-face sales. Now today, almost 80% of that sales is coming by telephone and buy online measures. So I'm pretty sure that we have rebuilt the entire technology and entire tracking system, where -- who could be interested because we cannot do the door-to-door marketing that we used to do earlier. Now how would this pan out going forward, that will depend upon the economy and the pandemic pan out.

[Ravi Gothwal]

[Operator Instructions] Next question is from the line of Prateek Kumar, Antique Stock Broking.

[Prateek Kumar, Vice President]

My first question is on the change in average revenue per paying supplier. Their small dip I know that last quarter, it was slightly higher than normal time, but what should be generally inferred on this?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

Sure. So Prateek, the way we see ARPU here, it is essentially the revenue for the quarter, and that is divided by the total number of paying customers at the end of the quarter. Since all of a sudden in the last quarter, if you see the total number of paying subscribers that we have on March, it was roughly around 152,000. It came down to 146,000, there was in spurt in the ARPU that you would see in the June quarter. This month, that spurt had been kind of normalized because as a customer have increased there and our overall revenues have stayed pretty much similar what it was in the last quarter. So that hopefully explains the variation in the ARPU.

[Prateek Kumar, Vice President]

Understood. The second question is on fund raises by some of your competition, start-ups like Moglix or [ Off ] business. So while we have also raised a significant amount of money there recently. So how the usage of fund may be different for us versus for them? I'm just asking a hypothetical question. But I mean, in case we can throw some live light -- so they are raising from private market we raise from public market. Yes, any views on that?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

Sir, every business is very, very different. Off business, for example, is a very different business. It's not a marketplace. So they are solving a very different problem to provide credit to the small and medium enterprise. By way of being a -- taking a dealership of some of the large brands. So they are more of a transaction financing business. B2B is a very, very large opportunity, as I've been telling almost $1 trillion of GMV happens in B2B every year. There is a Kirana B2B. There is a Garment B2B. And then there is a Raw material B2B. There is a Construction B2B and, there is a B2B Transaction Financing, Credit. And everybody is doing very different work. Moglix is trying to solve MRO and procurement solution. We were -- and we are trying to work towards providing them now apart from marketing the buyer and seller communication solution, trying to look at the more payment solution.So everybody is trying to solve this whole large problem in a very, very different, different manners. And multiple hits and tries would be done. Fortunately, for us, we have found one large problem that has been solved of finding a buyer and seller and finding a product at a cheaper price at a trustable source, and which has resulted into a network effect business, where there are more buyers attracting more suppliers and more suppliers attracting more buyers thereon, which has also started to become a profitable business. Just 3 years ago, we were also not profitable. So I think it is a cycle that will evolve. Fortunately, for us, we have access to capital from the stock market as well as we generate about INR 300-plus crores of cash flow from operation. That gives us a lot of ability to do better experimentation. I hope that answers your question.

[Prateek Kumar, Vice President]

Right. That answers, sir. And last question is on how do you see ad spend going or panning out over next 6 to 12 months?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

I mean we've been asking this question. And as I said, that currently, the buyer side traffic is enough for us, and there are too many uncertainties. We do want to do some branding exercise, but I don't think that anything of that is being planned as of now, in this quarter, we -- at max, there are -- last time, whenever we did branding exercise, it was generally to the tune of INR 20 crores, INR 30 crores a year. So if at all, it will come, most probably maybe the AFM or maybe next financial year.

[Ravi Gothwal]

Next question is from the line of Manish Gupta, Solidarity Advisors Private Limited.

[Manish Gupta, Founder & Chief Investment Officer]

I had 2 questions. The first question is that how much of your increase in paying suppliers is coming from suppliers who are migrating from the freemium model? That's the first question. And the second question is that you mentioned you have 100,000 paying customers in Vyapar. How many of these 100,000 -- how many of your 150,000 paying customers are currently using Vyapar as well?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

Okay. Let me answer the second question first. On Vyapar, when we did the investment at that point of time, we did a survey and we found that there was about 10% to 15% overlap between their paying customers and our paying customers. We have recently, last quarter, started experiment to see if any new customer who signs up at IndiaMART, would he be interested in taking up Vyapar. And the pilot seems to be encouraging. We haven't -- we do not have any access to the 100% customers of the Vyapar to see if how many of them are IndiaMART customers because IndiaMART customers are slightly bigger size than Vyapar. But I think anywhere between 10% to 20% overlap should be possible given what we have seen in the last 2, 3 months of our experiment. In terms of how many new customers come from our freemium model, almost 90%. Almost 90% of the customers in general, would have registered at IndiaMART, we would have registered them at IndiaMART, and they would already be a free-listed company on IndiaMART. And then we would go and -- that's the part of the sales process itself. Maybe 10%, 15% customers who directly sometimes call on our helpline to say that we would directly be interested into a paying customer. There could be those new businesses or some businesses, which we would have not discovered until then. But by and large, most of the customers upgrade from their free listings.

