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Ladies and gentlemen, good day, and welcome to the IndiaMART Q4 and FY '20 Results Conference Call. [Operator Instructions] Please note that this conference is being recorded. Joining us today from the management side, we have Mr. Dinesh Agarwal, Chief Executive Officer; Mr. Brijesh Agrawal, Whole-Time Director; and Mr. Prateek Chandra, Chief Financial Officer.Before we begin today, I would like to make -- I would like to remind you that some of the statements made today -- made in today's conference call may be forward-looking in nature and may involve risks and uncertainties. Kindly refer to Slide #3 of the earnings presentation for a detailed disclaimer.Now I would like to hand the conference over to Mr. Dinesh Agarwal for his opening remarks. Thank you, and over to you, sir.
Good evening, everyone, and welcome to IndiaMART's Fourth Quarter Results Conference Call. We have already circulated our earnings presentation, which is also available on our website as well as the stock exchange website. I'm sure you would have gone through the presentation and our recent disclosure made today on our investment in Mobisy Technologies Private Limited. I would be happy to take any questions afterwards.First of all, I'm pleased to report that IndiaMART has achieved a consolidated revenue from operations of INR 170 crores in the fourth quarter and INR 639 crores for the full year, representing a year-on-year growth of 23% and 26%, respectively. Collections from customers have increased moderately by about 10% from INR 671 crores in FY '19 to INR 738 crores in FY '20 as a consolidated basis. As a result, the deferred revenue as of March 2020 stood at INR 685 crores, where the year-on-year growth has been decreased to 17% as compared to 38% for the same period last year. Total paying subscribers at IndiaMART stood at approximately 147,000, with a net addition of approximately 5,000 subscription suppliers for the quarter.Now I will brief you about the impact of COVID on our business and our customers and the measures that have been taken by us to mitigate the same, until now. The last financial year has been challenging because of the weakness in the overall economy, and we have been sharing this information since last 2, 3 quarters itself. March onwards, the COVID-induced lockdown has further impacted the business environment. And due to the nature of COVID-19 exigency, our top priority was to ensure the safety and wellbeing of our employees as well as our vendor partners.First of all, all of our employees are safe, and they have adopted to this new work-from-home environment with full dedication and commitment. This has allowed unhindered running of the marketplace platform, both on website as well as on mobile app. We have continued the support on the customer service on our toll-free number as well as our e-mail and mobile apps.The nationwide lockdown has resulted into general business activity coming to a standstill. As a result, we have observed a reduction in the traffic on an average of 50% lower than the normal values. Though it varies significantly across categories and across geographies, IndiaMART has a very important responsibility towards the nation and we have a very important role to play, especially in these tough times. Everyone from across the world is looking for products and supplies related to hygiene, safety, medical, pharmaceutical and the entire food value chain.Due to the coronavirus outbreak-related lockdown in China, since early February, the entire world has been looking at India, and IndiaMART is the destination for many such categories. We are witnessing significant traffic growth in categories such as sanitization, safety, hospital, pharmaceutical and food supplies, et cetera and indirect categories like chemical, packaging, raw materials related to the above-mentioned items.To help buyers looking for essential items, we have identified many such categories of importance. And we are working hard to increase the number of products and suppliers available in those categories, from all across India and from the cities all across India, so that it is easier for buyers to be able to find the kind of products that they are looking for in these days of emergency of COVID -- created because of the COVID.Most businesses, including our customers, especially SME customers, are currently facing acute financial challenges, and they have been already facing financial challenges since last year due to economical slowdown and which got further aggravated in the month of October, November, when the financial crunch started. And it got further acute when the sudden and long lockdown has happened to them.As always, we promise to stand by our customers in these challenging times. We have undertaken various customer retention initiatives such as discounts and relaxed payment terms for suppliers to help them navigate the current situation. The current market is also nonconducive for any new sales due to the lockdowns as most of our salespeople are not able to meet the customer and most of our customer businesses and premises are completely closed. Hence, approximately 10% to 20% of our subscriber base may -- actually may be severely impacted and are more likely to churn.We are witnessing a sharp downfall in the sales and collections from customers and anticipate the same to remain suppressed for the next few months until the lockdown is completely withdrawn and life is back to normal. The situation requires us to be financially prudent, responsive and proactive in the larger interest of all the stakeholders of the company. We are taking a number of cost optimization measures such as relooking at our current cost structure, renegotiating with vendor contracts, looking at variable cost, deferment of appraisals and temporary salary rationalization without doing any kind of a layoff.Amongst this gloom, the silver lining that we foresee in the long run is the following: number one, there is an -- overall adoption curve of the Internet will improve and a lot more people and businesses will adopt to the Internet in times to come; there is a natural pull for making India, in the post-COVID scenario, that should increase the manufacturing intensity in India, potentially enlarging IndiaMART's market size; there would also be increased openness to the online and telesales that may reduce our reliance on physical meetings in the long run and make it more efficient; our geographic and category diversification put us in a position to leverage the staggered opening of the lockdowns; the inherent strength of our company's subscription-based business model with negative working capital and robust cash reserves give us the confidence that, at the end, we will emerge stronger together.Now I would like to apprise you about the investment that we have announced this afternoon. The Board has approved to invest INR 10 crores in Mobisy Technologies Private Limited. They run a business called Bizom, along with another investor, Triton Investment Advisors. Bizom is an Bangalore-based SaaS start-up offering -- SaaS start-up, offering sales force automation and distribution management system to medium- and large-sized businesses. This was co-founded by Lalit Bhise, Vasudeva M and Shree Bhise. It offers a mobile-first cloud solution that enables the digital transformation of sales and supply channels of the consumer brands distributing through retail stores.Bizom, which is solving the complex sales and distribution and direct retail needs of the consumer brands on a mobile-based, stabilized and scalable platform is a strategic fit with our long-term vision to make doing business easy for all kinds of businesses, whether small, medium or large.Now I would like to hand over this call to Prateek to discuss the financial performance more in detail, and we will come back to you with your questions and answers later. Thank you, and over to you, Prateek.
