Indiamart Intermesh Ltd

NSE:INDIAMART

Earnings Call Analysis

IndiaMART's Strong Q2 Growth & Subdued Additions.

During Q2 FY24, IndiaMART experienced a revenue operation growth of 22% year-on-year to INR 295 crores, driven by a 12% increase in paying subscription suppliers to 210,000, and rising unique business inquiries by 6% to 24 million. Collections surged by 28% to INR 337 crores while deferred revenue grew 26% to INR 1,244 crores. However, new customer additions were just 2,000 due to a recent change in silver subscription pricing and higher churn rates. Subsidiary Busy's performance was in line with expectations, posting a 38% increase in net billing. EBITDA stood at INR 81 crores (29% margin) and net profit at INR 69 crores, with a cash balance of INR 1,910 crores to end the quarter. The management remains confident in maintaining collection growth above 22% for the next quarters despite temporary setbacks.

IndiaMART Reports Significant Growth Amidst Subscription Price Changes

In a welcoming tone, significant growth figures were announced for IndiaMART in the Quarter 2 FY '24 Earnings Webinar. The management was proud to report a robust 28% year-on-year growth in collections, amounting to INR 337 crores. Additionally, deferred revenue rose by an impressive 26% to INR 1,244 crores, all on a consolidated basis. A noteworthy growth trajectory was seen in revenue from operations as well, with a 22% increase to INR 295 crores.

Growing Traffic and Subscription Base with Pricing Strategy Adjustments

IndiaMART experienced a significant rise in site traffic and business inquiries, witnessing about 10% growth in total traffic (288 million) and a 6% rise in unique business inquiries (24 million). On the subscription front, the total number of paying suppliers reached 210,000. A strategic change was introduced in May with a price adjustment to their silver subscription, which, although initially impacted new customer acquisition, is expected to stabilize and improve in the near future. This quarter saw a modest net addition of 2,000 customers, attributed to more than anticipated churn in the silver subscription category.

Busy Infotech's Performance Aligns with Growth Aspirations

A subsidiary of the company, Busy Infotech, also shared positive results with a net billing of INR 14.6 crores, a 38% year-on-year growth. Revenue from operations climbed by 24% to INR 12.9 crores, while deferred revenue soared by 49% to INR 38.1 crores. The EBITDA for the quarter was recorded at INR 1.7 crores, a 13% margin, along with a net profit of INR 2.5 crores. Busy Infotech is on track to achieve its growth rate targets set at the beginning of the financial year.

Solid Financials Highlighted by Strong Revenue and Profit

On the financial front, IndiaMART's strong performance continued with consolidated collection from customers and revenue from operations growing by 28% and 22% respectively. Standalone collections stood at INR 321 crores, a 27% year-on-year increase, with revenue operations at INR 281 crores, a 23% increase. Revenue growth was driven by a dual improvement—a 12% increase in paid subscription suppliers and a 10% rise in average revenue per user (ARPU). Their concerted efforts resulted in an EBITDA of INR 81 crores for IndiaMART's standalone business, translating to a 29% margin, a slight improvement from the previous quarter's 28%.

Share Buyback Program Completion and Strong Cash Position

IndiaMART informed investors about the completion of a share buyback program, contributing to a significant payout of INR 620 crores, inclusive of taxes and related expenses. Despite this large outlay, the company maintains a strong cash and treasury balance of INR 1,910 crores, indicative of a solid financial position capable of enduring short-term expenditures for long-term gains.

Earnings Call Transcript 2024-Q2

[Chittresh Lohani, executive]

Good evening, ladies and gentlemen. On behalf of IndiaMART InterMESH Limited, I welcome you all to the company's Q2 FY '24 Earnings Webinar.

[Operator Instructions]

Joining us today from the management side, we have Mr. Dinesh Agarwal, Chief Executive Officer. Mr. Brijesh Agarwal, Wholetime 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 conference call may be forward-looking in nature and may involve risks and uncertainties. Finally refer to 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, Dinesh.