[Manish Gupta, Founder & Chief Investment Officer]

So, one more question, if I may. So Dinesh, how do you think about what could be the number of paying suppliers you could have because at some point in time, the marginal suppliers might not get business because the well-run suppliers are taking all the business away. The enquiries that are coming in. So how do you think about -- and you know the number of product categories that you've got on your platform also will saturate at some point in time. So the 150,000-odd paying suppliers, where do you think you are in terms of the total -- what could this number be in 5, 10 years, you think?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

Yes. I mean -- instead of putting a number, let me put some of the other numbers around us. So people say that there are 60 million SMEs in India. And we -- 99% of our customers, we take it mandatory to make them only the GST-registered customers. The GST-registered customer base is about 12 million. Out of that, the manufacturing and trading and business services kind of people, they would be around half of them or 60% of them. So from there, we think that our total addressable market, just the GST, GST should be anywhere around 2 million or so. Another way of looking at it would be Vyapar or Tally or this whole space. Tally claims that they have about 2 million paying users in India. The third measure that I see is the number of customers, 1688.com has in China. They have about 1 million customers in a slightly bigger, maybe 2x bigger economy on the MSME side today. And their average revenue per customer is about $1,500 in China. They are continuing to grow at about 30% per annum. So I -- and if you look at the number of SMEs, advertising on Google or Facebook or the number of SMEs who are advertising on Justdial kind of platform. They are all in the range of 0.5 million here and there. So given that we are a B2B platform, our number would be slightly lower, but then if you extrapolate 10 years from here, I think 0.5 million number should be no big deal.

[Manish Gupta, Founder & Chief Investment Officer]

If I may ask one more question, Dinesh, that you're generating so much of cash, you have INR 2,000-odd crores of cash on your balance sheet. How do you think about the size of the bets that you are taking?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

Yes, you are right. So we had very little cash 3 years ago, 2 years ago, when we started to learn this. We have started to take smaller bets first. We do not have any experience of investing or M&A from the past. So I think from that perspective, let's learn, do smaller investments, see how that fans out, build the capability inside to do the pilot and co-piloting go-to-market strategies, and continue to look for bigger ones as and when they come up. I think the cash on the books has accumulated much faster than we would have imagined. And I think there is a lot of expectation that we should do bigger deal. But at the same time, we should be cautious that what kind of deals we should do, and that should add to growth as well as profitability both.

[Ravi Gothwal]

[Operator Instructions] Next question is from the line of Kalash..

[Unknown Analyst]

I have a very operational question. While your annual report says that IndiaMART is certified to ISO 27001 for information security. Maybe know what are the technical controls that IndiaMART deploys because we are an online property. So I'm sure we might be subject to a lot of cyber attacks. That's number one. And number two, where are our systems hosted? Are you hosting on-premise? Or are you considering cloud because we could use a lot of cloud native services for your AI/ML and other use cases?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

So let me answer the second question first. All of our hostings and all of our infrastructure is in the data centers. Some of the old data centers are more like co-location data centers. And most of the new migration has happened towards the cloud. Today, maybe we are 66% purely on these virtual cloud platforms like Amazon or Google Cloud platforms, and still 33% legacy on the co-location data centers across U.S., Singapore and India. Coming to the second question on the cybersecurity side. Multiple things are being done whether it is firewalls, whether it is API gateway, whether it is prevention of denial of service attack, distributed denial of service attract through sophisticated load balancers, whether it is data scraping, denial and fixing any personally identifiable mode, whether it is AI and ML block list-based algorithms to block certain restricted items, which could be restricted here in India, or which would be generally restricted everywhere.There could be -- there are technologies to detect a reentry of fraudulent buyers or fading supplier. So multiple solutions are implemented. I think we are also in the process of certain mode certifications. And as and when they will come we will let you know. I'm also thinking of adding one slide within the investor presentation going forward.

[Unknown Analyst]

Good. And thanks for highlighting that. I think, yes. And I wish you all the best for the coming quarters as the economy grows.

