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And welcome to IndiaMART's third quarter quarterly results conference call. We have already circulated our earnings presentation, and it is also on our website and the stock exchange website. I'm sure you have gone through the presentation. And you would have questions. Let me give you some summary of that, and then I can take questions afterwards. So first of all, I'm pleased to report that IndiaMART has achieved the consolidated revenue from operations at INR 165 crores in the third quarter, which is about 23% year-on-year growth over the last year. Total number of paying customers are subscription suppliers, that stands at approximately 1,42,000. The net addition for this quarter has been around 4,500. And deferred revenue for the quarter end stands at INR 649 crores. As we can see, there is a economical environment that is weaker and which is impacting our performance. Our net customer add has been slightly lower than in our longer-term average of approximately 5,000-plus customers per quarter. And the growth in deferred revenue has also slowed down considerably from 38% in the last year quarter, same quarter to 26% year-on-year this quarter. So we will remain cautious about the current economic scenario and we'll focus to maintain our margins while we're trying to find levers of further growth into our business. Now I would like to hand over this call to our Chief Financial Officer, to discuss the financial performance more in detail. And I'll come back to answer your questions later. Thank you, and over to you, Prateek.
Thank you, Dinesh, and good afternoon, everyone. Consolidated EBITDA for the quarter was INR 44 crore, representing a margin of 26%. This number is not comparable with the last year numbers as we have adopted Ind AS 116, with effect from 1st of April. The true margin expansion in the business was 3%, which has also reflected in EBIT margins for this quarter at 23% as compared to 20% last year. Net profit for the quarter was at INR 62 crores, which includes onetime deferred tax credit of approximately INR 23 crores on account of timing differences pertaining to the Tolexo demerger scheme with effect from January 2017. Our cash flow from operation was INR 71 crore, leading to a closing cash and investment of INR 859 crore as on December 31. Thank you very much. We are now ready to take any questions.
[Operator Instructions] The first question is from the line of Arya Sen from Jefferies.
Dinesh, Brijesh and Prateek, first, my question to Dinesh. Dinesh, you came on TV in December and you talked of some moderation in your growth expectation. Can you sort of clarify what -- which year that -- or which period that pertained to in terms of revenue growth, and what were the numbers that you were referring to?
Yes, Pranav? Arya Sen?
This is Arya.
Sorry, Arya. So if you really see, we have -- if you -- however revenue flows, and how our business model is, we collect money for subscription in advance for monthly, annual and 3-year or 2-year period, which results into negative working capital. We do collect -- most of our money comes in advance for the entire period. Thereby, accumulating a lot of deferred revenue. As you can see, our deferred revenue is pretty high at INR 659 crores. And then the revenue flows from the deferred revenue. And if you look at the breakup of the deferred revenue, almost 50% of that is the current, which is next 12 months, 60% and 40% is the -- beyond that. Internally, we calculate, we see that an average age of our deferred revenue or average period of our deferred revenue is about 20, 21 months. Now that means that the revenue that you see is a 20-month moving average which is reported on the quarterly financials. If you see the leading indicator of that, is the collections are the difference in deferred revenue that you can calculate, and which is there in our detailed financials also, collections or billings. So as compared to the last year, where our collections use to grow up 30% or so for the 9 months, our collections have only grown a 15% or so in the past 9 months, past 3 quarters. This will, which is resulting into slowing down of growth in our deferred revenue. So if you see last year same quarter, our deferred revenue grew by 38%. But this year, same quarter -- current quarter, the deferred revenue could only grow by 26%, quite sharp decline from 38% to 26%. And which will further show up in the actual revenue from operation. Even in the revenue from operation, if you see 3 quarters ago, Q1, we were at 30% growth rate; Q2, we were at 28% growth rate; and now Q3, we are at 24% growth rate. So it is declining, but that decline will not happen in one single quarter or immediate coming quarter. It is -- as I said, it's 20 months moving average. So in case the economy improves or our collection and net customer adds improve. And then it may not even go to the level of 15%, 18% because it will come back again above that. So that is where I see that in case we see a couple of more quarters continuing to be below 20% collection growth rate, then obviously, the revenue would start to trend in the similar line.
Right. And that you think would reflect in the revenue by second half of FY '21 or earlier?
So if next 2 quarters remains further subdued, you can expect the -- it to be reflected in the second half of this calendar year or next financial year.
Understood. Secondly, this 20, 21 months that you talked about, has there been much of a change to that number through this slowdown? Or is it more or less been where it was even before?
