Indiamart Intermesh Ltd

NSE:INDIAMART

Earnings Call Transcript 2024-Q4

[Avijit Vikram, executive]

Good evening, ladies and gentlemen. I am Avijit Vikram, Head of Investor Relations. On behalf of IndiaMART InterMESH Limited, I welcome you all to the company's quarter 4 and FY 2024 earnings webinar. [Operator Instructions]

Joining us today from the management team, we have Mr. Dinesh Agarwal, Chief Executive Officer; Mr. Brijesh Agrawal, Whole-Time Director; and Mr. Prateek Chandra, Chief Financial Officer. Before we begin, I would like to remind you that some of the statements made in today's call 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.

[Dinesh Agarwal, executive]

Good evening, everyone, and welcome to IndiaMART's FY '24 earnings webinar. We have circulated our earnings presentation, which is available on our website as well as on the stock exchange website. I'm sure you would have gone through the presentation, and I would be more than happy to take any questions afterwards. I'm pleased to report that IndiaMart has delivered a consolidated collection from customers of INR 484 crores in quarter 4 and INR 1474 crores in the full year, representing a year-on-year growth of 16% and 21%, respectively.

Deferred revenue grew by 24% to INR 1,440 crores unconsolidated basis. Consolidated revenue from operations has grown by 17% to INR 315 crores for the quarter and 21% to INR 1,197 crores for the full year. Unique business inquiries have also shown some good growth this year from 24 million, representing a Y-on-Y growth of about 14%.

Total paying suppliers have grown to 214,000. The net paying supplier addition was slightly improved from about 1,800 suppliers last quarter to 2,700 suppliers in this quarter. As we have been communicating since the last 2 quarters, we continue to see more than anticipated churn on first-year silver customers. While our platinum and gold customers, which constitute approximately 50% of our customer base and 75% of revenue continued to have very, very low churn and continue to grow healthily in terms of ARPU as well as numbers both.

As soon as we see improvement in the churn on the silver customers, we would come back with a better guidance on net addition per quarter. As we continue to strengthen our organization and leadership, we are said to welcome Mr. Jitin Diwan, who would be joining us as the CFO designate from May of 15 and would take over the role of CFO from June of 15. Mr. Prateek Chandra, who has been with us as the Chief Financial Officer for almost 9 years now, would move on to become the chief strategy officer and focus more on inorganic growth, including exploration of mutual synergies between IndiaMART and its investee companies.

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

[Brijesh Agrawal, executive]

Hello, good evening, everyone. Busy has done a net billing of INR 18.1 crores in Q4 and INR 69.7 crores in the full year. This represents a year-on-year growth of 29% and 45%, respectively. The revenue from operations grew by 24% year-on-year to INR 14.4 crores in Q4 and it grew by 23% to INR 53.3 crores for the entire year. The deferred revenue has grown by 59% to INR 43.5 crores. Busy has also generated positive cash flows from operations of INR 6.1 crores during the quarter and INR 24 crores for the full year.

During the quarter, we also sold 9,500 new licenses, taking the total count of licenses sold to 364,000. The new licenses sold during the entire year are approximately 33,000. The overall performance has been in line with our expectations, and we are focused on maintaining our growth rate in the coming year as well.

With this, I hand over the call to Prateek so that he can discuss about the financial performance.

[Prateek Chandra, executive]

Good evening, everyone. I will take you through the financial performance for the quarter and the fiscal year ending March 2024. Consolidated collection from customers was INR 484 crores in the fourth quarter and INR 1,474 crores on a full year basis, representing a year-on-year growth of 16% and 21%, respectively. IndiaMart standalone collection from customers for the quarter were at INR 465 crores. And for the full year, were at INR 1399 crores registering year-on-year growth of 16% and 20%, respectively.

The stand-alone revenue from operations stood at INR 299 crores for the quarter and INR 1,139 crores for the full year, registering year-on-year growth of 17% and 21%, respectively. Our growth in revenue was primarily driven by a 6% increase in paying subscription suppliers and 10% improvement in ARPU due to higher monetization. Deferred revenue stood at INR 1,440 crores, an increase of 24% on Y-o-Y basis.