[Dinesh Agarwal, executive]

Thank you, Chittresh. Welcome, everybody. Welcome to IndiaMART's Quarter 2 FY '24 Earnings Webinar. We have circulated our earnings presentation about an hour ago, which is available on our own website as well as the stock exchange website. I'm sure you would have gone through the presentation, and I would be very happy to take any questions afterwards. I'm pleased to report that IndiaMART has delivered 28% year-on-year growth in collections to INR 337 crores and 26% growth in deferred revenue to INR 1,244 crores on a consolidated basis.

Revenue from operations has also grown by 22% to INR 295 crores. Total traffic grew to 288 million and unique business inquiry grew to 24 million, respectively, representing a growth of about 10% and 6%, respectively. Our total paying subscribers -- total paying subscription suppliers grew to 210,000. As communicated in the previous quarter, we did a price change in our silver subscription on May 15, which generally has a temporary impact for 2 quarters on our new customer acquisition.

In addition to the price increase impact on the gross customer addition, we also have seen more than anticipated churn on the increased customer base in the silver bucket. As a result, our net customer addition was limited to only 2,000 in this particular quarter. As the impact of this price change stabilizes and the improvement in churn happens, we will come back with the guidance on the net customer addition.

While the customer addition has been slower than anticipated, we are confident of this similar collection and revenue growth for the next 2, 3 quarters. On the people front, we have added 234 employees primarily in the client servicing team to take care of the renewals and upgrades of the existing customer will continue to make these investments and strengthening our organization to leverage the growth opportunity.

Now I will hand over the call to Brijesh to update about Busy Infotech. Thank you. And over to you, Brijesh.

[Brijesh Agrawal, executive]

Good evening, everyone. Busy has done a net billing of INR 14.6 crores in this quarter. This represents a year-on-year growth of 38%. The revenue from operations have grown by 24% year-on-year to INR 12.9 crores, and the deferred revenue has grown by 49% to INR 38.1 crores. The EBITDA for the quarter is at INR 1.7 crores. That represents a margin of 13%. The net profit for the quarter was INR 2.5 crores. We also generated positive cash flows of INR 2.5 crores during the quarter. There were a total of about 8,000 new licenses that were sold to customers, taking the total licenses sold count to INR 3,48,000 at the end of September. The overall performance has been in line with our expectation and also our goals of increasing the growth rate in this financial year. And I think we are on the path of realizing the goals of increasing the growth rate that we've set at the beginning of the year.

With this, I'll hand over the call to Prateek to discuss about the financial performance.

[Prateek Chandra, executive]

Thank you, Brijesh. Good evening, everyone. I will take you through the financial performance for the quarter ending September 2023. Consolidated collection from customers and revenue from operations grew by 28% and 22%, respectively, to INR 337 crores and INR 295 crores. The deferred revenue for the quarter stood at INR 1,244 crores, an increase of 26% on a year-on-year basis. IndiaMART's stand-alone collection from customers for the quarter were at INR 321 crores, and revenue from operations stood at INR 281 crores, registering a year-on-year growth of 27% and 23%, respectively. Our growth in revenue was primarily driven by a 12% increase in paying subscription suppliers and 10% improvement in ARPU due to higher monetization. Deferred revenue were at INR 1,205 crores, representing a year-on-year growth of 26%. EBITDA of IndiaMART's stand-alone business stood at INR 81 crores, representing a margin of 29%, marginal increase from 28% margin in quarter 1 this year. Consolidated EBITDA was at INR 80 crores, and consolidated net profit was at INR 69 crores.

Consolidated cash generated from operations was INR 102 crores as we had completed the buyback in this quarter, leading to a total pay out of INR 620 crores, which includes buyback amount and the related taxes and expenses. Consolidated cash and treasury balance stood at INR 1,910 crores at the end of this quarter. Thank you very much. We are now ready to take any questions.

[Chittresh Lohani, executive]

[Operator Instructions]

[Aditi Chaturvedi, executive]

First question is from the line of Vivekanand Subbaraman from Ambit Capital.

[Vivekanand Subbaraman, analyst]

So my two questions. The first one is on the collections in the stand-alone entity. The growth was 27% faster than what IndiaMART has witnessed in the last several quarters. So I wanted management commentary on the thought process and outlook as far as collections are concerned. Also, if you could call out any one-offs or any other element related to long-duration customers renewing during the quarter at higher price levels. That would help.

