IndiaMART spent over Rs 900 crore on acquiring startups
When IndiaMART InterMESH Ltd, an online business-to-business marketplace, secured Rs 1,070 crore from eligible institutional buyers in February 2021, it had one aim in mind: to expand.
On the other hand, inorganic growth is difficult for IndiaMart, which supports buy-sell transactions in over 97,000 different categories. After all, it wanted to find companies with complementary synergies that would benefit its 143 million buyers and 7 million+ storefronts.
“We met over 200-300 companies and studied several areas” between February and November 2021, according to Dinesh Agarwal, Founder of IndiaMART.
While the Noida-based firm has made a few acquisitions, the current buying spree began last year. It invested over Rs 905 crore on 13 purchases since April 2021.
It invested in nine software businesses in the last five months, including Zimyo, Realbooks, IMPL, Fleetx Technologies, Busy Infotech, Simply Vyapar, Legistify, and M1Xchange.
According to Dinesh, these investments — in accounting, logistics, and other areas — are expected to help IndiaMART’s customers grow their businesses.
The aim was simple: to assist businesses in India in adopting digital technology.
According to one investment banker who has been working with companies with aspirations to go public, the pandemic has acted as a stimulant for digital adoption and adaptation, with small and medium businesses learning the value of digital more forcefully.
For example, micro and small companies can use Vyapaar’s services in accounting, medium-sized organisations can use Busy’s software, and large businesses with multiple locations can use Realbooks. Zimyo handles HR and payroll management, while M1Xchange handles invoicing.
Even though most of these investments are small, IndiaMART has a lot to gain – and a lot to contribute.
What’s in it for the startups?
“More than the funding, it is the collaboration we are enthusiastic about,” Punit Gupta, Founder and CEO of eCommerce solutions company EasyEcom, told YourStory in a meeting in January 2022, “where we can engage with them (IndiaMART) to drive our journey.”
About IndiaMART
IndiaMART InterMESH Ltd. is an Indian e-commerce company with a web portal offering B2B and customer-to-customer sales services. Dinesh Agarwal and Brijesh Agrawal launched the website IndiaMART.com in 1996 as a business-to-business portal to link Indian manufacturers and buyers.
In fiscal years 2017, 2018, and 2019, IndiaMART received a total of 32.5 crore (325.8 million), 55.2 crore (552.6 million), and 72.3 crore (723.5 million) visits, with mobile traffic accounting for 20.4 crore (204.8 million), 39.6 crore (396.9 million), and 55 crore (550.3 million), respectively, accounting for 63 per cent, 72 per cent, and 76 per cent of total traffic. The IndiaMART app has over 1 crore (10 million) downloads on Android and a 4.7 App rating.
IndiaMART invested in ProcMart and Vyapar in 2016 and 2019.
In the second term of the Modi government, IndiaMART was the first company to test the IPO market.
Background
Dinesh Agarwal and Brijesh Agrawal, cousins, founded IndiaMART as a website directory for customers in the Delhi-NCR region. India had barely 15,000 internet users at the time. The directory contained about 1000 listings by 1999.
After surviving the dot-com bust, the company opted to change its focus from export-oriented industry to India-focused B2B market in 2008–2009, when the US was affected by the recession and raised $10 million from Intel Capital.
IndiaMART began promotional activities in November 2014 with Indian film superstar Irrfan Khan as their brand ambassador.
According to research firm KPMG, IndiaMART has grown to become the largest e-commerce platform for enterprises in the last ten years, with roughly 60% market share. It handles 97,000 product categories from hundreds of Indian towns and cities, ranging from machine parts to medical equipment to textile products to cranes. Big suppliers include Agfa HealthCare India, Case New Holland Construction Equipment (India), Hilti India, JCB India, and Nobel Hygiene in the company’s marketplace.
IndiaMART went public in 2019, making it the first online B2B marketplace to do so. On June 24, 2019, IndiaMART launched an IPO to generate about Rs.474 crore at Rs.970-973. On Day 2, the IndiaMART IPO was subscribed entirely, and by the end of the last day of bidding, it had been oversubscribed by 36 times.
Funding
Intel Capital provided the company with a 50 crore Series A round of capital in early 2009, with a part of the money going to IndiaMART, One97 Communications, and Global Talent Track. It received Series C funding from Amadeus Capital Partners and Quona Capital in March 2016. It is reported that this money will be used to expand IndiaMART and Tolexo’s operations. IndiaMART filed draught papers with SEBI in June 2018 to raise $88.24 million through an IPO and list on the NSE and BSE exchanges.