Not really, it has not changed at all, in fact. If you go to the presentation in the slide number. In the Slide #16, if you see the 4, 5 quarters ago, the current deferred revenue was 61%, which is now 62%. So yes, there has been 1% change, but nothing much has changed.
You're right. Right, right. The other question I had was for Prateek. Prateek, on the -- in 4Q, typically, there's a seasonal dip in your margin. Is that going to happen this time as well. So that is something which we should build in for the fourth quarter?
Yes. Arya, I think that is the right. Typically, in Q4, what we see that our billings are the highest amongst the quarters in the year. And since our expenses also are in proportion to the billing. That is where our expenses also increases. As Dinesh just explained that the revenue increase would -- it is always a moving average of the last 20, 21 months of billings. So therefore, there is no such increase in the revenues. However, because of the billings increase our expenses increasing slightly, this is a typically a quarter where we see the highest cash from operations. However, as the revenue increases only over a period of 20, 21 months, we see margin declining in this particular quarter, that would -- that is a pretty seasonal that we see every year.
And the seasonality would be similar to what we saw last year, right? No reason to think there would be any major change in the kind of seasonal trend we saw last year?
Yes, more or less, it would stay the same, but it would also depend upon where do we end up with the billings in this particular quarter. So largely, it should be pretty much in line.
Fair enough. And then lastly, on the tax rate, if I look at the first 9 months, I think the tax rate is averaging more like 26%. But if I look at last year, again, there seem to be a much lower tax rate in the fourth quarter. Is there some seasonality to that as well?
So going forward, the tax rate will stay at around 25%, 26% because of the change in the taxation rules last quarter, we adopted for 25% flat taxation regime. And because of that, in the last quarter, you'll see the impact in the deferred tax, which we recognize. However...
Yes, sorry, go ahead.
Yes. However, on a run rate basis, it would stay at around 25% for the year.
But adjusted for other income, it should be a bit lower, right?
Yes. Other income is taxable at 20% and all the other operational income is taxable at around 25%. So maybe 23%, 24% you can take.
So I mean fourth quarter, would there be -- is there any adjustment that you make in the fourth quarter? Last year, if you see fourth quarter tax rate was a lot lower. Is that something which can recur the time as well?
No. As I said, that we are operating in a different tax regime now. So it would be fairly pretty standard coming at around 25%.
The next question is from the line of Pranav Kshatriya from Edelweiss Broking Limited.
I have one question regarding the decline in the total number of business inquiries delivered in this quarter, there's a Y-o-Y decline. I just want to understand that what factors really contributed to it? And if there are certain one-offs with regards to, let's say, Internet shutdown or some seasonal weakness. How is it trending for the first 15, 20 days of this quarter?
Pranav, there's a broader trend. If you see our business inquiries delivered has been pretty much plus/minus constant at the -- in the last 3, 4 quarters. There has been some marginal increase or marginal decline that you could see, but they are pretty much stable in the last 4, 5 quarters because there is a general demand slowdown in the economy and nothing else. Having said that, could there be a marginal Internet shutdown related or holiday related effect. I mean those are very smaller, but at a 90-day average, I don't think they matter much. And we -- our traffic is also very well diversified from across the geographies from South India, East India, North India. So I guess, one-off here and there keeps happening every quarter due to some or the other [ region ] and some or the other reasons. So -- which is a common thing. Sometimes, it is slightly higher. Now having said that, generally, am I too bothered about the buyer inquiries in the short run. Because if you see, we are sitting on a very heavy growth base over the last FY '16 to FY '19, where our buyer base and traffic and inquiries typically grew by 100%, 100% kind of growth rate or 80% kind of growth rate. So I think, given that we get about 60 million visits on our platform every month, and I don't -- I'm not really bothered about short-term in terms of buyer. Yes, in the longer run, if there is a fundamental shift from the way IndiaMART is used or the way other services are used, then there could be a issue. But given that the economy has seen a significant slowdown, many sectors like the automobile and others are 20%, 30% slowdown. Even the FMCG, even the machinery I think we are maintaining our traffic without any advertising, which is a -- decent for IndiaMART. I don't think we have any -- and if you really see...
It's 5 million.
If you really see our registered buyer growth, entire last 12 quarters or so, there is a 5 million new buyers are being added every quarter. So -- and that rate hasn't changed much. So I think we are fine on that side. Yes, there is a economical [ show up ] which is showing up in those numbers. But it's okay.
