IndiaMART InterMesh bags double upgrade from Nuvama; shares soar 6%

IndiaMART Intermesh shares have slipped 7.5 percent over the past year.

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Internet player IndiaMART InterMesh Ltd shares jumped six percent on Wednesday, June 25, after domestic brokerage Nuvama Institutional Equities upgraded its rating on the stock, given that the the business is entering a new demand upcycle.

Nuvama gave the counter a double upgrade, changing its rating to 'buy', from 'reduce' earlier; increasing the target price from Rs 2,100 to Rs 3,800, which indicates a 52 percent upside from the CMP of Rs 2,500.

"Management’s initiatives such as changes on platform and investing in marketing and branding to attract buyers will lead to higher unique business enquiries, followed by a rise in net new subscriber addition," said the brokerage.

Further, the brokerage hiked earnings estimates by ~9/10 percent for FY26E/27E each, driven by higher revenue growth while it lowered profitability.

IndiaMART has been facing elevated churn in silver subscribers for almost two years now. During this period, unique enquiries per paid suppliers per quarter dipped below its long-term average of 130 to 106 (below pre-Covid level) in Q1FY24 after remaining at ~148 during FY21–23.

At 9.26 a.m., shares of the firm were trading at Rs 2,623, higher by 5.1 percent on the NSE.

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According to the brokerage, the firm's management has been patient in their attempt to address the solution rather than investing in gross addition to offset higher churn. This metric has shown a steady improvement, and is now at 125 in Q4FY25.

"We argue a new demand cycle will start with improvement in traffic and unique business enquiry followed by rise in net subscriber addition and ultimately lead to collection growth acceleration as management focuses on enhancing customer engagement metrics," said the broking house.

With ARPU growth already in place, these efforts place IndiaMART well to capitalise on its monetisation potential and drive sustainable growth.

"We foresee a rebound in collection growth and, subsequently, overall revenue growth. We assert this normalisation will not alter investor sentiment given in the past the stock performance showed no meaningful correlation with margin improvement as investors consistently viewed higher margins as transitory," it added.

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