Thank you, Dinesh, and good evening, everyone. I would like to first discuss performance of the fourth quarter, followed by the performance for the entire fiscal year. The consolidated revenue from operations was at INR 170 crores for the quarter, with EBIT of INR 46 crores, representing a margin of 27% as compared to a 14% EBIT margin last year. The margin expansion is primarily driven by the higher revenue growth. Net profit for the quarter was at INR 44 crores, and cash flow from operations during the quarter was INR 94 crores.On a full year basis, consolidated revenue from operations stood at INR 639 crores, with EBITDA of INR 169 crores, representing a margin of 26%. Margin expansion in the business was 8% as EBIT margin increased to 23% as compared to 15% last year, and net profit for the year was at INR 147 crores. Cash flow from operations during the year was INR 261 crores, leading to a closing cash and investment of INR 931 crores as on March 31, 2020.Thank you very much. We are now ready to take any questions.
[Operator Instructions] The first question is from the line of Pranav Kshatriya from Edelweiss.
My first question is regarding the statement you made on 10% to 20% of the customer could churn out. Can you give us some sense that is this portion of the customer has already churned out? Or this is your expectation that the lockdown -- by the end of this lockdown, that is what will happen. And secondly, what would be the profile of these customers? Because top 10% of the customers give you almost 40% of the revenue, so should we assume this will be more of the bottom-end customers and hence, possibly revenue impact will not be to the similar extent? That's my first question.
Thank you, Pranav. Hope you are doing well in the lockdown days. So now coming to the 10% to 20% and why such a big range and why not close the range because I myself do not know. There are uncertain times. Initially, things were like 3 weeks of lockdown, then it further got extended and then it got -- further got extended. And the numbers of patients are also rising. So many people who initially thought that they should be hanging on to the subscription may give up in the times to come.So given that we have 150,000 customers and we are not adding any new customers or very little number of customers, who may be specifically coming from the special focus categories that are working in the COVID times, I would say that, let us assume, that we would be down by 20% from our current customer base, if the lockdown -- if this one -- this fourth lockdown is the last one to be. If the further uncertainty continues and the economy goes through further challenges, I can only come back and tell you, in a month's time or so, how -- what kind of figures do we have. As of now, I can only tell you that maybe about 10% are already on hold. And given that the next 45 days are based upon the last 45 days, another 10% may go. So that is where we are.Now coming to the second part of your question, which is the mix of the customer. And as you rightly said, that top 10% of our customers, which is the Platinum customer, accounts for about 40% of our revenue. So you are right, there will be higher churn at the bottom of the pyramid. This would be slightly lower churn in the middle of the pyramid. But please also understand that the top of the pyramid is the most expensive for people to sustain as well. And so on one side, those are the customers who have a long-term belief in IndiaMART because they have tasted the Silver solution or a monthly solution and then only have taken a Gold or Platinum or for longer duration.On the other hand, they are paying also on an average of INR 175,000 per annum, which is almost like INR 15,000 per month. So every month of lockdown is going to cause stress on them. So they may not churn out completely, but it is quite likely that many of them would go for a temporary suspension of the -- yes, temporary suspension of the -- for a month or for a quarter. A few of them may request us that please downgrade us to the lower tier. However, we can tell you that on the larger size of customers, about 50% of our customers are paid for more than 1 year or so. So they are probably more than 1-year, 2-year, 3-year combination. I hope that answers your question.
Yes. My -- just a follow-up on that would be how are you seeing the activity in some of the zones which are basically in the green zone and where some of the activities are allowed? Some of the factories are also opening. So in those areas, are you seeing some activity coming back? And if you can give a sense that, especially in those areas, how is the traffic for those kind of products or basically traffic for -- in those areas vis-à-vis how much it was when the entire lockdown was in place. So any color on that will be helpful.
Pranav, as I said, there is the week-on-week and day-by-day changes and certainty and uncertainty happening. So in the entire month of April, we have seen a huge fluctuation on the traffic as well as the traffic coming from different cities based upon how the cities have reacted to the first patient and second patient.Now this particular one that you were talking, in the last 10 days or so, was announced at the central level itself on 3rd or 4th of May, and which percolated to the state level and was percolated to the district level. It is only yesterday's newspaper and day before yesterday's newspaper that I could see that these -- many factories have given permission to operate in Noida. Even I, for the first time, stepped out after 20th of March, out of my home. And when I look out of my window from the office, it still looks like the entire Noida is at home.So there is -- it will take some time before people can actually return to any kind of normality. Having said that, have I seen some improvement in traffic over the month of April? Yes, I would not deny that. But am I hopeful of sustaining everything like this because the very next day, something was opened, Ahmedabad was completely put into the curfew. So I mean, I'm as clueless as anybody could be on that perspective.The good part is that whereas entire physical businesses are literally closed, literally means literally closed, 100%, apart from some bread and milk, at IndiaMART, still we are getting, on an average, about 50% of the traffic, which itself is quite remarkable for us. Inquiries in this 5, 6, 7 categories, which I mentioned earlier in my speech also, whether it is safety or whether it is health or whether it is hospital-related or whether it is medical equipment-related, pharmaceutical, chemical, PPE suite, so if you search for any of those items, you will find that IndiaMART probably is the only destination for finding something.And so that is where we are. I would say it is safe to assume that we'll remain anywhere around 50%, 60% because the worst time of the lockdown, we were at about 50%. If something improves, it would be a bonus for everybody.
Sir, a small follow-up on that. So 50% decline in traffic, should it translate into 50% decline in the inquiries also? And because a lot of businesses are closed, are you seeing pickup -- inquiry pickup rate lower?
So Pranav, when I say traffic, I actually almost interchangeably use inquiry versus traffic versus calls or versus RFQ. All of them typically fall more or less in tandem because the overall conversion rates do not change.
