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Indiamart Intermesh Ltd
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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's Q3 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 Agrawal, Whole-Time Director; Mr. Prateek Chandra, Chief Financial Officer; and Mr. Kushal Maheshwari, who has recently joined as Head of Treasury 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 risks and uncertainties. Kindly 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, sir.
Good evening, everyone, and welcome to IndiaMART's Quarter 3 FY 2022 earnings webinar. I hope you and your loved ones are staying safe and healthy. We have already circulated our earnings presentation, which is available on our website as well as on 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.I'm pleased to report that our consolidated revenue from operations has been INR 188 crores in the third quarter and deferred revenue of INR 790 crores, representing a growth in the deferred revenue, up 25% year-on-year. Elections from the customer for the period have grown by 25% -- 24% to INR 222 crores in quarter 3 FY '22. During the quarter, we also added 5,833 paying subscribers, closing the total count at approximately 156,000 during the quarter. Unique business inquiries is stood at 23 million, with our 90-day repeat buyers standing at about approximately 55%. As communicated last time, we are improving our algorithms for better matchmaking and higher efficiency in the systems for easing the efforts of buyers and sellers. Our average matchmaking for unique business inquiry reduced to 5.3x as against 6.3x earlier. Further, we are very excited to share that we have strengthened our value proposition in the accounting software space by acquiring 100% stake in Busy Infotech Private Limited for INR 500 crores in cash. Busy was founded in 1997 and currently is one of the largest accounting software company in the Indian market with over 2 lakh users. The business is cash positive with a revenue of INR 42.4 crores and PAT of INR 11 crores in FY '21.Also, Vyapar, one of our invested company, offering mobile accounting software, has announced the Series B investment round led by the WestBridge Capital, wherein we have invested an additional INR 63.5 crores and have raised our stake from 26% to 27%.Let me also brief you about some of the strategic investments that we made in the previous quarter. We have acquired 7.7% stake for INR 32 crores in Mynd Solutions which runs M1 exchange and invoice discounting exchange, one of the TReDS platform as approved by RBI. We have also acquired 26% stake for INR 13 crores in EasyEcom, which offers AI-driven omni-channel inventory and warehouse management solution to D2C e-commerce merchants. Looking ahead, we continue to see increasing adoption of Internet by businesses, which will fuel the long-term growth at IndiaMART. We remain committed to enhance our value proposition and leverage these opportunities. Now I would like to hand over the call to Prateek to discuss the financial performance in a little more detail. Thank you, and over to you, Prateek.
Thank you, Dinesh, and good afternoon, everyone. I will take you through the financial performance for the quarter ended December 2021. Consolidated revenue from operations was INR 188 crores in the quarter, a growth of 8% year-on-year, driven by both increase in ARPU and paying subscribers year-over-year. Consolidated EBITDA was INR 79 crores, representing a margin of 42%.Expenses have increased primarily in the manpower costs due to increase in headcounts and rerating of salaries across the markets and our investments behind growth. Net profit for the quarter was INR 70 crores, with a margin of 33% and cash generated from operations during the quarter was INR 84 crores.As of December 31, 2021, total cash and investment balance we have was at INR 2,523 crores.Thank you very much. We are now ready to take any questions.
Thank you, Prateek. [Operator Instructions] The first question is from the line of Mihir Damania.
So my first question is relating to a sharp drop in website hits if you see on a quarter-on-quarter basis. So what has actually resulted in the same and what are we doing to mitigate a drop in traffic -- to get traffic?
Thank you, Mihir. The sharp drop in the traffic, generally, you see these in quarter 3, we have historically have 10% lower than the quarter 2 traffic. However, this time, I think because of the pent-up demand from the wave 2, there was a much higher traffic in quarter 2, and that's why we are seeing this. I am seeing good 90 million kind of a traffic on a month-on-month basis. So I think we will stabilize back to 272-odd million visits per month -- per quarter.
Okay. My second question is relating to the acquired business. So once it is acquired, is the business -- am I audible?
No, Mihir. Sorry, you broke up. So can you repeat your question?
Yes. Yes. Yes. So sir, my second question is relating to the acquired business. So the acquired business is in accounting software. So does it compete with Vyapar in any way? And if not, how are they different? And what is the expected revenue and PAT for FY '22 for the Busy Infotech, which we acquired?
