Sie sind auf Seite 1von 32


PRE-IPO NOTE October 15, 2018

B2B classifieds champion Internet classifieds

IPO Information
Focus on a differentiated business model (B2B versus B2C) and flawless Mar’18 data ` mn
execution enabled Indiamart to emerge as a clear winner in the B2B
Net worth# 517
classifieds space. This resulted in 32% revenue CAGR over FY14-18 and
market leadership (~70% share). We see strong network effects Number of shares(mn) 28.59
enabling it to sustain its robust performance and capitalize on the Issue size(mn) 4.28
offline to online shift of B2B buying/selling led by industry’s digitization O/w: Offer for sale 4.28
tailwinds (low data pricing and easy online payments). Indiamart’s Likely issue price (`/share) 1,300
resilience to disruption from horizontal global internet giants like
Enterprise value* 36,720
Google is evidenced by its revenue growth acceleration with increased
mobile adoption (unlike Justdial). Valuations of `30-35bn (assuming FY18 EBITDA 657
issue price of `1,300/share) imply 22x FY20E EV/EBITDA, which is EV/EBITDA (FY18)* 55.9
reasonable given the long growth runway and sustenance of category P/E (FY18)* 68.2
dominance. Potential aggression by Amazon is the key risk. P/S (FY18)* 8.9
India’s first solely B2B based e-commerce platform for listing Promoter’s Stake 52.9%
Indiamart is a discovery platform for B2B e-commerce participants. Its business P/E investors 19.4%
model works on subscription from sellers who opt for paying. It controls ~70% Public stake post-IPO 27.7%
of the market in the subscription space. The quasi-vertical nature of business Source: Ambit Capital research, DRHP, # - considering
allows it to expand categories whilst remaining largely isolated from the threats the preference shares *post-money; Note: Lock-ins of
of large horizontals like Google. For a vertical business in the B2B space, we various stakeholders (a) 20% stake for 3 years from
allotment date by Promoters (b) excluding 20% stake
believe that the subscription model is the best model in the Indian B2B space. locked in by promoters for 3 years, the entire pre-offer
equity share capital (excluding that held by P/E investors
Stellar exhibition of operating leverage is locked in for a year (c) equity shares allotted to anchor
investors for 30 days
Network effects enabled consistent revenue growth without commensurate
increase in costs and no advertisement expense. Sale of long subscription term Indiamart v/s Justdial (FY18)
plans allows sustainability of revenues and margin expansion unlike Justdial.
Particulars Indiamart Justdial
This has enabled consistent growth; even FY16-18 revenue CAGR was 29%. A
testimony is EBITDA margin expansion from -51% in FY16 to 11% in FY18. Paid Listings(PL)(000's) 108.35 445.11
PL/Overall listings 2.3% 2.0%
Valuations: See the FY21E/22E discounted numbers!
Revenue/listing(R/L)(`) 40,173 17,758
We expect sustenance of past revenue CAGR whilst EBITDA margin will improve
(our base case is 35% by FY22, up from 11% in FY18). FY20E 22x EV/EBITDA is R/L CAGR* 8.7% -3.5%
comparable to that of Naukri. Reverse DCF-implied revenue CAGR of 13% over Revenue CAGR* 29.0% 8.2%
FY18-40E appears reasonable. It is also an acquisition target for serious online Source: Ambit Capital Research, Company,
players like Amazon and Flipkart. *- FY16-18.

Key questions for management

(i) Management’s thought process when it launched Tolexo and plans for further
such entries in non-subscription markets. (ii) Belief in sustenance of the network
effects without incremental spends on advertising (FY18: 1% of sales, down from
19% in FY16). (iii) Measures to safeguard and compete against competition from
global giants like Amazon (active in the US B2B space) and potent entrants like
Flipkart. (iv) Plans for increasing the paid subscribers (currently 2%).

Key operating, financial and valuation metrics

Year-end March FY14 FY15 FY16 FY17 FY18
Net Revenues (` mn) 1,357 1,761 2,458 3,178 4,105 Research Analysts
EBITDA (` mn) (50) (284) (1,203) (402) 657 Vivekanand Subbaraman, CFA
Paid suppliers (nos) NA NA 72,335 96,025 108,347
US Contact: +1(646) 361 3107
Registered Buyers (mn) NA NA 27 39 60
P/S (x) 27 20 14 11 9
P/E (x) NM NM NM NM 68.18 Deep Shah
RoE NM NM NM NM 104%
Deferred Revenue (` mn) 1,225 1,644 2,361 2,932 3,920
Source: Company, Ambit Capital research; ATV = Average Transaction Value, *post-money,
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital
may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.

Master in a challenging industry

The B2B e-commerce industry presents a larger opportunity than B2C e-
commerce. Given the nascence of the industry in India, multiple revenue
models continue to be experimented. Whilst the marketplace model presents
a larger market size, Indiamart has aced the subscription piece of B2B e-
commerce market. Existence of unproven multiple models leads to mapping
whether the model is a vertical or a horizontal one given different challenges
for each type. The large and untapped potential of the market leads to fresh
challenges and Indiamart has so far emerged victorious in the same.
Indiamart operates in the online B2B space, acting as an aggregator for suppliers and
buyers in the wholesale ecosystem. Its revenue model is subscription based, whereby
suppliers pay to get visibility on the platform. The market for the same is just
emerging in India given the rapid digitization over the business front. Whilst the
market potential of the business can be broken down over multiple heads, we present
the market size of its current venture. The B2B online subscription market is estimated
to be `11.9bn by FY22E.
Exhibit 1: Indiamart has been absolute leader in its core operations

14 ` bn 85%
This could very well be the picture
80% (Ambit estimates: Bull case)

8 75%

6 70%

0 60%
FY17 FY18 FY19E FY20E FY21E FY22E

Market Size Indiamart Revenue % market(RHS)

Source: Ambit Capital research, Company, KPMG Analysis

The overall market size in India over the B2B wholesale space could be looked upon
in multiple styles depending upon the model considered. The two prime models are
subscription based and marketplace models. Search advertising revenue could be a
supplementary model. We present our estimates of the market size of each model.,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 2


Exhibit 2: Overall market size estimates (FY21E)

Marketplace B2B Search

Subscription Revenue

Total GMV B2B

~US$ 800 - 900bn

~` 10bn ~` 62bn

fee, i.e. `~50 bn
Google wont let
Proved its
Failed once as launched Indiamart capture!
ahead of time
Source: Ambit Capital research, Company; NOTE: GMV = Gross Merchandise Value

The transaction model/marketplace place seems very attractive given its large
potential market size and ability to earn multiple revenue streams like commission or
credit charges or warehousing and logistics revenues, but it is a difficult model to
actually operate in. We take the example of USA to prove our case, where the
internet penetration was as high as 69% in 2006 and yet CAGR of B2B sales online
has merely been 8%. The more astonishing fact is that even in USA, where internet
penetration exceeds three quarters of population, the online share of B2B
transactions is merely 11%. In this context, our assumption of 3% online in the above
chart could be taken as optimistic.

Exhibit 3: B2B sales growth in USA has been merely 8% Exhibit 4: …and accounts only for ~1/10th of the total B2B
CAGR over 2006-2016… sales and is not expected to move up meaningfully

7,000 US$bn 78% 14%

6,000 76%
5,000 74%
4,000 72%

3,000 70% 11%

2,000 68%
1,000 66%
- 64%











US B2B sales Internet Penetration 2015 2016 2017 2018E 2019E 2020E 2021E

Source: Ambit Capital research, Company, Source: Ambit Capital research, Company,

In terms of the B2B advertising revenues, we are very skeptical of Indiamart thinking
of this as an addressable market. We believe Google and Facebook have complete
monopoly over the market in India and that shall not change meaningfully. Given the
fact that primary page landing is Google, we find it hard to believe that suppliers
would bypass Google to advertise on Indiamart. Additionally, our channel checks also
suggest that the company shall go forward with the subscription strategy only.,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 3


Understanding various revenue models

Multiple revenue models currently operate in the B2B ecosystem given the nascence
of the industry. Multiple startups operate on various models eyeing a share of the
large industry. While the above diagram doesn’t capture purchase and sale model of
business, we present the nuances of different models.
Exhibit 5: Indiamart chose a subscription model for B2B classifieds
Subscription Commission Resale Advertising
Listing for a % commission for each Purchase and re-sell at Pay per
fixed fee transaction profits click/banner model
Mapped target
Merits Scalable Simple Ready buyer
Disadvant Necessitated No track of ultimate buyer
Out of system transactions Complicated
ages network effects opportunity
Evolved Nascent Nascent Developing
Examples Indiamart Udaan Power2SME Google
Source: Ambit Capital research, Company

What revenue model do we like?

Whilst the online B2B e-commerce market leaves a large ground to capture, revenue
model has to be given paramount importance. This is because the nascent industry is
trying multiple revenue models and we believe that all these models have their own
relevance once the industry matures. We undertake elimination analysis considering
the issues with each model. As of the date, we like the subscription model of revenue.
Exhibit 6: Subscription appears the least risky whilst advertising is a challenge given Google’s overbearing presence
Model Issues
 The issue with the model is slow scalability, as packs can be revised only after some time.
Subscription  Additionally, the benefits of robust portal are not completely enjoyed by the portal as it has to be satisfied with fixed
subscription only.
 The large issue with the model is transactions outside the portal. Given that the wholesale market is a low margin business
and commission is payable on each transaction, there are clear incentives for the supplier to convince the buyer to operate
out of the ecosystem.
 This also limits the ability to increase commission percentage, as it will further incentivise point 1.
 This model shifts the entire risk to the portal, rather than acting as an aggregator. Thus, there is clear shift from aggregator
model to large wholesale model. 2.
 The model leads to very high working capital and capex investments.
 The operators in this model also undertake logistics, further enhancing the risks associated.
 The presence of Google in the space is the biggest impediment for any company trying to achieve revenue through this
Advertising model.
 Google being the default search engine would always continue to attract ads rather than second level pages.
Source: Ambit Capital research, Company

How does subscription model ace all?

