First e-commerce IPO Infibeam scrapes through

Infibeam offer subscribed 1.1 times, MFs give it a miss

The first-ever e-commerce initial public offering (IPO) of equity saw lukewarm response from the investor community, particularly mutual funds which didn’t apply for a single share.

Ahmedabad-based Infibeam Corporation’s IPO garnered only a 1.1 times subscription. Its 12.5-million share issue got bids for 13.85 million shares, data provided by stock exchanges showed.

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The institutional investor segment was subscribed 86 per cent, the high networth individual segment 2.23 times and retail portion 1.31 times.

Investment bankers said the data computation by stock exchanges was at the lower end of the price band. At the upper end of the price band, the issue was subscribed in all categories, they said. “Since most of the bids in the IPO came at the upper end of the price band, the company will have to issue fewer shares. As a result, the issue has been fully covered in all categories, including institutional,” explained an investment banker, working on the IPO.

The price band for the Infibeam IPO was Rs 360 to Rs 432 a share. At the lower end, the company would have had to issue 12.5 million shares to raise Rs 450 crore; at the top end, it would have had to issue around 10.4 million shares. As Infibeam didn’t need Securities and Exchange Board of India’s profitability requirement, its IPO had to be backed by institutional investors, which means a minimum of 75 per cent of the issue had to be reserved for institutional investors.

Interestingly, mutual fund investors, big participants in almost all recent IPOs, gave the Infibeam issue a complete miss.

Sectoral players said Infibeam’s relatively small size compared to domestic e-commerce players like Flipkart and Snapdeal, expensive valuations and dropping out of two investment bankers ahead of the IPO weighed on investor participation.

Analysts at Angel Broking and Reliance Securities in their IPO note had said Infibeam’s IPO was expensive on enterprise value (EV) to sales basis. The company was valued at over six times EV/sales. In comparison, most global e-commerce players trade at just four times EV/sales.

Also, the dropping out of ICICI Securities and Kotak Mahindra Bank ahead of the IPO had sent a wrong signal to the market, said analysts.

At the top-end of the price band, Infibeam will be valued at over Rs 2,200 crore. The company in the first six months of 2015-16 reported revenues of Rs 175 crore and net profit around Rs 6.2 crore. Infibeam has reported losses in each of the previous five financial years.