
Domestic brokerage Nuvama has upped its rating on IndiaMART InterMESH Ltd to 'Buy' from 'Reduce' earlier, as it increased its target price on the stock to Rs 3,800 apiece, an 81 per cent surge over its previous target price of Rs 2,100. The fresh revision comes after earlier downgrades in October 2023 to ‘Hold’ and October 2024 to ‘Reduce’, with the broking firm now expecting the business to enter a new demand upcycle.
The stock settled at Rs 2,500 on Tuesday. Nuvama's fresh target price suggests 52 per cent upside over this price.
The management’s initiatives such as changes on platform and investing in marketing and branding are seen attracting buyers, leading to higher unique business enquiries, followed by a rise in net new subscriber addition.
"We are increasing earnings estimates by 9 per cent/10 per cent for FY26E/27E each driven by higher revenue growth while we are lowering profitability. We are raising target valuation multiple from 22x to 35x – same as pre downgrade level driven by improving growth prospects thereby increasing the target price from Rs 2,100 to Rs 3,800," it said.
IndiaMart has been dealing with elevated churn among its silver-tier subscribers for nearly two years. During this time, the number of unique enquiries per paid supplier per quarter dropped below its long-term average of 130, falling to 106 in Q1FY24—below even pre-Covid levels—after hovering around 148 during FY21–23.
To tackle these structural challenges, the company management has implemented several strategic initiatives, including platform improvements, partial insourcing of the sales team, and increased investment in branding and marketing.
Rather than focusing on short-term subscriber additions to offset churn, the management has opted for a more patient, long-term approach to addressing the root issues, Nuvama said.
This key metric has shown consistent recovery over the last twelve months, reaching 125 in Q4FY25. A significant move has been the reduction in supplier enquiries from approximately seven to fewer than four, which helps decrease intra-supplier competition. Simultaneously, efforts to attract more buyers are expected to create ample opportunities for all suppliers to benefit, Nuvama said.
Nuvama said the worst of the headwinds is now behind IndiaMart, and recent investments are poised to deliver results. Subscriber additions are likely to pick up by Q2 or Q3, setting the stage for a rebound in collection growth, it said.
"IndiaMART is trading at one-year forward P/E of 28x compared with average (since listing) of 45x. We reckon valuation shall rerate due to improving growth trajectory. We are introducing FY28E numbers and roll-forward valuation to Q1FY28. This along with an increase in target multiple to 35x yields a target price of Rs 3,800; upgrade
to ‘BUY’ (from ‘REDUCE’)," it said.