Indiamart Intermesh Ltd
NSE:INDIAMART
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Indiamart Intermesh Ltd
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Good evening, ladies and gentlemen. I'm Ravi Gothwal from Churchgate Partners. And on behalf of IndiaMART InterMESH Limited, I would like to welcome you all to the company Q4 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, 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.
Thank you, Ravi. Good evening, everybody, and welcome to IndiaMART quarter 4 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 the website of the stock exchanges. I'm sure you would have gone through the presentation, and I will be happy to take any questions afterwards.
I'm pleased to report that the collections from customers for this year grew to INR 934 crores in FY '22, a growth of 31% year-on-year basis. Deferred revenue has also registered a growth of about 25% to INR 907 crores as on March 2020.
Cash flow from operations for the last year was INR 402 crores with 25% growth over last year. Consolidated revenue from operations of INR 201 crores for the fourth quarter and INR 753 crores for the full year, representing a year-on-year growth of 12% and 13%, respectively.
We also witnessed our highest ever net customer addition in the last quarter, while doing that, customer addition of 13,000 paying subscribers. At the end of March 2022, our total count of paying subscribers stood at 169,000. A supportive demand environment, recovery of large customers, growth in the number of channel sales partners and people in sales and service team have helped us achieve this milestone.
We are seeing a good growth momentum as we continue making investments behind growth and strengthening our product sales and customer service teams. The coming year will be the year of investment for us as we expect to add 8,000 to 9,000 net paying customers every quarter.
At the beginning of the COVID-19 pandemic, we communicated that the margins will be elevated for the next few quarters due to cost control measures implemented by the company in FY '21. Now with the business volumes recovery, a portion of the costs have come back, and we are doubling down on the growth momentum, which we are witnessing post COVID.
We have significantly expanded our sales and service team in Q4 FY '22 alone. Our employee head count has increased by 15% on a sequential basis. Consequently, the expenses have increased in the similar trend. As I have told you earlier, there has been an increase in the salaries across the board in the last 6, 9 months, as can be seen in the industry as elsewhere.
Unique business inquiries for the quarter stood at 23 million with over 90-day repeat buyers standing at about approximately 55%.
In the last quarter, we have announced the following investments: INR 104 crores for a 26% stake in industrybuying.com, an e-commerce platform for industrial and business supplies. This is operated by MonotaRO of Japan, who is a leader into the MRO goods e-commerce for the last 20 years in Japan.
INR 91 crores for 16.5% stake Fleetx, a freight and fleet management software as a service, which is fueled by corporates as well as fleet owners.
INR 46 crores for 51% in Livekeeping. This has been announced under the under the due diligence for the completion. Platform providing an add-on service to the existing on-premise accounting software, such as selling.
INR 17 crores for a 10% stake in Zimyo. It's a SaaS-based HR management software for small and medium new-age companies.
INR 14 crores for a 26% is taking Realbooks, which is, again, a cloud-based multi-location accounting software, mostly used by multi-branch multi-location, real-time accounting.
For the sake of our new participants, 2 transactions that were announced in the last to last quarter are completed during this quarter. One, we have participated in Series-B investment round for our associate company, Simply Vyapar, and currently now hold 27% stake post the transaction.
I'm happy to announce that we have completed the 100% acquisition of Busy Infotech accounting software company, which was completed on 6th of April 2022.
All these investments are focused towards building a comprehensive ecosystem for enabling businesses and helping them doing business easier. So far, we have invested close to INR 1,000 crores in aggregate in all of these companies.
Before I can conclude, I would like to say that we are very happy to close the financial year with good growth on all important metrics and we are optimistic about the next year and improving macroeconomic environment, increasing adoption of Internet by businesses and our strengthening value proposition will support the growth momentum at indiamart.com.
Now I would like to hand over the call to Brijesh to discuss about our investments, particularly in the accounting space with updates on Busy Infotech.
Thank you, and over to you, Brijesh.
Thank you. Good afternoon, everyone. As we had shared during the last call, accounting phase is a key strategic priority of ours. It is a priority because it is also key in realizing our vision of make doing business easy for businesses.
Now apart from our investment in Vyapar, we were able to complete 2 other investments, which were in process. One is of Busy and the second one of Realbooks, both of them done on 6th of April '22. We are in the process of closing the Livekeeping transaction, which should happen sometime in May month itself.
Now with these 4 investments in place, we have a portfolio of products that appeals to the entire wide spectrum of businesses from micro size businesses to the large size businesses put together.