The next question is from the line of Vivekanand Subbaraman from AMBIT Capital.
And I just wanted some more color on 2 things. The mix of packages that you have, longer than 1-year packages versus monthly packages, how different is it among your top 10 versus the rest of the customer base? And on a related note, you mentioned about the request that you've been getting from customers to possibly downgrade. Can you help us understand that in terms of your top 10% versus the overall universe? That's question one.
Yes. So, Vivek, to your first question, wherein you were saying that what benefit packages we have, so we have broadly 3 tiers. The top one is the Platinum tier. The middle one is the Gold tier. And the third one is the Silver tier. Platinum and Gold packages are available only in the yearly modes. So most of the customers then have taken the yearly and the longer-term subscriptions. In Silver, we have 2 different packages, either a supplier can opt for a monthly package, which we call it as a Silver monthly bucket, and either they can opt for a yearly option in the Silver.
About 1/3...
In total, about 1/3 of our total customers would have opted for...
Monthly...
A monthly package on the Silver.
And 10% of the customers are top...
And roughly 10% are the top Platinum customers. So hopefully, this answers your question on the mix of the packages.
Yes.
Now as regards to your second question...
Yes. The second question is with respect to your branch expansion. This year, I guess, you added around 14, 15 branches. Yet, if I look at the other expenses that you have reported for the full year basis, I see that your costs have actually come down. So any -- can you give any color on the cost initiatives that you have taken? Because in FY '20, also your cost performance has been quite good if I look at the nonemployee costs. A discussion there and where we should look at this number for fiscal '21 and '22, that would really help.
Yes. So Vivek, to your -- the second question on the expenses part, the other expenses and the G&A part, certainly with the branches, our expenses on that side have slightly gone up. However, in this year, we have also adopted Ind AS 116, which requires a reclassification of the rent expense to moving now into more like depreciation because the standard requires to capitalize all the long-term leases that we have and charge depreciation instead of showing it as a rental in the P&L.So roughly around INR 16 crores for the year and INR 4 crores for the quarter would have gotten reclassified from the other expenses to the depreciation line in this year. If you add back that particular line, you will see that my other expenses have actually gone up vis-a-vis last year.
All right. Understood. Okay. So you have recategorized the rent into depreciation. Okay. Got it. And last question is on the...
That was a requirement of standard. So it was not a voluntary decision as such. It was a mandatory applicability of the standard.
Of course. Of course, I understand. Right. And last question is with respect to the competitive intensity. We are reading news reports of dot-com companies like Udaan facing challenges given that the funding environment has become much, much more circumspect. So in this light, do you think that the competitive intensity in the space will subside? And if so, can you talk about the specific initiatives that you can take in this environment post-lockdown to look at adjacent market opportunities?
Yes, let me try and answer this question, not an easy direct answer. You are right that funding would become tougher for the short term to medium term as the funds will chase the best returns in these times. And for any new kind of trial and testing, the funding would be lesser available.However, the name that you have take, Udaan, they have a large amount of funds available with them. And they have also been financially prudent to cut cost and save that funding for long.On the other hand, Udaan and IndiaMART and Amazon business and Amazon are very, very different businesses. The kind of products and categories that we deal into, the kind of products and categories that they deal into are very, very different. We are mostly manufacturers, wholesale traders, custom products made, truckload of products.Just to give you one comparison. If Udaan has about $60 average order value, at IndiaMART, it would be around $600. So that will give you -- and at Amazon, it may be at around $16. So I mean, there's a $16 and $60 and $600. So we are in a very, very different category. Not every B2B and not every SME business is the same. However, having said that, once they get into the -- once they get their feet on the ground, there is always a possibility that they would try and expand into each other's area.As I said, as much as this crisis present the risk, so that people would not -- that -- so that smaller startups would wind down, so that the smaller startups would not get money, as much as it presents a silver-lining opportunity because 2 years down the line, when everybody would be using the Internet, when remote working will become like a norm and when, by that time, Internet-based commercial platforms like IndiaMART would become a super hit, the competition can and funding can come back with a far more rigor and far more vengeance. So just like when IndiaMART became successful, a large amount of funding went into multiple B2B and SME platforms.Similarly, for now, there may be certain opportunities for us to consolidate. And as much as we can consolidate, that should be our goal. However, those who have large amount of fundings are smart enough to save it for the rainy day. And once the overall scenario gets settled in, I think everybody would look at even higher degree of competition would probably come. So on a short run, yes, this is a positive. On a longer run, yes, we have to be cautious. And third, they are in very different business than ours.
Understood. One small follow-up. So the 2 investments that you have made until now are minority investments, do you also intend to buy out companies in different areas?
So we are not averse to buying out or averse to investing. We only invest in strategic areas, first of all. We are not a normal venture capital fund who will go and invest our money in a consumer startup or in a sports startup or a [ suite ] startup because there is an opportunity. Because there's a lot of money available with a lot of financial institutions for various kind of entrepreneurs. If we, at IndiaMART, cannot not add any value, we as a management with our experience, are -- we cannot learn anything from that startup, it's neither in our favor, not in their favor to give money or to take money from each other. So we will continue to be making investment in the spaces that are more adjacent to us, which add an ecosystem to the small- and medium-size businesses. And if you really see, [indiscernible] as an investment, people manage leads to us, and then we went on to the lead management system, which is a CRM, which has been developed by IndiaMART. And today, I can say that probably we are the largest CRM company in India used by distinct number of individual businesses, our IndiaMART CRM. And if I can give you the last quarter's CRM usage data. Last quarter, itself, the number of call back and reply done through our own CRM was to the tune of 40 million calls and messages. So about 40 million calls and messages have been exchanged by 100,000 distinct businesses, about 100,000 distinct businesses have used. So then we moved on to investing in a business called Vyapar. As you know, every SME, the first requirement on computer has been accounting software. However, accounting software comes with an accountant. And now that computer is in everybody's hand in the name of mobile computer, I do not need an accountant, and that's where the need of the mobile-based self-accounting software was there. I have been looking for a solution like that for myself and for my relative's businesses. Fortunate to find Vyapar and -- so we have taken a smaller stake to begin with because we feel that it's a very nascent business right now. We will wait and see how we can nurture that business. Today, we have made an investment into a forward management of distribution and sales, so helping distributors of large brand and helping the retailers of large brand using again the mobile-based SaaS application. The beauty of Bizom is that unlike being a standard SaaS application and unlike being a totally customized software, it is a best mix of a configurable multitenant SaaS software available. And in some senses, they have made their infrastructure or underlying infrastructure in a very similar way as SaaS in the customized software solution base or as sales force in the -- this kind of software base. Now coming to your question whether we are open to acquiring businesses. Yes, we will be open to acquiring. But for that, we need to continue to look for and continue to find the right candidate and a strategic fit and strategic value.
