All eyes set on this company as it is India’s first e-commerce enterprise to go public. Not all e-commerce companies dare to do this, especially in India, as most of them are not making any money yet and an IPO may undervalue their shares further. Even the e-giants like Flipkart and Snapdeal still prefer to raise money from the Private Equity investors and VCs.
First to go, Infibeam plans to raise Rs. 450 crore from its IPO that opens on 21st March’16. Although a technology driven business, Infibeam will enter the listed retail company’s cluster on both the stock exchanges. The price band is fixed at Rs. 360- 432.
From the latest news
ICICI Securities and Kotak Mahindra Capital- the two merchant banks have pulled off their hands from this IPO, as they seemed to be disagreeable with the pricing, valuations and the timing of the IPO. According to the new prospectus, SBI Capital Markets Ltd. and Elara Capital (India) Ltd. will manage the offer further on.
As the Indian tech startups are on a downturn since 2015, the valuations of Infibeam are questionable.
About the company
Infibeam is an e-commerce company incorporated in mid-2010 by Vishal Mehta. Before Infibeam, Mr. Vishal worked with Dell and Amazon for almost 5 years in the US. He returned to India in 2007 and founded Infibeam with a group of other Amazon employees.
The story starts in October 2007, when they (Vishal Mehta and his partners) started selling cars and bikes, in April 2008 they sold mobile phones as well, in July 2008 they were selling books, apparels, gifts, watches and cameras.
The business operations of Infibeam include:
- Infibeam BuildaBazaar: This is an online market where merchants can sell their own products. Apart from the platform itself Infibeam provides solutions like digital product catalogue, promotion handling, payment gateway, content management.
As on 31st December 2015, Infibeam BuildaBazaar had 48,724 registered merchants.
- Infibeam e-retail site: Here the company directly sells a range of fast moving products. This retail base includes more than 15 million SKUs (Stock keeping units) across over 40 categories.
The company has six subsidiaries working on these business operations:
- NSI Infinium Global Ltd
- Infinium (India) Ltd.
- Sine Qua Non Solutions Pvt. Ltd.
- OdigMa Consultancy Solutions Pvt. Ltd.
- Infibeam Logistics Pvt. Ltd.
- Infibeam Digital Entertainment Pvt. Ltd.
Having these two core business operations, Infibeam also generates revenues from:
- INDENT: Infibeam’s digital entertainment platform allows downloading and streaming of music.
- INCEPT: travel and ticketing platform.
- ILPL: Logistic solutions
- ODIGMA: Digital marketing and technical services
- Picsquare: customized gifting platform. Upload a pic and getting it printed on t-shirts, mugs, calendars, etc.
The company has incurred significant losses in the past. On a consolidated basis, in the FY2015 the losses after tax accounted to Rs. 97.86 million; and Rs. 259.48 mn and Rs. 249.10 mn in FY2014 and FY2013, respectively. The standalone losses have been Rs. 84.10 million in FY2015, FY2014-Rs. 12.11 mn, FY2013- Rs. 10.22 mn.
20 to 22 per cent dilution of stakes is expected by the company’s executives. This makes the company worth Rs. 22.5 billion post-ipo.
In the early 2000s, e-tailing launched in India with sites like Rediff and Indiaplaza. However, e-tailing got swift momentum only around 2007, as the internet access advanced and consumers diverted to online payments.
By 2020, e-tail i.e. online retail is forecasted to grow to 4-6% of total retail, currently it is 1.2% only. Online shopper’s base will be around 180 million by then, and 60% orders will be placed through smartphones. Digital adoption is a key factor pushing the growth here.
Of the total e-tail market, electronics, footwear and apparel cover half of it. Food and grocery hardy takes 1% of it.
A few curbs to the e-tailing sector in India are that there is no clarity on the policies and regulation from the government side. Then PEs and VCs are the only ones funding e-commerce projects. However, there is a difficult exit for them. So lack of capital becomes another hurdle in this sector. Additionally, this is a very highly competitive market.
The key participants in Indian e-tail sector are Flipkart, Myntra, Snapdeal, Amazon.in, Jabong, Patym and Infibeam, which are all web-only-e-tailers.
The IPO of Infibeam opens on 21st March. By 23rd March, investors can bid within a price range of Rs. 360 to 432 per share.
On 31st March, basis of allotment will be finalized, equity shares will be transferred to the allottee’s demat account and the refunds will be processed. The trading of Infibeam shares will commence from 4th April, 2016.
EPS share cannot be computed as they are not making any profits neither there is a comparable company having similar business. The valuation seems to be on the high side but as they are the first e-com company to go public, there are chance that they will see robust subscription.
Use of IPO proceeds
The plans to use the capital raised from this IPO to set up 75 logistics centers, the estimated cost for this is Rs. 375 million. Currently, Infibeam has 12 logistic centers spread across 11 cities in India.
Rs. 2352 million will be spent on setting up a cloud data center and shifting its registered and corporate offices.
Infibeam will also purchase additional software worth Rs. 670 million.
The rest of Rs. 4500 million will be used for general corporate purposes.
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