Shares of Indiamart Intermesh climbed 9 per cent in Friday's trade after the company board approved a Rs 500 crore share buyback proposal. The stock also gained as Indiamart Intermesh reported a 78 per cent year-on-year (YoY) rise in consolidated net profit at Rs 83 crore on a 26 per cent YoY rise in sales at Rs 282 crore. The numbers were led by a 16 per cent increase in number of paying subscription suppliers
The stock jumped 8.62 per cent to hit a high of Rs 3,149.30 on BSE.
"We expect the stock to continue to trade at punchy valuations amidst strong earnings visibility. We also expect the market to cheer the company’s intention to return excess cash through the buyback route. We reiterate Buy with a revised target price of Rs 3,300 against 3,000 earlier," JM Financial said in a note.
Indiamart Intermesh announced its intention to buyback 12,50,000 shares worth up to Rs 500 crore at a per share price of Rs 4,000, a 38 per cent premium over Thursday's closing price. The buyback will be through the tender offer route and will extinguish 2.04 per cent of the total outstanding shares.
"We believe Indiamart is likely to deliver strong revenue (32 per cent) and Ebitda (41 per cent) CAGR growth trajectory over FY23-FY25E as a key beneficiary of the robust growth in B2B e-commerce expected over the next few years. We maintain BUY, given its likely growth prospects and improving margin trajectory. We maintain our target price at Rs 3,500," said ICICI Securities.
There is no restriction on promoters’ participation. JM Financial expects promoters to participate in the buyback offer. "However, given that the buyback offer accounts for 24.33 per cent of the company’s total paid-up equity capital and free reserves, it will require shareholders’ approval," it noted.
JM Financial said Indiamart's Q1 beat was likely driven by price hikes and up-sells. Paid subscription additions were, however, weak at 5,000 sequentially, below the management guidance of 8,000 per quarterly additions.
"We believe this indicates a shift in strategy and the company may prioritise realisation over volume in the near term (in line with competitor actions). While this may not impact a 20 per cent-plus collection growth trajectory in the near term, the defocus on volume was a bit of a dampener over otherwise good results," JM Finanical said.
Analysts said they would look for clarity on near-term subscriber addition and outlook on operating margin at its conference call today at 4 pm.