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IndiaMart: From Rs 40,000 to Rs 17,000 crore company

How Dinesh Agarwal built the Alibaba of India

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This is a special edition, where I share the success story of Dinesh Agarwal and how he created the world's second-largest B2B marketplace Indiamart.

The commercial marketplace of Noida is not where you’d expect to find the headquarters of a major e-commerce company. But that’s where you’ll find Dinesh Agarwal, the CEO of IndiaMART.

Unlike the stereotypical tech entrepreneur, Agarwal is unassuming, dressed simply in grey trousers and a white shirt, and focused on helping small and medium enterprises (SMEs) thrive.

How Dinesh Agarwal built the Alibaba of India: IndiaMart

Born on February 19, 1969, Dinesh comes from Nanpara, a small town near the India-Nepal border in Uttar Pradesh. He was inspired by his grandfather, who was a freedom fighter and a forward-thinking person.

Dinesh completed his BTech degree in Computer Science from HBTI in Kanpur. His first job was at CMC (now part of TCS) in USA, where he worked on the first Railway reservation system.

In August 1995, when India first got public internet access through VSNL (Videsh Sanchar Nigam Limited), Dinesh knew he wanted to return to India. A year later, he quit his job and went back to become an internet entrepreneur in India. However, the reality in India wasn't as perfect as he had imagined. He says,

“It took us six to nine months to get a telephone connection. I started going to trade fairs to figure out what kind of business I could start and explored ideas ranging from a computer shop, hardware and software distribution, cyber cafe, NIIT-type education, building websites, and such."

He decided to make websites for companies but soon realized that there weren’t many internet users in India. Starting with InterMESH with a meager seed capital of ₹40,000, his company created websites for Delhi-based firms like Nirula's. But he wondered who would visit these websites.

“It was then I realised that in the US, Indian products were difficult to find, and even if you found them, they were expensive.”

From garments to agarbatti, there was no information on exporters. The thought struck, why not make the directories of these exporters available online. “That’s how the idea of IndiaMart, a global gateway to Indian marketplace, was conceived,” Dinesh adds.

Dinesh Agrawal’s mission is simple but powerful: to solve the problems of his small and medium enterprise (SME) customers, whether they’re handicrafts manufacturers, travel agents, or apparel suppliers. And he believes the internet is the magic wand that can transform their businesses.

In the early days, the company operated out of a modest office and relied on manual processes to send mailers to clients, a labor-intensive task that laid the groundwork for future success​. Dinesh remembers the early days of the internet in India, when his mother, wife, and other family members would help respond to inquiries from overseas buyers.

“Every day, approximately 200 mailers would be taken to the local post office to be mailed to the sellers. The post office guys would ask us to segregate them since it was too much for them. That’s not all; they would say now that you are here, ‘chai, pani kara ke jao’ (a euphemism for a petty bribe).”

He adds that this “heavy lifting” continued for close to seven years. When the dot com bust happened around 2000, Dinesh says it was good for them.

IndiaMart was started as a directory for websites created by InterMesh. Initially, IndiaMART focused on international clients, but a strategic pivot around 2007-2008 targeted the growing domestic market. This shift, combined with strategic funding, helped IndiaMART scale rapidly.

Agarwal remained true to his pursuit despite facing numerous challenges. These included the e-commerce bubble burst in 2000 and aftermath of the 9/11 attacks in 2001 which caused a 40% dip in revenues.

It’s a Numbers Game

Back in 2000, while many e-businesses were biting the dust, Indiamart was making modest profits—Rs 6 lakh on a turnover of Rs 1.35 crore. Fast forward to 2012, and the numbers are mind-boggling.

From 70,000 listed businesses, 1,000 paid suppliers, and Rs 400 crore worth of member business, Indiamart now boasts 50 lakh buyers, 10 lakh registered suppliers, including 50,000 paid customers. The site features over 6 lakh online catalogues listing 50 lakh products across 75,000 categories, second only to Alibaba.com. IndiaMART had become a cornerstone of online trade in India​.

The traffic? A cool 3.2 crore visits per month with 54 lakh unique visitors. And the bottom line? Members conduct business worth Rs 10,000 crore-plus annually.