Regarding Busy specifically, the business did a collection of roughly about INR 45 crores, and they did generate cash from operations of roughly about INR 10 crores, both of which essentially are showing a growth of about 10% from what was done in the last financial year.
Now post the closure of this or completion of this transaction, we are actively managing the business. We also now have a new Head of Finance, who's joined the team and helping us build the business. Our principal focus for this year at Busy essentially is to ensure a smooth transition because obviously, there is a change in the management team here.
The 3 key priority areas that we've picked up for us: one would be to double the growth in the top line; and also grow the new customer acquisition base for the company; and then further strengthen the team and the reach that Busy currently has, so that this entire growth can be realized.
Now while we invest behind this, like we are looking at continuing to build the Busy brand and make it far more stronger. During this entire year, obviously, we would have better visibility on the integrities of the business and we should also be able to go ahead and build a view on the timelines for these activities, which are required to cross-leverage the strengths of both Busy as well as IndiaMART.
As far as Realbooks and Livekeeping are concerned, we will continue with our existing strategy on the investments where we have a minority stake in the businesses. We will help the founders continue to scale the business, and then over the period of time, we would explore what are the deeper collaboration opportunities that are available to us. Right?
So this is the update on the accounting and Busy specifically. I'll hand over the phone now to Prateek to discuss the financial performance in detail.
Thank you. Prateek, you can take.
Thank you, Brijesh, and good evening, everyone. I will take you through the financial performance for -- I will take you through the financial performance for the quarter and fiscal year ending March 2022.
Consolidated revenue from operations were INR 201 crores in the fourth quarter, a growth of 12% year-on-year, driven primarily by increase in paying subscribers and marginal improvements in ARPU. Consolidated EBITDA was INR 57 crores, representing a margin of 28%.
As we communicated earlier, the margins during the last year were high due to low business volumes and related cost savings that were temporary in nature. Now with business volumes recovering and our focus on investing behind growth, we have significantly expanded our sales as well as customer services team that is responsible for the renewals and the upsells of existing customers. As you would have seen, our employee head count has increased by 487 people in this quarter.
Further, our outsourced sales cost has also increased by INR 12 crores as compared to the last quarter, in line with growth in paying subscribers. All of these costs are recurring in nature. Therefore, we expect our margins to remain subdued as we continue to make investments for the growth ahead.
Net profit for the quarter was INR 57 crores with a margin of 25%, and cash generated from operations during the quarter was INR 158 crores. On a full year basis, consolidated revenue from operations was INR 753 crores with EBITDA of INR 308 crores, representing a margin of 41%. Net profit for the year was INR 298 crores with a margin of 34%. Cash flow from operations during the year was INR 402 crores.
As of March 31, 2022, cash and investment balance stood at INR 2,419 crores. Subsequent to the balance sheet date, we have concluded our acquisition of Busy for which consideration of INR 500 crores has been discharged. Therefore, as of now, our effective cash balance will be approximately INR 2,000 crores.
In line with the policy of distributing return to the shareholders, we have proposed share buyback at a price of INR 6,250 per share for amounts not exceeding INR 100 crores. Further, a final dividend of INR 2 per share has been recommended for approval from the shareholders.
Thank you very much. We are now ready to take any questions.
Thank you, Prateek. We will now begin the Q&A session. [Operator Instructions] So the first question is from the line of Pranav Kshatriya from Edelweiss.
My first question is regarding the 8,000 to 9,000 paying customer addition, what you talked about. Should we expect this higher subscriber addition to have any implications on the ARPU? Should it dilute because the subscriber addition is going to be primarily at the lower end?
My second question is a little bit more color on the cost side. Q4 tend to have the highest cost in the quarter and typically in Q1, one sees the cost sort of going down. I mean, for example Q4 FY '19, the cost was [ INR 617 ] crores; in Q1, it came down [ to INR 110 crores ]. So should we expect the cost for the next quarter to be down because the variable payouts will not be there in that quarter? And if you can quantify that, that will be useful.
And also basically, the last quarter, we were talking about roughly INR 470 crore plus around 15% to 19% cost escalation on that, start of cost run rate for FY '23. Is that a sustainable cost run rate?
And my last very small question is on unique business inquiries. That has tend to plateaued. In fact, it's down 1% on a year-on-year basis, so what is happening here? Because I think that's a very important parameter but ensuring higher customer growth and satisfactory inquiries for the paying customers.
