Infibeam prices IPO at the upper end of price band

Infibeam Incorporation Ltd, the parent of horizontal e-commerce platform Infibeam and e-commerce enabler BuildaBazaar, has priced its shares issued in the initial public offer (IPO) at the upper end of the Rs 360-432 a share band. This is even as the firm had a poor show with its issue managing to sail through at the dying hours of the three-day issue period.

It ended with over-subscription of just under 11 per cent at the lower end of the price band and with 33 per cent at the upper end of the issue band.

The issue was led by non-institutional investors (wealthy individuals and corporate investors).

The lackadaisical response to the issue implied that Infibeam would have priced its issue at the lower end of the band. But, as first hinted by VCCircle, it is forced to price the share sale at Rs 432 each to ensure the institutional investors portion of IPO 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). However, the shares may face additional downward pressure on listing day.

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, showed that 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 eventually lists. It would become the first pure-play e-commerce firm to go public in India.

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 held 56.63 per cent stake, will own 45.5 per cent stake at listing.