Board Of Directors
Mr Dinesh Agarwal – Managing Director, Executive Director
Mr Brijesh Kumar Agarwal – Whole Time Director
Mr Dhruv Prakash – Non-Executive Director
Ms Elizabeth Lucy Chapman – (Non-Executive Independent Director)
Mr Vivek Narayan Gour – (Non-Executive Independent Director)
Mr Rajesh Sawhney – (Non-Executive Independent Director)
Awards
- Red Herring 100 Asia Awards 2008
- Manthan Award 2013 for Buy Leads Under E-Business & Financial Inclusion Category
- IndiaMART Bags Best Business App Award at GMASA 2017
- ‘Best Business App’ at Drivers of Digital Summit & Awards, 2018
- ‘Best Online Classified Website’ at Drivers of Digital Summit & Awards, 2018
- ‘Best Online Classified Application’ at Drivers of Digital Summit & Awards, 2018
- India Law Awards 2019 for ‘Technology, Media and Telecommunication In-House Legal Team’
- ‘Video Content in a Business Website- Special Mention’ at Video Media Awards and Summit 2019
The making of IndiaMart from Rs 40,000 to Rs 474 crore IPO
On June 24, 2019, the 23-year-old company, founded during the dot-com boom and survived the bust, issued its Initial Public Offering (IPO) with a price band of Rs 970-973 to raise approximately Rs 474 crore. The transaction ends on June 26; the corporation has issued 48,87,862 shares.
IndiaMart had about 5.98 crore registered buyers as of FY18, with a catalogue of over five crore products offered by over 47 lakh providers. Its mobile app has nearly 10 million downloads on the Google Play Store.
A fresh start
Dinesh Agarwal, 50, expressed his concern while expressing his happiness with the company’s attainment of this milestone during a busy schedule a day before the IPO subscription closes.
“There’s one more day to go,” Dinesh says, referring to the happy conclusion of a business trip that was anything but smooth. Half of the IPO was subscribed yesterday.” Dinesh adds that he hopes they will be “multi-times oversubscribed” by tomorrow.
“What does it mean to me if the company doesn’t earn money and I don’t make money?”
He responds to my question about his expansion ambitions with a question of his own. “I want to take the company to the next level,” Dinesh says over the phone from Delhi, where he resides and where his company is situated. I’ve been doing it for the past 23 years as a private corporation. We’ve had a lot of ups and downs, made money and lost money, and raised a few rounds of private cash. I’d like to watch how a public limited corporation operates in the following 23 years.”
IndiaMart took one customer, one business innovation at a time, away from the spotlight, unlike B2C eCommerce firms. So it’s no surprise that the most common inquiry is, “What worked for IndiaMart?”
Of course, there’s the tenacity, resilience, and hard work.
On the other hand, Dinesh thinks first of his early employees, family, and friends. “They stayed with me the entire time. I now employ over 100 employees who have been with me for more than ten years. Of course, remaining on track and driving traffic to our website (we were early adopters of SEO and did not believe in spending money on marketing) were two other factors that helped us succeed.”
He emphasises that they avoided the practices of new-age internet enterprises.
“We found that the classic profit-and-loss approach worked well for us. We weren’t looking for a valuation but rather a self-sustaining inning. I had no idea what the valuation game was all about. That was not something I was exposed to.”
A role model
Dinesh, a frequent at TiE Delhi events, now maintains a close eye on entrepreneurs. He invested in 45 different companies as an angel investor thus far across industries like health tech and cloud telephony.
Those who have met him and seen him speak at many startup events can attest to his underlying intelligence and wit presented in his inimitable style.
Founder of Portea Medical K Ganesh congratulated him on Twitter, saying, “Great role model to imitate for entrepreneurs.” Patience and perseverance in establishing a successful firm.”
“You’re a startup role model for exhibiting how to grow an internet firm in India,” Amit Ranjan, co-founder of SlideShare, tweeted. For the past 20 years, anytime I search for any B2B item on Google, I end up on IndiaMart – a testament to the power of what you’ve created!”
Abhishek Rungta of Indus Technologies praised IndiaMart’s tenacity, quoting well-known Silicon Valley entrepreneur and investor Naval Ravikant.
It’s a marathon
There’s no denying that this seemingly instantaneous jubilant success results from 23 years of hard labour and perseverance.
Dinesh recalls how, back when the internet was a phantom in India, his mother and wife and the majority of the household would respond to emails from purchasers outside India by creating mailers and forwarding them with the printed queries to Indian dealers. “Every day, about 200 mailers would be taken to the local post office to be mailed to the sellers,” Dinesh recounts. The post office personnel would request that we separate them since it was too much for them. That’s not all; they’d say ‘a euphemism for a tiny bribe now that you’re here.”