EBITDA of IndiaMART stand-alone business stood at INR 90 crores for quarter 4 and INR 334 crores for the full year, representing a margin of 30% and 29%, respectively. Consolidated EBITDA was at INR 84 crores for quarter 4 and INR 331 crores for the full year, representing a margin of 28% for both the periods. Consolidated net profit for the quarter was INR 100 crores which included onetime net fair value gain of INR 29 crores on account of revaluation of few of our investments, primarily ProcMart due to their recently concluded fundraise activity.

Consolidated cash generated from operations was INR 260 crores for quarter 4 and INR 559 crores for the full year. Consolidated cash and treasury balance stood at INR 2,340 crores as of March 31, 2024. Board of Directors have also recommended a final dividend of INR 20 per equity share for fiscal year 2024, subject to approval of the shareholders at the AGM.

Thank you very much. We are now ready to take any questions.

[Avijit Vikram, executive]

[Operator Instructions].

[Operator]

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

[Vivekanand Subbaraman, analyst]

So my 2 questions. The first one is on collections. The last 2 quarters, we have been seeing that the stand-alone collections have been growing at 16% year-on-year materially below the trajectory, the 20%-plus trajectory that Dinesh you keep highlighting. I understand some of this could be due to churn, which may be temporary, but your aspiration was to grow collections at 20% to 30% CAGR. And now collections is growing at a materially slower pace. So just wanted to get your thoughts on the extent to which the market is penetrated? And are there any other challenges that you see that are perhaps symptomatic of this issue, which is obviously a very big one for investors.

The second question is on the margin trajectory. We are seeing that the margins are improving, cost seem to be under control, not growing at the same pace as before. Could you help us think through the margins for the stand-alone business over the next 2, 3 years and the key levers.

[Dinesh Agarwal, executive]

Thank you, Vivekanand. Yes, you rightly highlighted the last quarter our collections grew by 17%, and this particular quarter our collections from customers grew at 16%. So as you rightly highlighted that the number of customers, net customer addition has not been growing for the last 4 quarters or so. And that is putting a pressure on the collection only for -- coming from the ARPU. So if you really see out of the 16% or 17% collection growth that we are getting, only 6% is coming from the new customers, while most of the other 10% is coming from ARPU growth per customer.

We were hoping that we will get another 2%, 3% increase in the customer base per quarter, which is happening. Last quarter, we added the lowest ever customers at 1,800 customers. And this quarter, we have added 2,700 customers. I'm hopeful that slowly and slowly, we will improve on net customer addition. And my aspiration, as you rightly said, continues to be 20% to 25% in the collection growth. 30% at this juncture on a stand-alone basis sounds a little difficult. But yes, on consolidated basis, I continue to have an aspiration for 33% of the collection growth or revenue growth.

Is there anything else? Nothing materially that I can say. One thing that I can probably point out is that we have continuously found ways on the platinum customer to improve the ARPUs. And some of those ARPUs as we have slowly and slowly as we are implementing the category-based pricing some of those customers are taking a little more time than anticipated to convert to higher value packages. So that could be just one, but I am not yet able to definitely say that other than the customer churn, anything else is doing that. On the margin side, as you can see, 2, 3 things have happened. One, we got our last quarter annual increment affected from the first of December instead of first of January. So some of it is held by that.

Secondly, if you see on the sales and marketing side, we have continued to improve quarter-on-quarter in terms of sales and marketing cost per -- so while it used to be 20% in the FY '23, it has come down to 18%. And in this quarter, it is 17%. How it has been happening because as I promised you, we are going to probably cut down a little bit from Tier 4 and nonprofitable places. So that optimization and focusing on more core markets has been able to do this. Some of it could be productivity gain.

Also, the overall cost base, which had grown very, very rapidly from mid FY '22 to mid of FY '23 because we were hiring heavily on the product and technology front also. So if you see, there is a consistent drop from 19% to 17% as revenue from operation. So that is also helping. And maybe a very little coming from the general and administration.

So general and administration is not coming much because most of the juice has already been taken out. But as the revenue will continue to grow, maybe a few bips every year, we will get from there. So from that perspective, I can assure you that we are now feeling a lot more confident of 30%-plus margin. And maybe we will improve by 1% every year going forward from here. Thank you.