The next question is from the line of Hiten Jain from Invesco Asset Management. [Operator Instructions] We move to the next question from the line of Sanjay Ladha from Concept Investment (sic) [ Investwell ].
Sir, I have 3 questions. So firstly, correct me if I'm wrong. In my view, most of the paying suppliers who are associated with the company for a long period of time renew the plan in the starting of the financial year. So the time also in the month of April, you have seen whether a customer is taking our subscription model or not. So what is going on in that side? If you can highlight more on that and how the demand of our product has been in the terms of paying suppliers? And what is the churning ratio in this quarter? This is my first question.
So it does not work on a financial year basis. It works on a rolling mechanism. So this company started their subscription, say, on 15th of February and has taken a monthly auto debit or an electronic clearing scheme kind of subscription. Then every 15th of the month, their subscription would be renewed. Similarly, coming to an annual subscription, if somebody has taken a subscription in the month of June 2019, he would be sent a renewable notice somewhere in the month of May for a subscription renewal in the month of June of 2020, and similarly for a 3-year subscription. So we do not have an annual budgeting from the SMEs as and when -- so this has 2 benefits. One, it gives the flexibility of our sales team to be able to sell all year around. At the same time, it gives flexibly -- it gives us continuous cash flow because if something was all gathered around a particular event, say, Diwali or New Year or say beginning of the financial year or end of the financial year, that's very risky. So all of our sales and all of our renewals are, by and large, equally disbursed across the year and across the geographies and across the various SME sizes. Second question was?
What is the churning ratio in this quarter?
Yes. So churning, I think we already -- always tell that in particular, in this quarter, there has not been much difference than the previous quarters. So we have 3 kind of customer base, platinum customer base, which accounts for about 10% of our customer base. There, we account for about 40% of our revenue. And that accounts for about -- that accounts for about 5% to 6% of the annual churn, 5% to 6% of the annual churn. Then when we have a gold customer base. And gold customer base is about 30% of our customer -- 30%, 35% of our customer base, where we have about 10%, 12% of the annual share. And then we have silver monthly and silver annual. In terms of silver monthly customer base, we have about 20% to 25% of our customers there. And in the monthly base, we have about 5% to 6% of our monthly churn. However, post the 20th of March, things have been under complete lockdown. And we have received multiple requests from multiple customers to stop their subscription or to give them extension. So we do not know how long this uncertainty will continue, and during that uncertainty how many people will be able to survive and will be able to afford the subscription over the longer period of time. So these are the historical figures. How they will pan out in the times to come, I cannot assess at this point of time.
Also my second question will be on the collection from customer in the quarter remained flat. So how is the previous trend? If you can highlight. And what is your view on the coming quarters? If you can throw some light on that? And the continuation to that question, in the previous con call, you have mentioned to have 5,000 paying [ subscriber ] every quarter, do we still hold this going ahead? And also the growth upward of 20%, do we still hold on a longer period of time? I'm not talking about the 3-month or 6-month period of time on a longer period of time.
So let me answer one by one. So collections from customers, it is already there in the presentation. If you go to -- now we have the presentation, there's a dedicated slide, which give you last 5 quarters. It gives you last 5 quarters collection and last 5 years collection. Let me read out to you. Last 5 quarters, collection has been INR 204 crores, INR 168 crores, INR 173 crores and INR 178 crores, and the immediate quarter was INR 202 crores. And now going to the growth rates, last -- in FY '18, we had a collection growth of about 33%. In FY '19 also, we had a collection growth of 33%. In FY '20, the collection growth has -- was about 15% until December and February. However, in the month of March, since the collection is negative or flat, the overall collection growth is only 10%. Now coming to your second question. We have been adding about next 5,000 customers per quarter. As I said, currently, we have about 150,000 or 147,000 customers. I mean just a rough calculation that is every -- for every month of lockdown, we may end up losing 10% of the existing customer base because during the lockdown, a lot of customers may not be able to afford or may have to change their business model. So I would say that assuming that in the next 3 months, all of this is over, I would start at a 20% lower customer base. And as things return to normalcy over 6 months, we will start to add maybe 1,000 customers per month per quarter and then 2,000 and 5,000 sometimes. But we don't really know how it will pan out in the times to come. Now as you said, we have been looking at upwards of 20% growth and have been guiding that the growth is a mix of 2 numbers. There has been about 10% to 15% of the growth, which has been coming from the new customer addition. And about 5% to 10% of the growth, this has been coming from the increased realization, which is called average collection per customer or average revenue per customer. Now last year, financial year, it has been very tough initially with the automobile sector completely drying up and real estate sector completely drying up. And then in the later part of the year, there has been financial turmoil and then the NBFC crisis, further hitting the SMEs and -- which further led to a toughness in the churn as well as monetization. And now this third wave of corona has happened. So I would say that it will take some longer period of time before we can look at that kind of growth again. So currently, we would say that we would like to protect our current revenues and current customers. And then as and when the situation improves, we would be able to talk about how and -- what kind of growth and in what period of time we can expect.
