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Share sale scrapes through amid valuation concerns

MUMBAI (NewsRise) - Online market place Infibeam's initial share sale scraped through on the last day of the public offer, amid concerns the stock was overpriced and India's e-commerce industry was heading for a cutthroat competition that would hurt profits for many years. Infibeam's IPO was closely watched by investors and industry experts, as it was perceived as a harbinger for the dozens of online ventures looking to list in future. However, several analysts had warned investors to stay away from the offer, citing its valuation and vulnerability in the face of stiff competition from large e-commerce companies such as Flipkart Internet, and the local unit of U.S. The offer was subscribed 1.1 times, according to preliminary data on the National Stock Exchange. Demand from retail and institutional investors, which remained tepid on the first two days, picked up on the last day for the offer that aimed to raise as much as $81 million.

     The IPO received bids for 13.8 million shares against the offer of 12.5 million shares, according to the data on the National Stock Exchange. The company had set a price band of 360 rupees to 432 rupees a share.

     The details of the subscription weren't immediately available.

     "Notably, there were some instances in recent times, wherein valuations of e-commerce companies were either marked down in the unlisted space or have corrected in the global listed space," brokerage IIFL said in a note to clients last week. "It will be a challenge for Infibeam to compete with the existing e-commerce giants."

     The IPO comes in the backdrop of a 27% markdown in valuation of India's largest e-commerce company Flipkart Internet last year by Morgan Stanley, one of its high-profile investors.

     Infibeam founder and chief executive Vishal Mehta had last week said the growth opportunity in Indian e-commerce is so huge that individual investment preferences don't matter.

     According to the draft IPO prospectus, Infibeam turned its first profit of 66 million rupees in the six months that ended in September, on total revenue of 1.71 billion rupees.

     Some analysts, however, say the subscription is a success for Infibeam.

     "E-commerce companies watching this IPO would take this as a positive sign, even at an apparent high valuation," said Pranav Haldea, managing director of PRIME Database. The successful listing of Infibeam would dispel the valuation concerns of many e-commerce companies that are registered outside the country and are looking to list in matured markets, Haldea said.

     Reuters reported that India's top e-commerce companies Flipkart and are considering a New York listing within the next two years.

     Still, Infibeam's subscription paled against some of the blockbuster offerings of last year. The IPO by InterGlobe, owner of the country's largest airline IndiGo, was oversubscribed nearly five times, making the offer India's biggest IPO in at least three years. Wind-turbine maker Inox Wind's IPO was subscribed over 18 times early last year.

     Started in 2007 by an executive Vishal Mehta, Infibeam also has a profitable services business which offers subscription-based software, web hosting and logistics tools called that helps merchants create their own online storefront.

     The company plans to use the funds raised from the share sale to build data centers and set up more logistics facilities and buy software.

     Infibeam's listing comes at a time when e-commerce is booming in the world's second- most populous country where millions of Indians buy clothes to electronics to groceries online, using cheap smartphones. Morgan Stanley predicts the value of India's e-commerce market to jump seven times to $119 billion in the next four years, aided by increasing Internet penetration and rising number of online shoppers.

     The share sale also comes in the wake of a revival in the IPO market, where listings had dried up since 2010 amid an economic downturn.

     In 2015, 21 companies raised about $2 billion through public offerings in India, according to Prime Database. That compared with 5 companies raising $180 million in the previous year, it said.

     India's benchmark S&P BSE index is up more than 10% this month. The Sensex closed 0.03% higher at 25,337.56 on Wednesday.

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