Valuation of Infibeam has come under focus ahead of the company’s initial share sale, as media reports suggested that investment banks Kotak Mahindra Capital and ICICI Securities dropped out of the issue due to disagreement over the same.
The debate over expensive valuation of Infibeam originates at a time when valuations of various e-commerce companies have witnessed sharp corrections.
At the upper price band, Infibeam is valued at Rs 2,220 crore. During the first two quarters of FY16, the company generated revenues of Rs 349 crore. During the period, the e-commerce player went on to make a profit of R6.75 crore.
Since inception,this is the first time that the company made a profit. It incurred a loss of R9.78 crore in FY15, while the loss stood at R25.94 crore for FY14, DRHP data showed.
Based on these financials, the company has been valued at 6.3 times its revenue and 167.43 times the profit.
This is steep compared to its peers in both listed and unlisted space. For instance, online market place Shopclues is valued 1.33 times its gross merchandise volume (GMV). The valuation of Infibeam is marginally less than that of Flipkart – India’s largest e-commerce company. In February, international mutual fund Morgan Stanley had valued Flipkart at $11 billion, which is nearly 26% less than the company’s peak valuation of $15 billion in early 2015.
In the listed space, Just Dial is valued 6.19 times the annualised profit of the company for FY16. Info Edge, another company related to e-commerce, is valued at 10.69 times the annualised profits, data compiled from stock exchanges showed.
However, promoters and investment bankers of the issue claim such expensive valuations are justified. “At a time when all the e-commerce companies are making losses, Infibeam has already made profits. The business model of Infibeam is different from others. Unlike its peers, Infibeam doesn’t burn large amount of capital in providing online discounts on merchandise. We also have the first mover advantage in the stock markets,” said an investment banker who is handling the issue.
The public issue of Infibeam will open on March 21 and the company has fixed a price band of Rs 360-432. SBI Caps and Elara Capital are the book running lead managers for the issue.
The company plans to raise Rs 450 crore through the offering. Infibeam, founded by former Amazon executive Vishal Mehta, aims to use the proceeds to set up a cloud data centre, shift its registered and corporate office, set up 75 logistics centres, buy software and for general corporate purposes, DRHP data showed.