So when we look at Busy Infotech, Busy Infotech actually is an accounting cum [ Indiscernible ] software which is available on premise for companies to do their accounting. The product features that you typically go ahead and see on the screen right now would give you an idea on the expanse of what all can be done within Busy. When you look at Vyapar, Vyapar essentially is a cloud-based SaaS product, which is being made available to businesses which are trying to do accounting on their own. It's a DIY kind of a model. So people generally would use this for the purposes of doing basic accounting on their own and therefore is a product that appeals to the micro and small businesses as a segment more, whereas Busy typically would be competing with Tally and Marks of the world, where you would look at small and midsized businesses being the principal set of our customers.
Second question was regarding the expected FY '22.
If you look at the current Busy business over the past 3, 4 years period, their typical revenue growth rate has been within the range of 10% to 15% on a CAGR basis. And our PAT margins have been around 25%. While we are, of course, going ahead, I'm going to focus on taking over the business over the next 1 or 2 quarters and trying to stabilize the overall management team there, we think that we would want to go ahead and look at, at least, doubling the revenue growth rate from the current levels. And then as we get better understanding of the overall business and the operations and how things are working on the ground, we will be in a superior position to comment upon the future growth rates after this understanding has been built.
So current FY '22 I guess, we would be looking at INR 44 crores to INR 45 crores of revenue.
Okay. And my last question is can you just talk briefly about a few strategic investments and how they are scaling post our investment? Last time you talked about Vyapar, can you get a few other examples what they are currently up to?
Yes. So if you look at Mobisy, Bizom -- which operates Bizom, so Bizom is one of the little scaled business, which is running at around INR 40 crores, INR 50 crores of run rate. And they have on a quarterly basis being growing at 10% to 15% per quarter. They are near at some quarters, they make some losses, some quarters, they don't. The other ones are all of them were invested in last 9 months only. So all of them whether it is Shipway, Legistify, Edgewise, all of them are very small. The only one which is a slightly bigger one is M1xchange It is the RBI-licensed entity which offers invoice discounting and bill discounting in an automated manner. It's an exchange, and you can only take up to 10% participation in an exchange. We have got secondary shares from SIDBI. SIDBI was the earlier -- early-stage investor in that. One of their funds was getting over. So we have got 7.7% there, a very recent investment in November '21. So all others are very new investments. So I don't have much updates on them. I believe once FY '22 completes and their numbers are there, I think in July quarter, I will be able to give you some updates on the investment made in the last 9 months.
Next question is from Kushagra Bhattar, Old Bridge Capital.
Sure. A couple of questions management. So first is if you can give more sense on the rationale behind both the deals of Vyapar and Busy? And also, if you can cover how you guys have valued both businesses, what all parameters you looked at and between both these businesses, how did you compare both of them? And also you mentioned in your opening remarks that it's an on-premise model. So when all your offerings and your future strategy of going into SaaS, which you may have been getting from past couple of quarters, why go in for an on-premise model and paying on most big acquisitions? And the related question is, initially, you have highlighted in the past that you generally go for smaller minority stakes and then see how the business is panning out. But this time, your upfront invested 100% not even testing for some period of time. So why a different set of an approach this time? And if the accounting is really that big opportunity, why not invest more in Vyapar instead of running two different softwares? Yes. So this is more a broader question. I would have a couple of questions more.
So let me answer about Vyapar and then Brijesh will add more rationale behind Busy. So Vyapar, as you know, has been growing well. And Vyapar, as Brijesh also mentioned, it is primarily a mobile first and primarily a micro-sized businesses platform, which is self-use platform, it is not meant for accountant or multi location or complex manufacturing or sourcing kind of product. Vyapar itself has grown to almost 1 lakh plus customers. When we invested in them, they had around 15,000 customers and around INR 20 lakh monthly run rate. Now they are over INR 2 crore monthly run rate in terms of collection. And we have -- that is why we have doubled down on Vyapar, where Vyapar has raised about INR 200-plus crores from WestBridge. WestBridge is taking about 20-odd percent there. And IndiaMART has maintained our position at 26%, not only maintained, but we have bought additional 1% from secondary share where we are investing about INR 63.5 crores. Now learning with Vyapar is that it's a very sticky and very large opportunity in the accounting space. And we have been studying this space for a while, whether it was the Busy or Marg. Marg has been recently acquired by PharmEasy as part of their DRHP it is disclosed. And we have valued Vyapar at a similar multiples as Marg deal. We have acquired Busy at a similar multiple as the Marg deal. Now valuation for early-stage business versus valuation late-stage business is very different. Also, the revenue in Vyapar is customer revenue. Most of the customers directly pay to Vyapar. While in case of Busy, it is a transfer pricing revenue, dealer revenue. So Vyapar sells it to dealers and then dealers further mark it up and sell it to the customer. So the retail price, MRP is different than the revenue realized in case of Busy. So I think taking into account multiple things, one, focusing on self-use, mobile side, SaaS and other focusing on slightly complex, more desktop kind of things, I think these are two are very complementary set of products, and they will continue to have a good growth in the times to come.On the, Brijesh, Vyapar side -- Busy side, more items.