Sir you alluded to the total registered buyers, which is -- that number is close to 100 million now, how much incremental scope is there for getting more buyer and if you can throw some light on how many are the active buyers or let's say that the buyers who have visited the website in the last 3 months or 12 months, sir, that will be helpful.
We don't publish that data very regularly. Internally, we do track 30 day active, 90 day active, 12 months active, everything. Our repeat rate -- 90 day repeat rate, which we have been publishing regularly hovers at around 54%-55%, if you see the 12-month active buyers are -- if you see the daily unique inquiries that again remains at 18 million, 19 million per quarter and which automatically translates into about 30 million 12 month active.
[Operator Instructions] Next question is from the line of Madhu Babu from Centrum Broking Limited.
Sir, currently, the paying customer is around 2%. So how can we increase that paying suppliers?
So how can is, I think, one, adoption of the SMEs on to Internet, more buyer and more supplier embracing Internet to how do we increase number of buyers or number of suppliers. One, by way of cataloging or digitizing the suppliers, the buyer automatically come because they find a better variety of products and coming from better location of the supplier. And they get to see the best prices on the website. So it's a vicious circle, which you increased the supplier to increase the buyer. Now how organically, can we execute that particular thing, we have multiple ways to onboard new suppliers. One, we aggregate suppliers from various sources. And call them back to see if they want to register. Two, they automatically come online and on IndiaMART and whether they come as a buyer or whether they come as a supplier, most of our -- since we are a B2B business, most of our users are business users, and they have a propensity to register as a supplier also. And third, we have a large sales force. If you see our sales and service representatives, about 4,000 people and another 500-odd people in the tele based sales, so about 4500 people totally working on helping these suppliers come onboard on IndiaMART and depending upon how well we can service and how fast is the adoption versus their propensity to leave the platform that is the net customer addition. So, I think if you compare worldwide, for most classified sites, 2%, to 3% is the common penetration. But that 2% to 3% penetration is on all India basis. If you really look at our penetration in the top 8 metros, where 60% of our customers now come from top 8 metro, there the penetration would be much higher.
Okay. And second, on the deferred revenue growth, which has been very soft. So have you seen any attrition with your top accounts? Because if I remember the top accounts contributed a significant percent of our revenues.
They continue to present -- represent -- so our top 10% customers account for 40% of revenue. So if you see the data book, they continue to remain in line with the previous quarters. No change has been observed there. Because even though top 10% customer means 14,000 customers, which remains more or less same. We are able to maintain that.
Sir, and just one last question on this, a competitor Udaan. So, they do all this credit as well as logistics, et cetera. So how feasible is it for our portfolio to try this method or are we looking into these value-added services?
So, let us first understand the product categories where different people deal into. So IndiaMART is a pretty long tail -- we have about more than 1 lakh product categories where we deal into. Now Udaan or Walmart wholesale or METRO Cash & Carry or Amazon business, these people generally are focusing on the specific product categories, which are typically FMCG or dealer distribution product categories. Number two, they are building warehouses, logistics and transportation. I do not feel unlike in B2C where home deliveries are a new concept. Home delivery is a new concept. Business-to-business deliveries -- [ FOR ] deliveries has been happening for ages by way of sea, by way of train, by way of surface. And I do not see a large value-add by our experimentation that we did in Tolexo in B2B logistics, so we are not currently interested. Three, I think they are doing some interesting experiments with credit, which is interesting item to look at, we continue to do study and experimentation to see if anything like that can be built in IndiaMART. In case our pilots are successful we would inform you and increase more penetration in that space.
Next question is from the line of Deep Shah from AMBIT Capital.
Sir, if you could help with the churn rates, and how have they changed over the past few quarters, that would be helpful. Second, if you could quantify the actual billings number this quarter and the corresponding quarter, that would be helpful.
If you see, we have customers in various segment, platinum customer, gold customer, then silver, annual customer and silver monthly customers. And then we have somebody who has paid up for 1-year, somebody has paid up for 2 years and somebody was it up for 3 years. So ever since the economical environment has changed in the last year. Yes, we have seen a marginal decline across all segments and all areas. However, the platinum segment continues to be very strong. As we said, gold and platinum typically have less than 1% churn per month, or an annual churn of about 10% to 12%. On the overall annual base, we now have about 20-odd percent churn. So monthly, as I said always, that is a volatile item. And on a monthly basis, trial keep on happening. And also, if you see our total customer base, we have 1/3 of the 1,42,000 customers on the monthly side only. And most of the other customers are in the annual side. And about top 10% of our customers are in platinum segment. You also asked for the billing and collection numbers. Though we do not specifically publish collections as a KPI, but if you see them in the detailed financial you can find there is a section note where it is available and it can also be calculated very easily by way of opening deferred revenue and closing deferred revenue and the revenue. For this particular call I will give you the number. Last -- collection for the current quarter was INR 183 Crores, previous quarter was INR 177 Crores.
