Stock to buy: After around a 22 per cent decline in the last four months, brokerage house JM Financial has upgraded IndiaMART InterMESH‘s stock rating from ‘Sell’ to a ‘Buy’.
The firm noted that this de-rating stemmed from a sharp deceleration in collections growth in Q2FY25 and muted additions of paying suppliers over the past six quarters. While a material improvement in key metrics is not expected in Q3FY25, JM Financial anticipates standalone collections to grow in the low teens in the medium term, compared to a mere 5 per cent year-on-year growth in Q2. Additionally, consolidated EBITDA margins are expected to remain high at 34-36 per cent due to limited growth investments.
The firm highlighted that INMART is now trading at 28x NTM PER (excluding cash and other income), which represents a 50 per cent discount to its five-year average of 56x. With a free cash flow yield (including other income) of over 6 per cent on FY26 estimates, JM Financial believes the downside risk for the stock is limited. The brokerage has revised its price target for March 2026 to ₹2,450.
Muted Growth Expected in Q3FY25
JM Financial emphasised that INMART’s paying supplier growth has been sluggish since Q1FY24, a trend unlikely to improve in Q3FY25 due to unfavourable seasonality and continued high churn rates in the silver category. The firm estimated a net addition of 1,800 paying suppliers in the core classifieds business during the quarter, significantly below the historical average of 4,500. This high churn is expected to impact the company’s upsell funnel, leading to minimal growth in average collections per paying supplier.
For Q3FY25, JM Financial forecasted a muted collections growth of 6 per cent year-on-year, only slightly better than the 5 per cent growth in the previous quarter. Revenue growth, however, may rise by 15.5 per cent year-on-year due to deferred revenue, though it would still mark a slowdown compared to prior fiscal years. On a positive note, cost savings from reduced sales incentives and servicing costs could drive EBITDA margins up by approximately eight percentage points year-on-year, with consolidated EBITDA projected to expand by 50 per cent during the quarter.
Medium-Term Growth to Stabilise in Low Teens
JM Financial maintained that INMART’s collections growth in the core classifieds business would settle in the low-to-mid teens, compared to its historical CAGR of over 20 per cent. The firm’s analysis indicated that the shockingly low 5 per cent year-on-year growth in standalone collections in Q2FY25 likely stemmed from sales execution issues, which could be resolved over the next two to three quarters.
If INMART manages to add 2,500-3,000 paying suppliers per quarter in FY26, it could achieve mid-single-digit growth in this metric. Additionally, realisation rates could improve, supported by stabilisation in Silver supplier churn and periodic price hikes in the Platinum category. JM Financial expressed confidence in INMART’s ability to recover to low-teens collection growth in FY26, backed by these medium-term drivers.
Upgraded to ‘Buy’ on Favorable Risk-Reward Dynamics
According to JM Financial, the recent correction in INMART’s stock presents a favourable risk-reward scenario. Trading at 28x NTM PER (excluding cash and other income) and a free cash flow yield of over 6 per cent for FY26, the stock appears attractively valued. The brokerage upgraded its EPS estimates for FY25-27 by 2-5 per cent, driven by margin upgrades, while maintaining its topline projections.
Rolling forward to March 2026, JM Financial set a revised DCF-based target price of ₹2,450, underlining its optimistic outlook for the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