He says that the “hard lifting” went on for over seven years. Dinesh claims that the dot com bust in 2000 was beneficial to them.
“I say that incumbents who make it through the boom and startups which make it through the slump go a long way.”
Dinesh and Brijesh have led IndiaMart through many ups and downs, having walked the talk.
IndiaMART did not raise any funds during its first ten years, and it primarily served international buyers. In the aftermath of the 9/11 terrorist attacks in the United States, IndiaMart’s business took a sharp downturn in 2001. Dinesh said they adhered to their plan despite laying off employees, “and after we got out of it, we were doing okay.”
The two founders identified a wider opportunity in the domestic market in 2007-2008. “We recognised that things were changing in India and pondered how we could grow to be a Rs 500 crore company,” Dinesh explains.
The company raised money (a total of $40.7 million in four funding rounds) and fast scale. However, in 2011, the company saw yet another downturn, which it was able to weather, and by 2012, it was back on solid ground. “B2B firms are probably difficult to start but easy to scale,” he explains. They are easily profitable once they scale.”
There were only about 15,000 internet users in India in 1996, when the cousins launched IndiaMart. “For a long time, we’ve been proponents of eCommerce. Our first major client was Nirula’s. We were perhaps the first company to introduce eCommerce shopping in 1999. During Diwali, we were delivering sweets. But, over time, we realised that B2C enterprises are difficult to profit from. As a result, we primarily focused on B2B business.”
IndiaMART Continues Investment Spree, Invests In HRTech Startup Zimyo
IndiaMART has invested INR 17 crore in Zimyo, a SaaS-based human resource firm, as part of its current investment blitzkrieg.
The funding will allow the B2B marketplace to branch out into other areas. The investment is part of IndiaMART’s long-term strategy to create a “holistic ecosystem” that meets all of a company’s demands.
Zimyo is an SMB-focused startup that delivers SaaS-based human resource management software to its customers. It was founded in January 2018 by Kumar Mayank and Ajay Kadyan. Users can utilise the platform to execute HR tasks like payroll management and performance management, like other things.
BEENEXT, AngelList, and other angel investors, including Sweta Rau and Kunal Shah of CRED, are Zimyo’s backers. Zimyo raised $1.5 million in a preliminary investment round led by BEENEXT in September 2020. The startup has now earned $3.7 million in venture capital funding with this latest investment.
The business claims to have worked with over 500 organisations so far, and its products have purportedly served over 1 lakh consumers.
GreytHR, Zoho, and BambooHR, compete against Zimyo.
IndiaMART, on the other hand, is a massive Indian B2B marketplace that connects buyers and sellers. Brijesh Agrawal and Dinesh Agarwal launched it in 1996, and it has since evolved to become a key leader in the industry.
The company claims to have 143 million buyers, 7 million vendors, and over 80 million products on its platform. Every month, the company receives 40 million business inquiries, resulting in combined revenue of INR 756 crore in FY21.
IndiaMART’s current investment spree includes this step. The following are some of its other investments:
In February of this year, the B2B marketplace invested INR 13 crore in Realbooks, a cloud-based financial accounting firm.
In February, the Noida-based B2B retailer paid INR 104.2 crore for a 26 per cent share in IB Monotaro, a Japan-based end-to-end commerce enablement business.
IndiaMART bought accounting software company Busy Infotech for INR 500 crore in January.
In January, the company increased its position in SimplyVyapar, an inventory workflow startup and a stake in Legistify, a legal workflow startup.
In April of last year, IndiaMART paid INR 18.2 crore for a 26 per cent share in Gurugram-based Shipway Technology.
Udaan, DealShare, and other new age internet enterprises battle against the B2B marketplace.
The stock market continues to rise to new heights. According to Research and Markets, the worldwide B2B e-commerce market is estimated to reach $ 20.9 trillion by 2027, with a CAGR of 17.5 per cent from 2020 to 2027.
In terms of B2B eCommerce, the Asia Pacific area had the biggest revenue share in 2019, over 65.0 per cent, according to the research, and is predicted to grow at a CAGR of over 18 per cent during the forecast year.
Inside IndiaMART’s $100 mn bet on nine startups in FY22
The business-to-business (B2B) industry has invested over $100 million in nine companies in the fiscal year 2021-22 alone. One of the proposals was a 100 per cent purchase of accounting software provider Busy Infotech Pvt. Ltd for 500 crore, the company’s largest sale to date.
Before becoming public, Noida-based IndiaMART benefited from venture capital and private equity investors like Amadeus Capital and WestBridge Capital. Since then, IndiaMART has made 11 investments totalling over 950 crore.