[Operator Instructions] Next question is from the line of Manish Saxena from PineBridge Investments.
Dinesh, Prateek, just a quick thing. If you can just share your thoughts essentially in terms of the total traffic that over the last 2, 3 years had actually gone up significantly and then has stagnated. And what led to the traffic increase? Was it a geography? Was it a product? Or was it some product innovations that you have done? And what can you further do to increase the total traffic out there? That's the first question, please.
I think in the last call -- couple of calls I have repeated this, but I will repeat this once again. Somewhere around 2015-2016 onwards we found 2, 3 good innovations that had started to work for us. One, which was the price of the product. Two, which was the detailed product -- we migrated from being a classified listing website to a product catalog website. We are no longer a classified listing website. You can find the detailed product photos, videos, specification, item-by-item. If you go to IndiaMART you will see, in different sections you will find.And third -- the thing we started to use algorithmic matchmaking -- behavioral based matchmaking, where we started to use suppliers RFQ consumption behavior to assess his preferred location and his preferred product category over his stated location and stated product category, which helped us. And all three of them helped us increase our buyer fulfillment rates significant -- from 20% to almost 40% buyer fulfillment rate over the 2015-2016 onwards. Second, if you see the macros also, there have been big changes in the mobile adoption and in the data speed and data cost both and -- which has -- and there has been forced adoption of the internet also by way of compulsory income tax filing, compulsory GSTN filing, demonetization led to a lot of people learning how to use internet and payment methodology. So, I guess all of it combined together started to play a network effect, and when network effect starts, so payout it was like an exponential growth that you can see in the buyer inquiries from FY2016 to FY2019. What led to the plateaued down -- I think it is mostly to see, inquiry -- mostly to see the economy is going through a pain and -- I believe that as soon as the economy will improve. And also we are already touching a good amount of customers [ likes ], given that we get about 60 million visits on our platform every month, that's like 6 crore people . And in a year we end up getting almost like 20, 25 crores people on our platform, which is a good number anyway.
Sir, this plateauing you think is largely economy or is there some more product innovations or anything that you can do across to increase or is it a certain geography or certain products which have reduced in terms of the traffic?
So is it largely economy? As far as we can assess, yes. Is there any migration of buyers towards any other platform, I don't see any significant -- there are so many B2B platforms being tried currently. But none of them have gained any significant traction to say that IndiaMART is losing out to them. What we can do, probably we can do Indic languages. So for example, now you can search IndiaMART on 7 different -- 9 different Indian languages, by way of voice command. We -- a lot of people who come from Tier 2, Tier 3, Tier 4 places, they do not read much, but they can -- they have a very good habit of watching videos. So can we do product videos. We have taken some initiatives on that direction, will that be immediately visible, as I said, the price initiative and specification initiative and algorithmic matchmaking initiatives were taken in 2015-2016 actually started to take -- pan out in the next 2, 3 years. As we have taken some initiative on Hindi language and video, over the next three to five years they should start to pan out. Secondly earlier we were only generating leads now we help buyer and seller talk to each other using IndiaMART lead management system or IndiaMART message section as a platform. Currently can we start to provide payment facilitation, can we start to provide purchase financing so there are many initiatives that can be taken, we continue to experiment them. Has anything become too big that I can talk about, not yet.
And just can you remind us ad expenses at one time was being guided at a slightly higher percentage of sales, but probably has tapered down, any thoughts on -- does it actually push across traffic or does it not?
In FY '17, 18, 19, we haven't done any advertising. So this is now going to be completing 4 financial year where we have not done any significant advertising. But you can -- what you would be seeing in a consolidated level was mostly what we were doing in Tolexo in FY '16 and 17, that would be visible. We have enough organic traffic as of now. Every year, we do budget for INR 20 crores, INR 25 crores for the purpose of advertising. And as and when we feel there is a need for advertising, we will go ahead and do that.
[Operator Instructions] Next question is from the line of [ Shamal Drove ] from Aditya Birla Sun Life Insurance.