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

Thank you.

[Ravi Gothwal]

[Operator Instructions] In the meanwhile, I'll just take a couple of questions from the discussion panel. I'll read out for the management. Can IndiaMART register sellers from outside India? Are there many sellers outside India who would like to register and sell in India? Can they register on our platform?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

So as of now -- no, earlier, we used to have such facility. As of now, over the last 5, 7, 10 years, we have not focused on that area. And we have internally debated on selling India kind of a solution. Of very recently, we have started to focus a little bit on the exports again but not yet on the selling in India. On the export side, we have, I think, 2, 3 quarters ago, we have started to experiment with the export only BuyLeads as our IndiaMART-verified exporter program. And we are seeing some good uptick on that side. Probably that has coincided with our Make in India and reduction in the corporate taxes and incentives that the government are giving. So I think we are trying to revive on the exports, but not yet on the sell in India.

[Ravi Gothwal]

Okay. Moving on to next question. So what kind of GMV IndiaMART would be generating across the whole ecosystem? And do we have the strategies to monetize this strength better than the subscription model currently? Also, do we have internal numbers, how much percentage of revenue from our subscribers would be coming from IndiaMART?

[Brijesh Kumar Agrawal, Co]

So when we look at our numbers, basically, overall number of business enquiries which have been delivered, the average order values that we get from sample of these RFQs that we have and the feedback we have from our customers on how many of those RFQs have been fulfilled. Basis that, our estimation is that we facilitate trade worth about USD 20 billion every year through the IndiaMART platform. Now when we look at that USD 20 billion worth of trade that we facilitate versus the revenues that we are able to generate you would see that the current monetization would be a little lesser than 1% of the overall transaction value. Given the fact that in B2B, these are not very high margin businesses. We think that the current model of subscription that we've adopted allows us to monetize this well enough to a certain extent. Obviously, there are opportunities which have been explored in the past by players like 1688.com in China earlier on where they're able to increase this monetization as the overall ecosystem actually matures a little bit. And therefore, there is a potential upside in terms of the ARPU. So for example, the ARPUs that we have here, which is closer to about $600, $650, compare that with China, which is at about let's say, USD 1,500 currently. So there is certainly a scope, but currently, given that we are in a market where we see a lot of growth potential. And this is a time that we would want to focus more on that and keep building up tools, solutions, which will help us improve this monetization in the years to come.

[Ravi Gothwal]

Thank you, Brijesh. We will now take a follow-up question from the line of Mihir. Mihir please go ahead with your question.

[Mihir Damania]

I just wanted to understand if there's been any impact on Justdial entry to the B2B business model space?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

Mihir, nothing so far. And we haven't seen any customers or we haven't got to hear any customers about Justdial B2B, JD Mart or something like that. I think they are also going through certain changes in their own management. So as of now, we don't see anything. We are confident that our network effects and our experience in building the B2B business has a lot more deeper understanding and that should help us remain the leadership position with us. I do not see any challenges as of now. Whatever comes later, we'll see to it.

[Ravi Gothwal]

Mihir, are you there? All right. So we'll move on to the next question. So sir, what is limiting our growth at 25% and above. Is it the inherent situation of the economy? Or do we need to provide any further innovative services to our users. Because the company like Shopify are growing at a 40%-plus despite operating in the developed economies.

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

Yes. I think it will be great to -- I cannot comment whether 40% is the right number or now 20% is the right number. But I -- if we have seen our historical growth rates, they have been around at around 25% to 28% CAGR. I think we would love to maintain that. Specifically this year CAGR has been impacted in the last 2 years due to the pandemic. But otherwise, I think we'd love to remain in that 25% to 30% growth rate system, hopefully, will emerge stronger and much better economy and should be able to do a better job in coming years.

