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Vishal Mehta, founder of Infibeam Inc. Ltd.
Vishal Mehta, founder of Infibeam Inc. Ltd.

Infibeam IPO fully subscribed despite lukewarm investor reception

The Infibeam Rs450 crore IPO, the first e-commerce listing in India, was subscribed 1.11 times at close

Mumbai: Infibeam Inc. Ltd’s 450 crore initial share sale was fully subscribed on the last day of its initial public offering (IPO), which made it the first Indian online retailer to go public.

The issue was subscribed 1.11 times at the close, according to data from NSE and BSE.

If Infibeam’s share sale was a gauge of investor interest in the country’s online retailers, which have received multi-billion dollar valuations, things have got off to a somewhat rough start.

While Infibeam Inc. is much smaller than Flipkart and Snapdeal, India’s biggest online retailers, it is still among the few profitable Internet companies.

“There was no one going gaga about it. We saw very less interest in it. There were some quotes floating around, but hardly any deals have happened in the grey market for Infibeam," said a dealer, requesting anonymity.

BSE data showed that the portion reserved for qualified institutional buyers was subscribed 0.86 times cumulatively for NSE and BSE.

Shares reserved for non-institutional investors were subscribed 2.23 times and those meant for retail investors filled in 1.31 times, data on BSE showed.

One of the bankers for the share sale explained that the number of shares eventually offered as part of the issue was lower since the per-share price discovered was at the upper end of the price band of 360-432 per share.

The price is discovered based on a book-building process. With the number of shares reduced, the extent of subscription is higher, the banker said, requesting anonymity.

Infibeam’s public relations firm declined to comment on the subscription levels saying that the data will be released after final evaluation of the bids over the next few days.

Using inputs provided by the banker, Mint calculated extent of share subscription based on the amount to be raised ( 450 crore) and the cumulative amount for which bids were received ( 660.38 crore, based on exchange data). This implies a subscription of 1.47 times.

SBI Capital Markets Ltd and Elara Capital (India) Pvt. Ltd were the two bankers who managed the sale.

Kotak Mahindra Capital and ICICI Securities Ltd withdrew as bankers ahead of the issue.

There were no anchor investors to the issue. The issue was also not marketed to mutual funds, according to an executive from an asset management firm who declined to be identified.

“There was not much excitement for this IPO," said Amar Ambani, head of research at IIFL Holdings Ltd, which had rated the issue as “avoid". “The response is the best Infibeam’s issue could have received."

Not many brokerages had opted to rate the issue. Apart from IIFL, Angel Broking Ltd had a neutral rating on the IPO.

According to the share sale document, Infibeam Inc. Ltd is an e-commerce firm focused on developing an integrated and synergistic e-commerce business model.

It owns and operates the Infibeam BuildaBazaar e-commerce marketplace, which provides value-added services to enable merchants to set up online storefronts.

It also operates Infibeam.com, a multi-category, e-tail website.

The company also launched .ooo domain registry, and has set up a joint venture company with Sony Entertainment Ltd to develop, build and own software applications by offering downloading and streaming of licensed digital music content.

In a note on 19 March, Angel Broking had pointed out that Infibeam’s online retail business has a model similar to Flipkart and Snapdeal, but is significantly smaller than the two dominant players, which have strong backing from private equity funds.

Its other business, BuildaBazaar, is also smaller than global competitors like Shopify.com in revenue terms, the note said. It added that even if the former does gain a dominant position in India, it is insufficient to justify the valuation.

“Like other e-commerce companies, they could have gone to other venture capitals firms and private equity players instead of hitting the IPO market at this stage," said Ambani adding that the stock may not see significant gains on listing.

The company, founded by former Amazon.com Inc. executive Vishal Mehta, turned profitable in the first six months of 2015-16. Infibeam posted revenue of 171.3 crore and a net profit of 6.6 crore for the six months ended September 2015. It reported a loss of 9.8 crore on revenue of 288.2 crore for the year ended 31 March 2015.

After the stock exchange listing, Infibeam will be valued at 2,250 crore, Mehta had said at a press conference earlier this month.

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