Thank you, Pranav. [ 7,000 ] to 9,000 customers have a minor implication on ARPU in the near term [indiscernible] Pranav, can you [indiscernible]? And the bulk of the customer we had added at the bottom of the pandemic, there's a little bit of a difference on the ARPU side. But over the time, it will catch up. We are confident that as we are going to be building a little bit of a differential pricing here and there. I think on the platinum side, our price momentum continues to be good.
Now coming to the new cost run rate and Q4 versus Q1, because we are only ramping up time, and we have added 500-odd people in the last quarter itself, also added many new channel partners, and they have added people at their end. So -- and much of that could have been in the February and March. So I don't expect this time around Q1 cost run rate to come down. In fact, cost for the March is running at around -- yes, cost for the March is running at around INR 50 crores plus, which is going to be reflecting in our increase first for quarter 1 as we are doubling down on the growth. Now -- so that answers the new cost run rate as well as the Q4 versus Q1.
On the unique inquiry side, last couple of quarters are -- have had this unique demand on the medical supplies, medicines, mask and other things, which I think as the COVID is subsiding, is going down, which is good. It is not a [ mark ].
So I think if you already see pre-COVID, the traffic and unique inquiries have anyway gone up by almost 50%. We used to -- if I remember correctly, we used to model our business thereabouts 500 unique business inquiries per customer per year. Now we are already at 600-odd. So I think we have enough scope there. I'm not worried on the flattening of the unique business inquiries as the business will settle down now that the schools are opening up, the school sector, which used to consume a lot of inquiries, that are coming back. Hotels are opening up. Travel is opening up. So I think all that will come back. Because we represent almost like 50 industries and 95,000 categories. It keeps happening in some of the industry the inquiries go up and some of the inquiries go down.
Currently, there is a lot of pressure on the commodity pricing because everything is inflationary. So that's why also there could be some slow demand. But I'm not worried on that side. Thank you.
AMBIT Capital, Vivekanand.
I have 2 questions. So can you tell us about the churn levels across customer segments, the silver monthly, gold and platinum. That's one.
Secondly, what is the progress of integration of some of the older investees like Vyapar and Bizom? You have had a shareholding in these companies for a while and I believe that Vyapar is in an area of immense interest for you, which is mobile accounting software. So if you could give us an update on that, that will be great.
The travel side, as we have been getting earlier also, platinum and gold churns are back to almost pre the COVID levels. We see less than 10% annual churn in gold and platinum customers, and we are back to those levels.
In terms of silver monthly and silver annual MYR, I think there is continued to be because annual and MYR customers are coming up now. There, as we have guided, the churn rates remain between 25% to 30%. It remains there. It has definitely improved from during the COVID level. And churn depends a lot on the vintage of the customer as the first year churn is higher, second year churn is lower, 30-year churn is further lower.
In the silver monthly customers, I think we have come down from 6% to now more like 5% per month churn, so which is a welcome move now. Hopefully, with increased number of customers, because 2/3 of those customers get added to silver monthly, we should be able to look at the churn more positively in times to come as the economy keeps opening and as the network effects become stronger.
On the second question was -- on the investment integration. On the Vyapar side, we have started to do a little bit of cross-selling. So if you take IndiaMART new subscription, you were offered the first year Vyapar subscription for free. I think about 20% of new subscribers who opt for IndiaMART, they are taking a trial package of Vyapar. We haven't yet looked back -- and we get some money paid on the onset basis for the referral of those customers from Vyapar. That would be visible in the financial numbers in the related party transactions.
On the reverse side, we have not yet done much an integration where our customers would be present on IndiaMART. We are looking at -- we are talking to them if we can integrate IndiaMART search within Vyapar application. So those people, if they need anything to buy, it will be more like advertising IndiaMART within the Vyapar platform. So that's what we have done.
On the Bizom side, we continue to learn from their business. Their business is more corporate in nature and more enterprise in nature. We haven't been able to do much integration so far. I think far closer, we should be able to do better integration with Livekeeping going forward.
So I think those updates and most other investments have happened in the past year alone.
Just 1 follow-up on the investees. So Dineshji and Brijeshji, in the next 12 to 24 months, should we expect IndiaMART to make many more new investments? Or will you be focused more on the existing investees, perhaps putting money in let's say the Series-B rounds? Can you give us some color on that?
As I said, during the COVID time, we looked at almost 300 companies in these 2 years. Given that there is a limited scope of the number of the startups within the SME, B2B kind of space, I think the deal flow has reduced considerably now because we have scanned quite a bit of market.