So far let me also just add on the rationale that we believe is driving this decision of going ahead and looking at multiple companies within the accounting space. When we look at accounting traditionally, it's a business, which is very, very sticky. Customers typically would not switch from one platform to the other very easily. And we've seen that players like Tally, Busy and Marg have had a very loyal and sticky customer base available with them. These are customers who have also been focused upon keeping their data in a fairly protective mode, not really going ahead and doing everything on cloud basis. And a lot of this is also driven by how the chartered accountants, daily, want them to go back and manage their accounting and auditing practices. So overall, today, when we look at the top 3 players in the accounting space, which do on-premise, they have more than 2.5 million paying subscribers between Tally, Busy and Marg. When we look at the mobile-first, cloud-based market, the number of paying subscribers there for each of these players put together is just a fraction of this number today. When we look at the overall GST-registered businesses only here in India, which is at about 12 million, all of these numbers, again, suggests that we have only -- all these softwares are only being able to reach to a certain small percentage of the overall population. The way we are seeing usage of mobile, acceptability of cloud and increased regulations and need for compliance, which is being pushed by the government in the form of e-invoices, e-labels, regular returns being filed, it is going to become almost mandatory for such businesses to go and adopt a software to manage their entire accounting and compliance and then reporting. So the overall market in itself, according to us, is poised for growth. And there is going to be growth coming in for all kinds of these offerings put together. So for us, it's by having multiple, let's say, presence across different kinds of products catering to different kinds of segments will mean that we would be able to address a larger chunk of this bucket. Given the fact that accounting is the -- our accounting software is the only product which is used at scale by small and midsized businesses and this is a global phenomenon by the way, if you really go ahead and look at it. In India, it is far more prominent. We think that this opportunity in itself allows us to go and reach to the widest possible SMB audience. Therefore, we are doubling down on this space. We have stated in the past also as how strongly we feel about it. And in fact, given our experience of investing in Vyapar and what we've seen there, that actually also gave us a lot of confidence to go ahead and look at doing a full fledged acquisition at this point in time rather than just simply taking the route of doing a minority investment and then look at taking a majority or doing an acquisition there. In fact, we feel absolutely confident about this entire space. We would want to go back and continue to build a world-class product and make sure that this expansion that we are going to see in terms of market, in terms of the penetration of accounting software within the SMB space, we should be leading that change here in the next decade to come here. So that is something why we believe that we need to invest behind on-premise accounting, why we believe we need to have multiple investments in the accounting space and also why we should go ahead and do an acquisition at this point in time rather than only taking a minority investment route.
Sure. Okay. No, this explains. Second, a related question is now you are almost done with 70% of the fund raise, which you did. So -- and pretty clear of knowing a little aggressive at this point of time, any thoughts on how you guys are planning to monetize all these acquisitions? Because a few quarters back, you sort of highlighted that we'll see how these businesses evolve and then we'll see some sort of monetization plans on all these SaaS offerings. So any color on how you will price these? How will you plug them in your current packages, your go-to-market or how you are going to offer or sell excel to your clients? All these new businesses, new offerings which you have acquired?
So as I said, we take about a year to understand the businesses after we've [ Indiscernible ] And then we start to experiment with any kind of cross-selling, any kind of data-sharing opportunity there. And I think we have been doing some experiments with Vyapar. To some extent, those are showing some results. Nothing very significant at the numbers that I can share you with. In terms of Mobisy, Bizom, we keep discussing what are the ways to further help each other. We haven't yet found anything very substantial that can be immediately plugged in. But all other investments are literally very small. I think we help them generate leads. But beyond that, they are still very small.
Sure. Last one from my side. On the logistic side, you've increased the stake. Again, a similar question what I asked on the Busy and Vyapar, if you can what changed basically in this business? And how do you see this very specific -- domain-specific business to evolve going forward?
In this round, we've invested almost INR 7.5 crores into Legistify. Legistify is a litigation tracking and management software. Currently, it's fairly early stage. In the terms of revenues, there would be approximately INR 15 lakh revenues a month. They have more than 100 customers who are the enterprise customers. So it looks like a promising start up. They were looking at doing the fund raise -- funding their expansion and growth. And since we believe in the story there, we decided to kind of support them. So it's more of a convertible. Devaluation, everything would be linked to their next fund raise. It's more of a bridge round to the larger fund raise, which they will plan after sometime.