[Vivekanand Subbaraman, analyst]

Thank you, Dinesh, for the very elaborate answers. Just pressing a bit further on the collections point, how confident are you to resolve this issue with respect to churn because this is the third quarter that churn seems to be cited as a key issue, and you don't yet seem to have the answers to resolve the elevated levels of churn. And if I may also add, could you help us understand the churn levels in percentage terms across the key customer buckets?

[Dinesh Agarwal, executive]

So as I said, in the platinum customers, our churn are like 0.5% per month are 6% to 7%, 8% per annum. On gold, we continue to have 12% to 14% or 1% per month or 12% to 14% per annum. On the silver side, on a silver monthly, we are like 7% to 8% per month and on the silver annual, we are running at about [ 40% ] per annum. So these are the churn metrics that I repeated last time also. Very little improvement even if we get 1% per month improvement in the [ tele ] monthly or silver monthly, what we call internally and silver annual, I think we would be suddenly looking at double the net customer addition from here on. So I hope that over the next quarter or so, I should be able to give you some positive results, but that's the only thing I can say for now.

[Operator]

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

[Nikhil Choudhary, analyst]

Dinesh sir, my first question is on the collection side again. I just want to understand, last time when we discussed the commentary by you was that collection, we will go back to 20% plus in coming quarters. And given the collection slow down further. So while supplier addition part was part of the expectation, I believe. So was there some disappointment even on the ARPU side and that's what led to collection where they are. Also, while ambition is to get back collection to 25% plus 30% growth, any guidelines for FY '25 for coming quarters given supply addition continue to remain lower?

[Dinesh Agarwal, executive]

I would continue to hope for a 20%-plus collection. No. Prateek is telling me to say Holi was in the last week in March, I don't want to take that phase behind the shield. But all said and done, I think 20% collection is doable. We should have done that. Purely, and purely could be one day here and there miss, but 20% collection is doable and I'm confident, and I continue to be confident that we will deliver a 20% collection growth coming quarter and coming many quarters.

[Nikhil Choudhary, analyst]

Sure, sir. There is further improvement in other few KPIs especially registered buyer entries further, last time you mentioned that it could have increased due to some scrapping or something or web crawling or something. But is this improvement is now a sustainable trend or organic trend and do you think this will lead to improvement even in purchasing or unique business inquiry increasing because while the unique business inquiry increased 14% Y-o-Y from a lower base. It's at a similar level what we have seen in quarter 2. So from that level, we haven't seen a material improvement in business inquiry. So is registered buyer can be seen as early indicator there?

[Dinesh Agarwal, executive]

I think you should always focus on unique business inquiries, and unique business inquiry number has grown and certainly by 14% this quarter also and 14% last quarter also. So effectively, if you see FY '22 and FY '21 were both COVID years. And during the COVID, we have gone through a lot of shortage and a lot of medical devices and medical-related items, food and food-related items. Now that world has gone back to physical world, we hardly saw a very little drop in unique business inquiry in FY '23 and FY '24, we are almost back at FY '21 and '22 numbers.

Effectively, now we are consistently doing 23 million, 24 million per quarter. So I'm confident that next year, we will comfortably be looking at 100 million-plus unique business inquiries. So I don't get where are you saying that 14% was last quarter also and this quarter also. In terms of the registered buyers, as I said, a lot of scrapping nowadays is very common for very popular websites. And people also come and try and see if this particular number or this particular e-mail has an account on IndiaMART or account on Facebook or account on Amazon or account on Zomato.

So there are a lot of these advertising companies are also trying to collect this kind of data from different mechanism. So that is why I don't rely too much on the registered buyer numbers or the traffic numbers more so on the unique business inquiries numbers.

[Nikhil Choudhary, analyst]

Sure, sir. Understood. Sir, last one on margin. Margins were very strong, similar to last quarter, even though you highlighted that wage hike started from December this time. Still on Q-on-Q basis, the margins were more or less flattish right despite of 2 months of wage hike in quarter 4. And clearly, sales and marketing is the one part where there was hardly an improvement on Q-on-Q basis despite a general trend, what we have seen in previous years that you pay large bonuses. Is it fair to assume that, that benefit is largely due to lower bonus payment?

[Dinesh Agarwal, executive]

No, sir. So if you will see the customer service cost, the most of the bonuses will go into the customer service because they come for renewal and upsell. On the sales and marketing, if you see on quarter-on-quarter, this is the new customer acquisition engine. Most of the bonus will be -- and bonus this particular year also, if I remember correctly was higher by 40% from the previous year same quarter, so I don't know which number you are referring to?

