IndiaMART to step up tech investments over two years after strong Q3: CEO Dinesh Agarwal

“It is the age of AI advancements. We started investing heavily in automation tools in the beginning of the year [FY25] and aim to maintain the momentum in the next two years," Dinesh Agarwal, founder and chief executive officer of IndiaMART InterMESH, said in an interview. He did not disclose the proposed investment figures.

The company currently has tools for operational efficiency, including a feature that facilitates AI-led smart replies, analytics for product categories and a personalized multilingual search feature. A new feature, which uses AI to match a buyer and seller based on metrics such as product, quantity, and location, will be at the centre of IndiaMART’s technology investments, Agarwal said.

The Noida-based company reported a 56% year-on-year rise in profit after tax to ₹188 crore, giving it fresh firepower to push a more aggressive growth play centred on technology. Revenue from operations grew to ₹402 crore from ₹354 crore in the year-ago period.

“The company delivered a steady quarter, supported by improving enquiry quality, stable customer engagement, and strong performance from higher-value customer segments," brokerage Centrum said in a note on 20 January.

Agarwal does not see a near-term reduction in employee count or other costs associated with enlarged technology investments.

“Given the size of the company, the overall investment figure may look very small, but we are focused on spending time and money on elevating it. Presently, we are not seeing any reduction in costs, but the expectation is that a longer period of time will present an opportunity for lowering costs. Next year is going to be important for us."

The company also hopes that the increased focus will bear fruit in terms of improving operational efficiencies, delivering better-quality leads and enhancing supplier retention rates, according to Agarwal.

Growing competition

IndiaMART’s strategy shift comes as competition in the B2B e-commerce space intensifies. Marketplaces including Flipkart’s wholesale division and venture capital-funded companies like Infra. Market are stepping up efforts to capture demand from small and medium businesses. Pricing pressure, higher customer acquisition costs and improving service offerings are forcing incumbents to invest more in technology, sales and retention to defend market share.

However, Agarwal does not appear to be worried about competition.

“Different players have developed a different muscle so there’s no cause for concern," he said.

The company is constantly looking for fresh growth avenues, with quick commerce now on its radar, according to Agarwal.

“We are open to partnerships with suitable last-mile logistics players who can fulfil faster deliveries for enterprise clients," he said.

E-commerce companies that cater to enterprise clients and retailers are boosting their ability to shorten delivery timelines, hoping that same-day and next-day deliveries will enhance the buying experience and result in improved cash flow in the supply chain, Mint reported in July.

“While near-term supplier additions remain moderated due to pricing actions and seasonality, management expects gradual improvement as product enhancements, AI-led initiatives, and better lead relevance translate into improved retention and monetization," Centrum said.

The company was founded in 1996 by Dinesh Agarwal, an IIT Delhi graduate, along with his brother Brijesh Agrawal, long before India’s internet economy took shape. At that time, Indian businesses, particularly small manufacturers and traders, relied heavily on physical directories, brokers and informal networks to reach buyers.

For much of its early journey, the company grew without large external funding, focusing instead on cash flows from paid listings and subscriptions. Institutional investors came in later, as the platform scaled up and demonstrated predictable revenue.

Over the years, the company raised capital from investors including Intel Capital and Amadeus Capital Partners, providing resources to improve technology, data capabilities and nationwide reach. Last week, Nalanda India Equity Fund bought shares worth ₹236 crore through a bulk deal on the BSE, pushing IndiaMART’s stock to rally almost 8% on 16 January.

Expanding to the south

While IndiaMART is largely present in the north including Gujarat, the National Capital Region and Uttar Pradesh, it is looking at cementing its position in the southern regions, with emphasis on Bengaluru and Hyderabad.

“A lot of south markets are yet to be explored. We are working on deepening our presence there," Agarwal said, adding that the region has a higher concentration of established, export-oriented small and medium businesses with longstanding supplier relationships.

Noting meaningful results from 13 strategic investments and two acquisitions, including the buyout of accounting platform Busy Infotech in January 2022 for ₹500 crore, IndiaMART is readying its acquisition pipeline, with an eye on technology.

“Busy Infotech started off by contributing 5% of our revenue and currently accounts for about 8-9%. We expect this to go up to 10% next year," Agarwal said.

IndiaMART’s shares gained 6% to ₹2,270 on the NSE on Wednesday.