Next question is from the line of Pranav Kshatriya from Edelweiss.
I have two questions. Firstly, can you throw some color on the flattish collection for this quarter considering I think this quarter, possibly the paying customer addition was decent compared to the last quarter. So in that sense, I also want to know that how the churn has for the silver monthly customer, which has been a key issue in terms of the paying customer addition? That's my first question. Secondly, I would also want to know on the cost side, how should we look at the cost going forward? And specifically, I mean, you had talked about steady-state cost coming to INR 100-odd crore per quarter. We are at INR 110 crores. So for FY '23, should INR 110 crores to INR 120 crores should be the base or it could be even higher, considering the manpower costs up? So these are my two questions.
Yes. So Pranav, to answer your questions you asked about the collection, the customer growth, which was the churn and about the cost, so starting with the question on collections. This quarter, we saw roughly around 24% growth in collection from customers. While you're right that the last quarter, again, we did the similar number which had a slightly higher percentage. However, collections, we would recommend to look at more on a year-on-year basis as it would have a little bit of quarterly seasonal trends there in. In the terms of customer, the growth and the churn overall, on a net basis, we've been able to add 5,800 customers in this particular quarter, which had been higher than the previous quarters. It is a result of two things, certainly improvement in the acquisition of the customers as well as reductions in the customer churn that you will see. So this quarter churn was slightly better than like it's previous quarter churn. We saw the churn stabilizing there. However, towards the end because of, again, the COVID wave, there is a bit of uncertainty about collection in customers. But overall, we saw things are pretty much improving and moving in the right direction.
Specifically about churn, I think as the monthly customer addition has been muted over the last 2 years, there has been relief on the churn side. And that's why the net customer addition is not showing up because we have been working to expand our new client acquisition in the multi-direction with the channel sales. And that has started to pick up a little bit. And I think going forward also, we continue to believe that we will do better than 5,800 net addition at least for the next couple of quarters that I have visibility, current visibility on. And in terms of collection, last 15 days of December as well as the first 15 days of January, there has been some impact on the Omicron. Many of our employees are also not feeling well and their family members. So -- but in general, I think this should be over by the month end and February and March should be great months. On the cost side...
Coming back to your third question on the cost side. So as I said earlier, if you see the increase in the cost has primarily been in the manpower side. Manpower side, again, there are two factors which are playing out. One is as we look at investing behind the growth, we are increasing the headcount. This quarter, we've added roughly around 225 more employees than the previous quarter. And we look forward to continue building manpower by roughly around 100 employees every quarter. The second factor, which is leading to the manpower increase is also the rerating of the salaries which have happened all across as what we see in the entire sector there has been in talent crunch and challenges on the talent retention. So, if the market correction is taking place, we'll have to come to that market correction because it's always advisable to retain the people rather than letting them go. So we would see some impact there. On the cost base of INR 110 crores and for the next quarter as to what will it become, we announced our increments in the quarter 4. So certainly, there would be a further cost increase you would see in the coming quarter. The exact number would be like -- it's difficult to guide but certainly, the cost would increase in the quarter 4 as compared to quarter 3.
On the FY '23 guidance, I would say that let this JSM quarter complete and as for the numbers, we'll be able to give you the FY '23 guidance on the cost.
Yes. However, if you look at from a margin standpoint, as we've guided that structurally, the margin had been more around 38% barring 1 quarter here or there, we think we should be able to maintain those margins on a yearly basis.
Okay. I mean, if I can just ask one follow-up question. So I understand that typically Q4 has the bonus payouts and so on, and that's why we should see the cost increase. But other than that, I mean, should we expect what we have seen the cost base, how it has increased? I mean, for example, before COVID, the annual cost increase was roughly 15-odd percent as the baseline increase in the cost, I mean, is that a fair assessment?
That's where there is a difference, Pranav. Pre-COVID, yes, you are right that we were typically having an overall cost increase at 15% to 18% barring a few years where it would have gone to 20%, but it has been 17%, 18% on an average. Now since last 2 years, we haven't had -- we have had a depressed cost. Offices were closed And we haven't given much of increment. We haven't hired many of the people. People were not hired. So I think there is one -- there is a replacement hiring that is happening of the people who left in the last 18 months. And now I think we are almost at the same level as pre-COVID. Now if you see, we have to hire for growth also. So that is why -- if you will compare that, this cost with the FY '21 cost that won't be correct. But yes, if you look at the FY '20 kind of cost, assuming 15%, 18% growth over there for FY '23 should be fine. So FY '23 versus '20, I think the 15%, 20% growth in cost should be assumed.