[Nikhil Choudhary, analyst]

Sir I understood, the only point last one I have is regarding the employee addition, which was about 200. Just wanted to confirm, is this addition was for the full quarter or this 200 addition was during the end of quarter just from cost perspective?

[Dinesh Agarwal, executive]

I don't have that detail. I don't have that detail.

[Operator]

Next question is from the line of Swapnil from JM Financials.

[Swapnil Potdukhe, analyst]

First, I wanted to understand on the breakup of the collections growth, which is around 16%, so what I understand, obviously, it includes the paying supplier base and then the ARPUs. But there is also a third element, which is basically the average tenure or customers are taking a longer period tenure instead of a 1-year or monthly plan. So that also supports collections growth, if I'm not wrong. So I just wanted to understand, so if I were to break it down, what would be the collections growth attributable because some of the customers would have taken longer tenured plans within that 16%?

[Dinesh Agarwal, executive]

Thank you, Swapnil. I don't have that particular number handy. Not much of a material change because on the multiyear customer mix, so annual and monthly mix, annual has definitely increased by 4%, 5% because monthly customers, we have tried to discontinue from Tier 4 towns. But do you want to add something?

[Prateek Chandra, executive]

Yes. Swapnil just to clarify, I think when you're looking at ARPU, that is essentially the revenue numbers, which is a result of the collections done in the previous quarters because 80% of the revenue is coming in from the opening balance of deferred revenues of that particular quarter. Right? So when we look at collection for the quarter 6% is, like you say, the customer growth. And you can say roughly around 10% is an ARPU growth or collection per customer growth. So most of this growth is largely from the gold and platinum customers.

[Dinesh Agarwal, executive]

No, but he's asking annual versus multiyear.

[Swapnil Potdukhe, analyst]

Has there been a change in the mix?

[Prateek Chandra, executive]

No, no. The mix has been pretty similar.

[Dinesh Agarwal, executive]

Just in total customers account of the annual and multiyear has grown. Golden Platinum customers count has grown, yes that's the only thing.

[Prateek Chandra, executive]

So not a material change there. And that's also visible in your deferred revenue schedule. So if you really see deferred revenue schedule, the current and noncurrent portion haven't changed materially.

[Swapnil Potdukhe, analyst]

Okay. I take your point. But if I were to just understand it a bit more. So typically, collections growth, collections mainly comes from the renewals or people in the gold and platinum tiers, right? Because silver inherently contributes very less to the collections right? And my sense is like the 80% of the collections comes from the premium categories versus around 15% to 20% from Silver. So my question is, why would a churn in Silver category impact your collections growth. I mean if it contributes just 15% to 20% to your collections, why is your collections growth slowing down then?

[Dinesh Agarwal, executive]

Yes, you have a very right question and that should have slowed down only by 1% or 2%, not by 4% or 5%. You're right. So that 4% or 5% because what happens is if there is a continuous low growth in the customer base, our ability to upsell from the silver to gold to platinum also gets limited. So the collection growth, while you are right, it comes from gold and platinum majorly. But it's been 4 quarters or 3 full quarters where we have not been able to grow customer base significantly. Every time we add 5,000, 6,000, 7,000 customers, we also add a pipeline to gold and platinum, which will give you a 9 months later or 6 months later, the same customer will go to the gold or platinum and give you INR 1 lakh there.

So since this -- and I explained this earlier also, when this has started happening, that if the net customer addition is 1 quarter here or there, I'm not bothered about long-term growth opportunities. But if the customer addition for 4, 5 quarters going to be affected, then it will start to show up in collection first. Collection last quarter was 17% growth and revenue was still growing at 21%.

This quarter, if you see, collection growth has also come down to 16% and revenue growth has also come down to 17%. So if you take our business, customer growth followed by deferred revenue growth, followed by collection growth, followed by deferred revenue growth and followed by revenue growth. So they all will show up 1 or 2 quarters after we think. So if something goes wrong for a continued long period of time, it's more like a 100-day moving average. So if number of customers for 365 days have not been adding up to the expectation, the collection will start to slowdown.