Sir, my question is mainly on the payee addition in this quarter. So we had around 4,500 addition in this quarter. So in the last quarter, we had mentioned that anything less than 500 would be difficult for us. So though the payee has increased from lows of 3,000 in Q1 to 4,500, but still it's below our aspiration range. So any comment on that, like when we would be able to reaching 5,000 level given the current economic slowdown.
Thank you. I think, you have already answered. We are striving. You can see we have increased the focus on sales and service. We have increased the number of people in sales and service. Economy is something not in our control. We -- by increasing the focus on sales and service and affordability of products, et cetera, we have been able to come back from a 3,000 to 4,500. And we'll continue to strive to make it 5,000 coming soon. Because acquisition is normally easier problem to solve than the early infant mortality or SME mortality. Currently, a lot of SMEs are not able to maintain their cash flows. So that is where the issue is. And that problem cannot be fixed by way of more sales or more affordability.
So with this economic slowdown, do you see our current clients holding back on like the monthly pay clients delaying their, like, spending and affecting our total customers on the silver side of the monthly business.
I think the answer remains the same. As I said, people are worried from 3 sides. One, their demand in the market has slowed down. So -- and their cash flows, or credit has crunch. So their ability to pay or -- pay a higher amount for upgrade or sign up, or their willingness to continue for a longer duration suffers. So I guess, either we find some experiments suddenly that works very beautifully with starts to work, or we wait for the economy anyway.
So on the connecting question on the payee addition. So you mentioned that you had increased your sales effort to get the higher payee customers. So that should translate into lower margin. But in this quarter, we had 300 basis points margin expansion. So with the current situation continuing, is this the normalized margin? Or you see any, headwinds on the margin part as well?
So on the stability of the margin or on the ability to maintain the margin I think we do not see any immediate problem. However, on the rapid expansion of the margin given that currently -- the cost is -- we are investing more money and we are receiving collections, which are slowly and slowly tapering down. The margin expansions will slowdown, but we are confident that we should be able to maintain the margin at these levels for sure.
[Operator Instructions] Next question is from the line of Vimal Gohil from Union Mutual Fund.
I just wanted to understand one of your data point that you provide is on the outsourced employees, which has risen by about 37% or 40% over the previous year and the current number is around 1,374. Wanted to understand the rationale behind having a larger portion of outsourced employees. Does it help us save on costs? Or is it only because of the flexibility that they have -- that they give you for keeping whatever amount that you keep in terms of outsourced employees?
So, this outsourced field sales representative, which is about 1300, 1400 these are spread across our 75 plus offices -- new sales acquisition offices. Now one when we hire people for the client servicing or for the purpose of product and technology or operations we do not hire for that particular role, we hire people so that they can grow in the ranks of management and over the period of time as a senior manager also. However not everybody who has done that kind of an education or done that kind of a -- he is interested in doing SME sales and so typically we find that for a field sales operation or tele sales operation the kind of people that you need, and the attrition that you have is pretty high, which actually unnecessary strains our own payroll systems. So that was the purpose -- in fact, they actually cost slightly more than if they were on our roll. We had taken the decision about three years agoAnd we'll evaluate going forward if that is -- that makes sense even continuing forward. So based upon that we'll do. There is nothing -- how much of to read between that, it's just that we wanted to be doubly sure, when we report those people as a headcount because they are not visible in the statutory financials.
Right, right. Correct. The basic point was to understand the cost advantage that we have so basically, they do -- they are more expensive than the on roll employees, right?
Yes.
Yes, sir, please continue.
Yes, if they were hired on roll, I think we would not have outsourcing extra overhead that we had. So outsourcing overhead is definitely an extra cost. But if they were hired on a on roll, will that come at the same cost? I don't know.
Next question is from the line of Krunal Shah from Enam Investments.
My question is regarding the cash on the books, what is the level we want to maintain? And what is the plan for the 850 crores cash on your books?
So as I stated last time also, we have 3 usage that we have planned. One, as a company of our size and scale, how much cash reserves that we want to maintain and given the deferred revenue also that we have. Number two, we would continue to look for possible opportunities where we can make investments or acquisition. As you know, we have done one investment in Vyapar, app, this is a mobile accounting software app in the -- in the first week of September, in 26% we had taken for INR 31 crores. So we will continue to look for such opportunity. Third, I think once the first financial year completes after listing, the Board will decide the quantum of dividend that has to be paid out.
Okay. And my second question is regarding the average revenue per user. What -- can you -- or do you share the vision of, say, the medium to long-term growth that is possible in the average revenue per user.