Second question is if you could give us an update on the churn levels across silver, annual silver, monthly platinum and gold, that will be helpful.

[Dinesh Agarwal, executive]

So on the collection front, I think we have been guiding that we should be -- we always target about 25% or so. And in the past, because we have now accumulated customer base, over the last 7, 8 quarters. And those customers, some of them have graduated to a higher package and some of them have graduated to now second year also that may be leading to the -- there is no one-off here because as I said, we are very well diversified across industries and across the customer, no single customer, no single industry, no single city contributes any large amount.

So this 26%, 27% could be a 1 or 2 quarter thing, but I think the collection, as I said, we are confident that over the next 2, 3 quarters, we should be able to maintain our collection growth in excess of 22% to 23%. That is what I've been guiding.

Now coming to the churn side. On the platinum and gold customer, which is about 50% of the customer base now and contributes about 3/4 of the total revenue contribution. That continues to remain healthy at 1% per month. So the churn in the top tier of the customers, platinum and gold is continued to be very healthy, which contributes about 50% of the customer base and 75% of the revenue. While the silver monthly and silver annual churn have deteriorated because probably because of the other things. So silver annual customer has moved from earlier about 2%, 3% to now close to 4% per month and silver monthly which used to trend at around 5%, 6%, now has gone to 7% or so on the monthly basis. So there, we are seeing churns to be higher than usual pre-COVID churns.

[Vivekanand Subbaraman, analyst]

That was helpful. So if I look at the collections on a pre-COVID versus current quarter CAGR. It appears to be a 17% CAGR. I'm comparing it with Q2 FY '20. So is this the number that you feel in the long run should trend upward further? Or am I reading the numbers wrongly or the commentary wrongly?

[Dinesh Agarwal, executive]

Right. I mean last -- because FY '21 and FY '22, we had so many ups and downs in terms of customer who were not being there, lockdowns and everything. So I don't know what kind of CAGR from that period would be helpful. I think it will be a longer term CAGR has been 21% CAGR and a nearer term CAGR quarterly on quarter, sometimes around 25%, sometimes around 22% and sometimes around 27%. So as long as the customer base has grown significantly in the last 6, 7 quarters, which is now resulting into the collections, better collections. And that's been the trajectory ever. So I think upwards of 20%, it should be possible whether it will be 17% or whether it will be 27%, that's difficult to commit on a longer-term basis.

[Prateek Chandra, executive]

Also Vivekanand, if you can see in the -- consistently in the last 4 quarters, our stand-alone collections growth have been northwards of 23%, 24%. So it's not like, let's say, one-off in the second area in this particular quarter, it has been consistently higher on more than 23%, 24% for last 4 quarters.

[Vivekanand Subbaraman, analyst]

Right. All right. The last follow-up, is there any specific reason, apart from the price hike that is causing this high churn or have you tried to identify what is causing this? And what are the steps that you are taking to mitigate or perhaps bring churn back under control given that it is now weighing on your net adds and adding to so much uncertainty that you are unable to give a guidance even on the net adds?

[Dinesh Agarwal, executive]

Yes. So see, net adds has 2 components. One is the price gross adds and the price impact is mainly on the gross adds. The price impact will not typically have a huge impact on the net adds on the churn side because currently, it's only been 3, 4 months of the new customers being added at the new price point. Rest old customers are still at the lower price point. So while typically, it takes anywhere between 3 to 6 months to stabilize on the sales team and digest the price hike.

I think there has been some valid days also, and it has been taking longer for us. So let's say, over the next quarter or so, if we are able to fix our gross add correctly back to the similar level as we had before 15th of May.

Now coming to the churn side. The churn side is not easy to answer in one line because there have been many differences, if you see over the last -- last 2 years or so, our Tier 3, Tier 4 customers have also increased as against metro customers. We have also expanded getting customers into many more categories than the customer concentration. However, it will still look 11% only. But that 11% is also into some of these industries which may not be very conducive for current IndiaMART platform.