If the collection will start to slow down, deferred revenue would start to slow down. And if deferred revenue would start to slow down, the revenue would start to slow down. So that's what we are seeing, and I am hoping that customer growth would take a U turn from here on. And over the next 2, 3 quarters, it should come back to our 5,000, 6,000 normal customer growth.

[Swapnil Potdukhe, analyst]

Okay. And one more question with respect to the churn itself. Now in the opening remarks, you mentioned that the churn is happening mainly in the first year silver monthly customers, right? And I'm presuming they would be onboarded at an average realization of around INR 2,500, which was the norm prior to the May hike that we took. So if we are not able to retain these customers who were there at INR 2,500 per month, and now we have taken a 20% hike in May, what is the confidence level of you have to keep on adding customers at 5,000, 6,000 that you just mentioned. Because I would presume that customers were on a lower realization, there would be -- you can return them far easier than someone who is on a 20% higher realization. And we are seeing this challenge in the low...

[Dinesh Agarwal, executive]

One, I think our price was INR 3,000 plus tax, just pre-COVID. We brought it down to INR 2,500 during the COVID because we wanted to support the thing. The churn did not go out of hand in the May -- until March 2023. And you may be completely right that is this INR 500 that is causing this churn to happen. While all our understanding is that it is purely and purely affordability item, it has nothing to do with conversion item or stickiness item.

People who want to try, at that point of time, it does matter. So our gross additions should suffer and they did suffer. But on a trial basis, if somebody tries it for a month or 2 or 3 either he will get enough value that it will be more than enough for INR 2,500 or INR 3,000, even for a INR 5,000 customers. It is the entry level, which is more problematic. Post INR 3,000 to INR 6,000, there are very few customers who want to continue on a monthly basis, they would either move towards TrustSEAL or move to a Maximiser or move to a Star Supplier within a year or 18 months of time frame.

There are very few, few customers who stay for second year or third year on a Silver monthly customer. In the Silver Annual, yes, you can say that almost 50% of the customers will continue even in the second year as a Silver annual, but not in Silver monthly.

[Swapnil Potdukhe, analyst]

But what is the confidence that we would be able to do 5,000 to 6,000 additions that you just mentioned next year, given that this issue may persist right next year as well?

[Dinesh Agarwal, executive]

As I said, I've been trying. I can only say I'm trying. Reducing the price won't help, that much I can say.

[Operator]

Next question is from the line of Samarth Patel from Equirus Securities.

We could not connect with Samarth Patel. We'll take questions from Mr. Anirudh Shetty from Solidarity Advisors.

[Anirudh Shetty, analyst]

Just a couple of questions from my side. Sir, just one question is as we aspire to grow collections at 20% plus, is it fair to assume that the unique buyer inquiries also must grow at a similar pace? Because finally, it's the buyer inquiries that feeds our customer addition growth or ARPU increase over time. And if that's true, then, do you think that the business inquiry growth that we're looking to achieve, which is, say, 93 million going to 100 million, would that be sufficient to kind of drive that growth? So I just wanted to understand how are we thinking about long-term business inquiry growth to kind of achieve our aspirational collection growth?

[Dinesh Agarwal, executive]

Yes. So if you see our traffic and active buyers and unique business inquiries over a long period of time have grown at a 20% CAGR growth rate, while our paying suppliers have grown at 15% CAGR rate. So we still have sufficient enough margin, and this is on a CAGR level to monetize customers better by doing a better match making, so I don't think it's the number of buyers. Yes, number of buyers would help, but is that a limiting factor for us over the next few quarters or few years? No. So over a longer period of time, even if my unique business inquiries grow by 15%. I think we should continue to grow by 20% in terms of the collection growth.

For now, even if we are growing at 10% because we had an excellent jump from FY '22 to FY '23 at 30-odd percent. I think we are fine there. It is not because of the less number of buyers that we are [ reducing ], yes, it is because of the kind of buyers that supplier is looking or the location in which a supplier is looking for that. It's not happening. And most of the time, we are still finding the suppliers' own ability to understand and put enough time and energy on the platform to be able to convert those leads.

So they say that you have enough leads, but we could not convert them because the buyer was asking for too much of a discount or we did not do enough follow-up. So those are one of the important pieces of churn. But yes, more buyers would definitely help. And we continue to find ways to serve the buyer better so that we can have more repeat buyers, because in terms of the total registered buyers or in terms of the last 12 months active buyers, we are already reaching almost 40 million active buyers.