SMEs using the digital platform for
The fact that SMEs engaged on the online ecosystem are abysmally low presents a
actively promoting business online
silver lining. The return on investment for the SMEs being on the right platform is
are merely 2%.
superfluous, as highlighted by multiple channel checks conducted by us. This directly
attracts SMEs to the best in class subscription model website as it can expose itself to
unlimited growth by paying a fixed fee. The issues in commission is primarily the high
commissions/credit charges (our channel checks suggest 2.5-4.0% p.m.), and this is
an issue for the low margin wholesale industry. What can best happen is
development of this model in a specific vertical. The advertising on Google has
multiple complexities for the Indian SME, but advertising on other portals doesn’t give
the visibility given the default landing page is Google.,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 4


Exhibit 7: What makes subscription the best model for online B2B space today?

Source: Ambit Capital research, Company

Decoding the revenue model of Indiamart

• The company solely relies on subscription purchased by sellers to list their
products in priority on searches made by the buyer. Thus, it is purely free for
the buyer.
• Indiamart acts as a discovery platform solely, connecting buyers and sellers,
and does not undertake any other allied activities like logistics, credit facility
• The paid sellers get a quota of RFQs (which we discuss in detail later) and
much more leads as it is obvious that priority listings would lead to immediate
buyer attention.
• Indiamart has been largely successful in the subscription model, with its
market share nearly touching 72% as per KPMG analysis primarily due to
network effects of highest sellers and highest buyers.
Exhibit 8: Business model of Indiamart

Priority Listing + DISCOVERT R

Paid (2% of suppliers)

Source: Ambit Capital research, Company,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 5


Is Indiamart a horizontal or a vertical business?

Our detailed thematic on the internet space laid out the differentiation of internet
companies in horizontal and vertical models. Horizontals are entities which serve
multiple product lines/services whilst verticals remain focused on specific industry. In
this framework, we believe that Indiamart is a quasi-vertical entity as it exhibits
attributes of both verticals and horizontals.
 We have used listings as a proxy for revenue as revenue breakup per category is
not available.
 A peculiar feature of horizontals is presence across multiple categories. Indiamart
is present across 52 categories.
 Secondly, the presence across multiple categories leads to limited reliance on a
segment of users for overall business operations. In the case of Indiamart, no
category contributes over 8% of its listings.
 Horizontals usually need a large feet on street to successfully run its operations. It
is also evident in the case of Indiamart, where the employee costs have continued
to be near 60% of revenues.

 Verticals specialize in one category and that leads to quality listings. Although
Indiamart operates across multiple segments, the operating model ensures that
the quality of listings is very high. This is because the products are the core of
listings rather than the seller.
We believe that the best way to
 Internationally, there are examples like Grainger (discussed in detail below) beat Amazon, if it enters in this
which have aced the B2B space by specializing in a few large categories like space is to be a pure vertical. We
industry supplies, maintenance, repairs and operating supplies. Albeit this is a discuss this later in detail.
broad space, but can be easily compared to a vertical.
 Successful verticals usually tend to have a strong position in their space of
operation. The only exception to this statement is Tencent, which has been a
successful horizontal other than Google. Indiamart too controls nearly 70% of the
market it operates in.
These broad characteristics of Indiamart lead us to believe that it is a quasi-vertical.,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 6


Prowess in performance
The internet era is marked with unicorns on the basis of strong revenues yet
they continue to bleed. Indiamart has been an outlier as it grew revenues
whilst constantly improving the bottom-line. The prowess has been an
outcome of focused sales staff, buyer centric focus and spiraling network
effects. It has truly rolled over the digitization wave, whilst capturing the
market and continued innovation. Whilst the threat of global competitors like
Amazon looms large, it has successfully risen to be the sole bright star in
Indian B2B e-commerce space.
Indiamart has scaled up meaningfully in the past 5 years of its operations,
significantly benefitting from the digitization wave in the country. Its revenues grew at
a staggering 32% CAGR over FY14-18. This was despite the entire economy being
affected by the demonetization and GST implementation.
Exhibit 9: Revenue growth has been staggering

4,500 ` mn 41%
4,000 39%
3,500 37%
29% 35%
growth 33%
2,000 even
post 31%
1,000 macro 29%
500 27%
- 25%
FY14 FY15 FY16 FY17 FY18
Revenue Growth(RHS)
Source: Ambit Capital research, Company

The growth achieved by Indiamart has been on the brink of increasing paying
suppliers and simultaneously improving pricing per paying supplier. This is credible
given the ability to improve pricing in the demonetization phase exhibits the ability to
follow up as the economy develops. An important factor in the ability to increase
prices has been gargantuan increase in buyers on the platform.

Exhibit 10: Suppliers and revenue/supplier increased… Exhibit 11: …as buyer interest kept on increasing

120,000 ` 42,000 70 mn mn 600

40,000 60
110,000 500
38,000 50
100,000 400
90,000 30
34,000 300
80,000 20
32,000 200
70,000 30,000
FY16 FY17 FY18 0 100
FY16 FY17 FY18
Suppliers Revenue/supplier(RHS) Buyers Visits(RHS)

Source: Ambit Capital research, Company, Suppliers here mean paying Source: Ambit Capital research, Company

October 15, 2018 Ambit Capital Pvt. Ltd. Page 7


Whilst the above achievement is in itself extraordinary, the bigger success for the
company is the ability to convert visits into business leads for its paying suppliers. This
is particularly required as ultimately business leads matter for the suppliers rather
than visitors. One must keep in mind that this increase of business leads has been
obtained even though the visits grew by 45% CAGR over FY16-18.
Exhibit 12: Continuous improvement in conversion of visits to business leads

600 mn 56%

500 52%

100 40%

0 36%
FY16 FY17 FY18

Visits Business Leads Conversion Ratio(RHS)

Source: Ambit Capital research, Company

Finally, we look at other prominent Indian internet companies to analyze the

performance of Indiamart. Indiamart has far outperformed Justdial and even
InfoEdge on certain parameters during the last three years. We look at the two most
important metrics for any subscription-based online company, namely paid
suppliers/campaigns and revenue per supplier/campaign.

Exhibit 13: Indiamart is in line with InfoEdge in terms of Exhibit 14: …while it decimates Justdial and InfoEdge in
campaigns growth rate and exceeds that of Justdial… terms of revenue/paid unit growth rate

35% 15%
20% 5%

15% 0%
10% FY16 FY17 FY18
0% -10%
FY16 FY17 FY18
Justdial InfoEdge indiamart
Justdial InfoEdge indiamart

Source: Ambit Capital research, Company; InfoEdge data is for recruitment Source: Ambit Capital research, Company; InfoEdge data is for recruitment
vertical vertical,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 8


What makes us convinced of growth ahead?

The majority of the paid suppliers of the company are SMEs. Whilst that would remain
status quo given that large organizations would have their own portals and 47 of the 50 Nifty 50 companies
mechanisms, the emerging SMEs shall be urged to use this platform to reach buyers are buyers on the Indiamart
at large. Thus, the growth ahead for the company shall be dictated by the digitization platform.
of the SMEs in India. Since 35% of the subscription packs sold are on three-year
packs, deferred revenue could be a good leading indicator for revenue in the near
term. Since the company has been able to improve its deferred revenue and the trend
of digitization in India is materializing quickly, we believe that the company shall
continue to grow its revenues.

Exhibit 15: Near-term growth seems guaranteed by Exhibit 16: …whilst medium-term growth would be on the
deferred revenue... back of digitization (% of SME)

` mn 100%
2,500 ` mn 4,500

2,000 4,000 80%

This 2% shall
1,500 3,500 60% increase
1,000 3,000 40%

500 2,500 20%

- 2,000 0%
FY16 FY17 FY18 India China
Long term Short term Revenue Engaged Online Offline
Source: Ambit Capital research, Company Source: Ambit Capital research, Company, Engaged refers to actively using
the internet for business, similar data for China NA

Additionally, the continuous increase in supplier storefronts as a result of excellent

incentive structure for the sales team also gives us confidence for revenue growth to We discuss the storefront and
occur in years ahead. Storefronts are pages created for the entities free of cost. The incentive structure in detail later.
persistent increase in the storefronts at higher rate even though on a higher base
shall translate into revenue as entities start to benefit from Indiamart listing.
Exhibit 17: Storefronts have doubled over past nine quarters

5 55%
mn The interesting point to note is the
50% growth in storefront is on the
45% upswing despite having a higher
3 40%

2 35%
0 20%
4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18

Supplier Storefronts Growth(QoQ)(RHS)

Source: Company, Ambit Capital research,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 9


How has Indiamart managed the outperformance?

The stark outperformance can be simplistically allocated to the network effect
phenomena, which is explained as under. Whilst there are multiple aspects to detail
the same, we look at the core business model to begin.
Exhibit 18: Understanding network effect for Indiamart

Source: Ambit Capital research, Company

Whilst the generic model of network effect is explained under, we back the same with
certain statistics. In this process, we compare FY17 with FY18 since the company has
Paid traffic is merely 1% of
reduced its advertisement costs from `173mn in FY17 to mere `31mn in FY18.
total traffic
• Total visits to the website increased by ~70% to 552.6mn in FY18 from 325.8mn
in FY17. 1% Other
• The total increase in visits also converted more than proportional increase in 2%
business inquiries as they grew by 85% to 289.9mn in FY18 from 156.8mn in
FY17. 12%
• Registered buyers increased 52% from 39.4mn in FY17 to 59.8mn in FY18. Searc
• Repeat buyers, based on 90 days, were a staggering 52%. h
• 42% of the suppliers also acted as buyers on the platform in FY18.

Source: Ambit Capital Research, Company,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 10


Revenue model of Indiamart

Indiamart earns revenues from the sales of subscription packs. Additionally, a
minuscule portion of revenue comes from sale of leads. These leads are Request for
Quotes of RFQs where the buyer posts his requirements without scouting for sellers.
We present the user Interface of both pages here.