So we will go back on the churn side. And as I said, those customers who have used platform nicely, those who have migrated to Golden, Platinum those who have migrated to gold and platinum, they continue to engage with the platform better. You can also see that customer engagement on the platform, which is available on say, CRM page, lead manager page, probably is one of the highest with 123 million replies and 25 million callback. So the customer engagement is also high and everything is also high. We need to probably go back to our drawing board to see which all places we are acquiring customers.

Another thing is the vintage of the customer. Another thing is we have built client servicing team in the last 18 months. As you can see, the number of employees addition in the last 18, 24 months has been too much. They also are newer into the system. So it could be -- there could be competition also within our own customer base that might be causing. So I think it's a difficult problem to solve and we have faced this problem later also. I'm sure we will go back to the drawing board and see, try many different things and come back to you sooner than later.

[Aditi Chaturvedi, executive]

Next question is from the line of Nikhil Choudhary from Nuvama.

[Nikhil Choudhary, analyst]

So my question is I would like to probe further what Vivek has asked regarding the churn and lower subscriber addition. Sir, this is not just the 1 quarter we have seen lower subscriber or lower paying subscriber addition. It's been like in the last 4, 5 quarters, except for 1 quarter, our subscriber addition has been lower than 8,000, which was our initial guidance of 7,000, 8,000 paying subscriber every quarter. Even in terms of engagement, what you mentioned, business call and query, that number remained more or less stable, even down from the COVID peak, right?

So just want to understand, to contain the churn and especially growing the paying subscriber, what are the change in strategy we are doing to make sure the growth comes back there?

And just one follow-up on that is, are we looking to maybe roll out the increase in price for our existing subscriber, a bit slower than earlier planned, given the higher churn we have seen for new subscribers?

[Dinesh Agarwal, executive]

So first of all, on the 8,000 target, I think, yes, you are right. We have missed this in 3 quarters now out of the 7 quarters that we have had post our total thing. Now second part is whether we are going to roll back the new client acquisition prices. No, we are not because it is not -- the churn is a different issue, and the new customer acquisition is a different issue. As I said, these prices were reduced, especially during the second wave of COVID.

When we saw that the people were really worried and so we dropped the prices by 25% to 20%. Now we have gone back to our pre-COVID prices. We haven't changed anything on the entry-level prices in the last 3, 4 years. So we are not going to roll back. On what strategies are we going to work upon to reduce churn, whether we will be able to increase the buyer base, repeat buyer base reduce some of the nonperforming industries, nonperforming cities.

I mean, I think all of them instead of just saying that have we been able to prioritize 1 over the other? No. I think all the 4 or 5 things that we need to work upon and maybe start recalibrating our client acquisition strategy, with how much to acquire from Metro and how much to acquire from Tier 4, how much to acquire from one industry versus how much to acquire from another industry, how much to acquire from one industry in annual mode versus how much to acquire in the monthly mode.

So I think all of that, I mean, churn containment is the biggest issue for any subscription-based marketplace. And there is no 1 single answer and there's no 1, 2, 3 prioritized answer. We will have to go and do things in all 5 directions and each one of them will probably work to 0.25%, 0.25% in our favor in the times to come.

[Nikhil Choudhary, analyst]

Just last one from my side. In terms of employee addition, we have again, started adding employee aggressively after slowing down for a quarter or 2. Clearly, it might be to address the churn, but that is putting pressure on margin. So just want to understand, vis-a-vis your earlier guidance of seeing incremental revenue or deferred revenue on a much higher margin. How you are seeing maybe even directionally margin going forward?

[Dinesh Agarwal, executive]

But where are you seeing the margin? So margins are already 29% this quarter for the stand-alone business. And we will continue to maintain this 28%, 29%, 30%, whatever plus/minus 1%. But I think in that range, I cannot give you exact percentage, but I think and the quarter 4 is always a low-margin quarter because there is upfront cost of collection that we get. But other than that, I think margin has been consistently maintain and also rising.

Maybe you are looking at the consolidated piece where we are also investing behind likely paying, we are also getting busy. We are also getting P&L losses from our associated companies. So those might be the case. But on the stand-alone basis, the margins are intact.