So my last question would be how strategic the investment in Mobisy would help the IndiaMART platform? If you can throw some color on the investment side and the strategic partnership with the IndiaMART platform?
So there are certain reasons and there are certain hypotheses based upon which we have done at Mobisy investment or Bizom investment. We look at the entire space, and we found that they are one of the fastest-growing player and the largest as well. So they have grown at 50%, 60% CAGR over the last 3 years. And they have become -- their last year revenue was about INR 30 crores, INR 35 crores, still the final numbers to come. Secondly, they are taking advantage of mobile phone or smart -- mobile computer, what we call. And that is a strategic fit as majority of our suppliers also are utilizing mobile -- IndiaMART mobile app. They are very stabilized and very scalable to our portfolio. I have seen their product working from a company like a Bausch & Lomb to a company like Coca-Cola, and to a company like Jyothy Laboratories and to a company like United Breweries and to a company like Philips, which have very different products and very different solution challenges. However, their product work seamlessly configurable across these set of customers. So it's an impressive set of customers, a stable set of customers and scalable and stabilized product. They're a cash-efficient business. If you really see, they have been able to come this far at 50%, 60% growth with efficient team. And the team has been together for a long period of time. So the founders have been together, not only founders, the entire senior leadership team has been together for a long period of time. I visited their office and I found the cultural treatment and financial prudence in everything that they do. Probable synergies with IndiaMART, there 2 kind of things that we can think of. One, as I have been saying that, now IndiaMART is not only relevant for smaller businesses, we have bigger brands who utilize our platform for buying and selling both. Today, we have more than 200 customers. Whether if you go to the diesel generator page or if you go to a medical equipment page, you will find customers like Philips and customers like Kirloskar, and customers like Tata Motors and customers like Tata Steel and Jindal Steel, and these are coming from diverse industries. Similar customer base is there at the Bizom also. So there may be a cross-sell or a joint-sell opportunity between IndiaMART and Bizom, but that is just too long shot.Second thing is when we approach these larger and bigger brands, many of them find it difficult to manage the volume of leads being generated from IndiaMART. They are habitual of lead handling by their dealers and distributors. They do not know how to monitor those leads. And I think that the Bizom provides me that platform where these leads can be directly put on to their dealers and distributors and retailers and, whereas, the principal brand can have a quite -- quite agree for quite a visibility on what is happening on those leads because Bizom is doing their sales force automation, Bizom is doing their distribution management and Bizom is also working with their retail partners.
[Operator Instructions] The next question is from the line of Prince Poddar from JM Financial.
Just one question. Sir, I just wanted to understand the kind of customers we have. How -- what kind of percentage of those customers would be completely or, to some extent, dependent on IndiaMART subscription for quality leads? So essentially, what I mean to ask is, if hypothetically, let's say this quarter was completely going out of the business, how many will come back immediately the next quarter because of their business need rather than as a discretionary spend? Would you give us a little sense on that? I mean of course, you would not have a perfect answer for that, but what is your sense on the kind of customers you have?
So one, I think you have already answered your question that many of the customers might have a larger portion of their business coming through the leads that are generated and that are followed by IndiaMART. And we will not have exact -- or exact means, even ballpark figures, that these many customers have 10% of their business coming through IndiaMART, and these many customers have 50%, and these many customers have 75%. However, the current situation is less on the dependence of their -- less about their dependence on IndiaMART, more about their own financial ability and their own financial commitments about so many other things. They may have rental. They may have other financial liabilities, banks and loans. So one, whether they will be able to fulfill the buyers that they are able to get from IndiaMART, that itself is going to be a [indiscernible] whether they would like to continue with the IndiaMART subscription. One is the survivor part of it. The second is the, what portion of their customers or revenues come from IndiaMART. And a cross section of these 2 will decide what will happen to our -- ourselves. And this will all depend upon the number of days we take to return to our normalcy. I mean on the 20th March, nobody would have thought that, even on 12th May, we would still be sitting at home. So I think the uncertainty is the biggest question mark in front of everybody today in planning for business or -- and that is even more uncertain for the small and medium businesses. So I would say that given that there are lockdown, IndiaMART will be preferred. It's their probably only choice, not preferred choice. It's their probably only choice. And there is no -- nobody in a competition in the kind of products and services that we deal into. So we are in a good position, but whether we will be able to monetize that immediately based upon what are the financials -- so last year, for example, I think we have been able to maintain buyer traction very well. And despite all that, we have had to deal with a higher churn and a lower monetization growth because this 9% of growth rate is not because of the COVID. Even until the 9 months as against upwards of 30% growth, we were running at 14%, 15%, 16% of growth rate. So there could be 2 reasons for that. One is the external and then the macro regions where people are not able to afford. The second is our own execution reason. We continue to look at where else can we improve. But at the same time, we all know that the overall economy and the growth rate has gone down substantially, and this will -- this particular event will be even more difficult for anybody to guess what is the -- people are comparing this with 300 years, I don't know.
Just a follow up on that, sir. Is there a possibility for -- because as you know, many of the suppliers are there, which are still not paying customers for IndiaMART, but they are already there on the IndiaMART platform. Is there a possibility that the suppliers who have a good cash position or a decent cash position, they might start opting for IndiaMART? I mean, are you seeing any of the traction that new customers of such types are coming in? Maybe from...
Yes, have I got few incoming leads from few known bigger brands? Yes. So your hypothesis is right. But how much will that add to still is something questionable. So we will definitely -- how many people would be left with a good amount of cash in there on their balance sheet. But yes, you are right. In the last -- whatever sales that we are able to do and whatever collections that we are to do today, is because of people who have cash and with all the people who have trust on IndiaMART. So I think there is -- and because of new people who are developing trust in IndiaMART -- in online business. So there is a possibility. In fact, there could be a possibility even on the export side if our Make in India becomes better or truer.
[Operator Instructions] The next question is from the line of Harsh Singhania from Aditya Birla Capital.