Exhibit 19: The landing page on Indiamart on a particular Exhibit 20: …Tab for RFQ just two rows below the landing
search… page

Source: Company Source: Company

We are particularly impressed that Indiamart themselves create storefronts or pages

on their portal for the entities they wish to list on their portal. Once the same is
created, they visit the entity to obtain approval for listing. This is a free listing and
thus entities usually list on the platform. Following this, there are multiple Our channel checks have indicated
subscription options; we list the same along with the prices herewith. that maximum suppliers that can
be listed in Industry
Exhibit 21: Summary of various subscription packages Leader/Leading supplier/Star
Package Prices (`) Features supplier from a category are
Storefront NIL Only Listing 2/10/10 respectively. Earlier it
Mini Dynamic 3,000 monthly/ Creation of product catalogue by Indiamart; 400 photos used to be 1/5/5.
Catalogue 25,000 annual permitted
Maximiser 50,000 Separate website
Star Supplier 100,000 Guaranteed listing above maximiser for 20 products
Leading Supplier 250,000 Listing above Star Supplier for 20 products
Industry Leader 1,000,000 Guaranteed listing on top irrespective of usage
Source: Ambit Capital research, Company

Additionally, each subscriber gets access to weekly quota of RFQs. This is particularly
useful as the buyer need not search for multiple suppliers and yet get the quotes.
Additionally, such RFQs can only be used by a limited number of suppliers and thus
the buyer doesn’t get spammed. Once the quota of RFQs is exhausted, the supplier
needs to purchase additional RFQs at varying rates for different subscription
packages. We list the different RFQs available with different packages herewith.,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 11


Exhibit 22: RFQs available in each package

Package Weekly RFQ's available for free
Mini Dynamic Catalogue 7
Maximiser 21
Star Supplier 35 RFQs are very crucial as our
Leading Supplier 49 channel checks indicate 50%-70%
conversion rate of a RFQ to sale.
Industry Leader 70
Source: Ambit Capital research, Company

Indiamart typically sells its subscription packs in three formats: Monthly, Annual and
As on Mar-18, 50% of the
the three-year packages. Whilst the mini catalogue package is sold for monthly
package also, the other packages are sold only in annual and three year terms. subscribers were on the monthly
Whilst the first package enables first time users to experience the platform and hence pack, 15% on annual and the
balance on three yearly packs.
incorporates monthly allowance, the remaining subscription packs ensure that the
entity remains with the platform for the long duration.

How is Indiamart different from Justdial?

Whilst we have mentioned that Indiamart is a quasi-vertical and not a complete
horizontal like Justdial, there are various specific points of differentiation that explain
our preference for Indiamart. We list them as below:
Exhibit 23: Stark differences between Indiamart and Justdial
Parameter Indiamart Justdial
Prime business proposition is specific The focus on being a local search engine
Business product search. This is due to the fact that it leads Justdial to be a go to space for
proposition is a B2B offering; thereby the buyers are individual businesses rather than specific
usually product specific. product types.
The proposition of being a B2B search
engine and discovery platform enables
Type of The suppliers on the platform are mostly
large scale transactions, thereby attracting
suppliers local and retailers.
larger suppliers and manufacturers on
Indiamart offers coverage Pan-India. Thus,
Scale Indiamart would help attract clients from It is a pin-code focused platform.
multiple geographies
It is relatively simpler to build up a supplier
It is very difficult to build up another granularity base like Justdial. This is
Indiamart. This is because Indiamart gives because one needs to merely list suppliers
product granularity via the suppliers on its and ensure that the data is updated.
Ease of
platform. This is the reason that verticals Further, being a B2C platform ensures that
like restaurants can’t be on the platform, the business listed on the platform have
but nonetheless developing product details many more visits, and thus building credible
is gargantuan task review points are easy for mammoth like
We have highlighted in our earlier
Google. note how easy it is for Google to
It has constantly focused on being a
They have entered into multiple spaces
disrupt Justdial; can’t do that with
discovery platform for the B2B market Indiamart!
like JD Omni, JD Social, transaction
Focus despite being a low market size.
focused rather than discovery platform
Although it had tried delivery, it shut it
down being a failure.
etc. Here is another example of Google
The competitors till date here are small and The biggest competitor for them is Google. app advertisement which poses
marginal players. Though global On top of that, multiple large pocket serious threat to Justdial model
Competitors heavyweights rule the market in competitors like SBI Yono are also B2C model.
USA/China, we are yet to see meaningful emerging. This is notwithstanding the
presence of the same in India. verticals.
Multiple communique modes are available It offers only call model to approach the
to the buyers and sellers to interact. This seller. This not only is a limiting factor but
includes e-mail, call, SMS etc. also an irritant for the seller.
Source: Ambit Capital research, Company

Additionally, there are various differences based on the financial aspects between
Justdial and Indiamart, which we have highlighted at appropriate places in the note.
Another critical factor whereby Indiamart outscores Justdial is after-sales support. Our
primary data checks indicated substantial difference in the approach of both
companies. We highlight the customer acquisition strategy and customer
maintenance strategy.,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 12


Understanding Indiamart supplier acquisition strategy

The success of Indiamart can be largely attributed to a very organized supplier
acquisition strategy. The entire sales staff has been divided into 3 parts:
• New sales division: The lowest rung of the sales team; employees here are
restricted to getting suppliers on board via verifying the storefronts created for
them, convincing them for providing approval to list on Indiamart and facilitating
the initial experience on Indiamart. Another team in this department is tasked
with upgrading the free suppliers to either the Mini Dynamic Catalogue package
(MDC) or the maximiser package.
• Client servicing division: The employees in this team are tasked to upgrade the
existing paid suppliers on MDC/maximiser packages to higher packages. The new
sales division team cannot sell these packages. On the operational front, this is a
key advantage as the employees can easily be sorted on that quality, and the
employees also have a clear idea of what they are expected to achieve rather
than all vying for the highest package subscriber.
• Key client division: Employees in this division deal with the highest paying
subscribers of Indiamart. Their role is limited to enhancing the leading suppliers
to industry leaders and servicing the current industry leader subscribers.
Furthermore, our channel checks indicate that the sales team mandatorily meets the
paid suppliers in a bid to eliminate any issues with using the portal and an attempt to
enhance the subscription package. On the other hand, our channel checks suggest
minimal after-sales support from the Justdial team.,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 13


Understanding the cost structure

Whilst the company has managed to be operationally break even only in FY18 in the
last five years, it embarked on an expansion drive to kickstart the circle of network
effects. The ability to turn operationally positive was an effect of increasing revenue
while decreasing costs. The network effect on revenue is clearly visible when one
looks at the operating cost which remained flat since FY15 whilst revenues rose 67%.
Exhibit 24: EBITDA positive achieved by maintaining costs and increasing revenues

4,500 4,500
` mn ` mn

3,500 4,000

(500) FY14 FY15 FY16 FY17 FY18 1,500

(1,500) 1,000
Operational Expenses EBITDA Revenues(RHS)
Source: Ambit Capital research, Company

To understand whether the operating performance in FY18 is a one-off or can be

sustained in the years ahead, we take a deep look into the major expense line items.
We try to find any one off items in the profit and loss to determine whether the cost
structure can be maintained. What gives us comfort is the cost maintenance has not
happened only in FY18, but also FY17, whereby kicking in of steady network effects
led to substantial reduction in advertisement expenses.
Exhibit 25: Evolution of various cost line items as a % of total costs over the last five years

Substantial reduction in advertisement expenses from 13% in FY16 to 1% in

90% FY18; whilst employee expenses stay high
5% 5% 1%
60% 12% 13%
2% 7% 12%
50% 6%
30% 63%
55% 56% 54%
FY14 FY15 FY16 FY17 FY18
Employee Outsourced sales Advertisement Content development expenses Buyer engagement Customer support
Source: Ambit Capital research, Company

It is clear from the above chart that the core expenditure for Indiamart has been
employee and advertisement costs. Whilst this is in line with expectations given the Employee split
nature of business, we take a deep dive to understand them better. FY16 FY18
Sales 1,149 488
What are employee costs all about?
Servicing 1,482 1,454
Employee costs include all payments made including incentives to the employees on Others 1,065 667
the payroll of Indiamart. On the other hand, in a bid to reduce costs, Indiamart has Outsourced
begun outsourcing its basic sales functions, and that cost is reflected in the line item - 979
outsourced sales costs. In our bid to understand the same, we consider three relevant Total 3,696 3,588
line items, namely employee, outsourced sales and customer support costs. Source: Company, Ambit Capital Research
There has been a peculiar shift in the company’s employees. A large part of its sales
force has been outsourced, to reduce costs, while the reduction in the others

October 15, 2018 Ambit Capital Pvt. Ltd. Page 14


employee expenditure is attributed to the shutdown of the company’s marketplace,

Tolexo, which it operated in 2016. We exhibit the difference in expense per employee
that the company incurs herewith; but the first year of both charts is only based on
simple average due to lack of data.

Exhibit 26: Employee costs per employee have Exhibit 27: …so have the costs for the outsourced
meaningfully increased… employees; yet overall employee costs declined by 30%

2,300 ` 850,000 450 ` 600,000

` mn
2,250 ` mn 800,000
2,200 750,000 400 575,000

2,150 700,000
350 550,000
2,100 650,000
2,050 600,000 300 525,000
2,000 550,000
1,950 500,000 250 500,000
FY16 FY17 FY18 FY17 FY18
Employee Costs* Cost/employee(RHS) Outsourced sales costs Cost/employee(RHS)

Source: Ambit Capital research, Company, *Employee costs refer to Employee Source: Ambit Capital research, Company
costs + customer support costs

Why is this cost so high?