[Operator Instructions] Next question is from the line of Ajay Modi.
My question, Dinesh is twofolds. First, on the growth. So while you've been guiding of a quarterly new subscription addition of about 6,000 to 7,000 and you've met that kind of amount for this quarter. The growth still seems to be low in terms of both new subscriber -- new paying subscriber addition and the ARPU. Now should I link it with the business inquiries because the business inquiries delivered were also seem to be subdued for this quarter. So is it that we are kind of losing market share? Or is it that a competitor is more competitive, which is why we are not able to kind of increase ARPUs or get more paying subscribers? Or is it because that we are not being able to add enough value to the free subscribers to convert them into paid. That is one question. The second question is on the acquisitions or the investments that we are making, are we looking at these as more of financial investments, passive investors? Or are we looking at kind of using a lot of these products for our existing subscribers kind of adding value to our existing paid subscribers. In summary, what I'm trying to understand from these questions is that, if I were to look at IndiaMART, say, 3 years, 5 years out, do I still look at IndiaMART as a company who's continuing to add subscribers and deliver inquiries. That's it? Or are we trying to move to a more value addition model like the Chinese counterparts?
Okay. Let me first answer your second question. I think I remember that part better now. So in terms of investment, you asked whether there are pure financial investments or strategic in nature, where we would be adding more value to either our customers or to their customers or to the entire ecosystem? Or will it help in increasing our ARPU or their ARPU or reduce our churn or their churn. So I think these are definitely not the pure financial investments. These are minority investments in the strategic spaces. And we will continue to find ways and means to up sell, cross-sell partner and create the partnership into more meaningful partnerships. These are not for a 3 to 5 years' investment and sales purpose.Now -- and as I have been guiding that we will probably take 1 or 2 minority investment every quarter and possibly an acquisition every year or so. And that is what if you really see in the February last year, mid of February last year, we raised fund. And we have been able to do by since then, almost 8 -- 7 or 8 investments so far in less than 4 quarters completed as well as we've been able to do 1 acquisition. I think for the first timer, that's a pretty encouraging thing. Now coming to the overall growth I believe Internet has a very long runway. B2B has a very long runway. India has a very long runway and SMEs have a very long runway. We have seen this journey from 1996 till date. Every 2, 3 years, we find some or the other dampner as well as some or the other rocket ship. And it has been happening every now and then. Last 2, 3 times, there has been a GST, there has been demonetization, there have been COVID and some of them have positive impact on digitization, some of them had negative impact on unorganized SMEs. I'll continue to believe that it is still a very, very large opportunity. IndiaMART is very, very relevant. And with all these investments being made, we will become even more thread to fabric kind of a relationship with the Indian businesses. In terms of growth, as I said, that in the past, because of every 9 months, there has been one lockdown or 1 wave. We have not had a continuous addition into the customers. If we had 5,000 typical continuous 5,000 to 6,000 typical continuous, we would have seen that growth. But you can see 2 quarters we had and then 1 quarter we had to sacrifice the growth. And so we cannot comment on that external world, but I think we are confident that our acquisition channel is working fine. Our product is working fine. And we should be able to add that 6,000, 7,000, 5,000 customers every quarter. And in terms of ARPU, whenever we have a customer growth, unique customer growth about 20%, the ARPU is about 5%. When we have 10% customer growth, then the ARPU increases by 10%. So because the ARPU is nothing but the total customer and revenue divided by the number of customers. So if the customer base increases because most of the customer base increased at the bottom of the [ Indiscernible ] at the lowest ARPU. And then over the period of time, they have paid to the higher services. So I don't see an ARPU increase suddenly from here. If the entire next year is free of COVID, I'm pretty sure we would be able to get to 15%, 20% customer growth and maybe very less ARPU growth from here on. But whenever we have the lesser customer growth, then we can get the ARPU growth.
Just to emphasize on this one. So when you look at the entire model for us, the leading indicators for us would essentially be in terms of our collections and the deferred revenues. And if it is around the deferred revenue bucket that you will see revenue actually getting recognized. So over the last few quarters, now we have seen almost like a mid-25% kind of growth both in our collections as well as in deferred revenues. And as obviously, we move quarters ahead, this increase in deferred revenue or collections will reflect into our revenues. The current growth in revenues, obviously, is dependent upon what we did 4, 5, 6 quarters ago, and therefore, you may see that as subdued. But we definitely see that with the number of net customer adds getting back on track, with the economy opening up, obviously, this Omicron thing is a bit that has happened for about a month or so. We think we are probably in a very, very good shape to take advantage of all the improved Internet adoption that has happened because of COVID in this way. And we should be looking at decent growth for us even going forward.