I had 2 questions. Firstly, that are there any COVID specific schemes that we are -- we will look forward to as in maybe an extension or some kind of discounts to the suppliers so that they can properly not discontinue with IndiaMART?
I've already said in my opening speech also, and I have already given that as part of the COVID update towards the end of the presentation that, we are already -- and these are difficult times. The -- our customers are facing acute financial crunch because of the second and long lockdown. So we are offering -- yes, we are offering shorter duration renewals. We are offering relaxed payment terms. And where need be, if need be, we are offering discounts as well. If you look at the Page #72 of our investors presentation uploaded on the stock exchange, you'll find that there.
Also, sir, you mentioned that you have around 200 big customers that are -- you have had on IndiaMART. So won't it be inherently a problem for the smaller base because the larger base might get a better start on IndiaMART and the smaller base might lose interest? So will it not be a problem in the long run with the platform mainly inherently catering to bigger players and shifting the focus from MSMEs to larger players?
Actually, what I have seen actually adds to the platform. First, I have seen that smaller players are typically regional players. And typically, they are able to deal with certain pockets of the -- whereas, the larger players, like I said, Tata Steel or Tata Motors, they are able to deal on an all-India basis. They have a dealer distribution network. Number two, the presence of a brand gives a lot more trust to the buyer that this entire list of manufacturers or suppliers that is present here is not a flea market, but it's a more trusted marketplace. So I think if you go to -- if you read the Google, advertising also, it is a level playing field for everyone, yes. And if you see, on Google also, everybody can advertise, whereas more than -- there is about 50%, 50% -- 80% of their advertiser base is also SME. So I think it is where everyone gains -- brands attract more traffic for IndiaMART. Brands will give more trust to IndiaMART. They are able to fulfill the remote buyer inquiry, whereas, the long tail of products and long tail of pricing is filled by the small and medium manufacturers. So I have not seen many complaints, where the brand has said that I would not join because you have so many smaller and uncertified or players. At the same time, I have not seen many smaller businesses quitting saying that we have now that we have a bigger brand, what's our need. So I think, we haven't seen that kind of a behavior yet.
Thank you. The next question is from the line of Ayaz Motiwala from Nivalis Partners.
Sir, I have 2 quick questions. One is the length of contract duration or the customers, which are the longest on the IndiaMART platforms. In your experience, as you've been to 147,000 paying customers, are there some customers who have been around for an extended long period of time?
Let me give you some basic numbers. About 1/3 of our customer base is definitely more than 3 years. And I don't have the exact percentage here in front of me, but we do track the customers more than 10 years and the customers more than 5 years. And I also happen to have few customers more than 15 years as well. But yes, to answer your question, more than 1/3 of our customer base is more than 3 years old.
Right. And sir, more than 3 years old would imply much extended, as you said, 5, 10 or even 15 years?
Yes. There is a blend of 3 years, 4 years, 5 years, 6 years, 10 years, yes.
Right. So the reason I was asking this question was on a premise that B2B relationships, the way you were expressing entirely through the call, get established for 2, 3, 4 years, and then they get very intimate. Is there a desire of such people who might then become even bigger platinum customers to churn out after a period? So that was my motivation of this question.
Sorry, I missed that. Can you please come again?
What I was trying to get at to know the length of customer engagement is if -- B2Bs are more long-established relationships, and after they're -- after they are set where the customer has discovered on your platform a supplier and then the business relationship builds up over 2, 3 years of being on the IndiaMART platform or longer, they find a less reason to be there and especially a motivation like this crisis may push them out of the platform. That was the reason I was asking this question.
No, sir, that is not the case. I have seen that even in case my capacities become full and because it's [indiscernible] about my capacity has become full. Now that my capacity has become full because of IndiaMART, I don't want to leave IndiaMART even I don't utilize it enough. That has been the generic premise that once you have benefited twice, you have benefited thrice, you have benefited -- you don't want to let go of that platform and relationship. And also the entry barrier, somebody might have -- just to tell you, when we launched the monthly package in January 2015 -- in December 2014, January 2015, it was at INR 2,000 per month. And those customers who are continuing since then, they're still paying INR 2,000 per month. Whereas, the new customer who have joined somewhere in 2016, '17, they started to pay INR 2,500. The new customers who have started -- joined later in 2018, '19, they started to pay INR 3,000. So if you really see an older customer, now if he churns out today and wants to join in back, his annual cost of reentry would increase from INR 24,000 to INR 36,000. So I think there is enough reasons for people to grow. Those people who have got these kind of benefits to us, they have also grown bigger and I've seen customers from single room -- and as we were from single room. And I have seen my chartered accountant from single room grown that way. My customers have grown that way. Our employees have grown that way. Together, all of us have only grown. There may be a few people who are left on the way, but yes, mostly, it has been a growth journey.
Right. Sir, the second question is regarding payments, collections, discounts, et cetera. You said there are hardly any new sales being done and even collections are very slow or not happening because salesmen cannot predict potential customers. Sir, in this backdrop, some of your competition, one of them, TradeIndia, seems to be promoting very aggressively and offering deals and discounts. So do you have a comment on the competitive market? Are the people trying to grab market share of [ joining ] customers of yours as such? And could you quantify the level of accounts and deferment in the same context, please?
