During its Q3FY25 earnings call, MapMyIndia stakeholders focused significantly on the rise in outsourcing expenses, particularly related to government projects, and how these costs tie directly to the corresponding revenue.
Stakeholders enquired about the company’s growth in government business, especially in sectors like GIS (Geographic Information System) and public infrastructure, noting the lower margins but long-term revenue potential.
Questions also centered on the company’s cautious approach to government receivables and its strategy to manage lower-margin work. Moreover, there was discussion around the company’s focus on EBITDA growth rather than profit margins and the competitive pricing pressures in the quick commerce sector.
Find the breakdown of the earnings report for Q3FY25 here.
Impact of Government Projects on MapMyIndia margins
Government projects and its impact on company’s margins took center stage in stakeholder queries. The stakeholders asked if the increase in government business could lead to lower margins or blended margins for the company.
“Wanted to understand how we are looking at the government business. Are we bidding on government-led GIS projects? Also, how are the margins in these kinds of projects?”, asked a stakeholder.
“Government projects are no longer something we shy away from. If you had asked me three years back, we would have definitely stayed away. But now, with a lot of government schemes coming up in the GIS (geospatial) space, we wouldn’t want to skip them—we’d rather grab those opportunities because they come with certain added advantages,” stated Rakesh Verma, Chairman and Managing Director at MapMyIndia.
Verma added that the company is very mindful of selecting only those government projects where payment is guaranteed. He pointed out that, according to the company’s financials, overall government receivables are less than 100 days.
While this includes both government and other receivables, the key point he highlighted is that there have been no issues with bad debts or increases in provisions for bad debts, which provides the company with confidence in pursuing these projects.
Verma clarified that when it comes to margins, government projects typically do not offer the high margins seen in corporate or automotive work. In fact, they tend to lower the overall company margin. However, the company maintained that these projects are essential and are being pursued for “very good reasons”.
MapMyIndia’s Government Projects
In July 2024, the Finance Minister announced plans to digitize urban land records using Geographic Information System (GIS) mapping, which led to a surge in MapmyIndia’s share price.
MapmyIndia has been involved in various government projects, including urban land records and property taxation for the Municipal Corporation of Gurgaon, town planning for the Roorkee regulated area and Haridwar Development Authority, and municipal GIS for JKERA (Jammu & Kashmir Economic Reconstruction Agency).
Additionally, the company provides print and mobile maps for state tourism departments across Delhi, Punjab, Goa, Kerala, J&K, Maharashtra, and West Bengal.
In this quarter’s investor presentation, MapMyIndia outlined key government contracts, including engagements with two state tourism departments, the Railways, enhancing the incident management system for a national public health organisation, and tracking rake movement for public sector units. Moreover, notable go-lives include property taxation systems for various cities and urban local bodies, along with 3D mapping for flood management in Patna.
Outsourcing Expenses Driven by Quick Scaling
“C&E revenue growth trajectory is sustainable as it appears that it was a one-time project revenue that got booked in this quarter, which explained the steep rise in outsourcing expenses. Can you elaborate more on what we did in this project?” asked a stakeholder.
“Those outsourcing expenses arise when certain projects need to be scaled up very quickly and within a short period of time. In such cases, we have to go outside and use external resources. It also includes certain software costs as well which become part of it. So, altogether, it is very much in line with the revenue that we generated during the quarter,” explained Verma.
“I think there are two different things. Outsourcing is a different question I can address because that’s the only item in the presentation where you will see quite a big jump in our expenses. That relates to the corresponding government projects, which are part of the revenue,” Verma added.
Technical Outsourcing Costs and Revenue Impact
A stakeholder enquired about the temporary increase in technical outsourcing costs, asking if these expenses were incurred in anticipation of expected revenue growth from certain types of business or contracts. In response, Verma clarified that the expenses are directly linked to revenue, as accounting standards require expenses to be tied to corresponding revenue.
The stakeholder further asked, “So, is it unlikely that this elevated level of technical outsourcing costs will recur in the near term?”
“The nature of technical outsourcing is mostly linked to government projects. If revenue from government projects is high in a particular quarter—like it was in Q3 and potentially in Q4 as well—then technical outsourcing expenses will also be higher,” Verma clarified.
“See, we were at a couple of percentage points in government business for many, many years. Over the last two to three years, we’ve started increasing it. Last year, if I remember correctly, it was a single-digit percentage of our total revenue from the government. This year, we might be in the double digits, but less than 20%, more like 15%, so more or less,” added Verma.
The company clarified that its primary focus is on revenue growth, followed by EBITDA growth. They emphasized that margin should not be the main point of focus, as EBITDA growth directly reflects profit growth, which is what truly matters for the company and its shareholders.
MapMyIndia Hardware Sales Declining
A stakeholder enquired about the lack of a pickup in hardware sales despite earlier resolution of the IoT-led business issues. Verma explained that while they had addressed certain constraints, delays in customer adoption of IoT-led business impacted sales this quarter. However, he highlighted that subscription revenue from the IoT-led business has increased significantly.
In response to a stakeholder’s enquiry about the impact of hardware sales on revenue growth, Verma stated, “hardware sales being down has affected the revenue growth; otherwise the revenue growth would have been higher.”
The company’s response also highlighted that hardware sales haven’t dropped, but some major projects didn’t materialize, which would’ve helped hit the target.
Notably, another stakeholder pointed out that the drop in hardware sales isn’t a major concern because, when you look at the bigger picture, hardware isn’t where the company makes the most profit.
The big profits actually come from the services the company provides.
But hardware, in essence, enables the company to drive those service sales. So, the stakeholders want to understand if the decline in hardware sales is part of a bigger trend, and if so, what that means for the overall business. They’re trying to figure out if the momentum in hardware sales is just a temporary dip or something that could affect the future growth of the company.
Queries on Quick Commerce
The stakeholders asked about the company’s success in quick commerce, particularly with aggressive pricing from competitors like Google Maps. They enquired what factors are driving the company’s wins in e-commerce and new-age digital, and whether this success validates the product-market fit.
“There are a few small things, a few important things, and they matter. The quality of our product—meaning the map data underlying the APIs or SDKs we give them. And when that’s better than the competition, that’s when we win. Quick commerce, especially, is very hyperlocal. That level of detailed maps is what is helping us to win,” stated Verma.
The investor presentation highlights multiple go-lives across various industries, including live order tracking and address capture for quick commerce companies, data solutions for major global social media networks, an emergency SOS feature for live location tracking on women’s watches launched by a watch brand, and digital KYC APIs for credit card applications of a large credit card company.
Open Order Book and Backlog Queries
Stakeholders also raised questions regarding the open order book and the current status of order backlog.
“My first question is whether you can provide some details on the deals announced this quarter and how they impact your order backlog. The last update we had on the order backlog was towards the end of the previous fiscal year, which stood at roughly 1,370 crores of open orders. Could you share insights on the quantum and nature of recent deal wins and what the current order backlog looks like in terms of visibility going forward?” asked a stakeholder.
“Regarding your other question, we have been winning new projects across multiple verticals within C&E, including global contracts. As for the order backlog at the end of the year, it will definitely be better than last year—that’s the best answer I can give at this point,” stated Verma.
Read More:
Support our journalism: