Monday, 21 March 2016

Infibeam IPO hits capital markets today : 21 March 2013


Infibeam IPO: The company has fixed the price band at Rs 360-432 per equity share for the IPO. The initial public offer (IPO) will conclude on March 23.

 Infibeam hit the capital markets on Monday to mop-up Rs 450 crore through an initial public offerings (IPO), becoming the first e-commerce firm to tap the IPO route.

The company has fixed the price band at Rs 360-432 per equity share for the IPO.
The initial public offer (IPO) will conclude on March 23.

The company competes with Flipkart, Amazon, Snapdeal and others in the e-commerce space. Started in 2007, Infibeam runs several e-commerce services like Infibeam.com, BuildaBazaar, Incept and Picsquare. It has proposed to list its shares on NSE and BSE. The issue is being managed by SBI Capital Markets and Elara Capital India.

Infibeam will use the net proceed from the IPO to set up cloud data centre and purchase of property for shifting of the registered and corporate offices, setting up of 75 logistics centres, purchase of software and general corporate purposes.
According to Choice Broking, the company's e-tail website, infibeam.com, contributes about 72 per cent to company's consolidated revenue. infibeam.com adopts the inventory led model of e-commerce industry and is selling product at discount compared to its purchase price, there by making a loss in this business. Though the company is betting on the sales of services segment whose major share of revenue comes from Buildabazaar, it only contributes only 28 per cent to the business's revenue.

For the financial year ended March 2012, 2013, 2014, 2015 and in the six months ended September 30, 2015, revenue from operations of Infibeam stood at Rs 127.88 crore, Rs 151.15 crore, Rs 207.34 crore, Rs 288.28 crore and Rs 171.27 crore, respectively. The company's revenue from operations increased at a CAGR of 31.12 per cent between 2011-12 and 2014-15. Infibeam losses after tax for financial years ended March 2012, 2013, 2014 and 2015 were Rs 10.83 crore, Rs 24.91 crore, Rs 25.95 crore and Rs 9.79 crore, respectively, while profit after tax in the six months ended September 30, 2015 was Rs 6.58 crore.
According to Reliance Securities, at the upper price-band, Infibeam is valued at EV/Revenue of 6.2x (FY15 revenue). Average of peers including global e-tail (Amazon/Alibaba/eBay/Rakuten), e-commerce solution providers (Shopify, GoDaddy) and domestic internet peers (InfoEdge, Just Dial) are at around 4x EV/revenue.

Shareholding Pattern

Should you Invest

Choice Broking: At the lower price band of Rs 360 per share, the company's share is available at a P/S (x) of 5.6, while at higher price band of Rs 432, it is available at P/S (x) of 6.7 of its FY16E, which is 39 per cent premium to its global peers such as Amazon.com, eBay Inc and Shopify Inc. Thus, the brokerage house assign 'Avoid' rating to the issue."

Infibeam's e-retail business has a similar model as Flipkart and Snapdeal, but is significantly smaller than the two dominant players which have strong PE backup. Its other business, i.e. BaB, in revenue terms is also smaller (Rs 67cr FY2015) compared to global players like Shopify.com (US$205mn CY2015). Moreover, even if BaB business does gain dominant position in India, it is insufficient to justify the valuation. Considering this, Angel Broking believes that the EV/Sales multiple of 4.3x-5.2x demanded by the company is steep. Given that the company is still evolving, has an unproven profitability track record and the expensive valuation, the brokerage house has a 'Neutral' recommendation on the issue."

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