Now so your question is right that I think from now on, a lot more focus to go on trying to understand these businesses, trying to integrate these businesses and also do the follow-on investment. As we have done in Vyapar, the Vyapar Series-B investment. So Series-A, we invested about INR 31 crores. And then we invested about INR 62 crores more in Vyapar. So I think the follow-on investments would be required.
We have recently announced a follow-on investment in Super Procure as well as [ Logistify ]. So I think going forward, less of new investment, we will continue to look for, but more of existing investments.
Next question is from the line of Motilal Oswal, Mukul Garg. Mukul, we cannot hear you. So maybe you can come back in queue. Now we'll move on to the next participant Abhishek Bhandari from Nomura.
Sir, I have 2 questions. First, if you can give some ballpark cost number. Is it fair to assume it will be like INR 150-odd crore per quarter for FY '23? That's the first part.
Secondly, could you also help us understand how are you trying to control no attrition in your sales team, servicing team? Because in most of the services sector, we are seeing a very high attrition level and the incremental hiring is so expensive, I know which is a cost item for us. So if you could help us on these 2 parameters, it will be helpful.
See, we are investing aggressively behind growth and salaries are also increasing, and there is lower spike from the increase in the wage inflation. All I can say for the next quarter or so, let's assume that it can be INR 55 crores, whatever it is. But going forward, as we -- if we increase our number of customers, we will definitely need more people to serve them because for every 70, every 75-odd customers, you need 1 person and you need to build that pipeline early on.
So I think on the cost front, this entire year will remain on the investment side because we have -- we can see that we can probably get a similar level of collection growth and customer growth as pre-COVID levels.
On the attrition side, I think, one, we have done aggressive salary revision, which you can see in the cost side as well as we have also issued ESOP SaaS [indiscernible]. So about 365 new people, new and existing people, so all in, about 500, 600 people who are still under the SaaS of 2018 is -- yes, 100 additional people have been included in the ESOP program, which will be further going on for the next 3, 4 years. So I think that is also reflecting -- starting to reflect in the cost side of the employee benefit expense.
So we are doing levels. We have also announced quite a bit work from home or from anywhere. So for the -- most of the people who were working behind the desk or behind the telephone, most of them are allowed to work flexible-working working days. So that also we are trying to do.
So multiple areas we are trying to work upon. Hopefully, that should result into a better vintage. As of 31st March, we had around more than 200 people who are more than 10 years older -- yes, more than 10 years old in our organization. About 800 people are more than 5 years old into our organization.
And I don't know if you noticed, we are probably the first company to adopt a weekly pay, salary pay structure in the country. In U.S., et cetera, there are biweekly pays and in Australia and New Zealand, it's a weekly pay. So we are the first company in India to adopt. And this is applicable across all the levels. So 100% of our employees are now getting weekly salaries. So hopefully, these things should be better. We have been a good employee retention company and hope we continue to be there.
Sir, 1 more question if time permits. So basically, what's your thinking on long-term growth rate of ARPU? I think you said in the -- one of the earlier questions that since most of the guys are entering at lower end of the package, that is tracking down the growth in ARPU. But if you could give some indication around the premiumization trend and the increases you're seeing in the premium pack value as an ARPU.
And longer term, do you think you really have a pricing capability to enforce 4%, 5% kind of long-term increases on your ARPU to your customers?
Yes. So I definitely believe that the long-term trend of 5% will continue because the top 10% and top 1% customers, the top 10% customers give us about 45% revenue today, which means their ARPU is about INR 1 lakh 80,000-odd and now we have started to disclose another number. If you see on the Slide #20 of the presentation, top 1% contribute about 17% of the revenue, which means that ARPU of about INR 8 lakh, which is 1,700 customers, close to 2,000 customers giving us INR 8 lakh.
So in the near term, yes, it may have INR 1,000 dent on the overall ARPU that you can see and primarily not because the customers will start to pay low, it's the denominator, which will increase substantially.
But our gold and platinum ARPU continues to be healthy and continues to improve year-on-year. We have definitely -- we have particularly reduced the ARPU of this number because we want to invest behind the growth. So we will -- we are pretty confident that the 5% long-term CAGR should be possible.
But sir, if you can give the ARPU growth of premium customer, what has been the trend for the last few years?
I can come back on that because I don't have that number handy. But they can -- in the meantime, if you can pick out that number. I will give you in the call, but -- no. Let's take another question because they will dig out the number and give you the request. That thing is that if you look at the leads that we are giving to every person, whether it is platinum, gold or silver, we are the lowest cost per lead platform across all the -- whether it is Facebook, whether it is Instagram, whether it is Google. Nowhere you can get that kind of a cost per lead.
