Differences over Rs 2200 cr valuation: ICICI Securites, Kotak withdraw from Infibeam IPO

Two investment banks — ICICI Securities and Kotak Mahindra Capital — dropped out from the Rs 450-crore initial public equity offering (IPO) of Infibeam, an internet and e-commerce company. Disagreement over valuations was the reason, said three people with knowledge of the development.

But Infibeam said the decision was due to the small size of the offering.

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A spokesperson of Kotak Mahindra Group said, “Infibeam and Kotak Investment Banking have mutually agreed to disengage and we wish them all the very best for the IPO.” ICICI Securities declined comment.

At the time of filing its offer document with the Securities and Exchange Board of India (Sebi), it had appointed four investment bankers — SBI Capital Markets, Elara Capital, ICICI Securities and Kotak Mahindra Capital — to work on the IPO, touted as the first by a company in the segment.

When Ahmedabad-based Infibeam started marketing the IPO with potential investors, ICICI and Kotak Mahindra Capital dropped out, as they couldn’t agree with the company’s management over valuations, said the sources.

The offer document was filed in June 2015. The go-ahead came in October and the company started taking to investors, termed 'roadshows' in market parlance.

“The year 2014 was great for e-commerce companies. However, valuations started to correct (fall) in 2015. The banks wanted this trend to reflect in the valuations but the company was confident that it would fetch investors at higher valuations, which led to the differences,” said a banker, requesting anonymity.  

“All four banks did a good job of due-diligence. However, when we entered the marketing stage, SBI Caps and Elara took the lead. As we had to raise only Rs 450 crore, we decided to go with only two investment banks,” said Vishal Mehta, managing director, Infibeam.

Infibeam at the top end of the price band is valued at Rs 2,200 crore. The company in the first six months of 2015-16 reported revenue of Rs 175 crore and net profit of Rs 6.2 crore.

It had losses in each of the previous five financial years.

As no domestic e-commerce company is listed, the valuations aren’t comparable.

Mehta said the company has arrived at these from “investor feedback”.

As Infibeam doesn’t meet Sebi’s profitability criteria, its IPO needs to be backed by institutional investors.

In other words, a minimum 75 per cent of the subscription has to come from institutional investors, as against 50 per cent in normal cases. The retail portion is restricted to 10 per cent.

Officials from SBI Caps and Elara who are working on the IPO said they were seeing strong demand from institutional investors.

PULLING OUT

• Infibeam: Appoints SBI Caps, Kotak, ICICI Sec and Elara for IPO
   
• June 2015: Company files for IPO with Sebi
   
• Oct 2015: Infibeam gets Sebi nod for IPO
   
• Differences: Emerge with Kotak, ICICI on valuations, say source
   
• Infibeam: Drops Kotak, ICICI from IPO plans
   
• March 21: Infibeam IPO launch day