So Brijesh, thank you for that and Dineshji thank you. I would like to -- so Dineshji I'm with you. I understand that the space is very large. And we are becoming more and more digitized. The only problem is that having seen so many Internet companies, the problem is a lot of these Internet businesses are in an exponential growth trajectory, whereas IndiaMART, as a company, we've been in a subdued growth environment right now. And I can understand, look, the target market which we cater to, which is SMEs, they have kind of been in a little bad shape for a while now. But then my question again is, look, are you satisfied? I mean, is it that 6,000, 7,000 new customer addition and a little bit of ARPU hike is all that we should expect going forward? Or -- and I understand, look, so many acquisitions that you're doing is definitely for some outcome. But having said that, whatever last 4 quarter acquisitions you've done kind of still does not reflect so far. So what I'm trying to just simply dig through is, is it because the base of 156,000 paying customers? Is that base very large now from where growth of, say, north of 20% is going to be a little difficult?
If you look at our collection from customers, it is still -- last quarter, it grew by 36%. This quarter, it grew by 24%. So I don't think -- if you look at the revenue from operations, that's a 20-month moving average. When collections were minus 10% and minus 50%, then also revenue was minus 2% and plus 10%. So we are still growing at 30% plus/minus and we will...
No, no. Sir, you -- but your guidance always remains about 6,000, 7,000 quarterly new subscriber number...
Now I'm guiding that -- I think we have been guiding at 5,000 and 5,500. Now I'm guiding INR 6,000, 7,000.
Okay. So when do we get to 9,000, 10,000 kind of a number?
That we will let you on next quarter or about quarter or 2.
[Operator Instructions] Next question is from the line of Antique Stockbroking, Prateek.
Can you hear me?
Yes, Prateek, we can hear you.
Yes. So I had a question. One of the competitions mentioned about significant shift to monthly subscription plan from this quarter, while we are short of -- I think what do we think about like changing like subscription mix or a period mix for us?
So we keep doing that, sometimes it's 60-40; sometimes, it's 40-60. And depending upon when we see where we want to keep it and where we want to acquire it, I think -- for example, when the COVID hit, we didn't want to do a monthly. And we could not have done monthly. A lot of people signing up remotely on a phone was much more difficult. So entire FY '21, we hardly did -- at least for the first 9 months, we hardly did monthly subscription. And then we opened up monthly big time. I again remember that when 25th year of anniversary happened, then we ran anniversary offer for 2, 3 quarters at annual subscription being at 10% discount. So I think that keeps on changing between 40-60, 60-40.In terms of rent client mix, currently, we have only 1/4th customer of the total 160,000 customers, about 40,000 customers are in silver monthly. Rest all are in the annual or multiyear mode. And as I've been saying that almost more than 50% of our customers are in more than 1 year subscribed.
Again, trend-wise, particularly related to industry shifting to monthly or industry or your customers wanting to shift monthly because they are sort of feeling the crunch and that's why they want to pay less initially and rest?
If you remember, we had done some easing out on that side. Earlier, the monthly subscription used to come with INR 5,000 setup fee and then INR 3,000 a month inclusive of taxes. So first -- after the first wave or the first lockdown, we first tried to improve on that because the E-NACH had become far more easier by then. So we removed the INR 5,000 initial setup fee and converted it into an advanced EMI kind of a thing. So the INR 3,000 as advance EMI. We also experimented with INR 3,000 plus tax, but we found that, that becomes too expensive at INR 3,500 at the entry level. So currently, the INR 5,000 setup is gone, and it's a INR 3,000 inclusive of tax.And we get about 50-50 annual and monthly plus/minus, depending upon any particular month when we run any promotion or something. So I guess, the new customer acquisition will continue to happen at almost half and half between monthly and annual subscription.
Sir, second question is on like we have added like sales employee you mentioned. So -- and we continue to like sort of add them in coming quarters. So remember that earlier like pre-COVID, we had a significant dependence on, on-field employees to ramp up our business, and we moved to offline mode and channel partners, et cetera. So this increased hiring now will also go towards this on-field sales and -- which will also impact your costs?
