In today’s Finshots, we tell you why IndiaMART InterMESH is making analysts happy.

The Story

You’ve probably come across IndiaMART while looking for a product online. But unless you’re a business owner, chances are you’ve never actually used it. That’s because IndiaMART isn’t your everyday online shopping site. It’s India’s largest online B2B (business to business) marketplace where companies come to discover and connect over business products and services.

And this week, the stock was buzzing — jumping nearly 6% after analysts suddenly turned bullish. Most brokerages gave it a thumbs up, pointing to a new demand upcycle that could boost revenues and margins.

But this is quite the U-turn from what was happening back in January. At the time, the sentiment around IndiaMART was gloomy. Analysts weren’t impressed, and firms like Nomura even downgraded the stock over concerns about weak growth.

So what changed in just six months, you ask?

To answer that, let’s rewind and understand how IndiaMART runs its business.

The story began in 1996, when cousins Dinesh Agarwal and Brijesh Agrawal spotted the rise of the internet. Initially, their business focused on building websites. But soon they realised that Indian exporters had no proper way to reach international buyers. So they built an online directory to connect the two. And that’s when the real IndiaMART was born.

They kept building even through the dot-com crash, managing to get 10,000 paying customers. Their belief in the business was so strong that even after tripling their prices, they grew the base to 18,000 customers. But in 2008, the global financial crisis hit hard, crushing export demand. So they pivoted. They raised VC (venture capital) money and built a domestic B2B marketplace instead, connecting Indian businesses with each other. And in 2019, they finally went public.

Today, IndiaMART controls around 60% of India’s B2B e-commerce market. And while the core business is the marketplace, IndiaMART has also invested in startups offering accounting, payroll and logistics tools. But these only contribute about 5% to its operating revenue. So for now, we’ll just stick to talking about IndiaMART’s B2B marketplace.

Let’s start with how IndiaMART makes money.

It’s fairly simple. The platform mainly serves MSMEs (Micro, Small and Medium Enterprises). Buyers can post their requirements for free. Suppliers, too, can list their products at no cost. But if they want better visibility and access to leads, they need to pay a subscription fee. These subscriptions come in different tiers, starting with a basic freemium plan, then Silver, Gold and Platinum. Premium plans can be paid monthly, yearly or even in bulk for multiple years — which means the company receives customer advances, recorded as deferred revenue. But 20% of this deferred revenue gets recognised within the next 3 months, which is a good thing.

But the real strength of IndiaMART lies in its network effects — the kind of self-reinforcing loop where more buyers attract more suppliers, and more suppliers bring in more buyers. This builds a sticky ecosystem, lowers customer acquisition costs, and drives operating leverage. After more than two decades in the game, IndiaMART has built a massive self-sustaining engine.

You can actually see this reflected in the numbers.

Back in 2019, around the time of its IPO, IndiaMART had 55 lakh registered suppliers. That number has now grown to 84 lakh, thanks to a steady annual growth rate of 13%. Of these, about 2.5% are paying subscribers. On the buyer side, IndiaMART’s user base has ballooned from 8.3 crores to 21 crores over the same period.

And this metric — paying suppliers, is what analysts obsess over. Because it directly impacts revenue and signals how healthy the platform’s growth really is.

But back in January, this very metric looked underwhelming. IndiaMART lost around 4,000 paying subscribers between Q2 and Q3 of FY25 — a 2% dip. Now, in the grand scheme of things, that may not seem huge. But for a midcap company with about ₹15,800 crore market cap, such drops could make analysts nervous. After all, fewer suppliers could eventually mean fewer buyers too.

So, why were suppliers leaving?

No one knows for sure, but one theory is that consumer demand had softened during that period. And when buyers pull back, suppliers tend to cut costs, often by downgrading or cancelling subscriptions. Interestingly, most of the churn came from Silver-tier customers, which pays the least and gets fewer buyer leads in return.

Now, you might think — why would analysts care about the low-tier users?

But if you think a little harder you’ll see that Silver users are future Gold or Platinum users. If they stick around and see value, they’re more likely to upgrade. If they drop off early, that’s a lost opportunity. It also suggests that they weren’t getting enough bang for their buck.

So IndiaMART did what it had to — not by chasing new customers, but by focusing on retention. It brought its sales team in-house to improve lead quality and ensure better matchmaking between buyers and suppliers. It also offered closer hand-holding to Silver-tier suppliers in the early stages of their journey. All this in the hope that a better experience would keep them around longer, and eventually push them to upgrade.

And it seems the strategy worked.

While net additions slowed, IndiaMART was building a stronger core. And that quiet improvement finally showed up in the numbers — paying subscribers ticked back up last quarter. And that’s likely what made analysts change their tune.

Today, IndiaMART’s revenue has been growing at a steady 16% CAGR over the last five years, touching ₹1,380 crores in FY25. EBITDA margins are solid too, hovering close to 40%, which is way healthier than peers like Infra.Market or Udaan. And despite minimal ad spending, repeat buyer rates are strong at 58%.

So it’s no surprise that brokerages have gone bullish again. Nuvama, for instance, has increased its target multiple (value as a multiple of its earnings) from 22x to 35x — a sign of confidence that IndiaMART’s growth story is back on track.

Sure, analysts may change their minds with every quarterly wobble. But IndiaMART has shown, time and again, that it knows when to pivot, when to pause and when to double down. And that kind of long-term adaptability is what truly matters when deciding if a stock deserves a place in your portfolio.

The only thing that remains now is whether it can continue to deliver on that growth promise in the coming years.

Until then…

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