As highlighted earlier, Indiamart follows a concept of three separate sales teams. We
highlight the salary structure of the first and lowest paid team on the ground to get a
fair idea of cause of such high employee costs. Our channel checks have presented
us an elaborate salary + incentive structure, which is explained as under:
 The incentive structure is based on Treasury points (TP), which one accumulates
based on various tasks like convincing suppliers to upload photos, verifying the
contact details, GST number etc. These expire on weekly basis.
 The benchmark TP limit is 840 points. Incentives are awarded weekly based on TP
points acquired as a % of the benchmark.
 The incentive structure for the new sales division(bringing suppliers to the
platform and upgrading them to paid suppliers) is as under:
Exhibit 28: Incentive structure for employees
Sale/Supplier upgrades Base for incentive (`) This structure is for employees
1 1,750 whose monthly fixed salary is in
2 4,000 range of `20,000 -`25,000. One
3 6,500 can thus easily fathom the
4/4+ 9,500/3,000
incentive to higher sales divisions.
Source: Ambit Capital research, Company

 The manager gets 20% of the incentive earned by all employees under him.
We thus reckon that employee costs shall remain elevated as Indiamart continues to
remunerate employees well above industry standards. We reckon this is also
important given the business requires dedicated personnel to serve existing paying
subscribers and bring new suppliers to the platform and in paying zone.,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 15


At this juncture, we present another large differentiator with Justdial. Justdial average
cost/employee is nearly half of that of Indiamart. This should obviously not be
considered a positive sign since employees and technology are the two pillars of the
business model. It is obvious that Indiamart is able to hire the best talent, retain them
and also extract superior performance as they are paid much better. The worst part of
the story is the differential continues to rise between the companies as Justdial
suffered on margins over FY16-18.

Exhibit 29: Employee cost per employee differential is wide Exhibit 30: …but InfoEdge aces Indiamart in this metric
between Indiamart and Justdial… also
1,000,000 35%
800,000 110%
` `
500,000 700,000

80% 600,000

300,000 70% 500,000 25%

FY16 FY17 FY18 FY16 FY17 FY18

Indiamart* Justdial Difference(RHS) InfoEdge indiamart Difference(RHS)

Source: Ambit Capital research, Company * - considered employee costs as Source: Ambit Capital research, Company * - considered employee costs as
in-house + outsourced for fair comparison. in-house + outsourced for fair comparison.

What will be the normalized EBITDA margins? Justdial management has explicitly
Given that Indiamart is a quasi-vertical, we believe that its EBITDA margins hover expressed that their advertisement
anywhere between Justdial and InfoEdge. In the first year whereby it achieved expenses shall be 8%-9% of
operational breakeven, it managed 16% EBITDA margins. However, this has been led revenues.
by maintenance of costs whilst revenue increased. We believe this trend will continue
and employee costs shall continue to rise. This is one peculiar problem of horizontals
whereby they continuously need feet on street unless one is Google. However, as it
has already exhibited, it won’t necessarily need advertisement spends to shore up
revenues like Justdial. In terms of other costs, content development costs will remain
sticky while customer management should also increase. We present our normalized
margin assumptions for the longer period. We arrive at a weighted average
probability adjusted margins of 37% for the company in a normalized state.
Exhibit 31: Our thinking about the margins that the company can achieve
Scenario Comments Probability*
 We reckon that irrespective of revenue growth, the employee
expenses (total of in-house outsourced) shall continue to
hover at 45%-50%.
 The real delta will flow from the other expenses field; which
Base case 35% 50%
was 48% of revenue s in FY 17, but 39% in FY18. Exhibit 1: Long-term EBITDA
 Increase in revenues would not lead to commensurate margins of Indian internet
increase of other expenses, and thus 35% margins should be
 This is a case whereby the network effects become so large Company EBITDA margin
that employee expenses growth can also moderate.
Justdial 23%
Bull case 45%  Whilst the possibility of this happening will depend a lot on 35%
how market develops, we fear that this scenario could make it Infoedge (Naukri) 52%
too sweet for Amazon to aggressively enter the market.
Matrimony* 22%
 The quasi-vertical nature; if shifting to the horizontal space, or
the revenue growth remaining soft like the Justdial problem Source: Ambit Capital Research, Company,
Bear case 25% could lead to continued high employee costs like Justdial. 15% *-FY17 and FY18
 In this scenario, it will be very difficult to extract value from
the business.
Source: Ambit Capital research, Company,* - Ambit Estimates,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 16


What are the key standout elements about the

Whilst the financial aspects of the company are good, we are also impressed by
certain operational aspects of the company. We believe that these aspects also need
to be duly considered before making a long-term investment. We list some of them:
 Creation of pull force via supplier listing:
It is one of the core issues facing a subscription-led company. Given the obvious
intuition to search for top listed suppliers after encountering the RFQ tab, it is a
challenge for lower listed suppliers to get leads from buyers. This is a key
impediment as it prohibits the gradual increase of subscriber packs by the
suppliers. To eliminate the problem, Indiamart has come up with an innovative
solution. The second/third level subscribers like Star suppliers can list 20 products
where they will get guaranteed higher listing. For the balance products (400
allowed), the listing shall be based on usage. This implies that more the supplier
uses Indiamart, higher the chance of being listed at the top. This guarantees a
chain effect to use Indiamart and thus a pull force is created rather than a push
Exhibit 32: An example of Maximiser subscriber listed as a Star supplier

We conducted checks across

categories and conclude that this is
a recurring feature and not a one-

Source: Company, link for above webpage,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 17


 Supplier quality maintenance

We earlier spoke about Indiamart’s virtuous cycle of buyers flocking to the largest
marketplace and driving in higher business inquiries and increasing the number
of suppliers on the platform. However, quality of suppliers is a better way to
analyse network effects. Indiamart follows a policy of full refund (say annual
pack) if the supplier is not satisfied with the services even after using for 11
months. Each paid supplier is allocated a sales agent. The sales agent guides the
supplier over the portal and sends timely reminders. Every three months a
meeting is emphasized on and if the supplier continues with his timid interaction
on the portal, he is sent a warning after six months. It is obvious that if he
continues to be inactive, he is going to claim a refund. In this case, refund is
provided but the supplier is permanently blacklisted from the portal. This helps
ensure that supplier quality is maintained on the platform.

 Premium number service (PNS)

Another service provided by Indiamart to suppliers is the PNS, whereby a paid
supplier can register up to 5 mobile numbers with the company. Whenever the
buyer calls on the supplier via the number listed on the portal, a call is made
simultaneously to all five numbers. Additionally, a SMS is also sent if the call goes
unanswered. This allows the suppliers to better manage prospective buyers
without hindering the normal business activities.

 Continuous Innovation
Indiamart has taken over nearly the entire subscription market and not yet turned
complacent. It has excelled in continuous addition of new features to make the
website experience superior. In this context, we look at some of its recent
Exhibit 33: Innovation has been a constant at Indiamart
Year Innovation
2010 Launched IndiaMART Premium Number Service
2012 Launched IndiaMART mobile website and app
2013 Launched price discovery service
2015 Launched behavioural matchmaking feature
2016 Implemented mobile enterprise resource planning (ERP) system
2017 Launched IndiaMART payment protection program and payment facilitation
2018 Launched lead management system
Source: Ambit Capital Research, Company,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 18


Competition: Who can disrupt Indiamart?

As highlighted earlier, there are multiple revenue models and thus there shall be
different competitors. We first highlight the competitors in the subscription space that
Indiamart is present in. Given the fact that it controls ~60%/72% of the market in
2017/18E (KPMG estimates, source: Indiamart DRHP), it is clear that it commands
near monopoly position here. We don’t see any player currently in the market space
which can deter the fortunes of Indiamart.
Exhibit 34: Comparison of various players in the subscription online B2B business
Indiamart TradeIndia Industry Buying Moglix
Users(mn) 59.8 4.28 1.6 NA
Suppliers(000's) 4,700 NA 5.5 2
Direct Traffic 12% 12% 16% 25%
Country Rank(website) 45 1,030 4,438 NA
Traffic*(mn) 40 4 1.6 0.23
Revenue(` mn) 3,222 689 449 NA
Source: Ambit Capital research, Company,*Based on Oct-17 to Mar-18;

Apart from these, other players like Justdial and Alibaba are also present. Whilst
Justdial is primarily a B2C entity and thus segregation of its operations for B2B is not
feasible, Alibaba has been a watchdog rather than an active player.
However, we see some action over the transaction model front, whereby the market
opportunity is larger. In this space, we have players like Udaan, Amazon Business, Ali
Express, Power2SME etc. Amazon Business has also been slow in its India expansion,
having set up a platform but not aggressively attracting traffic. We believe that
Amazon is testing the market size and response before making its mark. Whilst we
don’t believe that Amazon will enter the market in an aggressive manner in the next
couple of years, it would be foolish to ignore the power of Amazon. We present a
short case study to make our point.
Case study: Grainger
Grainger is US-based company, which expanded its operations in multiple
geographies including but not restricted to LATAM, China and the North America
continent. It connects suppliers with buyers, and facilitates deliveries of goods which
are transacted on its platform. It also independently sells goods and earns through
resale. Grainger has been focused on the maintenance, repairs and operating
supplies market along with industrial and safety supplies. It currently trades at 12x 1- Whilst the small market of India
year forward EV/EBITDA. could be a deterrent for Amazon to
make a big bet, it could always
Amazon entered the B2B space in the US market only in 2015. The offerings were enter the segment for B2C
launched in the name of Amazon Business, and within four years of operations, it synergies.
nearly matched revenue of Grainger. We present the revenues of these businesses,
proving that Amazon has the might to disrupt any business it wishes.
Exhibit 35: Amazon Business is a rags to riches story in four years


2015 2016 2017 2018E
Amazon Web services* Grainger
Source: Ambit Capital research, Company,*-The numbers are not separately reported and are thus based on
media articles/company blog.,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 19


What is the way out?

