Two of four domestic investment banks that were initially part of the upcoming primary issue for Infibeam Inc. Ltd have opted out as they were not comfortable with the pricing and the timing of the issue, said three people familiar with the matter.

Infibeam, which will be the first e-commerce firm to trade on Indian stock exchanges, will launch its initial public offering on 21 March. The business-to-business online marketplace is seeking to raise 450 crore through its primary issue.

The change in the banker mandates is visible in the red herring prospectus (RHP) filed on 11 March by Infibeam. It shows just two bankers, SBI Capital Markets Ltd and Elara Capital (India) Pvt. Ltd, managing the offer. The draft red herring prospectus filed by Infibeam on 30 June mentioned Kotak Mahindra Capital and ICICI Securities as part of the team of bankers.

“We decided to go ahead with SBI Caps and Elara as they went ahead and took the lead in marketing of the offer and we were happy with their work," said Vishal Mehta, managing director at Infibeam, in a telephone interview. He added that since Infibeam’s is the first e-commerce IPO, investors will be keen to look at it.

The two banks and the company could not arrive at a consensus on the valuation and pricing of the offer which led to a parting of ways, as the company was confident about the price it sought and wanted to move ahead with the launch, said one of the three people mentioned above.

Infibeam has fixed a price band of 360-432 per share for it public offer.

The timing of the IPO launch was another bone of contention, a second person added.

“The e-commerce sector as a whole is facing several headwinds, with funding in private markets drying up and companies facing severe stress on valuations. Given this scenario, the bankers felt that launching the deal in the near term could be tricky affair."

A Kotak Mahindra group spokesperson said in an email that “Infibeam and Kotak Investment Banking have mutually agreed to disengage and we wish them all the very best for the IPO". An ICICI Securities spokesperson did not respond to an emailed query.

The exit of Kotak and ICICI comes in the backdrop of a recent markdown in valuation of e-commerce companies by some institutional investors.

On 27 February, Mint reported that a Morgan Stanley fund had trimmed the value of its stake in India’s most valued e-commerce company Flipkart by almost 27%. The fund has also marked down the value of its stake in other tech start-ups such as Dropbox Inc. and Palantir Technologies Inc.

“E-commerce companies are coming with valuations based on the registered or active number of customers and their gross merchandise value (GMVs)," said Deven Choksey, managing director, K.R. Choksey Shares and Securities Pvt. Ltd. GMV is the value of merchandise sold on the site.

“I am unsure how much premium you can give e-commerce companies just on the basis of their GMVs," he added.

“In my view, listed companies in the e-commerce space will trade at discounted valuations till they are profitable," Choksey added.

Infibeam, founded by former Amazon executive Mehta, turned profitable in the first six months of 2015-16.

The company posted revenue of 171.3 crore and a net profit of 6.6 crore for the six months ended September 2015. It reported revenue of 288.2 crore at a net loss of 9.8 crore for the year ended 31 March 2015.

The firm will use the IPO proceeds to set up a cloud data centre and set up 75 logistics centres, it said in its RHP.

After the stock exchange listing, Infibeam will be valued at 2,250 crore, Mehta said at a press conference on Tuesday. Match-making website Bharat Matrimony is another e-commerce company working on a share sale.

ankit.d@livemint.com

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