For gold or platinum, our cost per lead turns out to be around INR 15. For a silver, cost turns out to be around INR 30 or so. So we've been -- we have a lot more power to increase the prices in the long run. We are going slowly because as the base needs to expand for better network effect and for better matchmaking. We are going slowly. And also, it gets complicated as you go and try to get every dollar for the birth of the platform that is delivered.
So we are going slow, which is easier on sales, simple plans, which are flat pricing kind of. As we slowly and slowly introduce differential pricing at here and there, the ARPUs will continue to get a 5% jump; may not be this year, but over a long period of time.
Next question is from the line of Ratik Gupta from Guardian Asset Management.
My first question is on the sales per sales employee. So we have -- although you have mentioned that the sales employees have increased in the latter half of Feb and March. But the per employee revenue has been decreased. So are we seeing to going to that level? Or is this the normal level what we are expecting in the coming quarters?
Per employee revenue, right?
Yes, revenue per employee.
Yes, I think it will catch up over a period of time because the customers -- new customers are being added at lower revenue per customer itself. But we need to allocate similar number of employees whether the customer is paying you INR 30,000 or whether a customer is paying you INR 3 lakh, at least the head count to service them remains the same.
In fact, as the customers move to a higher ARPU, they become far more self-aware about the platform and it requires much less servicing to be done. It's counterintuitive, but yes, so we allocate much expensive results to serve them, but less frequently it is done.
So I think in this particular year, you may see that revenue per employee will remain a little bit lower as the ARPU also will remain lower. But it will fast catch up because if you look at the collections and the cash flow from operations, all of that will catch up.
In the past, also I'm telling even during the IPO and before the IPO, we had INR 182 crores of cash from operation, but only INR 60 crores of EBITDA margins, which got catch up. So ultimately, the cash flows will reflect into the profit.
Okay. And sir, do you have in hand of the revenue breakup between the platinum, gold, silver annually and silver monthly?
Yes, sir. We already declared that top 10%, which is similar, which is more or less flat in our customers. Platinum customer, you can assume top 10 customers are -- top 10% customers, which is about 17,000 customers today. So they contribute 45% of the revenue, which means the ARPU is about INR 1 lakh 80,000. And we always say that silver monthly remains at around 25% to 35% of that. The rest is broadly similar MYR in both.
And what can be the reason for such increase in the other expenses for this quarter as compared to the previous quarter?
So that expenses is not related to the outboard sales expenses. The other expenses have remained more or less stagnant because most of the new acquisitions, a lot of new acquisitions happens through channel partners and well, employees on the partner payrolls. So that is all what is reflected in the other expenses. And within that, it is outflow sales cost.
Next question is from the line of Mihir Damania from Ambit Investments.
So my first question is, what are the other investments which you have made or are looking to make in order to drive growth, and that is over and above the increased account?
Can you repeat your question once more?
Yes. So my first question is, you said that you made investments in order to drive growth. So are we looking to make any additional investments other than increase in head count, because we've seen our traffic growth being almost kind of flattish? Are you also looking to make investments to drive traffic growth in addition to subscriber growth?
Okay. Pre-COVID, we used to get 60 million traffic per month, which increased to now close to 90 million per month. So traffic has already grown. We have not monetized in the last 2 years. Now in order to monetize, our monetization model is mostly semi-driven and field-driven and people-driven. As you can see the -- on the people slide, so many people in the sales, several persons -- so many people in the channel partner, so the traffic has already grown. Now we need to monetize that traffic for next couple of years or so.
So if you mean to ask whether are we going to invest on the advertising to bring the traffic, not in the near future. But even in the past, it has not been a very large amount, even if we do. But that is nothing is planned in this calendar year for sure.
Okay. And just a simple basic question that what are the factors that have driven such a high substantial subscriber growth from like 6,000, 7,000 to almost 13,000 odd? And what gives you the confidence that we'll be able to make more than likely 10,000 subscriber additions for the quarter?
Yes. So as I said, one was there is a supportive economic environment. The second was the recovery of the lost customers because if you see during the 2 COVID waves, we had cumulatively lost about 20,000 customers. So I think many of those customers by themselves came back and said that they wanted to come back to IndiaMART.
And second, we increased the number of people in sales as well as the number of channel partners. And most of this, about 2/3 of those customers come at the silver monthly level and 1/3 of those customers come at the silver annual level.