Looking at the B2B market side, I don't think -- I mean we might be already 40% penetrated in terms of the buyer side base. I just keep assuming that there would be 100 million B2B buyers in India, whom we can attract on a yearly basis. How many of them we can attract on a quarterly basis, on a monthly basis, that is the more important piece for us. Hope that answers.

[Anirudh Shetty, analyst]

Very helpful. And say, if the market is 100 million, we are at 40 million, do you think at some point, advertisement could help to attract more buyers. And from a frequency of transaction perspective, just getting them to transact more on your platform, what are the levers that we have available there?

[Dinesh Agarwal, executive]

Yes. So when we get a little bit handle on churn, I think we will try and address the buyer churn also. First let us get some comfort on the supplier churn and then we'll come to the buyer churn also.

[Anirudh Shetty, analyst]

So my next question is on the gross profit margin. The last couple of years, our gross profit margin seems to have come down. I just want to understand the reasons and going forward, where do you think the gross profit margin could settle?

[Dinesh Agarwal, executive]

So pre-COVID, it was 72%. Now we're 73%. I mean FY '21, '22, were anyway different years and then we got back all the investment in place. So I think we are doing fine and we'll continue to probably improve by 1% from here on.

[Anirudh Shetty, analyst]

So we should see improvement in -- when you say EBITDA margin can improve by 1%, that's -- is that primarily going to come from gross profit margin improvement? Or we could see...

[Dinesh Agarwal, executive]

I think it will come more from the bottom, less from the gross profit margin. Gross profit margin might improve by 0.5% or so. But sales and marketing and technology and content I believe we should be able to. I mean, it's a combination of all of them, but not on a quarterly basis, but on a yearly basis, when we will draw the trend we will know. But I'm more confident that we should be able to do more than 1% for sure.

[Operator]

Next question is from the line of Abhisek Banerjee from ICICI Securities.

[Abhisek Banerjee, analyst]

No, just trying to understand on the manpower cost a bit, right? The net additions have been low for almost the last 4 quarters. So by now, we would think that manpower should have come off a little bit in terms of additions. So what is your outlook going ahead. And also this quarter, I saw that the outsourced sales cost has actually declined on a sequential basis, right? So is that indicative of a strategic call to not outsource as much anymore because some of the churn was also due to this.

[Prateek Chandra, executive]

Abhisek, Prateek here. So if you recollect in the last quarterly call, we communicated that from a sales outsourcing standpoint, there were 2 kinds of outsourcing. One, we had a channel partners arrangement and roughly around 50% of the sales were coming in out of that -- 40% of the sales are coming in out of that arrangement. So that continues to be as it is. We continue to build on that piece. The second kind of an outsourcing was where in we have outsourced sales and it was more [indiscernible] [ staffing ] to the kind of the companies like GI, Spectrum [indiscernible] these kind of companies. So that part is what we were looking at building the sales team in-house and reducing dependence on those kind of outsourcing.

So that was a movement that we planned for the teams that is supposed to be done in 2 to 3 quarters time frame. So half of that movement has happened. So that's why you see a reduction in the outsourced sales cost to that extent. And that cost would have got added to the manpower cost. Other than that, it has been the normal increments and the headcount increases and the other [indiscernible].

[Dinesh Agarwal, executive]

And that is why you are not seeing the manpower cost declining because some of the outsourced sales costs have shifted to the manpower.

[Abhisek Banerjee, analyst]

Understood. Understood. So also with regards to the net additions, given that from Q1 FY '24 is when you had the problem of churn. And if I think that -- so by this time, probably most of the people who were on the verge would have churned out, right? So that kind of implies that Q1 FY '25, the churn numbers should come down pretty sharply. Is there something that I'm missing in this analysis?

[Dinesh Agarwal, executive]

Sorry, Abhisek we could not understand the thing of 1 year that you [ drawing ] first.

[Abhisek Banerjee, analyst]

No. So I'm saying, see, these people, the people who are churning out were mostly silver monthly and silver yearly customers right. So I would imagine that the people who were churning out I mean the less valuable customers would have churned out within a year's time frame, right? Because all their subscriptions would have expired. So from Q1 FY '25, we should not see the same problem in, I mean, that is what it is.