While it will be a tough match to survive the mammoth Amazon, we feel that the
answer lies in the Grainger model itself. Given its specialization in a particular large This is again in line with our media
vertical of industry supplies (which itself delves into multiple small verticals), it has thematic that verticals will rule in
managed to grow despite Amazon’s might. We believe that this may be the only way India.
out for Indian companies including Indiamart, and this granularity will eventually
convert them into a full-fledged vertical. Considering the current split of listings, we
believe that the company is not geared up to the challenge, and the wide disparity in
industry of listings could act as a potential issue while facing Amazon.
Exhibit 36: Share of different industries in terms of listings on Indiamart

30 no of industries





5% or more 4% 3% 2% 1% or less

Source: Company, Ambit Capital research

No credible home-grown rivals

Whilst it is very clear that no competitor exists which can dethrone Indiamart in the
subscription-led model, we present a company named Udaan operating in
transaction based model which could potentially be a challenger to Indiamart.
Udaan is a relatively new business, operating on a very small scale currently. Its
business model is based on logistics fee the buyers. The sellers and buyers can come
on the platform for free; Udaan charges delivery fee on delivering orders placed on
the platform. Additionally, it provides easy credit to buyers and charges 2-4% monthly
interest. Unlike Indiamart, which merely generates leads, Udaan works on the model
of fulfillment. The proposition for sellers is better as they can sell on the portal pan-
India without any hassles of delivery, and also receive payment guarantees. Our
channel checks have indicated that the portal has scaled up 3x in the last five months,
and has a sales force on round of 700-1200 people.
Whilst this model looks amazing in equilibrium, the remains a major issue of
scalability. Udaan recently raised US$225mn from P/E investors. To put things in
Doesn’t Grainger work on a near
context, this is over six times the loss that Indiamart has reported cumulatively over
similar model and is successful?
FY14-17. The business model of extending credit requires continues intensive
Oh yes; but if the market becomes
working capital investments, and the provisioning of logistics leads to a bloated
so large, Amazon will enter!!
balance sheet. Thus, notwithstanding increased scale, working capital needs keep
escalating. Finally, since there is no payment for listing, the sort option is lowest
price, which is a good strategy for B2C but not B2B. Whilst we agree that revenue
through allied services will flow in once scale is reached, we remain watchful but
skeptical about scalability.,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 20


Valuations – Deserves multiples of

successful web verticals
Given Indiamart made profits only in FY18, valuation based on P/E is
challenging. We recommend valuation based on EV/EBITDA. Since there are
no comparables listed in Indian B2B e-commerce, we use other listed entities
in the internet business. Indiamart’s dominant quasi-vertical standing with
robust growth implies that it deserves valuations of successful classifieds
companies like Naukri. So, we believe valuations of 21-23x 1-year forward
EV/EBITDA are reasonable. There are few global examples of standalone
B2B marketplaces as the same is usually part of larger ecommerce ventures
or diversified internet classifieds companies. Grainger, a US based
standalone B2B classifieds company, trades at 12x 1-year forward
EV/EBITDA, a steep discount to successful web verticals, owing to Amazon's
overbearing presence. Whilst Indiamart will be able to hold ground, we
expect the company to be an acquisition target for serious ecommerce
platforms looking to integrated backwards (e.g. Amazon and Flipkart).
Details of the offer
The offer for sale is for maximum of 4.28mn shares, out of which 2.72mn shares are
provided by current P/E investors. The remaining offer shall be given by promoters to
the tune of 1.43mn shares and the remainder 0.14mn shares form the employees
liquidating their positions. The offer is purely for providing P/E investors with partial
exit. The company receives no cash as such and the promoters sell a small part of
their stake. Post offer for sale, the promoters will continue to control the company
with ~53% stake. We present the structure of the shareholding pre- and post-offer.
Exhibit 37: Shareholding pre-offer… Exhibit 38: …post offer shareholding leads to major
reduction in P/E stake

13% Others
29% Promoter Promoter
58% 53%

Source: Ambit Capital research, Company, *-based on top-10 shareholder Source: Ambit Capital research, Company, *- based on top-10 shareholder
The capital structure of the company was divided into equity and preference shares.
The preference shares were held by the P/E investors and they are all going to be
converted into equity shares before the IPO. Accordingly, as seen in the chart above,
the pre-offer shareholding takes into account as if the preference shares were
already converted.
Is preference share conversion fair value an apt way to look at valuations?
Preference shares were converted to equity shares at fair value. The fair value
computation done by management leads to value of each preference share being
priced at `1,109. Indiamart had 3.36mn preference shares, which are to be
converted into 7.07mn equity shares. Thus, the fair value as per management is
`527/share. Based on sale of 4.28mn shares, the total amount for sale would be
`2,261mn. Since this would be for 15% stake, the minimum value of the company as
per management comes to `15bn. But we feel this is not an apt way to forecast the
value as the preference shares were converted based on past performance. The fact
that P/E investors and promoters remain invested indicates confidence in the business

October 15, 2018 Ambit Capital Pvt. Ltd. Page 21


Optimum valuation methodology

We believe the optimum valuation methodology would entail envisaging a revenue
projection once there is confidence on margin stabilization. We believe FY22E should
be an optimal year because, other than the EBITDA stabilization clarity will also
emerge as to sustainable growth rates in the wake of disruptions (such as Amazon’s
potential aggression in this space). We present our valuation methodology:
Exhibit 39: The valuation framework (based on FY22E)
` bn Revenue EBITDA Discounted value Value of company*
8.09 2.99 1.84 20x 36.72
Bull case 9.52 4.28 2.63 24x 63.04
7.14 1.79 1.09 18x 19.70
What does this imply?
1. Revenue CAGR over FY18-
Base Margins at 15% rate of
22E of 18% Based on the company being a quasi-vertical with definite growth in sight.
case 37% discount
2. Market share ~68%
1. Revenue CAGR over FY18-
Margins at 15% rate of
Bull case 22E of 23% Tad lower than the multiple of Naukri.
45% discount
2. Market share ~80%
1. Revenue CAGR over FY18-
Bear Margins at 15% rate of This is the least multiple that Justdial has been trading at in its entire listing
22E of 15%
case 25% discount cycle.
2. Market share ~60%
Source: Ambit Capital research, Company, * Enterprise Value
We re-state that even Grainger,
Considering the base case scenario, the company should be valued today at which has faced intense
`36720mn. This would imply a per share value of `1,284. At the base case valuation, competitive pressures from Amazon
reverse DCF implied revenue growth CAGR is 12% over FY18-40E. This appears trades at 12x 1-yr forward
reasonable given the strong network effects, industry tailwinds and category EV/EBITDA.
Given the fact that there are limited listed comparable in the space, we present
valuation table of multiple internet companies. We re-iterate that given the listings
versus product focus of Justdial and Indiamart respectively, Google will easily eat up
Justdial’s pie but shall find it hard to replicate that on Indiamart.,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 22