So the traditional, you see historically, we've been growing our customers at around 15%. And our ARPU growth has been trending at between 5% to 10%. Given that the economic scenario, what we've been through, we think probably the lower end of the growth should be the reasonable one to assume. In this quarter, if you look at our growth is already down to -- ARPU growth is already down to 7%. So maybe 5%, 7% should be the reasonable one we should assume.
I am asking about from a medium-term perspective of 5 to10 years, is the same numbers you've used before?
Sorry?
I'm asking more from a medium-term perspective of 4 -- 5 to 10 years. These actually also the same number you will guide for?
Yes. At this point of time, we can guide for the similar thing what we've seen historically in the past.
Next question is from the line of Ayaz Motiwala from Nivalis Partners.
So the first question is on -- are we noticing in the marketplace, a distinction between B2B and some sort of B2C businesses online, in particular, so eroding? Is the customer very strict when they're doing a search for suppliers focused on B2B or B2C or want to get a solution?
See internet is an open platform and available at the click of a button. Now, nobody can stop one wholesaler to go and checkout on B2C side and one consumer to come and checkout on a wholesale website. So, I guess there is always that 20% overlap that remains on our internet platform and beyond that nothing much that happens. So, I guess we will continue to have that 20% overlap where IndiaMART has 20% direct consumers who come and search for prices and other things. Yes, for higher value products, also, sometimes even the direct consumers when they have to buy high value products like if you want to buy a generator, which is maybe for your personal home consumption, but if it is a INR 100,000 generator I am not too sure if you will go on a B2C side and do an order as of now, we are better off doing it on IndiaMART. So, I hope that answers your question.
Sir, just one basis of that 20%, is that a number for IndiaMART or you're quoting an industry-wide sort of number from...
No, I'm just quoting 80/20 principle number. Neither quoting IndiaMART calibrated number nor quoting industry-wide standard.
Sure. Sir, and the other question was related to the average spending. We've talked about it in the past call as well. And you talked about platinum customers contributing a certain number. I didn't catch -- if you could describe that in terms of your platinum customers' contribution to the overall business. And how much is the difference in which they pay versus the average ARPU or whatever you call it?
Yes. So if you go to the Slide #15 of our presentation, the revenue from operations slide, the -- yes, Slide #15. That says very clearly, that 40% of our revenue is contributed by top 10% of our paying suppliers.
40% of revenue by top 10 paying suppliers, right, sir?
Top 10% of the paying supplier.
Yes. Yes.
And we have 142,000 paying supplier now.
Which is what you quoted as top 15,000 top paying customers go?
Yes, 14,000 top paying customers. And not that exactly that all they are 100% platinum customers. By and large, 90% of them would be platinum customers, or more or less.
Yes. Yes. And I think you mentioned that 40% number by platinum customers.
Yes, my top 10% paying customers, which is similar to platinum customers
Right. So the range of monthly or annual or 2-year committed payout would be -- how would that range be for, as you said, entry-level B2B suppliers who come into the net of IndiaMART and people who are evolved into sort of the platinum or the top 10 percentile customers. How much would be the difference here?
Yes, so at entry level when a new customer comes in we have 2 plans, which is the monthly and annual. The monthly plan is INR 3000 per month with a [ INR 5,000 ] extra cost. Both of them are inclusive of GSTN and the annual plan is INR 30000 plus GST, which is more or less -- both of them are similar plans. And almost 99% of our customer start at the silver monthly or a silver annual level. At the acquisition level 80% of them again are on a monthly acquisition and 20% of them are on an annual subscription and then they are upgraded as they try the service or as they become comfortable with service, they are upgraded in 2 ways. One they are upgraded into the tier from silver to a gold tier, or a -- and we have a multiple tiers in platinum. And two, they are upgraded into a multiyear service [ off-prem ]. Three, sometimes there is a combination of gold plus multiyear, which is one of our most popular ones. Generally, you'll see that the ARPU at the blended level, which we have been reporting is about INR 44000 or INR 45000 per annum. As I said the entry level is about INR 30000 and if you calculate the top 10% contributing 40% of the revenue that works out to be a little upwards of INR 160,000 per customer. So, 14,000 customers would be paying us about INR 160,000. So now you have three numbers of ARPU.
Yes. Yes. So that's helpful. And sir, again, I'm asking this question, which was -- is to try and learn about the business. Is in your algorithm or the way you display when a B2B buyer comes in to seek from supplier. Does your system have preference, for the same tiers that you talked about or it would just give a number based on geo location or how does that work, Sir?
