Infibeam IPO sails through without bells and whistles

The initial public offering (IPO) of Infibeam Incorporation Ltd, the parent of horizontal e-commerce platform Infibeam and e-commerce enabler BuildaBazaar, sailed through in the dying hours of the three-day issue period.

It ended with over-subscription of just under 11 per cent at the close of the issue on Wednesday.

Non-institutional investors (wealthy individuals and corporate investors) led the show and bid for 2.23 times the portion reserved for them. Retail investors' quota was oversubscribed 30 per cent while qualified institutional buyers' (QIB) portion wasn't fully covered at the lower end of the price band and fell 15 per cent short of the mark.

However, the QIB portion was just about covered at the upper end of the price band.

The issue had got off to a slow start, receiving bids for about 21 per cent of the shares on offer at the end of the first day and saw subscription for 63 per cent of the issue 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, shows large investors are not bullish about backing internet ventures.

It may force a rethink on the IPO plans of another consumer internet venture that is in the queue--Matrimony.com Pvt Ltd. The parent of BharatMatrimony and other related portals had received capital market regulator SEBI's nod to go ahead with a public float in December.

The picture will be clearer when Infibeam lists, and any spike in its share price may well turn the tide.

Infibeam happens to be the first pure-play e-commerce firm to go public in India.

Meanwhile, while the lackadaisical response to the issue implied that it would price its issue at the lower end of the band of Rs 360-432 a share. At that price the company would have commanded a market value of around Rs 1,986 crore ($298 million).

However, the issue would now need to be priced at Rs 432 a share to ensure the QIB portion does not remain undersubscribed, a key criterion for its success. At this price, the firm would be valued at Rs 2,290 crore ($343 million). On the flip side, the shares may face additional downward pressure on listing day.

Founded in 2010 by former Amazon executive Vishal Mehta, Infibeam will also be 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 currently own a 56.63 per cent stake, will hold a 43.7 per cent stake after the issue.

For full details of the public offering, click here.