[Ravi Gothwal]

A similar question on the strategy. I mean what is the IndiaMART strategy to accelerate from, say, 150,000 subscriber to 0.5 million subscribers in the coming years. Because we have been at 140,000 to 150,000 subscribers for the last couple of years. So how do we want to accelerate the growth from here on?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

Yes, if you see the number of paying customers, they were also increasing in the -- with the rate of 15% to 20% per annum, even despite the fact that the last 2 years have remained more or less same 147,000 and 152,000 still the CAGR is maintained at 16%. I would say that barring the pandemic, we would continue to stretch this number anywhere between 15% to 20% per annum. Now that we have a much stronger network effect. Given that earlier we were having 50 to 60 million visits on our portals every month, now we get about 80 to 90 million visits on our portal every month. That definitely means more buyers have come into the ecosystem of IndiaMART. However, since the suppliers have had certain rough time over the last 2 years, I'm sure all of them will come back. And on the strategy side, on the ground, you see most of our sales used to come from field sales operation and where our field sales force, old sales force used to do this. Now we have 3 pronged strategy to acquire customers: one in the larger market, we have our old field sales force as well as we have got channel partners who operate with the field sales force. We have also got good success because of this pandemic-led online adoption and people's acceptance of the telephone-based and online-based sales. Today, almost 20% of our sales have started to come from telephone and online-based mechanism. So I think with all the 3 channels, I'm sure that as the economy opens up and we would be doing a better job in terms of customer acquisition.

[Ravi Gothwal]

Thank you, Dinesh Ji. We'll take next question from the line of Swapnil, JM Financial.

[Swapnil Potdukhe, Research Analyst]

Sir, just one question. Like historically, we have been saying that the quarterly addition subscriber addition would be in a steady state of 5,000 to 6,000. Now my question is like what would be required, what we need to do to increase that beyond that 5,000 to 6,000 quarterly additions. Because if I were to compare it with let's say, 1688, the way they grew was like for between 2000 to 2012 or odd, they will -- each year they were adding the pace of subscriber addition was significantly higher than what is ours. And after that, the focus was on our ARPU increase. So I would just like to understand like what is your strategy to increase that 5,000 to 6,000 first, subscriber number. Second, on ARPU increase as well, once that number has reached a certain level?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

Yes. So last 2, 3 years, as you see, we have been trying to maintain that 5,000 to 6,000, and that has been difficult ever since the ILFS crisis happened. I think that's our first -- that is why our first goal is to overcome this and become consistently at 5,000, 6,000 customers. And then as I said, we have a very good plan now in terms of telesales, online sales, channel-based sales and own -- our own field sales. I'm sure if we have to go faster on the customer acquisition, given that now we have a lot more ammunition in terms of buyers also and in terms of buyer enquiries also. I think probably the stage would be set as soon as the economy opens up. Do want to add something?

[Brijesh Kumar Agrawal, Co]

So in fact, on the channel side, if you see our dependence on field-based sales operations to acquire customers pre-COVID was significantly higher than the other channel contributed very little to customer acquisition. Today, we are operating with 4 different channels altogether. So that, of course, has increased the higher power that we have to go back and acquire customers in larger numbers. The -- we've actually used the COVID period of these 18-odd months to carry out experiments. Some of them have really worked very well for us and they are scaling up. So one, that readiness does exist ahead of us. Second, when you look at the pre-COVID causes on what were the reasons which limited the kind of net customer additions we were seeing. We did mention that the transition from doing business in an off-line model where you either have a shop in a wholesale market, or where you would typically have dealers or distributors or retailers helping you sell a product. The transition required a shift in the mindset altogether. And that shift in mindset is something which, if it happens naturally, it only can happen at a gradual pace.What COVID has come and done is that it has shaken this entire belief that in order to be better prepared, SMBs need to have a hybrid kind of a presence. And I think given this fact that there is a better realization on having a hybrid presence, both offline as well as online. There is a definite shift that we are seeing in that mindset, as the business starts to get back to normal as the overall GDP that we were doing pre-COVID, we start to cross those GDP levels, I am sure this is going to be an additional reason for us to be able to acquire a higher number of customers. So that's the second big change that we are seeing here. Third, of course, as we've mentioned, because of the overall stress that the SMBs have faced over the last 18 months. It's the customer churn, which has been one of the reasons why the number of net adds have not grown. It's not the acquisition piece, which is which is where the real challenge is, it's been churned. So as we are now seeing easing up of the economy normalization of the businesses, we've seen an improvement in churn in the last quarter. Hopefully, if nothing further goes wrong, we should see that improvement to a level where we there pre-COVID, that should again help us add the overall number of net adds every quarter that we are able to see. So there are these 3 things that have happened, which we believe will help us get higher net adds from the 5,000 to 6,000 numbers that we used to do pre-COVID.