It works on multiple combinations. So it will definitely take into account if somebody has paid INR160,000 versus the INR 30000 , it will also take into account the proximity of the buyer location and it will also take into account whether this particular supplier has preference for that location is it local location or is it RFQ consumption preferred location. It will also take into account if suppliers phone pickup rate is above the threshold or not because we cannot let the buyer experience hamper if the suppliers are nonresponsive. So, it is a 20 different parameters that will decide a particular search to rank the supplier for a particular buyer. Every buyer will see a very different supplier depending upon where is he logging from and every supplier will see very different set of RFQs depending upon his past behavior and depending upon his tier of subscription.
Sir, just a final sort of subtlety in this part, which is on the gross listed suppliers versus paying customers, when we talked about that 2% ratio for listing companies in some sense implying that while you are an open platform you want to do business with people who spend on your platform. So in the end if you do not have any paying supplier in that category then someone who has just been listed may also show up in that RFQ?
Yes, I think in fact we do not give out the numbers of exact how many inquiries are delivered to a free supplier, but there's a significant business that you can do freely being listed on IndiaMART depending upon which category you are and how much competition in that category it is. So, from our point of view we want the buyer to be satisfied, whether or not I made money from that supplier that is a secondary objective. If a buyer has come to IndiaMART he must go satisfied and every buyer who is satisfied with the free supplier, that becomes a sales lead for us and that is how we go and talk to that seller and say that since you have received ex number of leads already being a free customer imagine what you can do by being a paid customer. And many of them wants to pay up and show up higher up in that category or location . And if you are saying that -- or let me say that, okay, we'll continue to enjoy free.
[Operator Instructions] Next question is from the line of Arpit Shah from Stallion Asset.
Yes. I had 2 specific questions. One is regarding dividend distribution policy what is going to be our dividend distribution policy going ahead and are there any plans to launch any new product with IndiaMART or any new product, which would be other than IndiaMART?
We have adopted the dividend distribution policy, the amount of dividend that is to be distributed every year would be decided by the board depending upon the yearly performance and cash availability and cash utilization. So that is about dividend distribution policy. And in terms of product as I mentioned earlier we continue to launch many products.As I said lead management system has become significant enough to be mentioned as it is -- it has been used regularly by buyer and supplier. We also have pay with IndiaMART where we facilitate payments. We also have started to offer searches and display in Indian Indic language content. We also started to use AI/ML and [ online ] video, but since any of those products significant enough at this point of time, no.
And what will be the typical renewal rates for all kinds of customers, be it platinum, gold, silver?
Yes. So Arpit, in our customer base, we have 2 kind of customers. 2/3 of our customers have taken an annual or a multiyear package. Therein, we have seen renewal of approximately 80-odd percent. And 1/3 of our customers are taking monthly subscriptions, wherein we are seeing a renewal of close to 95%.
Okay. And we had discussed something regarding auction-driven pricing before. So are we having new plans to do that?
Sorry, what's that? Could you repeat the question, please?
We're looking forward for auction driven price pricing on our platform.
It was not auction driven, but we were trying to do a differential pricing, because currently, the entire pricing on our platform is in standard price, irrespective of the location or irrespective of the value of the category in which you deal in. Though we were trying to move to the differential pricing. However, given the current economic scenario, we may take slightly longer time in the terms of launching that differential pricing all across.
Okay. And what are the trends that you're seeing right now? In like 21 days of past for the month of January? What are the subscriber addition? What are the trends like?
That information, at you would understand we can't disclose. Also, I believe we are probably one of the few companies who are announcing results in 21 days, the December quarters have -- have already been shown to you.
Next question is from the line of SivaKumar, K. from Unifi Capital Private Limited.
Sir, just to confirm the churn rates in both the annual plans in the monthly plans haven't changed much, right, from the last quarter, 20% and 5% per month is a monthly plan.
Yes. So we haven't seen significant change from the last quarter though historically if we see certainly the churn rates have increased on an annual and multiyear customers. We used to see 16% to 18% churn, which has gone up to more like approximately 20% churn annually now. And similarly on the monthly customers, which is one third of our data base, so our churn rates was around 3% or 4% per month, which have gone up to more approximately 5% per month.
So that happened in Q2, but from then on you have not seen further scale up?
It has happened in the last 3 quarters.
I see. Got it. And one question with regards to the employee cost, which have moved up by almost 23% in the current quarter and almost 24% for the three quarters put together so should we expect the same kind of trend going forward?