So one is the -- if you see at 147,000 customers we had about 3,200-odd employees. And we need employees for two things: one for acquiring new customers and other for servicing the existing customer. And servicing the existing customer only silver monthly and Tier 3 customers are served over the telephone. All Tier 1, Tier 2, gold and platinum customers are served on -- and annual customers are served by field sales force. So there itself, we needed more people to serve these additional 15,000, 20,000 customers and more customers being added every quarter. Also, the outsourced sales have increased to -- this is in terms of crore, INR 62 crores or what -- So I think in terms of new client acquisition, you are right that we are slowly and slowly changing the mix. In terms of earlier, we had almost 1,000 plus our own people on the field and then about 300 people on the -- in the tele call centers. Now we have almost -- we are planning in a manner that 40% would be our own field sales force, 40% would be probably channel field sales force and maybe 20% on the telephone. That's the split that we are working towards. And on an overall basis, the increased customer acquisition would happen based upon that increase in the number of people in all the 3 channels.
And one last question on -- do you still feel any need based on industry trends of increasing your ad spend or you're not still looking at hankering major ad spend to accelerate your growth in line with like a question mentioned earlier?
I think on the ad expense side, if you see our traffic from the pre-COVID levels have grown from 60 million per month to almost 90 million per month. So that's digital adoption itself has done a 50% increase in terms of our traffic on an annual basis if you see. So I don't think there is a need for that. It's more of trying to get the seller side. And on the seller side, ATL advertising is very expensive. I think you'll be investing more on the sales and distribution rather than working on the ad spend. Some brand ad spend might happen. As I have always been guiding, we can keep that INR 20 crores, INR 25 crores budget per annual. But whenever that will happen, we will let you know.
Next question is from the line of Manish Gupta, Solidarity Advisors.
Dinesh, just wanted to understand when should we start seeing more operating leverage in the model because in one of the slides you have shown your contribution at about 80%. And over time, your technology headcount is not increasing much. So the current margin profile, if we look at the business a couple of years out, why should the EBITDA margin not expand from operating leverage?
Yes, so last 2 years, if you take pre-COVID level, EBITDA margin were 26%, 28%. From 26%, 28%, they are expanding to 38% in 2 years. Whether they will continue to expand, given that there has been a salary rerating and we haven't had growth, so I think I'm guiding that for the next 1 year, let us stabilize at 38%. After that, again, the same guidance will continue. If we grow over 20%, if our cost grow at 15%, we'll continue to see 1% per quarter margin expansion.
1% per quarter, you mean or you mean 1%...
1% per quarter is what -- if we grow at 15%, if your expenses grow at 16% and if your revenue grows at 20%, you will see a 4% margin expansion every year.
[Operator Instructions] Next question is from the line of Amit Chandra.
Yes, sir, can you hear me?
Yes, Amit, we can hear you.
So my question is on the investments, I know you have explained a lot about the rationale behind the investment, but just to have some further clarity on this, so most of the investments are in the ERP space. So how are we actually looking to leverage these investments in our existing client base or our platinum clients. So for example, how many of our platinum clients are actually using these software, specifically if you don't want to talk about Busy. So is there a huge cross-sell opportunity in our existing client base where we can go and sell this software? And if you can also highlight what is the pricing model there in terms of -- because it's an on-premise model, so whether we are charging it as a license or a SaaS kind of a model or it will be more of an offering which will be more like a bundled offering, right, in which you will like bundle it along with the yearly subscription charges. So if you can throw some light on that.
So Amit, when we look at Busy as an accounting software, currently, the on-premise model that they had, they offer subscription, they offer licensing model, whereby you can take it for a single user for 2 users or for multiple users. Price typically would range anything between INR 8,000, INR 9,000 to about INR 35,000, INR 36,000. There are these -- some of these users who would also go back and pay anything between INR 3,000 to INR 5,000 every year to get the upgrades that are launched by them. Currently, about 25% of their customers essentially go for these services right now. And that adoption has happened over the last 2 years specifically.Now their current market share in the accounting software market and specifically for businesses that are GST registered, they have about 10% market share. And that is also fundamentally more on the manufacturing and the wholesale trading side of it. A sample dipstick between our customer base and the Busy customer base suggests that there is a current overlap of anything between 15% to 20% of the customers of IndiaMART customers using Busy accounting software. So we definitely see that in terms of the target segment, that is the existing overlap. However, as we go back and understand the operations of Busy far more deeply over the next year or so and we get a good hang on how they have been doing the overall sales distribution all these years, there is definitely an opportunity possible for us to look at bundling of these products.However, one important element that we must know is that at IndiaMART, these subscriptions are for recurring payments typically. These are not onetime licensing fees. So therefore, when you look at closer bundlings, we need to look at a subscription model rather than a onetime payment for it. So better clarity on it, of course, will emerge as we go and build a better understanding of the business and also look at how do we enable Busy in itself to look at a subscription model from the license fee by building up a cloud SaaS-based application. But that is something which is a year or 2 away from where we are. And once we get into the business, I think that's the time when we would be able to give you better clarity on when would this be sort of possible for us to go back into.The current spread of customers that is already there with Busy suggests that they are fundamentally very, very strong in North. Almost about 2/3 of their business comes in from the northern states itself. At about 25-odd percent comes in from Maharashtra. So there is a lot of open space available in South, in East, in the central part of the country, where, in fact, their presence is very, very minimal currently. And I think that will, of course, be one of our priorities to go and use these white spaces to increase the overall customer base there.
