HomeShop18 files for $75M IPO on NYSE

HomeShop18 has filed its prospectus to raise a total of $75 million through a listing on the New York Stock Exchange (NYSE) including offer for sale by some shareholders such as its CEO Sundeep Malhotra and parent Network18, as per a SEC disclosure on Thursday. The issue has not been priced yet but back of the envelope calculations show it could value the firm at around $500 million (more on that later).

This would make it the second Indian products e-commerce firm to go public after fashion e-tailer Koovs listed on London's AIM market a few weeks ago.

HomeShop18, which operates a television home shopping network and also runs an online marketplace, is part of diversified media house Network18 and is backed by PE firm SAIF Partners and funds managed by OCP Asia; it also counts South Korea's GS Home Shopping as a strategic investor.

Both the financial investors as well as GS Home Shopping are staying put and have not offered any shares for sale.

Currently HomeShop18, which is headquartered in Noida, is operated by TV18 Home Shopping Network Ltd, which in turn is owned by Cyprus-based holding entity NW18 HSN Holdings PLC (formerly TV18 HSN Holdings Ltd). This entity is a step-down subsidiary of Network18 (through Network18 Holdings Ltd, Mauritius) and counts SAIF Partners, OCP and GS Home Shopping as minority shareholders.

The public issue would see Network18 and some other executive officers selling some shares.

It said Rs 250 crore ($42.3 million) of the proceeds that Network18 Holdings Limited expects to receive from its sale of ordinary shares in this offering will be paid directly to NW18 to fully fund all of its partially paid preference shares and warrants held by Network18 Holdings. Thereafter these preference shares and warrants will immediately convert into its ordinary shares.

As a result of this conversion, the compulsorily convertible preference shares of NW18's Indian operating subsidiary, currently owned by Network18, will convert into ordinary shares of TV18 Home Shopping Network. Shortly after the completion of the IPO, NW18 will use the funds it receives from Network18 Holdings to purchase the ordinary shares of the key Indian subsidiary issued to Network18 upon conversion of these convertible preference shares. This is to be completed within 45 days of the IPO.

What's noteworthy is that the financial investors are not looking at a part exit in the public issue. Particularly, this would add another feather in the cap of SAIF Partners, which has been successful in taking a string of its portfolio firms public. Last year it took Just Dial public in India. The business listings venture has seen its share price rocket since its listing.

Earlier, SAIF Partners-backed online travel agency MakeMyTrip had listed on NASDAQ.

SAIF Partners owns 25.2 per cent effective stake in HomeShop18 and is the lead financial investor ahead of GS Home Shopping (17.1 per cent) and OCP (6.4 per cent). Network18 holds majority stake in the venture.

HomeShop18

The firm launched HomeShop18 television channel in April 2008 and its e-commerce property HomeShop18.com in January 2011. Its revenues are derived from the commission it gets from the sale of products by its vendors through its platforms. It still generates bulk of its revenues from television shopping business.

Its revenue from operations grew from Rs 87.5 crore ($19.2 million) for fiscal year ended March 31, 2011, to Rs 117.6 crore ($24.5 million) for FY12 and Rs 221.8 crore ($40.7 million) for FY13. For the first six months of the last financial year (April 2013-September 2013) it clocked revenues of Rs 153.9 crore ($25.6 million), up 66 per cent over the year-ago period.

HomeShop18's gross transaction value grew from Rs 285 crore ($62.6 million) for fiscal year 2011 to Rs 522.3 crore ($108.5 million) for fiscal year 2012 and Rs 907.7 crore ($166.5 million) for fiscal year 2013. Its gross transaction value reached Rs 568.9 crore ($94.6 million) in the six months ended September 30, 2013, compared with gross transaction value of Rs 383.2 crore ($69.8 million) in the six months ended September 30, 2012.

This means its blended commission from the overall transaction value shrank from 30.7 per cent in FY11 to 27 per cent in H1 FY14.

However, the commission it charges form e-commerce transactions moved up from 13.2 per cent in the first half of FY13 to 17.6 per cent in the April-September 2013 period. In the same period, the commission revenue from television shopping business rose from 27 per cent to 30 per cent. The firm has been trying to generate more net revenues.

Its adjusted EBITDA loss shrank from $9.8 million to $7.6 million in the same period.

What's interesting is that bulk of the growth in transaction value lately, has come from its television business while its e-commerce unit has almost been flat at around Rs 139 crore in the first half of last financial year, almost the same as the year-ago period. In the same period value of products sold through its television channel has moved up from Rs 244.5 crore to Rs 429.6 crore.

Valuation

The IPO has not been priced yet but its past funding deals could give some clue.

Last October it raised $14 million (Rs 87 crore) follow-on funding round with existing investors GS Home Shopping, funds managed by OCP Asia and Network18. This transaction valued HomeShop18 at $360 million (Rs 2,230 crore).

This came six months after the firm raised fresh capital of $30 million (Rs 163 crore back then) from OCP Asia and Network18. This transaction valued HomeShop18 at $330 million (Rs 1,790 crore).

Before that, the company raised over $100 million in multiple rounds from SAIF Partners, Network18, GS Shopping and OCP Asia, as per data collated by VCCEdge, the financial research platform of VCCircle.

SAIF Partners, the earliest investor in the venture, did not participate in the last two funding rounds.

Purely based on the valuation commanded by the firm on its net revenues, and expected growth in revenue for the year ended March 31, 2014, the firm could be eyeing a valuation of around $500 million (Rs 3,000 crore), as per back-of-the-envelope estimates.

Lifestyle e-commerce venture Koovs, which listed with around 20 per cent jump in its share price on debut at London's junior stock market AIM last month in a fully underwritten public issue, closed on debut with a market cap of around £44 million ($74 million). The company said it is picking 57.5 per cent in Koovs India for £16.5 million, valuing the venture at £28.7 million or $48 million. Koovs' share price has declined since then and is currently trading 10 per cent above its issue price.

(Edited by Joby Puthuparampil Johnson)