[Dinesh Agarwal, executive]

That's just cyclical. So Abhisek, this is like, let's say, the customer acquisition and the churn is like it's a monthly progress, right? It happens every day. So it will continue to be a cyclical issue. The only thing what we saw in the last year was that since we started acquiring customers a year before, the proportion of the first year customer to the overall customer base was slightly higher. And because of which, since in the first year customers, there was a higher churn, you were seeing that kind of churn. So only as a proportion, if that mix improves, that benefit would certainly be visible. However, the churn rate, if I compare it on a like-to-like basis on the silver customers, specifically the first-year customers, whether in a monthly or on an annual basis, that continues to stay at the activated levels as we say.

[Abhisek Banerjee, analyst]

No, that I understand. But just now you also spoke about your first year customers, right? So obviously, if the net additions have been on the lower side in the last 1 year?

[Dinesh Agarwal, executive]

Your are right, you are right. So if the net additions are lower, the first year churn should come down on a yearly basis because the net addition itself improved. So that should help us by some margin here.

[Abhisek Banerjee, analyst]

Great. Sir, also, if I were to try and understand the strategy for monetizing the other part of the supplier base who are not paying anything right now. And I know -- I mean, this is obviously much easier sale than done. But is there something that you're working on? Because see, on one hand, I completely understand the value-added offerings that you are giving for your platinum customers? I mean for people to be moving to the higher end of the spectrum, right?

But at the same time, there is obviously need for a platform to be a place for just converted businesses might -- I mean largely offline businesses to just come online and exist, right, or to create a foothold on the online part. So what is the strategy? Is there any way that some kind of monetization can be worked out here?

[Dinesh Agarwal, executive]

I mean, we tried in the past by way of [indiscernible] or things like that. I mean you're saying that is there a value in charging a lifetime free at a very low cost with no ROI free listing in a directory. I mean, monetizing something INR 1,000 a year, the cost of sales is too high. The cost of sales is too high, but it's a good idea. We will try once again to see if there is something that we could sell for INR 1,000 a year.

[Abhisek Banerjee, analyst]

Perfect. And in terms of the overall consolidated performance, it was a little surprise to see that busy on a yearly basis has not really outperformed on the profitability part. Anything that you would like to call out there? And if there any corrective actions that are being put in place?

[Dinesh Agarwal, executive]

I don't think we should look at the profitability Busy, my continuous recommendation to Busy is to have zero EBITDA and invest all the money that they can generate it into growth. So I'm not even looking at INR 1 crore quarterly EBITDA as being something substantial. My only advice is that don't go into negative, but don't try and chase INR 2 crore, INR 3 crore EBITDA every quarter or INR 2 crores, INR 3 crores of EBITDA every year.

[Brijesh Agrawal, executive]

And the other thing Abhisek there is if you see our deferred revenues have grown by 59%, the net billing has grown by 44%. So what you see is that there is money that has been collected from the customer, which is yet to be recognized. So when you see the accounting EBITDA, accounting EBITDA will be on a lower recognized revenue, whereas all the cost of manpower, marketing that we've invested in, that is already budgeted in and that is why you see lower EBITDA there. But when you look at it on a, let's say, cash-to-cash basis, the margins still are healthy.

[Abhisek Banerjee, analyst]

Understood. Understood. So also, you have very kindly shared a sheet on your CapEx expenditures and all. There I saw some strategic investments which were done in this year to the tune of around INR 25 crores, yes. So what was this, if you could give us some clarity?

[Prateek Chandra, executive]

These have been the follow-on investments that we've been making in our investee companies. This is the yearly number of INR 25 crores Abhisek. So I can give you, in fact, the entity wise breakup maybe later on.

[Abhisek Banerjee, analyst]

No, that's fine. I was just trying to understand if something fresh you have done or not. Okay. This is very helpful, sir. Thank you so much for your time.

[Operator]

Thanks, Abhisek. Next question is from the line of Sarang Sanil from RW Investment Advisors.

[Sarang Sanil, analyst]

Thank you for the opportunity. Firstly, sir, was there any depreciation, amortization item that has materially impacted this quarter? And should we expect this run rate to continue because we saw quite a jump this quarter.