Got it. Got it. So just pushing a bit on it, but would it be fair to assume that the subscriber addition of this quarter can be replicated in the future quarters?
No, no. So as I said, this was a lot of one-off. One is the [ JFL ] quarter is always seasonally best quarter for us. As you can see historically also, March quarter is the best quarter. But yes, as I am guiding that 8,000 to 9,000 customers, we've been trying to add. Earlier, we had the capacity to add 5,000 to 6,000. And now we have built the capacity to add up to 9,000 customers.
Let us see how the churn behaves because the net customer addition is a function of new customer acquisition minus [indiscernible]. Since we have acquired -- started to acquire many new customers now in the last 3, 4 months, as they will become 6 months old or 9 months old, we can say that first year channel is higher. So I think we will come to know about the steady-state level of net customer addition third quarter. But let's assume for the next 2 quarters, 8,000 to 9,000.
[Operator Instructions]
This is Amit here. Yes. So my first question is on the salary cost. So as you have seen the salary costs going up. So now in that, how much would be fixed and the variable costs that we have incurred in this quarter? And is there any bunching up of sales incentives that we have given in the quarter because we have not given incentives earlier?
So -- and also in terms of incentives, are we giving the incentives weekly as we have changed this salary model? So are the incentives also going out weekly? Or is it still a quarterly or annual basis?
Yes. Prateek, will tell on this criteria.
Sure. So if you look at our manpower expenses in three heads, the salary, the incentives and the stock-based compensation and gratuity and leaving cash backs. So the salary part, for this particular quarter has been roughly around INR 74 crores as compared to INR 60 crores in the last quarter. So there is an increase of INR 14 crores in this salary side.
Incentives were almost INR 5 crores as compared to INR 2 crores last quarter, so an increase of INR 3 crores there. And all the other expenses, the stock-based compensation, gratuity leaving, cash backs combined were roughly around INR 9 crores as compared to INR 3 crores last quarter. So that should give you the increase by the elements of the total manpower cost.
And in terms of incentive disbursal, I know new client acquisition incentive dispersal happens weekly. The client servicing incentive -- and client servicing incentives are disbursed fortnightly. However, the entire salary is now being disbursed on a weekly basis.
Okay. And sir, the -- you mentioned about the -- in the March, the run rate is around like INR 50 crores per month. So this cost is excluding the acquisition, right? So that we have made Busy, so that will be integrated next quarter, so that the cost of like Busy acquisition will be additional to this, right?
Yes. So as we've concluded the Busy transaction in the month of April, there could be the onetime cost of completing the acquisition. And other than that -- and other than that, I think it will get consolidated from the next quarter onwards. We would give you a separate breakup of the revenues as well as expenses in the Busy business separately.
Okay. And sir, on the -- like you mentioned about the channel partner model that you have been investing in that. So if you can elaborate now like more on that, what exactly is it and how it is like benefiting us?
So earlier, we used to have our own branches everywhere. And we could not afford very, very small branches because we have our own management structure, sales managers. So in many cities, we could not cover partner areas. In Tier 2 towns, we could not cover many of those areas. So I think, one, we have seen -- and we were forced actually, during the COVID, we were forced that most of our clients went home and they were mostly working from home, only could do telesales.
So we -- and as much COVID effect was there on the metro city, it was not there on the Tier 2 cities. So we started experimenting with the channel partners in Tier 2 cities. And we found that it was a good model, 1 profitable model for a small proprietor or a small firm to run our business. And then we started to experiment even in the bigger cities.
In any case, they all use our own CRM system, with our own mobile CRM as well as the desktop CRM. We have signed the company and we have signed the leads. It is only that we are now able to operate small and smaller branches, which are owned and operated by a channel partner. However, we have a manager who looks at each one of those personally.
So this particular model is it starts as a fixed pay model. But over the time, we are able to move into the variable pay model. We have done that for many channel partners. It is only the last 6 months or so that we have increased -- we have asked them to increase salaries similar to IndiaMART salary levels, and that's why you see outsource sales cost increasing.
So I think the model is working and we will keep evolving as and when it requires better.
Okay. So sir, in the channel partner model, the incentives are higher than like what we give or is it on a revenue share kind of model?
I think they're the same, same as -- same as our side. There are no differences.
Okay. And how much of the subscriber additions that we had has been coming from the channel sales margins? If you can give some number.