[Operator]

Next in queue is Swapnil from JM Financial.

[Swapnil Potdukhe, analyst]

So a couple of questions. First, on the traffic side. I think you -- we have seen some decent improvement in traffic on a Y-o-Y basis, and that has come after a few quarters where we had a flattish kind of trends, right? Any specific reason you want to call out as to why -- how this traffic improvement has been achieved? And how should we see these trends moving forward as well? That's one.

And the other question is on the margin side. So if I remember your commentary from the last quarter, you had mentioned that the margins would repeat for this FY '24 -- quarters would move towards 30% at a consolidated level. Now obviously, that has not ...

[Dinesh Agarwal, executive]

I don't think I have ever said it at a consol level. And I can never say it because at a consol level, if we are investing INR 750-odd crores in accounting business and another INR 250 crores in the other businesses. At a consol level, those are not possible to be predicted.

[Swapnil Potdukhe, analyst]

Okay. Let me refresh that. In case -- so how should 1 look at the margins then at a consol level and a stand-alone level separately. Obviously, your stand-alone margins are improving, no doubt about that, and they are moving inching -- towards 29% now. But since you will be -- you will continue to invest in your accounting businesses. Is there any guidance that you would want to give? Or is there any way that 1 can estimate that would like to help us.

[Dinesh Agarwal, executive]

Unfortunately, no. Because many of these are minority investments and their boards run independently on how to manage the growth at Vyapar and how to manage growth at industry buying or how to manage growth at M1xchange and we get a profit or loss coming from them, and many of them get revalued also time to time. So it is very, very difficult to predict a diversified business consolidated margin at early level like this. On the traffic side, yes, Prateek wants to add something on that.

[Prateek Chandra, executive]

So sorry, I was just saying that if you see still the ...

[Dinesh Agarwal, executive]

Slide 2?

[Prateek Chandra, executive]

No, this is reference Slide #70 of our investor presentation, which talks about EBITDA of each of the business lines, which gives a very clear visibility about the EBITDA of IndiaMART and EBITDA of newer initiatives, specifically, if you say, Busy and Livekeeping are the other ones. So these numbers are fairly small in the overall context. Though in terms of percentage margins, it may have some impact because the revenue from these businesses gets added. And the bottom line doesn't get added up there in the terms of the profit. So therefore, in the percentage while it looks, but if you see in the absolute terms, these numbers are fairly small as compared to the EBITDA that we generated at the IndiaMART level.

[Swapnil Potdukhe, analyst]

If I can just add to that, is there any target spends that you have in this new businesses, yearly spend that you want to -- would do over cap beyond which you will not invest.

[Dinesh Agarwal, executive]

No, sir. As and when we get the right opportunity, we will invest. And as we have said that we will probably stay away from a very high cash burn businesses being acquired at a consol level. We will try and see businesses which are either low cash burn businesses or which are closer to breakeven. And Busy is the one which is closer to breakeven business and currently profitable, but my view is that it is neither highly profitable nor losing money.

On the other hand, Livekeeping, we are investing. We know for sure that we will probably end up investing INR 1 crore a month there. And that's the current target. On future, what will happen is anything that happens, I will come back and tell you. But as of now, these are the 2 things which are happening whenever new things start, we will come back and tell you.

[Swapnil Potdukhe, analyst]

Got it. And if you can answer that on the traffic side question.

[Dinesh Agarwal, executive]

The traffic side depends a lot upon, depends a lot upon many things. So many times, changes in the Google search on [ many things ], focusing on desktop versus mobile and things also help because currently, we do not do any advertising. So I cannot directly attribute it to either any advertising or any e-mail marketing that would have worked significantly higher than the last quarter. While we have seen the traffic in general improving and so we continue to work on UI/UX and various parameters. However, whether this is going to be a sustained trend that I think we will know only after another quarter passes by year so.

