Online Marketplace Warrior Strikes It Rich

A Twitter user recently wrote about a rumour doing the rounds that “a cow-dung-plated car could be used as a nuclear bunker”. He got an instant reply — “Such a product is already available on IndiaMART!”

IndiaMART Founder Dinesh Agarwal likes to quote this Twitter exchange to emphasise the place this online marketplace occupies in India’s consciousness.

Meeting Agarwal is an experience in itself. When BW Businessworld caught up with the soft-spoken Agarwal in his 13th floor office in Noida, there were hordes of youngsters pestering him for selfies.  Agarwal, 50, is no less than an icon for Indian entrepreneurs and youth.

Incidentally, Agarwal has been a BW Businessworld discovery, and this magazine featured him on the cover in its May 14, 2001 issue as someone who had survived and thrived through the dotcom bust. And thrived Agarwal certainly has. “After the BW Businessworld cover, I went to many places showing it off as my achievement. I even got admitted into IMT, courtesy this,” recalls Agarwal.

IndiaMART, the country’s pre-eminent B2B online marketplace, had everything going for it in 2001 until the 9/11 happened, and suddenly its revenue fell by half. Its traffic then was largely export-oriented, with 80 per cent coming from the US, Europe and Australia.

IndiaMART got another major jolt in 2008, when after a steady period of growth, it realised that exports had become non-competitive in UPA-1, and this was also the period when China was emerging as a major export hub. “We got convinced that our model, centred around exports, won’t work. The exports haven’t picked up majorly since then.”

While IndiaMART began operations in 1996, it was post-2008 that Agarwal thought of focusing on domestic businesses, and it turned out to be a good strategy. With 500 million Internet users, and deep penetration of smartphones, this constituency will only grow.

“In 2010, we were on a growth spree — opening 52 offices in 52 weeks. Our workforce increased from 500 to 2,500 in those 52 weeks,” recalls Agarwal.
But 2011 was also a year of deep introspection as Agarwal realised that like 2001, he was losing out on revenues, customers, and even the business model was not working. The next year or two were spent in fine-tuning the business model and product, and this time, he was ready for the smartphone-generation net-savvy young businesses.

Today, IndiaMART statistics say it all. They had 88 million buyers in June 2019. In other words, every fifteenth Indian has registered a query on IndiaMART. They do 3.7 crore match-making every month. Customised products in demand range from mouse pads to antique marble slabs to silver paper plates.
In the last 4-5 years, the company has grown at a 29-30 per cent CAGR while costs have increased at 17 per cent. The growth has lasted through shock periods of demonetisation.

The current slowdown, though, worries Agarwal. “While India is not a car market, I have never seen a slump in the two-wheeler demand in the country,” he says. One-third of his customers are monthly-subscription based, and many have seen their businesses getting hit.

So, why and how did he think of an IPO? “For one, it enhances the credibility of the company,” says Agarwal.

And then Intel Capital (Mauritius), which had invested in the company, wanted an exit. “I ran the company for 23 years as a private entity. I want to run this as a public company for the next 20 years,” says Agarwal.

SBI Mutual Fund, HDFC Mutual Fund, ICICI Mutual Fund, Birla Mutual Fund were among the 15 anchor investors. The IPO in a challenging environment was subscribed 36.16 times.

So, what’s the secret to a successful IPO? Says Agarwal: “It’s a difficult journey. After a period of lull, we were the first to go for an IPO. A company ranking high on profitability and scale should go for an IPO,” he says.

He further adds: “IPOs should be done at prices that are good. Some of the recent successful IPOs were done at prices 20 to 30 per cent lower than expected.” Kanpur-educated Agarwal, an IT engineer, came back from the US in 1995 when India was opening up for the next big IT revolution. “Everyone is born with 20 per cent luck. One should crack the formula to get luckier,” he says.