The employee cost had primarily gone up because of the 2 reasons. First is the annual increments that we announced. And second is the headcount infusion, which is largely we have done the hiring in the sales and servicing side. Specifically, this hiring was ramped up in the last quarter. And that is why you were seeing slightly higher increase on the manpower. Overall on a going forward basis, along with the client addition we certainly need to add a few more people on the servicing side for every quarter. If we are adding almost 5000 customers there would be some 70 to 100 people that we would be adding on the servicing side every quarter, but that is pretty much it and the increments will be effective every June.
Historically, we our manpower cost has been increasing at the rate of about 18%, and that is also because there were -- in FY '17 there were changes in demonetization time, so we were slow in hiring, but I think going forward also we will continue to remain in that 18% to 20% of the cost. Currently it has gone up to 25%.
Sir, the line for the participant got disconnected, we move on to the next participant. The next question is from the line of Hardik Solanki from Moneybee Investment Advisors.
Just wanted to understand the person on the technology side where there is an always upgradation and as far as the industry requirement, they keep upgrading, innovating new things. So just wanted to understand the person or the team looking after that and do we have a -- the specialty team as a [ lock in ] Or how it is?
So about 20% of our expenditure remains in the product and technology side. We have about 400 people in the product technology data and we have pretty seasoned set of people new as well as old, as old as 15- 20 years would be -- as new as -- so, I am pretty confident that we have a team which is very good in the product and technology and at par with the industry standards anywhere in the world. We also keep taking consultancy from various sources, so for example we are constantly looking at innovation in artificial intelligence and machine learning. So I am confident, and I myself is a software engineer, but -- so I think we have enough number of product and technology people here.
And other teams who would be managing like you and also few of the people who will be looking after the technology team so just want to understand do we have the lock in with all these people around because now the competition is huge and lot of competition come across in this space and there are chances that people may move out or just want to understand that angle?
No, sir, we don't believe in lock in. In fact, we don't have any locks and keys in the entire of our office. We don't have in any of our cabins, any of our -- so we do not believe in lock and keys.
Next question is from the line of Ikshit Naredi from Naredi Investments Private Limited.
My question is in this quarter the company generated cash flow of INR 71 crores and the total cash and investment is INR 859 crores so as per the deferred revenue amount INR 649 crores so it looks like the company will generate good flow in future. So how you will utilize this cash in near future, please provide us the definite plan?
I just now answered that question, I will repeat that again. First thing is we will continue to maintain good balance because for the size of our company and for the size of this kind of a deferred revenue, what is the balance that we need to maintain. Number two, we'll -- we have already done one investment at INR 31 crores for 26% in Vyapar app and we'll continue to look for adjacency-led investments that we can do either in minority or in a majority. And third we have adopted a dividend distribution policy that we will distribute dividends. The amount of such dividends would be decided by Board of Directors at the -- in about year and we will let you know
One more question is that like -- Amazon and Flipkart is also like [ very big ] they have offered, they are also in the same industry. So they're like -- and send to this type of B2B thing, what's the like -- the risk on company?
So anyway, I think, nobody is stopped from anyone from entering any business. Let us understand whether what kind of an exit barrier do we have in our business, what kind of a stickiness that we have in our business. As I said we have a lot of supplier behavioral data and lot of buyer who are already registered on IndiaMART and we have achieved a significant portion of the flywheel that is moving faster and getting bigger. So there is a network effect that is there and once you achieve that network effect it is not so easy for anybody to come into a network effect business, it's generally difficult. However, people do innovate, and people do -- can come, but I don't think since we are not a transaction base model the discounting led incentive may not work. Also, we have a copyright on all our information that has been accumulated over the period of time. We will -- we do not -- so even to accumulate that kind of information that we have, just imagine we have about 59 lakh suppliers registered on our platform and we have about 6 crore products with -- coming from 100,000 product categories. So unlike the current model of the names that you have taken they deal largely into standard set of products, which are fast moving whereas we deal into more of a customized set of products and most of the B2B transactions are for larger amounts. So that will give you some comfort. And two, we have the behavioral data which nobody else has that gives us a competitive advantage against any new entrant.
Thank you very much. As there are no further questions, I will now hand the conference over to the management for closing comments.
Thank you ladies and gentlemen for joining our Q3 conference call. We are delighted by the interest in participation that you have shown in the company and in case you have any further questions later you can definitely reach out to our investor relations team and their email IDs available on our website. Thank you very much for your time once again and have a great new year. And a healthy financial year ahead. Thank you.
Thank you very much. On behalf of IndiaMART that concludes this conference. Thank you for joining us. You may now disconnect your lines.