Another part is the content aggregation that we do consistently. So as we have added about 60,000 customers in the last 6 quarters or so. Those 60,000 customers, content is also useful enough, which might be adding to this additional traffic. But whether it will sustainably hold or whether it will be start to increase further, that we will -- we can only comment after 2 quarters or so. I think a better number would be to also look at the unique business inquiries because sometimes what happens, the traffic also ends up increasing if somebody starts to scrape your site. So I think the better metric would be the unique business inquiries, which has also grown, but it has grown by about 6%, 7% or so.

[Aditi Chaturvedi, executive]

Next question is from Mr. Mihir Damania. We'll take question from Mr. Manoj Doshi.

[Unknown Analyst]

Is it fair to assume that the employee addition will be sort of not as high as we are having in the last 2 quarters, given the subscriber addition is not so high.

[Dinesh Agarwal, executive]

Yes, it is fair to assume, I think it is fair to assume that.

[Aditi Chaturvedi, executive]

[Operator Instructions]

Next question is from Mr. Manish Gupta.

[Manish Gupta, analyst]

You mentioned that gold and platinum are about 50% of your customers and about 75% of your revenue. So I was just wondering whether the growth of customers and in the Golden, Platinum is a better metric of how the overall business is progressing vis-a-vis churn in silver customers? Because I would imagine that if gold and platinum are 75% of revenue, there actually might be a significantly larger in terms of percentage of profit because the gross margin on this business might be higher than on the silver customers. So just wanted to understand that would the high churn rate in silver, et cetera, really bother you because bulk of your revenue and profit is essentially coming from the gold and platinum customers.

[Dinesh Agarwal, executive]

Yes. Manish, that is true. That is also depicted in the -- historically in the top 1% and top 2% and overall ARPU. So if you see the overall ARPU being INR 54,000, while the top 10% ARPU being INR 250,000, accounting for 46% of revenue alone, the top 10% of the customer itself accounts for 46% of the revenue, that already gives you that feel that 50% of the revenue is coming from top 10%, 12% customers. And that top 10%, 12% customer is not also a small in number. They had 22,000 customers -- 21,000 customers. So you can't say that, okay, your dependency is only on 10 customers accounting for you. It is not 10 customers. It is 20,000 customers at INR 250,000 average revenue.

However, for a freemium marketplace like this, it is important that you continue to have a longer-term growth on the silver bucket because that silver market ensures your leadership on the market in the space and build the network effect. While on the financial metrics, I think the golden, platinum will probably drive for different marketplaces different for different SaaS business is different, but they will typically drive anywhere between 50% to 75% of the revenue. And maybe more than 100% of the cash flow because the whole bottom of the pyramid is to maintain leadership and create that network effect, even the freemium model is also for that. They don't contribute anything on the revenue, but we do spend sizable amount of time, money, energy on maintaining and adding freemium customers.

[Manish Gupta, analyst]

Second question was that how do you track your share of competition because it's not easy to define competition in this space.

[Dinesh Agarwal, executive]

So I mean if you directly defined competition, direct competition which offers a very similar business model has a very large overlap with kind of customers. We have always said Trade India and Exporters India are the two which are the nearest one. And I think both of them are private limited companies so they file their annual returns with the MCA. And that data is available, and we track that closely how we are doing. And their traffic data is also available. So that the -- purely doing the similar business model. Now then there are indirect business models where we might be having 5% to 10% overlap with different businesses. This 5% to 10% overlap could be with Google, 5% to 10% overlap could be with Justdial, 5% to 10% overlap would be from Amazon also and I'm talking this 5% to 10% overlap on the buyer side as well as on the supplier side.

So on that side, it is difficult to define a real market share. But on the like-to-like basis, I think it's very clearly we used to probably have 60% market share at the time of the IPO. Today, we might be having much higher a market share than the IPO time.

[Manish Gupta, analyst]

Okay. Very clear. And my last question is that a decade -- very long term down the road, do you see any chance of being able to monetize a little bit on the buyer side. I mean we have 182 million registered buyers. There is over 50% repeat buying purchase. Do you see any opportunity where you could maybe a decade down the line, ask a buyer to pay a little bit just to participate on your platform.