Exhibit 40: Valuation Summary - Internet Companies

M-Cap P/S ROE(%) EV/EBITDA (x) 2017-19 CAGR (%) P/E
Company Country (US$
(2016) 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E Sales EBITDA EPS 2017 2018E 2019E
Job Search Portals
Seek Inc Australia 4,814 7.0 4.5 4.0 3.5 3.8 14.3 15.8 17.9 17.5 15.5 14.9 7.4 113.7 127.4 32.4 27.9
51job China 3,790 10.6 1.0 0.8 0.7 (4.4) 19.2 20.0 22.6 16.5 12.4 27.7 35.0 107.7 10.2 3.0 2.4
Real Estate Portal
Zillow Inc USA 7,792 (0.0) 5.8 4.0 2.6 (3.3) 1.5 0.8 NM 29.4 23.0 34.3 NM NM NM 71.8 54.5
Rea Group Australia 6,914 22.0 10.6 9.4 8.4 29.0 32.3 32.3 21.9 18.6 16.3 13.5 15.9 24.2 38.5 29.3 25.0
Rightmove UK 5,111 221.0 14.6 13.5 12.5 969 915.9 849.4 21.6 19.0 17.6 9.0 10.8 10.5 27.1 24.0 22.1
Fang Holdings (Soufun) China 1,014 1.5 2.8 2.5 2.3 (5.7) (2.1) 12.1 20.4 18.2 10.1 (4.1) NM NM 46.7 13.9 10.3
Real Estate
Redfin USA 1,389 NA 2.9 2.3 1.8 NA (10.0) (11.0) NM NM 413.3 28.6 NM NM NM NM NM
Global Dating Apps
Match USA 14,991 18.0 8.7 7.5 6.5 84.7 57.7 40.9 40.4 24.6 20.9 22.7 39.2 21.2 42.8 35.4 29.1
The Meet Group USA 353 NA 2.1 1.9 1.7 (32.5) NA NA (8.4) 13.6 12.0 22.2 NM NM (5.5) 14.9 12.3
Indian Classified
InfoEdge India 2,455 10.8 15.6 13.2 11.2 28.2 14.7 15.9 65.0 48.7 38.1 18.0 30.6 NM NA 59.0 46.0
Justdial India 443 12.9 3.8 NA NA 15.2 15.6 16.0 19.4 16.2 NA NA NA NA 22.8 19.7 NA India 149 NA 3.7 NA NA NA NA NA 18.3 NA NA NA NA NA 14.8 NA NA
Online investors
Naspers 88,026 9.3 170.5 150.6 133.7 59.2 13.2 17.2 NM 129.8 78.4 12.9 NM (32.3) 112.6 356.1 245.4
Silicon Valley Bank USA 15,433 1.7 5.9 5.1 4.3 16.3 19.7 19.3 NA NA NA 22.8 NA 51.2 31.5 16.6 13.8
InterActiveCorp USA 16,767 9.1 4.0 3.5 3.1 22.1 19.6 17.9 58.2 19.4 15.6 20.0 92.9 NM NM 25.3 24.1
Rocket Internet Germany 4,522 NA 89.1 82.1 76.4 NA (0.9) (1.2) NM NM NM 13.9 (3.1) NM NM NM NM
Food delivery &
Delivery Hero Germany 7,551 NA 8.4 6.1 4.4 NA (12.4) (12.3) NM NM NM 40.8 NM NM NM NM NM
Grubhub USA 10,543 7.7 10.7 8.4 6.6 10.5 13.0 13.7 71.9 38.3 29.0 35.8 57.4 48.4 106.5 61.1 48.4
Just Eat London 5,439 11.2 7.6 4.4 3.7 15.1 16.0 18.9 (120.8) 22.9 18.0 30.7 NM NM (40.4) 36.0 27.1
Yelp USA 3,580 6.8 3.7 3.2 2.8 16.0 8.2 9.3 12.5 15.1 11.9 15.5 2.6 NM NM 28.4 22.6
Newspaper Classified
Axel Springer Germany 7,191 4.7 2.0 1.9 1.8 18.5 13.0 14.0 10.1 10.9 10.0 (3.5) 0.9 (2.4) 18.0 20.3 18.9
Schibsted ASA Norway 7,963 4.8 3.6 3.3 3.1 9.3 8.6 12.8 16.5 21.2 17.1 7.3 (1.8) (1.6) 30.6 46.7 31.6
ANGI Homeservices USA 9,247 NA 8.2 6.7 5.5 NA NA NA NM 36.3 26.4 37.2 NM NM NM NM 69.2
Meredith USA 2,337 NA 0.8 0.8 0.8 9.5 NA NA 24.4 8.1 6.4 17.0 95.3 87.5 23.5 13.6 6.7
Time Inc. USA 5.0 NA NA NA (0.2) 7.6 8.0 NA NA NA (8.0) 73.1 NM NM NM NM
EW Scripps USA 1,322 NA 1.1 1.1 1.0 (4.3) NA NA 34.7 9.7 13.1 16.1 62.7 NM (100.9) NM 49.8
XO Group USA 901 NA 5.4 4.9 NM 7.2 NA N/A 37.4 21.3 19.1 6.8 40.1 88.7 162.9 52.9 45.8
Other Internet
Auto Trader UK 5,066 49.3 11.1 10.4 9.8 NA NM 698.9 18.5 17.1 15.9 6.0 7.6 8.4 22.6 21.0 19.2
Tegna Inc. USA 2,415 8.3 1.1 1.1 1.0 56.0 32.1 22.9 8.1 7.4 8.3 6.2 (1.4) 3.8 8.8 6.7 8.2
Grainger USA 17,488 15.4 1.6 1.5 1.4 42.9 44.4 42.3 15.0 12.2 11.2 7.2 15.5 31.6 29.9 19.1 17.2 UK 1,989 50.9 4.4 4.0 3.8 50.4 52.6 47.0 12.9 11.6 10.7 6.9 9.8 14.5 19.4 16.2 14.8
Ctrip China 21,073 2.7 0.8 0.5 0.4 5.4 6.7 8.4 NM 25.3 17.9 20.4 NM NM NM 3.9 3.1
Expedia USA 17,719 3.2 1.8 1.4 1.3 13.2 15.5 18.1 12.3 9.8 8.6 11.6 19.6 60.6 46.9 21.5 18.2
TripAdvisor USA 6,238 7.7 4.0 3.5 3.2 10.8 12.5 12.8 23.7 14.9 13.6 6.7 32.0 NM NM 31.2 27.3
Makemytrip India 2,480 (11.5) 3.7 3.1 2.4 (9.9) (4.8) 2.1 NM NM NM 9.7 (46.5) (55.0) NM NM NM
Yatra India 215 (17.2) 0.0 0.0 0.0 NM NM NM NM NM NM 6.0 NM NM NM NM NM
Source: Ambit Capital research, Bloomberg,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 23


What are the red flags?

We herein note certain aspects of the company which we would like to get further
1. Preference shares liability: The preference shares have been classified as a
financial liability in accordance with Ind-AS. However, we would like to highlight
the following:
o The fair value per preference share, based on the logical assumption that all
shares on the balance sheet have the same fair value, comes to `1,109. Why
has this price not been disclosed anywhere?
o The fair value is subject to various assumptions by management. It has
disclosed that fair value has been based on DCF using cash flow projections
adopted by management. We feel certain broad-based assumption disclosure
would have been helpful.
o The Series A CCPS have been issued at face value of `328. The conversion
price is `293.86, subject to prescribed adjustments. Additionally, Series B
CCPS has conversion price of “then in effect, subject to prescribed
adjustments”. There has been no disclosure of what are the prescribed
2. Business Leads: The method of calculating business leads is as under, in the text
of DRHP:
o “A single business enquiry made by a buyer that is received by multiple
suppliers is counted as a separate business enquiry
delivered to each receiving supplier.”
o While there is nothing wrong per se with this mode of calculating business
Our channel checks also
leads delivered, our channel checks suggests that earlier each RFQ/business
suggested that one of the
lead used to be delivered to only three/five sellers, which is now increased to
reason for doing so was buyers
ten sellers. Thus, the 85% YoY (FY18) growth in business leads is not merely a
feedback that connecting to
result of 70% YoY (FY18) growth in total traffic but also due to same lead
merely three sellers do not lead
being delivered to more sellers. We believe management should have clearly
to optimal price discovery.
spelled out this rather than creating an impression of gargantuan increase in
Even in that case, the
buyer interests. We hereby present what the DRHP highlights.
disclosure is missing!
Exhibit 41: The 85% growth in business enquiries is misleading without disclosure
FY16 FY17 FY18
Total Traffic (mn) 262.2 325.8 552.6
Growth 24% 70%
Registered Buyers (mn) 27.06 39.37 59.81
Growth 45% 52%
Total business enquiries delivered (mn) 115.09 156.84 289.98
Growth 36% 85%
Source: Ambit Capital research, Company

3. Managerial Remuneration: We believe the managerial remuneration taken by

the promoters is too high for the scale of business. We explain this by a chart
plotting the remuneration taken by the promoter on the scale of revenue and
profitability in FY18 amongst all the listed internet companies in India. Justdial
and InfoEdge fare the best, and the irony is despite having much larger revenue
and profitability, their remuneration/promoter is lower than Indiamart.
Matrimony, on the other hand is a smaller business and accordingly the
remuneration taken is much lower. InfoEdge promoters’ remuneration is only
60% of Indiamart’s promoters while the business is more than double Indiamart’s
size even after excluding Zomato and Policybazaar.,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 24


Exhibit 42: Indiamart promoters take the highest remuneration of all listed internet

` mn
Profit (FY18)


1,000 Matrimony Justdial


- 2,000 4,000 6,000 8,000 10,000 12,000
Revenue (FY18)

Source: Ambit Capital research, Company, size of bubble represents promoter remuneration

4. Tolexo Online Private Limited: The company ventured into the revenue model
of marketplace in the B2B segment via its own subsidiary Tolexo Online Private
Limited. Whilst the subsidiary was completely owned by the company and not
promoters, we remain wary of the company doing such further investments. The
subsidiary was infused with a capital of over `1,300mn; whilst the standalone
Indiamart business was already at loss of `584mn (FY16). The subsidiary
recorded loss of over `700mn in the first year of operations, and the
management was right to quickly shut it down. Resultantly, the net assets post
investing `1305mn were only `130mn. This seems to be a purely business loss
but we need to be skeptical over the managements assumptions if it makes
further such investments.
5. Deferred tax assets: The consolidated accounts reflect a Deferred Tax Assets
(Net) worth `1156mn. Of the above, `1074mn related to deferred credit due to
losses in the income statement. It must be emphasized that Indian Income Tax
Act, 1961 allows for these losses to be carried forward for set off only for 8
assessment years. In the given scenario, assuming that we use accounting income
as a proxy for taxation income, the operating losses over the period FY13-FY17
have been cumulatively `1,940mn. At the tax rate of 33.9%, this implies a credit
of `658mn. It is important to see whether the company can make enough profits
in stipulated time to obtain the balance credit of `416mn as it would refer to
losses prior to FY13. The management has not given any disclosure as to when
these tax assets shall expire; which we feel is of paramount importance.
Key management personnel
Whilst Indiamart has not been able to replicate the ability of InfoEdge to retain senior
management, it is yet a professionally run company. Remuneration earned by the key
management personnel is a good proxy for the same, and we feel that the
compensation is adequate.,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 25


Exhibit 43: Key details of key management personnel

Compensation (`
Name Designation Joined in Previous Experience Education
mn) (FY18)
Hindustan Management and Technical Services Private
Dinesh Chandra Limited, HCL America, Inc., HCL B.Tech (Computer Science &
Managing Director Promoter 43.47
Agarwal Limited, HCL Hewlett-Packard Limited, Centre for Engineering)
Development of Telematics (C-Dot) and CMC Limited
PGD (Business
Brijesh Agarwal Whole time director Promoter H N Miebach Logistics India Private Limited. 31.75
Exl (I) Private Limited, Bharat S Raut & Co.,
Prateek Chandra Chief Financial Officer Feb-15 Chartered Accountant 20.75
Chartered Accountants and HT Media Limited.
Jenson & Nicholson (I) Limited, Bharti Airtel Limited, Kodak B.Tech (Chemical
Dinesh Gulati Chief Operating Officer Mar-12 33.23
India Limited, Reliance Infocomm Limited, Indian Express Engineering) - Honors
Amarinder Singh Micromax Informatics Limited, BCCL, SBI Capital Markets
Chief Product Officer Jun-16 PGDM, IIM-Ahmedabad 12.93
Dhaliwal Limited, PowerGenIndia Ltd, TIL
Integrated Databases India Limited (India Today group),
Company secretary,
Barista Coffee Company Limited, Varun Beverages Limited
Manoj Bhargava Company Secretary Dec-17 postgraduate diploma in IP 2.17*
HT Media Limited
Source: Ambit Capital research, Company, * - for three months