[Prateek Chandra, executive]

Yes. Sarang, so in this particular quarter, other than the regular depreciation, there is a onetime impairment charge on right of use of plan that we had. During the quarter, this is a land, it is there in sector 75 Noida. And during the quarter, we received a cancellation notice from the authorities. And while there is a provision to file an appeal against that particular order, and we have already filed that appeal, that appeal is pending review in front of the appropriate authorities, but out of a conservative basis, we have taken that impairment provision once the outcome of the appeal is more clear at that point of time, we will revisit this provision. So this is to the extent of INR 3.5 crores.

[Sarang Sanil, analyst]

Okay. So we can expect about INR 6 crores to INR 7 crores run rate?

[Dinesh Agarwal, executive]

Yes.

[Sarang Sanil, analyst]

All right. Secondly, though in the previous call, you had mentioned that moving outsourced salespeople to permanent payroll of the company does not help us on the cost side. I just want to double check that this strategy has not really aided our margin expansion this quarter.

[Dinesh Agarwal, executive]

Yes. The only thing is that as you bring them in from a temp staffing payroll to company payroll. While most of the benefits are same, people do value a large company payroll thing and hope that results into some percentage point reduction in the attrition or retention, which further helps us improve the productivity. That helps us improve the sales and marketing cost.

[Sarang Sanil, analyst]

Sure. So there's no training cost per se when they migrate to permanent payroll, right?

[Dinesh Agarwal, executive]

I mean that would be immaterial to make any difference on the -- but I'm saying the attrition has a 2 edged sword. One, it gives you a cost of hiring, cost of training and other it gets you a productivity dent both. So in case we are able to save a few percentage points on attrition by moving people from outsourced to in-source, in-house that should generally help us save some cost and give some better productivity.

[Sarang Sanil, analyst]

So in the medium to long term, it's a lever for margin expansion, got it. Okay.

[Operator]

Next question is from the line of Jasdeep Walia from Clockvine Capital.

[Jasdeep Walia, analyst]

So what is the growth in the number of gold and platinum customers for FY '24 and 4Q '24?

[Dinesh Agarwal, executive]

So gold and platinum customers are now at about 49% of the total customer base, which was about 47% at the beginning of the year. At the beginning of the year, we were 203,000 customers? And 47.5% of that was gold and platinum. Now we are 49% to be precise.

[Jasdeep Walia, analyst]

What was the number at the beginning of the year, 46.9%?

[Dinesh Agarwal, executive]

No, 47.5%. Now it is 49%.

[Jasdeep Walia, analyst]

Got it. And sir, what is the growth in revenue of gold and platinum customers for the year.

[Dinesh Agarwal, executive]

I always say that approximate number I've given you that now it is close to 75%, but it is still not exactly 75% I think you can give the exact number of what is the 75% -- 73% is the current exact number of the revenues. I won't be able to give you last year's number. But last year, I said top 10% ARPU, if you see last top 10% ARPU in the FY '23 was INR 214,000 for the FY '24, it is INR 247,000, which is very similar to platinum ARPU.

[Jasdeep Walia, analyst]

Got it, sir. And sir, is there any change in the churn metrics for gold and platinum customers? Or they remain?

[Dinesh Agarwal, executive]

So nothing on the platinum side. Platinum is about 12% of our customer base or so. Keep varying because of the denominator. On the gold side, about 40% or 35% of our customer base, that's where -- because the numbers have gone quickly high from 45% of 150,000 to now 49% or 50% or so. So there, we have seen a big number. So there might be 1% churn reduction from 10%, 11% to 12%, 13%, but that's about it.

[Prateek Chandra, executive]

And just to clarify, the churn actually is dependent also on the vintage of the customers and the evolutions of the customer. So they may like it sort of vary because of these factors. However, on a like-to-like basis, there is no change as such in the gold and the platinum customer churns.

[Dinesh Agarwal, executive]

There's by and large stable and by and large, growing and by and large, bringing more money.

[Operator]

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

[Dinesh Agarwal, executive]

Ladies and gentlemen, thank you very much for joining our year-end conference call. We have tried to address your queries in the time available. But in case any of your questions were not taken up, please do reach out to our Investor Relations team on [e-mail], and we will be able to help you from there. Thank you, and have a great day, and good wishes for your next financial year. Thank you very much.

[Operator]

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