Infibeam Incorporation Ltd, the parent of horizontal e-commerce platform Infibeam and e-commerce enabler BuildaBazaar, made its stock market debut with gains on Monday, defying naysayers after its initial public offering (IPO) sailed through without bells and whistles last month.
The issue, the first by an e-commerce firm in India, was seen as an appetizer for other consumer internet firms to test public markets. While several analysts expected the stock to come under pressure on debut, the listing gains send a positive signal to firms such as Matrimony.com Pvt Ltd. The parent of BharatMatrimony and other related portals had received the Securities and Exchange Board of India’s approval for a public float in December.
Shares of Infibeam opened at Rs 453 apiece, up 4.8 per cent from its issue price of Rs 432. The stock touched an intra-day high of Rs 467 and low of Rs 440.25 before ending the day at Rs 445.55 on the National Stock Exchange in a strong Mumbai market.
The positive response also flies on the face of reports of 'down rounds' in consumer internet firms in India. Indeed, a public market fund under Morgan Stanley had previously marked down the value of its investment in India's top e-commerce venture Flipkart (click here for a different take on that).
Earlier, Infibeam had priced its shares issued in the IPO at the upper end of the Rs 360-432 a share band. This was despite a poor show with the issue just managing to sail through at the dying hours of the three-day subscription period.
The issue ended with over-subscription of just under 11 per cent at the lower end of the price band and and 33 per cent at the upper end. The issue was led by non-institutional investors (wealthy individuals and corporate investors).
The lackluster response implied that Infibeam would have had to price its issue at the lower end of the band. But, as first hinted by VCCircle, it was forced to price the share sale at Rs 432 each to ensure the institutional investors’ portion of the IPO does not remain undersubscribed, a key criterion for its success.
At this price, the firm was valued at Rs 2,290 crore ($343 million). Based on its listing gains, it is valued a tad higher.
The issue had got off to a slow start, receiving bids for about 21 per cent shares on offer on the first day and 63 per cent at the end of the second day.
Unlike some recent IPOs, Infibeam had not allotted any shares to anchor investors. Infibeam also happens to be an exception in the Indian e-commerce sector where firms have absorbed billions in venture funding while it didn’t bring any significant external investor.
There were apprehensions surrounding the aggressive pricing of the issue and two marquee domestic merchant bankers withdrawing from managing the IPO. While the issue did manage to sail through, the not-so-ecstatic response from investors, especially institutional shareholders, showed that large investors are not bullish about backing internet ventures.
Founded in 2010 by former Amazon executive Vishal Mehta, Infibeam is also one of the youngest firms to list on a national bourse. Having restricted itself from raising private capital, unlike its peers, it did not get too aggressive in customer acquisition to drive the B2C business and has been especially pushing the B2B e-commerce enabler platform BuildaBazaar.
It is promoted by a Gujarat-based affluent family whose business interest straddles a dealership for Toyota cars.
Infibeam promoters, who held a 56.63 per cent stake before listing, now own 45.5 per cent of the company.