So between -- I mean if I give you some numbers, about 1/3 will come from say channel partners, 1/3 will come from our own tele versus field -- our field telesales combined. And 1/3 will come from our own outsources employees that we have on our -- so I think currently, it is like that, which used to be 80% ours, and 20% telephone pre-COVID.
Okay. And sir, in terms of technology, what kind of investments we are making? So we have around 7 million free suppliers on the platform. And out of that, only around 2.5% or 3% is paying. So are we intending to like increase that further with the help of technology and anon [indiscernible] programs on [indiscernible] people and rather use technology to penetrate deeper?
There are 2 separate areas. One we use technology to predict who will benefit from our platform, what kind of customer will benefit from our platform and whom should we approach. But for the SME customer, as of now, as you can see, earlier 100% of the sales used to happen from the field sales. As people have learned a little bit, now a lot more sales are happening on telephone. That itself is a technology adoption. Our online sales is contribute -- but most of -- almost 40% of our sales are coming from people who come and give a lead online and say that I want to do this service online or to add a product online and then we approach them.
So it is not that all of these people are doing only pure database calling. They are all working on a proper hot lead system, and those leads are -- so everything that a visitor does on our app or on our website, whether he adds a product, whether he looks at a buy lead, whether he tried to do any payment, all of that is recorded and then we use an intelligent engine to say that he is the one who is more likely to benefit and then run technology. So I guess we are already a good profitable company. And over the period of time, technology has eased our margin lever well. However, if you can see the current slide, technology and content cost, which used to be INR 100-odd crores every year, has now gone up to INR 32 crores per quarter. So we are already investing quite a bit behind technology.
I don't know if you noticed that this particular time, we have declared another number which is 32 -- which is the replies and callback number under our lead manager. And there, almost close to 1 million conversations have started to happen beyond our discovery platform. So technology is being used at all the places, one to identify a supplier; two, to do the better discovery and matchmaking; and three, to make them converse between the buyer and seller both.
Sir, like one last question from my side on the buyback. So we have around INR 100 crores of buyback. So I think maybe I was wondering that like it would have been higher and because the quantum is very small. And because we are almost done with the acquisitions and we have cash on our books. So it's like it -- and also on the promoters are the promoters going to participate in the buyback?
Prateek, go ahead, please.
Sure. Thanks. If you look at -- in this particular year, we have announced INR 100 crore of buyback, and another INR 2 of the dividend -- the final dividend, subject to the shareholders' approval. Now combine this, including taxes and everything, this would mean an outflow of close to INR 126 crores to INR 130 crores, which would be -- if you see the cash that we've generated for this year, it's been roughly around INR 400 crores, which would be almost 1/3 of the cash that we've generated.
So behind this, we have decided to -- we have proposed the size of the buyback. And as we go along, we would see, depending upon the cash flow generation and the cash requirements as to the Board will visit this every year and will come back on the suitable shareholder return.
On the other promoter part.
The second question was on the promoters' participation too. Promoters' participations would be to the extent of their entitlement that would be the pro rata to the shareholding to the buyback issue size.
Next question is from the line of Mr. Anuj Sehgal from Manas Asian Equity.
I have 2 questions. One on the employee cost. If I look at the annual trend, the employee cost per employee actually went down in FY '22 if I divide the employee expenditure by the total number of employees. So is that to say that the extremely high wage inflation that you are talking about only started to happen towards the latter half of the year? And what is your trend in terms of employee expenses per head going forward?
And my second question is, if I look at your buyers on the platform, it's about 149 million as of end of FY '22. There's a substantial 20% jump from last year. What drove that? And can you explain when you say that, I think, if I remember correctly, 38 million of those are recurring or current buyers, meaning they have done a transaction in less than 1 year. But the ones that have added, have they just been added and have not done any transaction? Because I can't really understand when there is a big jump in the number of buyers, why the ones who have transacted with IndiaMART is only a very small piece.
Yes. So first on the wage inflation. So you are right, the wage inflation typically started to happen only around, I think, June, July onward, July onwards, so we responded. We started to respond sometime around June, July 1 and then January 2. So you are seeing mostly later part of the -- so that would be visible going forward as well.
On the buyer side, Kushal, can you go back to the buyer slide?
Yes.
On the buyer side, so 125 million to 149 million buyers, which is about 20 million new buyers, 24 million new buyers got added in this year. So now this 38 million, so 24 million new buyers who came in definitely transacted this year and from the past, another 12 million -- 14 million, which transacted this year. So that's how you see this. That's why we started to report this number.