[Dinesh Agarwal, executive]

So let's say 2 things. So total 182 million people have sent an inquiry or made a call from this platform over the last decade or so. However, every year, in last year or so, 37 million, 38 million people who have done that. Even that number is large enough to be monetized. That monetization is possible in 2, 3 ways, people have done that. So if you get into an e-commerce mode, where you are able to charge a convenience fee for buyer for every transaction or charge a commission from sellers.

We in -- generally, we don't intend to necessarily promote a high commission marketplace, we take pride in saying that we are a 0 commission marketplace. Maybe 1%, 2% commission for facilitation is possible. Nobody in the world has proven that big time. On the -- our payment subsidiary, whatever that we -- revenue that we generate, that's all of it, 100% of it from the buyer monetization because we only charge buyers. But the sellers -- yes, I mean, the buyers pay for the credit that they avail through credit card or other methods. Tomorrow, we'll be able to find a product like Amazon Prime or Zomato Gold, we don't know. We haven't seen that happening much in the 1688 in China. But yes, you never know.

[Aditi Chaturvedi, executive]

Next question is from the line of Mr. Rahul Jain from Dolat Capital.

[Rahul Jain, analyst]

Basically, I wanted to understand slightly more in terms of what we are doing to increase the ARPU and at the top end of your subscriber base, where possibly the increased activity on the digital side, maybe helping them to value our platform and preposition slightly better. So we've been seeing that ARPU number going up, but if you could share some of the inputs in terms of what we are doing to ensure that we are able to get more and more from that top 20,000, 25,000 customers and beyond.

[Dinesh Agarwal, executive]

So historically, I think I've talked about this maybe 2 years ago in the con call, but not recently. So historically, we have had very a similar all category, all cities or all locations based pricing for silver, gold, platinum, all customers. So our leading supplier, our star supplier packages used to be agnostic of the number of categories or number of locations as many as you deal into. Over this time, we have moved to limiting the number of categories as well as increasing this monetization. Then I think we move to location and category combination. We are now in the process of moving to purely and purely category-based pricing, category-based pricing framework.

So instead of you buying x number of category by 1, 1 category separately. And that instead actually reduces the overall input entry price point, but at the same time gives us higher ARPU for customers who actually use that properly. So effectively, if you see -- if you see the ARPU of top 10% customer, that has grown significantly over the last many years. And if you actually subscribe most of the ARPU gain has come in typically from top 10% customers only. So I think that's already built in, and these are the 2, 3 initiatives that we have taken.

[Rahul Jain, analyst]

So when you say categorization, is there some focus on keyword monetizations also?

[Dinesh Agarwal, executive]

What -- when I say category or when you say keyword, they are interchangeable. So our categories are so micro that they are -- so cotton shirt would be one category. Full sleeved shirt would be another category, designer shirt would be another category. So these are very similar to keywords and categories. So when we -- we don't sell category separately and keyword separately. So when you buy a particular category, you get that keyword also as a search keyword.

[Rahul Jain, analyst]

Right. So players with more number of SKUs and scale players are eventually the player where the ARPU monetization could be far superior.

[Dinesh Agarwal, executive]

Yes and no, because it is not next -- I mean, in fact, if you have less number of SKUs or categories or keyword, in fact, it might be more used for a customer like that to use our online platform because here, the targeting is very accurately possible, while for a brand or for a customer who owns multiple keyword and multiple category or multiple SKU, it might be -- there might be other avenues of promotion. So like the traditional dealer distribution are going to slightly mass media of advertising. But if you have a very unique product and unique pricing a unique location targeting, then I think -- so it helps in both the cases. I can't say that one over the other.

[Rahul Jain, analyst]

Right. And last bit on this categories that we defined some 97,000-odd category that we have. Is there a way to understand that, of course, many of these categories are subcategories within a particular domain. So which categories, how many of this 97,000 category, you see India has a significant TAM. Any threshold if you want to draw and say that a category is defined category of a significant size, let's assume if it has a INR 100 crore market in India or whatever way you want to define.