And there, if you see their revenues until pre-GST were about INR 10 crores, INR 20 crores. It is only post GST that they reach to the INR 30 crores, INR 40 crores. So their ability to spend massively on a sales force or a distribution network was also limited. And I think they have done a very good job making a product which is very stable and getting up to 2 lakh customer base. I believe now we are a INR 1,000 crore company. I think we have a lot more ability and lot more cash behind us to be able to expand our sales force whether it is the dealer distribution sales force or whether it is new sales force or whether it is our existing sales force. And we all know that sales has a lagging effect, somebody with limited capital has that limited ability to press the paddle on the sales. We have seen multiple times how investing in sales can have a lagging effect on subscription businesses. So I think next 9 months, I would say that we would not go and disturb the business, we would just try and digest the business, understand the management, understand the product, make it a stable smooth transitioning. And then we would like to experiment with sales first and then going to mobile and going to cloud and doing other things. I think it will be year 1, year 2, year 3 kind of a thing. Let's look at a 5-year, 10-year horizon on this rather they're looking at 3 quarters, 5 quarters.
Okay. Fair enough. Fair enough. And sir, also one of the objective behind acquiring companies earlier was to increase our value-added services, maybe in terms of increasing more focus on the logistics, warehousing and other ancillary services, which actually increases the ROI or audit transaction capability foreign seller. So what is the progress on that side? Why we're not acquiring or investing in like in that area, so which can actually give a boost to our existing MSME -- MSME penetration basically?
We are investing in the current financial year alone, April '21, we invested in Shipway. March '21, we have...
But these are very small investments. I'm talking about the kind of steps you are taking in Busy, like a big company and investing with full confidence that kind of investment in those particular areas, basically.
After investing for 2 years, we have been able to make this courage to do a bigger investment. Let's digest this one. And then we will do one acquisition a year over -- as I've been guiding, if we can do 1 acquisition a year, let's first for the next 3 years, that should be our target. And then we look at -- there are companies in the world who do one acquisition every month.
Next question is from Kotak Securities. Sumit, are you there?
I just wanted to know how is the competitive intensity? And are we losing market share?
I haven't seen anything like that. I haven't found any customer saying I'm going to XYZ. And even recent many a times, I think some of the research reports that you guys published have done customer diligences or customer voices. And there has been no overlaps. And I've highlighted this earlier also if the average order value on D2C marketplace like Amazon or a Flipkart is $10, $15 versus the average order value on a B2B grocery marketplaces are like $50, $60, the average order value on Pay with IndiaMART that we see is around $400, $500. And the Pay with IndiaMART only can use for lower transaction, lower-value transaction, not for high-value transaction. I mean, if you see, say, one of our categories is digital generators, now who's who of the customer brands that you see and nonbrand also are our customers. And their average order values will run into upwards of INR 50,000 anywhere up to INR 5 lakhs, INR 10 lakhs. So I guess we haven't yet found any competitive pressure.
What will -- how we should see the growth trajectory going forward from here for next 2 or 3 years?
As I said, if this kind of -- every 9 months, some kind of lockdown or a wave does not happen, I think we should be good at anywhere between 20% to 30% growth rate.
So due to time constraint, that was the last question. And with this, we come to the end of our Q&A session. And now I hand over the call to the management for their closing remarks.
Thank you very much, everybody, for joining our Q3 FY '22 conference call. We have tried to address all your queries. In case you have any more questions or follow-up questions, you can please contact our Investor Relations department. And now Kushal is full time available to handle all your queries in much more detail. Thank you very much. Have a nice day, and look forward to a great quarter again.
Great. Thank you, everyone. On behalf of IndiaMART, that concludes this webinar. You may disconnect your lines. Thank you.