Infibeam eyes $70M in IPO; claims 7.2M active users, 4K third party merchants on Infibeam.com

Infibeam Incorporation Ltd, the parent of horizontal e-commerce platform Infibeam besides e-commerce enabler BuildaBazaar, has filed its draft red herring prospectus with securities market regulator SEBI for its initial public offer to raise up to Rs 450 crore ($70 million).

This would make it the first pure-play e-commerce firm in the country to float an IPO in India and would test the general investors' appetite for the sector. E-commerce in India has absorbed billions of dollars in the past four years, much of it from foreign private equity and venture capital firms.

Infibeam happens to be an exception of not having tapped on to any significant private investor till now. It is promoted by a Gujarat-based high net-worth family whose business interest straddles dealership for Toyota branded cars.

It has been self funded even though it has several individual shareholders. The only external equity funding has been with media house Bennett, Coleman & Co Ltd that bet around Rs 33.3 crore through ad-for-equity investment platform Brand Equity Treaties Ltd (BETL). BETL owns 1.8 per cent stake in the firm. BETL also pitched in with Rs 2 crore of non-convertible debentures, which are outstanding as of now.

Infibeam would become one of the youngest firms to go public in a national bourse. Having started in 2010, it is among the youngest home-grown e-commerce ventures. Having restricted itself from raising private capital, unlike its peers, it did not get too aggressive in customer acquisition to drive the B2C business.

It built a parallel business of becoming an e-commerce enabler for offline retailers and brands. This comes across as a B2B business for the firm and hogs less cash than the front-end e-tailing business.

To its credit it is one of the rare horizontal e-commerce platforms to have survived without large external funding. Others like IndiaPlaza shut down as they failed to get follow-on funding as the market, and as a consequence, investors funding got concentrated to the troika of Flipkart, Snapdeal and distant player ShopClues. Global e-commerce behemoth Amazon itself is on a high growth path in India.

It would expand the pool of public-listed internet related companies out of India. While online travel agency MakeMyTrip is listed on NASDAQ, Info Edge—the parent of Naukri.com and 99acres besides majority stakeholder in ventures such as Zomato—is another listed firm in India. Local business site Just Dial that went public a couple of years ago in India is now morphing into an e-commerce marketplace itself and small firms Intrasoft (which runs123greetings.com) and Rediff also have e-commerce exposure but are too small as ventures.

Lifestyle e-commerce venture Koovs is majority owned by a firm listed on London Stock Exchange's junior market AIM. Home shopping and e-commerce firm HomeShop18 planned to go public in the New York Stock Exchange but later withdrew the proposed issue after a change in management with Reliance Industries gaining control of the group.

Infibeam would be the first significant pure-play e-commerce related firm to go public in the country.

It would join a list of over one-and-a-half dozen firms that have filed or have even got SEBI's nod to float their IPOs.

The volatility in the stock market over the last two-three months has led to a temporary pause in the number of IPOs.

Here's a snapshot of the IPO:

Issue comprises fresh issue of shares to raise up to Rs 450 crore. The firm said it would float at least 25 per cent of the equity in the IPO, which means it is looking at a valuation of as much as Rs 1,800 crore.

Bankers: SBI Caps, ICICI Securities, Kotak Mahindra Capital and Elara Capital.

Use of proceeds:

The company said the bulk of the money it raises (Rs 235.2 crore) would be used to set up a cloud data centre and purchase of property for shifting and setting up of registered and corporate office. The rest would be utilised for setting up 75 logistics centres (Rs 37.5 crore), purchase of software (Rs 67 crore) and the rest for general corporate purposes.

Company:

Started in June 2010 by MIT grad and former Amazon Inc executive Vishal Mehta, with the backing of his business family, Infibeam is positioned as an integrated e-commerce player. It owns and operates the Infibeam BuildaBazaar (BaB) e-commerce marketplace, which provides cloud-based, modular and customisable digital solutions and other value-added services to enable merchants to set up online storefronts. It also operates Infibeam.com, a multi-category e-retail website.

As of March 31, 2015, it had 33,489 registered merchants under BaB as against 350 registered merchants as of March 31, 2012. It claims Infibeam.com e-retail operations provide it with access to customers, market analytics and other synergistic operating efficiencies and offerings and an additional sales channel for BaB marketplace merchants. It counts customers like Unitech Amusement Parks, Panasonic India, Crossword Bookstores, Spice Retail, Adlabs Entertainment, Hidesign India and Mumbai International Airport among its clients for the BaB offering.

Under Infibeam.com, as of March 31, 2015, it had more than 15 million SKUs of products across 40 categories. It has followed an asset-light inventory model and having turned into a marketplace, claims more than 4,000 registered merchants on the site comprising manufacturers, distributors, aggregators and retailers ranging across various industries, including media and entertainment, travel and hospitality, publishers, lifestyle products and technology providers. As of March 31, 2015, it says it had more than 7.2 million active users on Infibeam.com (based on last login in the immediately preceding 12 months). This increased from 3 million as of March 31, 2012.

As of March 31, 2015, it had 13 logistics centres across 12 cities in India, including in Mumbai, Bengaluru, Delhi, Gurgaon, Kolkata, Hyderabad, Guwahati, Jaipur, Pune, Lucknow, Ahmedabad and Chennai, and currently selectively outsources some of its logistics services. In addition, as of March 31, 2015, it had six warehouses located at Delhi, Gurgaon, Bengaluru, Ahmedabad, Mumbai and Kolkata.

The firm plans to expand its logistics network in the future to strengthen fulfilment capabilities for the BaB marketplace as well as Infibeam.com e-retail operations.

It has also strategically launched .ooo top level domain registry as part of merchant acquisition strategy and also has a joint venture with Sony Entertainment to develop, build and own software applications by offering downloading and streaming of licensed digital music content.

As of March 31, 2015, it had more than 850 employees, including a large number of software engineers and information technology experts.

Financials

Its revenue from operations rose from Rs 127.88 crore in FY12 to Rs 207.3 crore in FY14. In the same period its net loss rose from Rs 10.8 crore to Rs 25.9 crore. For the April-December 2014 period its revenues was pegged at Rs 214.35 crore with net loss of Rs 9.6 crore.

Bulk of its business (around 75 per cent) represents the gross merchandise value or GMV of direct sale of products or inventory-led e-tailing through Infibeam.com with the remaining 25 per cent coming from services. Services represents what it earns through BaB besides listing fees from third-party merchants selling through Infibeam.com.

For the nine months ended December 31, 2014, GMV through direct sale by Infibeam (not counting sales logged by other merchants) was Rs 165 crore against Rs 176 crore for the 12 months ended March 31, 2014. AlthoughInfibeam.com continues to be the key revenue generator, the services unit has been growing much faster. Its revenues have grown from Rs 2.9 crore in FY11 to Rs 30 crore in FY14. In the April-December 2014 period it grew to Rs 49.3 crore.