The startup play
“After we got listed in July 2019, we thought about expanding IndiaMART’s ecosystem,” Dinesh Agarwal, IndiaMART’s co-founder and chief government officer, told VCCircle in a digital conversation.
A closer look at the company’s 11 investments reveals that it’s attempting to broaden horizontally at a time when competition in the net B2B e-commerce space is heating up from new-age firms like Udaan, Zetwerk, and Moglix, which have raked in venture capital over the last three years and are rapidly expanding in the country.
However, Agarwal noted that IndiaMART is distinct from new-age firms in that it invests in startups rather than competing with them. “I’m not diversifying because I’m dealing with competition in that market.” I’m stating that because I make a lot of money, capital allocation is an important aspect that should be considered,” he continued.
According to Agarwal, IndiaMART’s investments have primarily been in companies that provide business enablement solutions in accounting and finance, advertising, and logistics. Currently, the accounting firm holds the greatest share of IndiaMART’s interests, totalling over 600 crore spread over three organisations.
The company bought a 26 per cent share in Simply Vyapar Pvt. Ltd in September 2019, marking its first investment in the accounting firm. Vyapar claims to have over 100,000 paying customers for their GST billing, accounting, and stock management system for small firs, allowing them to digitise their business processes. IndiaMART made a follow-on investment in the company in January of this year. It owns a 27 per cent ownership in Vyapar and has spent a total of 92.75 crore in the company.
“I’ve known computer systems since I was a kid, and one of the first applications I learned was accounting for businesses. As a result, this is the need of every business. When the shift from desktop computers to mobile computers or smartphones occurred in 2015-16, I was looking for a more mobile-friendly company in terms of accounting, which is why I invested in Vyapar,” said Agarwal.
EasyeEcomm, a platform that offers ready connections with major e-commerce platforms like Flipkart and Amazon, internet storefront providers like Shopify, Zepo, and StoreHippo, and shipping providers like Delhivery and Bluedart, is IndiaMART’s second accounting investment. IndiaMART bought a 26 per cent share in EasyEcomm for Rs. 13.35 crore. In January of this year, the firm made its biggest bet in the accounting industry by purchasing a 100 per cent stake in Busy Infotech Pvt. Ltd for Rs 500 crore.
Busy, which was founded in 1997, provides an accounting software platform.
“These (acquisitions) broaden our ecology.” Not everyone wants a web-based advertising lead chain like IndiaMART right now, but everyone wants some accounting solution, which broadens our customer base,” Agarwal noted. Agarwal further stated that he was confident that these investments would help IndiaMART acquire more prospects in the future.
Apart from accounting, IndiaMART has focused on logistics companies, investing a total of 154.85 crore in as many as five companies so far.
Busy Infotech, an accounting platform, has been acquired by Indiamart for Rs 500 crore.
IndiaMART, a leading B2B marketplace, announced that it is acquiring accounting software firm Busy Infotech Pvt Ltd for Rs 500 crore in cash. The B2B marketplace announced that it had invested in Simply Vyapar Apps Ltd’s Series B fundraising round.
“IndiaMART InterMESH Limited has agreed to acquire 100 per cent paid-up capital of Busy Infotech Private Ltd,” the business said in a regulatory filing (BUSY). BUSY will become the company’s wholly-owned subsidiary upon the abovementioned acquisition.”
“The acquisition cost is up to 500 crore,” according to the regulatory filing, “for purchasing 100% paid-up capital of BUSY, i.e. 45,000 shares (with a face value of 10) at a premium of 1,11,101 per share from current shareholders.”
Busy Infotech, founded in 1997, is one of the country’s largest accounting software companies, with a presence across the country. In the fiscal year ended March 31, 2021, it earned Rs 42.4 crore in revenue and Rs 11 crore in profit after tax.
“For the past 25 years, Busy has been a well-known name in the Indian accounting world. In a statement, Dinesh Agarwal, founder and managing director of Indiamart, said, “Their value offer matches nicely with Indiamart’s long-term mission of making doing business easy for Indian enterprises.” “This acquisition enhances Indiamart’s value proposition, and we are confident in our ability to take Busy to the next level, given our vast customer base and market understanding.”
Meanwhile, the B2B marketplace said it had invested in Simply Vyapar Apps Pvt Ltd’s Series B funding round of 217.5 crores. Westbridge Capital led the round, including India Quotient, an existing investor.
Vyapar provides small businesses with a full GST billing, accounting, and inventory management system that allows them to digitise their operations. Its product has over one lakh paying customers. In September 2019, IndiaMART led Vyapar’s Series A Investment Round, investing 31.2 crores for a 26 per cent company ownership.
edited and proofread by nikita sharma