So sir, can you -- so what is the 35 million going to 38 million, it was just an increase of 3 million. That is the existing buyers which have transacted or increased. Is that what you're saying?
So 38 million it has 2 portions. One is the 149 million minus 125 million which is 49 -- which is 24 million. So 24 million is definitely transacted in this 38 million. Okay? Now the other 14 million...
The other is 14 million...
Now the other 14 million came from the previous 125 million or 35 million.
Got it. Got it. But then is that also to say then that assuming at the end of FY '21, you had 125 million, so only 14 million of them continue to transact, which is just about almost say 10%. So 90% of the buyers on the platform are actually idle?
These are not on the platform. These are registered buyers 'til date. So if you want to look at the -- on the platform, let's go to the traffic slide.
Now on the traffic slide, this is -- when you say that there is 1 billion people, 1 billion visits have happened. These 1 billion visits have happened by close to 0.5 billion people. Out of those 0.5 billion people, about 40 million have transacted, so 10% of the people who visit end up doing some transactions. Transaction means end up doing some inquiry.
Right. So just to be clear, the 149 million is not the existing number of buyers on the platform? Like as you say, right, the store...
That is why we report that unique buyers. If you go to unique buyers slide, this is the current people who are buying.
Right. Right. Okay. Understood. And then just to get...
People buying on a daily basis, so anybody who comes today and looks for a pen and comes 3 days later and looks for a pencil, those are considered to be 2 different buying. But this is a better number.
Right. Understood. And then on the cost side, you -- as I mentioned earlier, so your actual cost per employee was down 4% in FY '22. But what is your expectation of that number going forward in terms of wage inflation? Is it -- did you say 15% earlier?
So if we look at the quarterly numbers, that will give you better because the yearly number has changed dramatically in these last 2, 3 quarters. The last quarter run rate number will give you some better idea there. Prateek, you may want to add something there.
Yes. I also just wanted to add that if you see one that the wage inflation also happened in the second half of the year, the head count addition also started building up in the second half of the year. So therefore, the FY '22 is not reflecting the full year cost of the increases that happened, which is why you may be getting a 4% reduction in the average cost of employee. And you would get the true picture of the price.
And if you look at the financial, what happens when you issue a swap or share, it is the front loaded -- the cost comes front loaded while the vesting happens [ tail end ]. So if we have 10, 20, 30, 40 vesting, the cost becomes 40, 30, 20, 10.
[Operator Instructions] Next question is from the line of Chirag Maroo from KEYNOTE Capitals.
So I just wanted to ask like the new sales for that that is added in this year, which part are they added in? Could you give it in terms of percentage that they are added in: this percentage are added in metro cities; this percent is added in Tier 2 and rest of India?
So if you go to our slide there, there's a buyer/seller geography wise, this is Slide 12. And you can take the Slide #12, I mean similar slide 1 year old, that will give you the metro versus Tier 2 versus the rest of the India paying subscription suppliers.
No, sir, I'm asking for employees. That sales force that has added.
Sales force that is added, mostly added in the metro cities and Tier 2.
Okay, sir. Sir, are we facing any kind of issues in growing paid suppliers in metro cities right now?
No. In fact, now metro cities are reviving after say 2 years because metro cities were the most affected during the COVID because most of the lockdowns, most of the -- these are [indiscernible] cities, so they were the most affected. In fact, the last 2 years, or for the 18 months of the COVID, a lot of clients came from telephone or Tier 2. Now we have started to refocus on metros.
Okay. So good to hear that. Sir, last 1 question. Is it possible for you to provide data -- like you have provided of paying subscribers, is it possible for you to provide data for the total suppliers that are available means that 7.1 million...
That would be market intelligence.
With this, we come to an end of the Q&A session. And now I hand over the call to the management for their closing remarks.
Thank you very much, everybody. I think this has been a great year for us after a very muted FY '21 where we had negative collections growth. I think we have gone up to [indiscernible] 31%, which is very healthy and -- but is that we are exiting the year at a higher net customer run rate also, which is also very good. And third is we completed the acquisition of Busy, and now we have a very good foothold on the accounting space.
So looking forward to a great new financial year, and thank you for joining the con call.
In case you still have some queries left, which have been not answered, you can definitely reach out to our Investor Relations team, whose e-mail ID and is given on the investor PPT.
Thank you very much. Have a nice day. Have a great weekend.
Thank you, everyone. On behalf of IndiaMART, we now conclude this webinar. You may exit your lines. Thank you.