E-commerce company Infibeam Incorporation Ltd launched its initial public offering to raise Rs 450 crore on Monday. It is the first of India’s online retailers to gauge investor interest for the sector and if successful could pave the way for more such share sales in the future from e-commerce firms.
As of 2pm, the issue was subscribed just 0.12 times. Of the total issue size of 1,25,00,000 shares on offer, it received bids for 14,47,108 shares. The issue closes on Wednesday.
Infibeam has set a price band of Rs 360-432 for the share sale, which many have termed expensive.
Two of its investment bankers – ICICI Securities and Kotak Mahindra Capital - recently withdrew as the bankers to the issue, on concerns over the pricing and timing of the issue, which is a cause for concern, say analysts. SBI Capital Markets and Elara Capital are the other two book running lead managers to the issue.
Infibeam is founded by former Amazon executive Vishal Mehta and runs e-commerce website infibeam.com, apart from online marketplace BuildaBazaar.
The company intends to use the proceeds to set up 75 logistics centres and a cloud data centre, apart from buying software. It also plans to buy property to shift its corporate and registered offices.
Markets regulator Securities and Exchange Board of India is keen on e-commerce companies to raise capital via India’s equity markets. However, most of these online retailers still make losses and that could keep investors away.
For the year- ended March 31, 2015, Infibeam reported a loss of Rs 9.8 crore on revenue of Rs 288 crore. The company also reported a net loss for fiscal 2012, 2013 and fiscal 2014. Its revenues over fiscal 2012-2015 rose at a compounded annual rate of 31%. For six months ending September 2015, Infibeam reported a net profit of Rs 6.6 crore.
“The company has low/nil margins in its core business. Operating expenses could increase in future due to expansion of operations, upgradation of technological infrastructure, marketing and branding initiatives, addition of human resources etc,” said Saptarshi Mukherjee, analyst at brokerage IIFL.
Analysts say that it will be a challenge for Infibeam to compete with existing e-commerce giants like Amazon, whose parents have deep pockets and if its revenue growth in the future is not in-line with the rising operating expenses, it could post operational losses.