While management seems competent, we believe there is certainly change required

on the Board of Directors. The current board consists of the two promoters, one non-
executive director (who also earns coaching fees from the company) and three
independent directors. Whilst the board composition is in compliance with the
Company Law provisions, we feel that it would be great if the company is able to get
successful internet entrepreneurs who can guide the promoters on key strategy
Exhibit 44: Board of Directors: it would help if independent directors with strong credentials are inducted
Name Designation Work experience
Hindustan Management and Technical Services Private Limited, HCL America, Inc., HCL
Dinesh Chandra Agarwal Managing Director Limited, HCL Hewlett-Packard Limited, Centre for Development of Telematics (C-Dot) and CMC
Brijesh Agarwal Whole time director H N Miebach Logistics India Private Limited.
Korn/Ferry International Private Limited, Helion Ventures Private Limited, Hewitt Associates
Dhruv Prakash Non-executive Director (India) Private Limited, Amar Dye-Chem Limited, DCM Toyota
Limited, Hindustan Reprographics Limited and Escorts Limited
Rajesh Sawhney Independent Director Reliance Capital Limited and Reliance Entertainment Limited
DBS Bank Limited, Goldman Sachs International, The Wellcome Trust Limited and Nahar
Elizabeth Lucy Chapman Independent Director
Credits Private Limited.
First Leasing Company of India Limited, Infrastructure Leasing & Financial Services Limited,
Vivek Narayan Gour Independent Director Tata Finance Limited, Genpact India and GE
Capital Services India , Managing Director - Air Works India(Engineering) Private Limited
Source: Company, Ambit Capital research

Key litigations pending – fire at office leading to loss of lives and a couple of
criminal proceedings against promoters
Given the nature of business of being a discovery platform, it is obvious that any issue
either the buyer/seller faces, Indiamart becomes the center of ire. In this regard,
multiple court cases have been filed but have not resulted in any penal issues for the
company. The pending cases are miniscule for them to be called material, and are
mainly related to the Income Tax and Service Tax issues. One material issue relates to
a pending case in relation to fire at its Ghaziabad office, which led to death of five
employees. Additionally, there have been two criminal proceedings initiated against
the promoters, the financial amount thereby being unascertainable.,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 26


Exhibit 45: Snapshot of key litigations

Nature of claims Amount (` mn)
Income Tax 24
Service Tax 67
Civil 50
Criminal 1
Total 141
Source: Ambit Capital research, Company

There are no material contingent liabilities against the company.

Related-party transactions: nothing material but operating out of leased out
related property
There are no large related-party transactions that materially affect the financials of
the company. Despite that, we highlight a related-party transaction on which further
clarity is required.
The company operates out of leased offices, and in that course has taken an premises
on rent from one of related entities, Mansa Enterprise Private Limited (MEPL). The
promoters of Indiamart have a 20% holding in this company. The DRHP states the
objectives of MEPL as follows:
“MEPL is currently engaged in the business of purchasing and giving on lease or hire,
in any part of India or abroad, all kinds of machinery, industrial and non-industrial
plants, lands, semi furnished and furnished office and furniture, among other things.”

Revenue of MEPL for FY15, FY16 and FY17 is `5.31mn, `5.01mn and 4.86mn
respectively, whilst the schedule of related-party payments for Indiamart states the
payment made for rent to MEPL amounts to `5.31, `5.01mn and `4.80mn
respectively. This implies that MEPL earned no revenue from outside the Indiamart
group in FY17 and FY16, and a paltry revenue of `0.06mn in FY15. This seems
inconsistent with the objects mentioned by the company.,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 27


Snapshot of company financials

Balance Sheet
Year end March. ` mn FY14 FY15 FY16 FY17 FY18
Equity share capital 582 582 92 92 100
Reserves (1,203) (1,522) (3,362) (3,992) (3,312)
Total Equity (621) (940) (3,271) (3,900) (3,213)
Share buyback obligation - - 2,195 2,461 3,729
Deferred Revenue 357 535 922 1,213 1,661
Others 7 7 12 23 62
Total Non-Current Liabilities 364 543 3,129 3,697 5,452
Total Sources of funds (257) (397) (142) (204) 2,239
Net Block & CWIP 66 63 108 89 82
Loans 34 44 0 2 1
Other Non-Current assets - 105 160 52 1,500
Current Investments 580 600 1,286 1,363 3,111
Trade Receivables 5 4 2 5 7
Cash and cash equivalents 67 103 187 407 467
Other Current Assets 72 105 201 292 259
Trade Payables 180 268 376 302 419
Deferred Revenue 869 1,109 1,439 1,718 2,259
Other Current Liabilities 32 46 273 392 509
Net Current Assets (357) (609) (411) (345) 657
Total Assets (257) (397) (142) (203) 2,240
Source: Company, Ambit Capital research

Profit and Loss

Year end March. ` mn FY14 FY15 FY16 FY17 FY18
Revenue from operations 1,357 1,761 2,458 3,178 4,105
Growth 30% 40% 29% 29%
Employee Expenses 939 1,190 1,819 2,097 1,949
Other expenses 544 974 1,894 1,625 1,690
EBITDA (126) (403) (1,256) (544) 466
EBITDA Margin -9% -23% -51% -17% 11%
Depreciation 22 30 37 46 29
EBIT (148) (433) (1,293) (590) 437
Other Income 76 120 53 142 190
Fair Value Adjustments 3 5 71 193 1,229
PBT (76) (319) (1,311) (641) (601)
Tax - 0 5 2 (1,149)
PAT (76) (319) (1,316) (643) 548
Other Comprehensive Income - - (4) (6) (9)
PAT after OCI (76) (319) (1,319) (649) 538
Source: Company, Ambit Capital research,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 28


Cash flow statement

Year end March. ` mn FY14 FY15 FY16 FY17 FY18
Operating cash flow before working capital change (125) (407) (1,246) (520) 503
Working capital change 350 459 709 526 1,297
Taxes paid and others (2) 18 (19) (12) (10)
Operating cash flow 223 71 (555) (6) 1,791
Capex (40) 28 74 27 22
Free Cash flow 263 43 (629) (33) 1,769
Investments and Others (250) (10) (608) (51) (1,631)
Investing cash flow (210) (38) (682) (78) (1,653)
Issue of shares - 0 1,326 73 152
Repayment of debt (0) (0) (0) - -
Interest Expenses (1) (1) (1) - -
Financing cash flow (1) (1) 1,325 73 152
Net cash flow 13 32 88 (11) 291
Opening cash and cash equivalents 55 67 99 187 177
Closing cash and cash equivalents 67 99 187 177 467
Source: Company, Ambit Capital research

Key Ratios
Year end March FY14 FY15 FY16 FY17 FY18
EPS(`) (2.7) (11.2) (46.2) (22.7) 18.8
BVPS(`) (21.7) (32.9) (37.6) (50.3) 18.1
P/E(x) NM NM NM NM 68.2
P/B(x) NM NM NM NM 71.0
EV/Sales(x) 27.1 20.9 14.9 11.6 8.9
Source: Company, Ambit Capital research

Return Ratios
Year end March FY14 FY15 FY16 FY17 FY18
EBITDA Margin (%) -9% -23% -51% -17% 11%
EBIT Margin (%) -11% -25% -53% -19% 11%
PBT Margin (%) -6% -18% -53% -20% -15%
Net Profit Margin (%) -6% -18% -54% -20% 13%
RoCE (%) NM NM NM NM 60%
RoE (%) NM NM NM NM 104%
Source: Company, Ambit Capital research,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 29


Institutional Equities Team

Research Analysts
Name Industry Sectors Desk-Phone E-mail
Nitin Bhasin - Head of Research E&C / Infra / Cement / Home Building (022) 30433241
Aadesh Mehta, CFA Mid-Caps (022) 30433239
Abhishek Ranganathan, CFA Retail / Consumer Discretionary (022) 30433085
Amandeep Singh Grover Small Caps (022) 30433082
Archit Varshney Auto Ancillaries (022) 30433275
Ariha Doshi Consumer (022) 30433228
Ashish Kanodia Power Utilities / Capital Goods (022) 30433264
Basudeb Banerjee Automobiles / Auto Ancillaries (022) 30433141
Bhargav Buddhadev Power Utilities / Capital Goods / Small Caps (022) 30433252
Deep Shah Media / Telecom (022) 30433064
Gaurav Kochar Banking / Financial Services (022) 30433246
Karan Khanna, CFA Strategy / Small Caps (022) 30433251
Kushagra Bhattar Oil & Gas (022) 30433062
Nikhil Mathur, CFA Healthcare (022) 30433220
Mayank Porwal Retail / Consumer Discretionary (022) 30433214
Pankaj Agarwal, CFA Banking / Financial Services (022) 30433206
Pratik Chheda Automobiles / Auto Ancillaries (022) 30433121
Prateek Maheshwari Cement / E&C / Infrastructure (022) 30433234
Rahil Shah Banking / Financial Services (022) 30433217
Ritesh Gupta, CFA Oil & Gas / Agri Inputs / Chemicals (022) 30433242
Ritika Mankar Mukherjee, CFA Economy / Strategy (022) 30433175
Ronil Dalal, CFA Aviation / Home Building (022) 30433278
Sudheer Guntupalli Technology / Staffing (022) 30433203
Sumit Shekhar Economy / Strategy (022) 30433229
Surabhi Bomb E&C / Infrastructure (022) 30433254
Vihang Subramanian Agri Inputs / Chemicals (022) 30433297
Vivekanand Subbaraman, CFA Media / Telecom (022) 30433261
Name Regions Desk-Phone E-mail
Sarojini Ramachandran - Head of Sales UK +44 (0) 20 7886 2740
Anmol Arya India (022) 30433079
Dharmen Shah India / Asia (022) 30433289
Nityam Shah, CFA Europe (022) 30433259
Punitraj Mehra, CFA India / Asia (022) 30433198
Shaleen Silori India (022) 30433256
Praveena Pattabiraman Singapore +65 6536 0481
Shashank Abhisheik Singapore +65 6536 1935
USA / Canada
Hitakshi Mehra Americas +1(646) 793 6751
Achint Bhagat, CFA Americas +1(646) 793 6752
Sajid Merchant Production (022) 30433247
Sharoz G Hussain Production (022) 30433183
Jestin George Editor (022) 30433272
Richard Mugutmal Editor (022) 30433273
Nikhil Pillai Database (022) 30433265,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 30


Explanation of Investment Rating

Investment Rating Expected return (over 12-month)
BUY >10%
SELL <10%
NO STANCE We have forward looking estimates for the stock but we refrain from assigning valuation and recommendation
UNDER REVIEW We will revisit our recommendation, valuation and estimates on the stock following recent events
NOT RATED We do not have any forward looking estimates, valuation or recommendation for the stock
POSITIVE We have a positive view on the sector and most of stocks under our coverage in the sector are BUYs
NEGATIVE We have a negative view on the sector and most of stocks under our coverage in the sector are SELLs
* In case the recommendation given by the Research Analyst becomes inconsistent with the rating legend, the Research Analyst shall within 28 days of the inconsistency, take appropriate measures (like
change in stance/estimates) to make the recommendation consistent with the rating legend.

