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NRI’s tech IPO rocks on Wall Street

Jagdeep Singh's Infinera Corp lists a 52% gain on the Nasdaq, recording a $1.5 bn market capitalisation, reports N Madhavan.

business Updated: Jun 12, 2007 12:01 IST
Narayanan Madhavan

While India was awaiting its biggest IPO from realtor DLF, another Indian IPO was making waves last week in far away New York.

Jagdeep Singh is not a familiar name to Indians, but this NRI technology entrepreneur made Wall Street sit up when his company, Infinera Corp, listed with a sensational 52 per cent gain on the Nasdaq, ending with a market capitalisation of about $1.5 billion (Rs 6150 crore).

That compares with an average gain of only 9 per cent for intitial public offers (IPOs) of shares in the United States this year, and certainly marks the most successful technology debut there.

Helped by two brand-name Indians in Silicon Valley, venture capitalist Vinod Khosla and Pradeep Sindhu of Juniper Networks, this turbaned son of an Indian diplomat, who founded Infinera in 2000, has managed to build a microchip that changes the rules of the game: instead of electrons, it uses light as the basis to build an integrated circuit.

The dramatic shift in the way chips are built has made some compare Infinera to Intel, whose founder Gordon Moore built the electronic integrated circuit in the 1950s.

Curiously Infinera was backed by the market despite the fact that it is still running losses. It was backed for the brilliance of its idea, the integrated photonic circuit (IPC), which it has successfully demonstrated.

<b1>Singh, along with co-founders Dave Welch, Drew Perkins, has raised more than $300 million in venture capital since he began, to build Infinera, which also became one of the earliest US-based startups to head for Bangalore and set up an innovation-oriented software development centre there, while global giants were still slowly sending existing work to India in order to cut costs.

Infinera recorded revenues of $58.2 million for the year ended December 2006, and a net loss of about $90 million.

Last Wednesday, Infinera raised about $182 million by selling 14 million shares at $13, a day after it was priced in the $10-12 a share range at a valuation of about $1 billion. On Thursday, on listing, the shares shot up to $22 , up about 70 per cent, before ending the day 52 per cent higher at $19.7 a share with a market capitalisation above $1.5 billion.

“Great controversy surrounds the company and iinvestors wonder whether the valuation attached to the company is justifiable,” Andrew Schmitt wrote in the stock market analysis Web site SeekingAlpha.

But there is little doubt that the field is hot, and its founders, who have previously built successful networking companies, know their high tech.

Om Malik, who runs the U.S.-based technology news Website gigaom.com, wrote that Infinera was comparable to search engine leader Google, Internet phone company Skype (since acquired by eBay) and broadband phone service Vonage.

"The common trait amongst all these companies is the audaciousness of the idea, and the unrelenting desire of the founders to just march to the beat of the drum only they hear. Some have happy endings, others don’t, Malik said.

Optical networking, which uses light waves to transmit digital data that enables the Internet and its carriage of text, sound and video, is not new, but has involved high costs that involve dozens of components that go into network equipment.

Infinera’s PICs include the functionality of more than 60 optical devices on one pair of chips, each one less than 1 square centimeter. That helps telecom companies lower costs of rolling out equipment including broadband infrastructure dramatically. Infinera’s aim was to halve the costs.