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

And on the ARPU, any time when you have higher than 20% addition, the ARPU will decline. And when you have lesser than 10% net addition, the ARPU will increase. The average growth rate of the ARPU has been at 5% and which we -- I think we will be able to maintain at 5% because that is the price rise that SMEs are comfortable with. So I think the ARPU growth at a 15% to 20% customer addition, typically, it remains at 5% if the customer addition grows higher than 20%, the ARPU growth will reduce. And if the customer growth grows below 10% then the ARPU growth increases.

[Swapnil Potdukhe, Research Analyst]

Right. And just a follow-up question to that. See, when we talk about 1688, they reached a level of 900,000-odd or 1 million paying customers, and that's where their volume growth stagnated in a way. In fact, it came down after that. So what is that level that we -- what will be that number where our volume growth will not grow after a certain period. Is there any number that you can...

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

No, sir. We will not be able to put a number there. That will depend on the India shining story. Let's see how India -- how far the sky from India is.

[Swapnil Potdukhe, Research Analyst]

Okay. And another question on your tech employee additions. So last quarter, you mentioned that you would be increasing your product guys to around 600 employees. Right now, it's around 475. So in 1 quarter, I don't see much increase in that number. So any -- so by when you would be adding those employees? And what kind of output do we expect from them basis that addition?

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

So on the employee side, we are all aligned. I think we are -- we continue to add people at -- some months are good, some months are not so good. But we will continue to add more number of people. So -- and we are committed to make about 600 product and technology employees. It is growing, albeit slowly, but I think we are committed there. In terms of sales and servicing, as I said, the sales and servicing employee headcount is now because it is spread across the channels and telechannel and outsourced channels it would be wiser to look at the outsource sales cost along with that to see the number of employees going. We will continue to grow that number as well because in the JFM, we had good time in hiring the people. So that was reflected in the last quarter. Again, the last quarter, I mean, the April, May, June quarter, we could not hire anybody. So again, this quarter, we have worked on hiring hopefully the results should be visible in the next quarter.

[Ravi Gothwal]

We will take last question from the line of Pranav Kshatriya.

[Pranav Kshatriya, Research Analyst]

I have 2 questions. Firstly, if we look at in this quarter, the cost has come to almost INR 100 crores per quarter, which is what you have sort of guided that, that will be the steady state cost -- from here on, how should we see the cost going forward? I mean, will it stay steady and possibly grow at 15-odd percent, which is what has been the growth rate pre-COVID when you are growing at 20-odd percent. That is my first question. And secondly, if I look at the funnel, I think there is too much of a concentration which has happened in the platinum customer. And that could possibly be because of how the 2-speed economy is that the top guys are doing relatively better than the bottom guys. But do you think that you can do a pricing intervention or a sales intervention where you put in more resources to get and get this pyramid corrected so that you onboard more paying customer, although by giving some freebies discount or things like that, so that you have a proper funnel, which actually eventually grows? So these are my 2 questions.

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

Yes. On the first question, Pranav, you are right that we've been guiding INR 100 crore to INR 105 crore steady state number on the expense side. The only thing is that over the last 6, 9 months, talent pricing has changed quite a bit. And so I think instead of 15%, 16% growth rate in the cost, I think you should budget more like 20% growth rate in the cost. Given that the talent pricing has been re-rated and we should not be losing our talent to that. On the second question, given that we have not added many customers and most of the revenue has been coming from the top of the pyramid. Currently, it looks like that. If we start to add a lot many more customers, I think it should stabilize there at 43%, 44%.Obviously, it is slowly and slowly growing at 1% because most of the pricing increase comes at the platinum customer. Those are the most engaged customers. And if you remember, we were talking about differential pricing, and the differential pricing will again be implemented mostly into the platinum tier. So I guess your question on how do we acquire more silver monthly customer? That remains the bigger question. Because of the churn has also happened mostly in that silver monthly bucket, and that is why the pyramid is seems a little disproportionate. We believe that once we start to acquire customers in silver, annual and silver monthly at the large numbers, the pyramid should be back to the normal position.

[Ravi Gothwal]

Thank you, Pranav. With this, we come to an end of the Q&A session. And now I hand over the call to the management for their closing remarks.

[Dinesh Chandra Agarwal, Founder, CEO, MD & Director]

Thank you very much, ladies and gentlemen, for joining our conference call. We have tried to address your queries in the time available. But if you still feel that there is some questions are unanswered, please feel free to connect with our Investor Relations team, and they will help you as much as they can. Thank you very much. And have a very, very good happy Diwali, sir.

[Ravi Gothwal]

Thank you, everyone. On behalf of IndiaMART, we now conclude this webinar. Thank you.