So I think [indiscernible] the name that you took is not a new name. In fact, when I started my business in 1996, they were already in business for 5, 6, 7 years. So they started probably in '87 or '91, if I remember. So they have been following our business day in, day out. Today, we get about 50 million, 60 million visits on our platform every month. As per the public data available on similar web, they get less than 5 million -- 3 million to 4 million visits on their platform every month. So -- and obviously, whenever there is a leadership position, there will always be some rub-off effect, which will go to the smallest competition, but the distance between us and the nearest competition has been increasing forever. Now coming to your second question was length of deferment. So as of now, because when we started, we thought that it's a 3-week thing. And most people said that, okay -- and the government also came back and said that you can defer your EMI. So similarly, most people came back and said, please defer for this particular month or give us an extension for 3 months. So it is ranging mostly between -- and now that it is we are in the second month, so it is -- most of the people who have been deferred have been deferred anywhere between 1 month to 3 months. And this is totally business customer requirement. Many of the customers are using this time where we are offering flexible terms than in the normal days using this time where we are offering discount than the normal days to lock up for a longer period or to upgrade. However, those stories are far and few. Most of the money that is coming nowadays are purely and purely because of the categories, which are more relevant in these times which are related to health, safety, food, hospital, medical, pharmaceutical, chemical and related items. I hope that answers your question.
Next question is from the line of Dheeresh Pathak from Goldman Sachs. [Operator Instructions] We move to the next question from the line of Hiten Jain from Invesco Asset Management.
Sir, I had one question. So your top 10 clients contribute 40% of the revenue. This number was similar last year as well, which means that you have been able to have a higher realization increase in your top 10 clients, that is why the 40% number remains the same this year as well. And given that the realization is quite high, as you said, it's closer to INR 1.5 lakhs or something, how are you able to do that? And this is in contrast to what you said earlier, where your older clients tend to pay at a lesser price compared to the newer customers.
Yes. Lesser per unit per month. But generally, I've seen that the older customers also want to upgrade their tiers. They have tested the platform. They have experienced the platform. They have the -- they expected success from platform, and they want more and more inquiries. They have expanded their business through us. So if you see the data book where we clearly say that -- and it has remained at 40%, 41%. In general, we have taken price hikes and not everybody is on a monthly customer base. In general, on an annual customer base, we are able to take a 10% price hike every 2, 3 years, which also results, and we are able to launch more innovative products such as earlier, there was a single -- all-category pricing, which has been now kept to a limited category pricing. We are also working with the category city combination-based pricing. And as I've been telling you in the past that we are thinking of finding ways and means to introduce city category-based differential pricing. So because somebody who is selling in Delhi versus somebody who wants to sell in Darbhanga, the prices cannot be the same. And similarly for the, say, somebody who is selling a bag versus somebody who's selling a bag-making machine, the prices of advertising cannot be similar. So -- but currently, it is very similar in IndiaMART. So I think we continue to have more and more opportunities, where: one, customers are liking us; two, their relevancy is increasing. A number of inquiries for customers have gone up if you really see over the last 5 years' data, how our customers have gone up and how our number of inquiries have gone up. The number of inquiry per customer has almost doubled or tripled over the last 4, 5 years. So that has also increased the realization. And belief on the platform and, overall, Internet users have also gone up. So I think, all in all, those are the areas that help us retain that. And the total number, 10% customer base is also growing. So if we had 100,000 customers, there were only 10,000 customers. Now we have 150,000 customers, they are 15,000 customers.
Sure. And in your strategy, how do you look at this because 40% of your revenue is coming from 10% of the clients. Now given that when we are seeing some kind of stress in the environment, and you also alluded to it in your opening remarks, that this could be a risk if any of this hiring customer both stress, then that hit our top line as well. So from a strategy perspective, do you think you want to look at this number in a different way? Would you want to bring this down? Currently, this year, we haven't seen that happening. So how do you look at this risk internally?
I think as I repeated, we will continue to look at the combination of 3 things: one, shorter duration package; two, flexible payment option; three, discount-led sales and retention. And also we really see the overall churn metric. As I said, on the lowest tier of the customer, which is silver and monthly, the churn rates are to the tune of 5%, 6% per month. Whereas on the top tier of the customer, which is the platinum customer, the churn rates are less than 1% per month. So the churn rate instances are indicative of the overall stickiness of the platform. It's not a risk of the top 10% because it is around 15,000 customers and very, very diversified. So even if I end up losing 100 customers here or there, that my overall revenue would be affected by maybe 1% or 2% there. I think the bigger risk is to reduce the overall customer date itself by -- whereas, bottom of the pyramid customers may go out of the business or may not be able to afford the B2B marketing. So those are the bigger challenges. I don't think I worry a lot about losing the top end customer. I would worry then maybe for this partial period of time to downgrade or to extend or to take certain discount. But I would not worry a large impact of that on overall revenue.
The next question is from the line of Deepak Poddar from Sapphire Capital.
Sir, first question is, I know you mentioned about giving customer discount and then the shorter duration renewal. So do we expect that our average revenue per paying subscriber can fall substantially over next 1 year or maybe in the shorter term?
As I've been repeating again and again, our current priority is to retain the customers. The current priority is to save the mortality. And at that -- at this point of time, I don't want to save my ARPU at the cost of losing a customer or at the cost of closing down his business because he could be highly -- making a large portion of his business could be coming from IndiaMART. And if we do not -- and he, himself -- I mean, that customer himself could be running into financial crunch because of the many other things. And at this point of time, if we do not offer them help, which will be a help to IndiaMART as well in terms of retaining the customer, I think that would be unfair as well as unwise on our part. So you can safely assume that average realization per customer can go down substantially in the short run. And upon the -- in the long run -- but depending upon how lockdown plays out, we will come to know a clearer picture on this. But as of now, as I said, neither the sales are happening nor the collection is anywhere near to the previous normal. So that is already affecting our average collection per customer in the month of April and ever since the lockdown.
Right. Right. Fair enough. And sir, my second question is regards to your -- you spoke about this emerging new category in terms of safety, hospital pharmaceuticals and supply sanitization. So over the next 1 year, how do you foresee this new business opportunity can become -- how much portion of your current categories or current subscriber? I know it may be too early to comment on that, but any kind of guidance would help in terms of any comments, yes.
