IndiaMART premium retention and ARPU growth offset elevated silver-tier churn

Investment View and Valuation

Motilal Oswal Financial Services’ July 21, 2026 results update retains its Buy rating on IndiaMART and its Rs 2,250 DCF-based target price, compared with a CMP of Rs 1,918. The broker views IndiaMART as a beneficiary of increasing technology adoption among MSMEs.

The investment case is supported by demand from out-of-the-circle buyers, a strong network effect, more than 70 per cent market share in the underlying industry, scope to increase ARPU despite low price sensitivity, and operating leverage. Motilal Oswal considers the valuation undemanding because it already reflects concerns over churn, product-market fit and subscriber growth.

1QFY27 Financial Performance

IndiaMART reported 1QFY27 revenue of Rs 4 billion, up 11 per cent year on year and broadly in line with Motilal Oswal’s 9.6 per cent growth estimate. Collections rose 8 per cent year on year to Rs 4.7 billion, while deferred revenue increased 16 per cent year on year to Rs 20 billion, providing revenue visibility.

The EBITDA margin was 35.3 per cent, above the broker’s 33 per cent estimate and up about 260 basis points sequentially. The improvement was aided by lower customer-acquisition costs and a 4 per cent year-on-year reduction in headcount. Adjusted PAT was ahead of estimates because other income was higher than expected. Total suppliers reached 8.8 million, up 5 per cent year on year, while cash and investments stood at Rs 3.5 billion.

Paying Supplier Base and Churn

The key operating concern remains the paying supplier base. Paying suppliers declined by about 1,850 sequentially to around 218,000 in 1QFY27, reflecting slower gross additions and elevated monthly churn of about 7 per cent in the Silver tier.

Management is prioritising product-market fit and renewal behaviour rather than pursuing gross additions aggressively. Excessive acquisition could raise customer-acquisition costs and reduce lifetime value. Gold and Platinum subscribers account for about 50 per cent of suppliers and over 75 per cent of revenue; their healthy retention and upsell are cushioning overall churn. Motilal Oswal believes a sustained recovery in net supplier additions depends on lower Silver-tier churn.

ARPU-Led Growth Outlook

Growth remains primarily ARPU-led. ARPU increased 9 per cent year on year to Rs 69,000, and management identified pricing headroom in several categories. IndiaMART is developing a category-based, three-tier Platinum pricing framework linked to return on investment, product value and buyer volume.

Motilal Oswal forecasts collections growth of about 8–9 per cent across FY27E–FY28E. The broker expects FY26–FY28 revenue CAGR of 11 per cent, with EBITDA margins of 33.6 per cent in FY27E and 34.8 per cent in FY28E, while keeping estimates largely unchanged.

Buyer Activity and Platform Quality

Buyer activity remains soft, with unique business inquiries at about 26–27 million. Management attributed roughly 4–5 per cent of the year-on-year decline to OTP-based bot filtering, with the balance linked to weaker demand, platform-awareness issues and traffic migrating to LLM-based search.

IndiaMART is improving buyer and supplier trust through GST and bank-account verification, buyer verification, payment protection and AI-led content moderation. Management regards improving buyer repeat rates as a more relevant engagement measure than headline buyer growth. The broker expects these quality initiatives to take time to translate into stronger growth.

IndiaMART Finance Initiative

The Board approved IndiaMART Finance Limited as a wholly owned subsidiary to facilitate short-term MSME transaction financing through lender partnerships. Management clarified that IndiaMART does not intend to lend from its own balance sheet. The final product structure, including potential invoice discounting, remains under development.

Key Risks to the Investment Thesis

• Persistent Silver-tier churn.
• Delayed improvement in product-market fit and subscriber additions.
• Weak buyer demand.
• Higher acquisition spending without commensurate growth.