[Dinesh Agarwal, executive]

So one way to look at this is instead of looking at 100,000, just look at this 56-industry segment that is given here. And I think we've already given some 48 industries here. So out of these 48 industries, it is clearly visible that 8% is construction building, raw material, industrial plant, machinery equipment and like that. And if our total GMV is anywhere between 0.5% to 1% of GDP that makes it about $15 billion to $30 billion. Now based upon that, even 1% of share on that market, makes it INR 150 million market. So given that the overall B2B market size itself is more than $1 trillion market size defining our TAM per category is slightly difficult and slightly too big for us. We are still very, I think, scratching the surface or -- I don't think IndiaMART [Foreign Language] Can it make a lot a lot more difference to the economy in 5, 10 years? Yes.

[Rahul Jain, analyst]

Understood. Understood. And last bit, if I can. Basically this churn issue that we are facing because of potentially because of the price hike factor. So is it any change in the existing churn behavior of the existing customer that we have observed or it is simply that the gross addition number is not picking up with the increased pricing, which is resulting into net small addition per quarter or it's a combination of both.

[Dinesh Agarwal, executive]

Let me again clarify. The price increase has nothing to do in the short term on the next customer addition are in the short term on the churn because they are still less than 10% of the total customer base added in the last 4, 5 months. They typically have the price increase, typically have the early effect on the gross addition. The churn is obviously because we used to add about 20,000-odd customers per year. And last year, we added about 34,000 customers. Now that sudden influx of this new customer is 1 region that we have seen even in the past FY '16, '17 [Foreign Language] and now also. So that's 1 reason. But I think it cannot be just 1 reason. It has to be a combination of our sales and service, tier mix, industry mix, product performance. So I think all of that, we will be able to probably fix the grass edition, which will probably take our net customer addition a little higher than what we have delivered in the last 2 quarters. But for us to be able to do consistently 5,000 to 8,000. I think we need to fix the churn for sure. And that is not the easy 1 to pay. It generally takes time to fix back.

[Operator]

Next question is from the line of Ms. Ruchi Mukhija from Elara Security.

[Ruchi Mukhija, analyst]

Many of my questions are already answered so 2 bit. One, you have top 10 paying suppliers, which today makes 46% of the revenue. They have been growing at a faster rate than the company for consistently 9 quarters for more than 2 years. Now this quarter the trend, there is a divergence to this trend. So could you update us regarding your client mining effort for this bucket? And is there any strategic change. That's question number one.

And secondly, for the silver category where we are highlighting that the churn rate was higher. Have you already put in place some mechanism to curtail that short? I understood you have got that the results may come with a lag, but have you already started and which are those steps that we have already taken.

[Dinesh Agarwal, executive]

On the churn side, I think I've already answered 2, 3 times repeatedly the similar answer. So I don't have anything else to add. On the top 10% customers revenue share, I didn't understand an ARPU. I didn't understand what are you pointing at this quarter being different than the previous 7, 8 quarters.

[Ruchi Mukhija, analyst]

So this 46% of the top 10% of your paying supplier for, I would say, previous 9 consistent quarter, more than 2 years have grown at faster rate than the overall IndiaMART stand-alone business grew. This quarter, their growth was lower than the overall company growth, not material difference, but still lower. So trying to understand the client mining effort or I would say, upscaling in this bucket. Is there some strategic change? And do you expect that this pace of growth to cool down further? Or how to look at this?

[Dinesh Agarwal, executive]

So it has top 10%. So if my total customer base has grown only by 2,000. It is the top 10% of the customer base that also has grown by 200 only. So that's about it. There's nothing -- no nothing else to read here.

[Ruchi Mukhija, analyst]

Nothing else, okay.

[Dinesh Agarwal, executive]

It's just a statistical number.

[Aditi Chaturvedi, executive]

Thank you very much. It has been a very engaging session. I would now like Dinesh to give his concluding remarks.

[Dinesh Agarwal, executive]

Thank you, ladies and gentlemen, for joining our second quarter conference call. We have tried to address all the queries in the available time and whosoever have raised hands. But still, if I could not take anybody's question, please feel free to contact our Investor Relations team, and we'll be more than happy to answer that. Wishing you all the very best on this upcoming festival times, a very, very happy Diwali to all of you. And very wishing you a very prosperous new year for all of you. Thank you very much.

[Aditi Chaturvedi, executive]

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