Disclaimer for U.S. Persons

1. The Ambit Capital research report is solely a product of AMBIT Capital Pvt. Ltd. and may be used for general information only. The legal entity preparing this research report is not registered as a
broker-dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and/or the independence of research analysts.
2. Ambit Capital is the employer of the research analyst(s) who has prepared the research report.
3. Any subsequent transactions in securities discussed in the research reports should be effected through Ambit America Inc. (“Ambit America”).
4. Ambit America Inc. does not accept or receive any compensation of any kind directly from US Institutional Investors for the dissemination of the AMBIT Capital research reports. However, Ambit
Capital Pvt. Ltd. has entered into an agreement with Ambit America Inc. which includes payment for sourcing new MUSSI and service existing clients based out of USA.
5. Analyst(s) preparing this report are resident outside the United States and are not associated persons or employees of any US regulated broker-dealer. Therefore the analyst(s) may not be subject to
Rule 2711 restrictions on communications with a subject company, public appearances and trading securities held by the research analyst.
6. In the United States, this research report is available solely for distribution to major U.S. institutional investors, as defined in Rule 15a – 6 under the Securities Exchange Act of 1934. This research
report is distributed in the United States by Ambit America Inc., a U.S. registered broker and dealer and a member of FINRA. Ambit America Inc., a US registered broker-dealer, accepts responsibility
for this research report and its dissemination in the United States.
7. This Ambit Capital research report is not intended for any other persons in the USA. All major U.S. institutional investors or persons outside the United States, having received this Ambit Capital
research report shall neither distribute the original nor a copy to any other person in the United States. In order to receive any additional information about or to effect a transaction in any security or
financial instrument mentioned herein, please contact a registered representative of Ambit America Inc., by phone at 646 793 6001 or by mail at 370, Lexington Avenue, Suite 803, New York, New
York, 10017. This material should not be construed as a solicitation or recommendation to use Ambit Capital to effect transactions in any security mentioned herein.
8. This document does not constitute an offer of, or an invitation by or on behalf of Ambit Capital or its affiliates or any other company to any person, to buy or sell any security. The information
contained herein has been obtained from published information and other sources, which Ambit Capital or its Affiliates consider to be reliable. None of Ambit Capital accepts any liability or
responsibility whatsoever for the accuracy or completeness of any such information. All estimates, expressions of opinion and other subjective judgments contained herein are made as of the date of
this document. Emerging securities markets may be subject to risks significantly higher than more established markets. In particular, the political and economic environment, company practices and
market prices and volumes may be subject to significant variations. The ability to assess such risks may also be limited due to significantly lower information quantity and quality. By accepting this
document, you agree to be bound by all the foregoing provisions.

Ownership & Material Conflicts of Interest:

i. Ambit America Inc. or its affiliates or the principals or employees of Ambit Group may have or have had positions, may “beneficially own” as determined in accordance with Section 13(d) of the
Exchange Act, 1% or more of the equity securities or may conduct or may have conducted market-making activities or otherwise act or have acted as principal in transactions in any of these securities
or instruments referred to herein.
ii. Ambit America Inc. or its affiliates or the principals or employees of Ambit Group may have managed or co-managed a public offering of securities or received compensation for investment banking
services or expects to receive or intends to seek compensation for investment banking or consulting services or serve or have served as a director or a supervisory board member of a company
referred to in this research report.
iii. As of the date of this research report Ambit America Inc. does not make a market in the security reflected in this research report.

Additional Disclaimer for Canadian Persons:

9. AMBIT Capital is not registered in the Province of Ontario and /or Province of Québec to trade in securities and/or to provide advice with respect to securities.
10. AMBIT Capital's head office or principal place of business is located in India.
11. All or substantially all of AMBIT Capital's assets may be situated outside of Canada.
12. It may be difficult for enforcing legal rights against AMBIT Capital because of the above.
13. Name and address of AMBIT Capital's agent for service of process in the Province of Ontario is: Torys LLP, 79 Wellington St. W., 30th Floor, Box 270, TD South Tower, Toronto, Ontario M5K 1N2
14. Name and address of AMBIT Capital's agent for service of process in the Province of Québec is Torys LLP, 1 Place Ville Marie, Suite 1919 Montréal, Québec H3B 2C3 Canada.

15. NIL

Analyst Certification
The analyst(s) authoring this research report hereby certifies that the views expressed in this research report accurately reflect such research analyst's personal views about the subject securities and issuers
and that no part of his or her compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in the research report.
This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Ambit Capital. AMBIT Capital Research is disseminated and available primarily electronically,
and, in some cases, in printed form.
Additional information on recommended securities is available on request.

16. AMBIT Capital Private Limited (“Ambit Capital”) and its affiliates are a full service, integrated investment banking, investment advisory and brokerage group. Ambit Capital is a Stock Broker, Portfolio
Manager, Merchant Banker and Depository Participant registered with Securities and Exchange Board of India Limited (SEBI) and is regulated by SEBI.
17. Ambit Capital makes best endeavours to ensure that the research analyst(s) use current, reliable, comprehensive information and obtain such information from sources which the analyst(s) believes
to be reliable. However, such information has not been independently verified by Ambit Capital and/or the analyst(s) and no representation or warranty, express or implied, is made as to the
accuracy or completeness of any information obtained from third parties. The information, opinions, views expressed in this Research Report are those of the research analyst as at the date of this
Research Report which are subject to change and do not represent to be an authority on the subject. Ambit Capital may or may not subscribe to any and/ or all the views expressed herein.
18. This Research Report should be read and relied upon at the sole discretion and risk of the recipient. If you are dissatisfied with the contents of this complimentary Research Report or with the terms of
this Disclaimer, your sole and exclusive remedy is to stop using this Research Report and Ambit Capital or its affiliates shall not be responsible and/ or liable for any direct/consequential loss
howsoever directly or indirectly, from any use of this Research Report.
19. If this Research Report is received by any client of Ambit Capital or its affiliate, the relationship of Ambit Capital/its affiliate with such client will continue to be governed by the terms and conditions in
place between Ambit Capital/ such affiliate and the client.
20. This Research Report is issued for information only and the 'Buy', 'Sell', or ‘Other Recommendation’ made in this Research Report such should not be construed as an investment advice to any
recipient to acquire, subscribe, purchase, sell, dispose of, retain any securities and should not be intended or treated as a substitute for necessary review or validation or any professional advice.
Recipients should consider this Research Report as only a single factor in making any investment decisions. This Research Report is not an offer to sell or the solicitation of an offer to purchase or
subscribe for any investment or as an official endorsement of any investment.
21. This Research Report is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied in
whole or in part, for any purpose. Neither this Research Report nor any copy of it may be taken or transmitted or distributed, directly or indirectly within India or into any other country including
United States (to US Persons), Canada or Japan or to any resident thereof. The distribution of this Research Report in other jurisdictions may be strictly restricted and/ or prohibited by law or contract,
and persons into whose possession this Research Report comes should inform themselves about such restriction and/ or prohibition, and observe any such restrictions and/ or prohibition.
22. Ambit Capital Private Limited is registered as a Research Entity under the SEBI (Research Analysts) Regulations, 2014.,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 31


Conflict of Interests
23. In the normal course of Ambit Capital’s business circumstances may arise that could result in the interests of Ambit Capital conflicting with the interests of clients or one client’s interests conflicting
with the interest of another client. Ambit Capital makes best efforts to ensure that conflicts are identified and managed and that clients’ interests are protected. Ambit Capital has policies and
procedures in place to control the flow and use of non-public, price sensitive information and employees’ personal account trading. Where appropriate and reasonably achievable, Ambit Capital
segregates the activities of staff working in areas where conflicts of interest may arise. However, clients/potential clients of Ambit Capital should be aware of these possible conflicts of interests and
should make informed decisions in relation to Ambit Capital’s services.
24. Ambit Capital and/or its affiliates may from time to time have or solicit investment banking, investment advisory and other business relationships with companies covered in this Research Report and
may receive compensation for the same.

Additional Disclaimer for Canadian Persons

25. Ambit America Inc. is not registered in Canada
26. Ambit America Inc. is resident and registered in the United States.
27. The name and address of the Agent For Service in Quebec is: Lavery, de Billy, L.L.P., Bureau 4000, One Place Ville Marie, Montreal, Quebec, Canada H3B 4M4.
28. The name and address of the Agent For Service in Toronto is: Sutton Boyce Gilkes Regulatory Consulting Group Inc., 120 Adelaide Street West, Suite 2500, Toronto, ON Canada M5H 1T1
29. A client may have difficulty enforcing legal rights against Ambit America Inc. because it is resident outside of Canada and all substantially all of its assets may be situated outside of Canada.

© Copyright 2018 AMBIT Capital Private Limited. All rights reserved. Ambit Capital Pvt. Ltd.
Ambit House, 3rd Floor. 449, Senapati Bapat Marg,
Lower Parel, Mumbai 400 013, India.
Phone: +91-22-3043 3000 | Fax: +91-22-3043 3100
CIN: U74140MH1997PTC107598,

October 15, 2018 Ambit Capital Pvt. Ltd. Page 32