If you really ask my wish, I want this category to die tomorrow. I do not want this category to survive for a really long time. I want this category to end as soon as possible, so that we can focus on the rest of the category. Having said that, some of the categories, which will be here for a longer term to stay, which are medical equipment. So I don't want face mask to survive. I do not want a disinfectant to survive. And we are giving -- our endeavor is to build on those categories to help the hospital and help the consumer rather than make the monetization. Whatever little monetization is coming, coming, but -- yes, in the longer run, whether we will be established as a player in the medical and pharmaceutical, and chemical and disinfection as a category due to the work that we would have done in this time, yes, probably and that could be our endeavor. But I would want this category -- this consumable category specifically related to corona, I want to die as soon as possible.
The next question is from the line of SivaKumar from Unifi Capital.
Sir, referring to the employee benefits expenses in Q4, which has come down sequentially, what's the reason for this fall? And when you are referring to cost rationalization in your opening comments, what are the targets towards which you're working towards?
Yes. So Siva, Prateek here. In the terms of our employee expenses, roughly around 20% of the employee expenses represents the variable portion. So certainly, in this particular quarter, as our collections have been much lesser as compared to what we have seen in the terms of the historical past, the growth rate has only been around 10% for the year. So certainly, there are savings on that front on the variable incentives. Probably because of that, you're seeing a much lesser employee expense in this quarter as compared to the previous quarter.
Right. And how should we look at this number going forward in FY '21?
It is really difficult to comment on how this number will play because these are the variable of incentives and the variable portions, which are linked to certain performance targets in the [indiscernible]. Currently, at this point of time, it is difficult to assess as to what the target would because of the given uncertainties. So really difficult to say as to how it will pan out in the next year.
And just to add, we have not planned any layoffs. So it is only the variable play -- pay, which is automatically has come down. And we have done a very little rationalization on the salary over and above the variable pay. Also, more -- as I said, a lot of our people are in sales and service divisions. Though they are not able to meet the customers, they are not able to go to the customer level, but they are certainly engaged in customer service and possible renewable collection from home using the telephone and online as a method. So whatever sales that are happening or whatever renewal collections that are happening, or whatever collections that are happening, are happening in the -- by way of the telesales and online sales and work-from-home solution. As I said earlier also that our -- currently, we are trending at about 20% to 25% of our previous normal of collection. I don't know how will that pan out going forward depending upon the -- how unlocks -- the lockdown will pan out. But it is not that everybody is sitting idle. In fact, I'm getting more complaints from my wife as well as from my employees that this lockdown is making me work harder than when we were going to the office.
Fair enough. Sir, second question is just a bookkeeping one. As you -- you said the platinum plan has about 10% of the customers and the number for gold yearly plans and silver yearly plan would be what?
So 10% of the customers are platinum. And the 1/3 of the customers are silver, monthly because the rest of the customers are divided between gold annual and silver annual.
Okay. And what would be the ARPUs for gold and silver? You've given us [indiscernible] for the platinum.
We have not been disclosing a separate ARPU. We have been disclosing the entry-level price, which is INR 3,000 per month accurate inclusive of tax. So it works out at about INR 2,600. On an average, overall ARPU is around INR 45,000 per annum and top 10% customers contribute about 40% of the revenue, which will work out at around INR 175,000 or so.
Okay. Sir, is there any scope for increasing the efficiency in the nonemployee expenses? Is there any scope for savings there?
So I think if you really see nonemployee expenses, if you really see, we have already done a good job from the days of demonetization and from the days of -- so I had done a full cleanup during the demonetization. And even in the last 45 days, we are trying to do a lot of cleanup there. Overall, out of the INR 120 crore, if you really see INR 90 crore is manpower cost. INR 30 is the nonmanpower cost and INR 5 crore will be below the line, which goes into the EBITDA, which is the rental cost. Out of this INR 30 crores, 1/3 is already variable cost, which is depending upon the number of leads, the number of new customers that we host and number of -- so we are seeing wherever we can. But beyond this variable and beyond, there is not much of a scope, I will try to squeeze that further by 10%. But on a sustainable basis, there is not enough scope there.
Ladies and gentlemen, due to time constraint, we take the last question from the line of Rajat Setiya from VRDDHI Capital.
Sir, my question was just answered.
The next question from the line of [ Bismit Nayak ] from RW Investments.
In your experience, have you seen such churn before of 10% to 20% that you stated? And how long before the numbers get back to normal?
So this churn has been -- we have been reporting the churn number on every con call. If you listen to over the last 3, 4 con calls, you will come to know that there has been a constant update on churn numbers. This particular [indiscernible] I'm talking about is specific to the COVID lockdown situation, where we are saying that our overall customer base itself can be reduced by 10% to 20% by the time lockdown ends, if lockdown ends within this quarter itself. Hope that answers your question.
But did you see the same kind of churn in 2008 crisis?
Sorry?
For the -- in the 2008 crisis.
Yes. One, this crisis cannot be compared with that. Two, we were way too small to be affected by a crisis of a global level or a national level at that point of time. Indian SMEs were not, not so badly affected. If I remember correctly, we were like INR 40 crores company back then, INR 36 crores company back then. Yes, did our growth rate came down? Yes, but the churn rates would not be -- I mean those are 11, 12 years old story, and we had only 10,000, 15,000 -- 14,000 customers to be precise. And today, we have 140,000 customers, which is 10x bigger. I'm not so sure if you can compare those 2 scenarios. And Internet user base was also uncomparable.
Understood. Sir, one last thing. If I look at Page 14, close to 24 -- 25% to 30% of business is related towards...[Technical Difficulty]
Sir, we lost the line for the current participant. I now hand the conference over to the management for closing comments.
Thank you, everybody, for taking out time in this particular crisis time. Sorry, we ran out of time, and we could not cover everybody's question, and thank you for your enthusiasm as always. We would try our level best to be -- standby our customers as well as standby our employees and vendor partners in these times, and help the nation as much as we can. I'm sure, together, we will emerge stronger after this crisis. And I hope that you all keep well at home and take care of your health and safety. Thank you very much. Thank you.
Thank you. Ladies and gentlemen, on behalf of IndiaMART, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.