Indiamart’s growth has been steady, with an annual growth rate between 45-60%. The expanding number of businesses brought new revenue opportunities. Agrawal cleverly created competition among suppliers by introducing a trust seal and premium listings for better visibility. The paper lead system, where buyer inquiries are verified and sold to suppliers, further boosted revenues to Rs 150 crore in the last financial year.

With time Agarwal’s introduced some innovative features such as price discovery, payment protection programs, lead management systems, and supplier reviews and ratings to stay on top of the game.

Scaling Up: Challenges

Scaling up wasn’t easy. Agrawal’s first major expansion came between 2002 and 2006, increasing paid customers from 2,000 to 10,000. Despite pitfalls, he raised prices and saw revenue per customer rise. A second phase of growth began in 2008 during an economic slowdown, with the paid customer base soaring to 45,000 by 2011.

With Intel Capital’s investment and new board members like Deep Kalra of Makemytrip, Indiamart expanded but faced challenges in customer service and efficiency. Agrawal refocused on quality customer acquisition and retention, aiming for profitability within six months.

In 2019 IndiaMart achieved a significant milestone with a successful Initial Public Offering (IPO) which was oversubscribed by 36 times and raised ₹475 crore. IndiaMART’s market capitalization crossed ₹20,000 crore soon after its IPO listing.

The company’s revenue grew at a CAGR of 29% from FY19 to FY23. It reached ₹985 crore (around $120 million) in FY23.

According to Trendlyne, as of March 31, 2024, Dinesh Agarwal publicly holds stakes in 9 companies with a combined net worth of over Rs 4,942.5 crore.

Dinesh Agarwal’s success story serves as an inspiration to aspiring entrepreneurs worldwide. It showcases the power of adaptability and a relentless pursuit of one’s vision, even in the face of adversity.

Before I go, I know many of you reading this newsletter want to start your own business or side projects but find it difficult to begin. Starting something new can be challenging, so please check out these frameworks that can help you get started.

Steve Jobs once said:

Your time is limited, so don’t waste it living someone else’s life.

It was the wake-up call I needed to quit my job to start my own business.

Here are some of his most life-changing ideas:

1. People with Passion can Change the World

Steve Jobs founded Apple. After 12 years of absence, he returned to save it from bankruptcy.

How did he do it? Passion.

He had a vision and worked to make it a reality. "The only way to do great work is to love what you do."

2. Ideas are Worthless

There’s a tremendous amount of craftsmanship in between a great idea and a great product.”

Many people think that a great idea comprises 90% of the work. It doesn’t. Ideas alone are worthless. Focus on craftsmanship to turn ideas into reality.

3. Do One Thing Well

Master one thing rather than doing a lot of mediocre things.

If not, the level to be “good” will drift further away. Become better with what you already know.

Success demands singleness of purpose.” Gary Keller

4. Prioritize Relentlessly

Understand your priorities to make the best decisions. Find what matters most to you & focus on that area.

Being the richest man…doesn’t matter to me. Going to bed at night saying we’ve done something wonderful…that’s what matters to me.”

5. Disrupt and Innovate

"Everything around you was made by people no smarter than you."

Don’t let anything hold you back. Challenge the status quo.

Create an impact by making something people need. Don't be afraid to disrupt and innovate.

6. Simple is Elegant

When you first start off trying to solve a problem, the first solutions you come up with are very complex, and most people stop there. But if you keep going, and live with the problem and peel more layers of the onion off, you can often times arrive at some very elegant and simple solutions. Most people just don’t put in the time or energy to get there.” - Steve Jobs, Co-Founder of Apple

It’s hard to be simple. And very easy to be cluttered.

In a chaotic & busy world, focusing on a few essentials gives a significant advantage.

Simplicity is the key to innovation. When it’s simple, people understand it and will adopt it.

If you found this newsletter informative and thought-provoking, why not forward it to someone you think would enjoy it? Forward this email to them and help spread the word. 😊

Thank you for being a part of our community, and I look forward to bringing you more exciting content next week.