Infibeam's listing will be the moment of truth for India's e-commerce industry

If the stock does not manage to perform well, it is likely to impact valuations of the entire ecommerce sector

E-commerce firm Infibeam which is looking to go public at a targeted valuation of $330 million is a dwarf in comparison to giants such as Flipkart and Snapdeal.

But the performance of this David, completely bootstrapped and to be the India's first e-commerce firm to go public, would impact the valuations of Goliaths such as Flipkart and Snapdeal, who have multi-billion dollar valuations.

After Morgan Stanley marked down its investment valuation in Flipkart, the firm has lost its value by over a quarter to around $ 11 billion from $15.2 billion, when it raised $700 million in July 2015. This has already dampened the valuations of several startups as investors look at profits and sustained business growth over splurging cash to get more customers on board.

 “Listing would be the moment of truth for all internet companies,” said said V Balakrishnan, co-founder of venture capital firm Exfinity Ventures. “When you are listed, you have to be much more transparent in operations, disclose how you are building a sustainable business model with focus on profitability, cash flows and growth.”

Balakrishnan, a former chief financial officer of Infosys Ltd and part of the team that led Infosys to successfully list on Nasdaq says how the Infibeam stock is received on the exchanges would impact the entire e-commerce industry.

“Infibeam’s performance (on the stock market) will have an impact on the entire e-commerce sector. There are already lots of concerns over valuations of e-commerce companies,” “If it (Infibeam) lists with a better price, then it is good, if it is not, it would impact the valuations of the entire sector.”

Infibeam, founded by a former Amazon executive Vishal Mehta and based out of Ahmedabad, has shied away from venture capital and private equity investments unlike its larger peers. The firm has also focused on building a sustainable business than focus on throwing discounts to get more customers on board.

Infibeam had reported a loss of around Rs 9.8 crore on a revenue of Rs 288 crore for the year that ended March 2015. In the following six months, the company reported a profit of Rs 6.6 crore on a revenue of Rs 171.3 crore, according to share sale documents.

In contrast, its larger peers such as Snapdeal, Flipkart and Amazon have combined losses of Rs 7,884 crore for the year that ended March 2015. 

“A good successful public listing gives a lot of confidence for promoters and retail investors. Investors typically believe because e-commerce firms are backed by private equity players, the business model is not sustainable,” said Abdul Majeed, a partner at PriceWaterhouseCoopers. “In the Indian context, it gives lot more confidence for promoters not to depend on short term capital such as Private equity and look at public funds to run long term sustainable business.”

According to its filing with Sebi, Infibeam plans to raise close to Rs 450 crore from the public market for the setting up of a cloud data centre, shift its corporate office, setup 75 logistics centres, buy software and for general corporate purposes.