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Eyeing the exchanges.
GOING PUBLIC

India’s first e-commerce IPO has arrived

Itika Sharma Punit
By Itika Sharma Punit

Co-editor, Quartz India

India’s thriving e-commerce sector—which has so far grown mainly on venture capital and private equity money—will soon see its first public listing.

On Sept. 30, e-commerce firm Infibeam Incorporation received an approval from the Securities and Exchange Board of India (SEBI), the country’s stock market regulator, to raise around Rs450 crore ($68.9 million) through an initial public offering (IPO).

Once it goes through, the Ahmedabad-based company—which competes with Flipkart, Amazon, and Snapdeal in the e-commerce segment—will become the first online retailer to list on the BSE and the National Stock Exchange (NSE).

Indian technology startups have largely stayed away from listing on domestic stock exchanges so far due to unfavourable regulations. The existing rules often measure startups on the same parameters as legacy companies, which have entirely different business models and growth trajectories.

But lately, India’s market regulator has been trying. In June, SEBI announced a fresh set of norms to facilitate easier listing of startups on a separate platform of the BSE and the NSE.

Moreover, Infibeam’s IPO comes amid rising concerns over a likely valuation bubble in the Indian e-commerce market. So the response that this listing gets from investors may provide a reality check for the sector.

“This IPO could be indicative, if not decisive, for the entire Indian e-commerce sector’s future funding plans,” Bharat Anand, partner at Khaitan & Co, which advises businesses including startups, told Quartz. “The reaction that the IPO gets from investors will show whether the stock market is mature enough to accept such a paper or not.”

Of the handful internet companies listed on Indian stock exchanges, the most prominent are Info Edge—which operates portals like Naukri.com, Jeevansathi.com and 99acres.com—and Just Dial. InfoEdge’s stock issue, back in 2006, was subscribed 55 times, while Just Dial’s 2013 IPO was subscribed 12 times.

Founded in 2007 by Vishal Mehta—a Cornell University and Massachusetts Institute of Technology graduate, who worked at  Dell and Amazon—Infibeam has presence across several e-commerce verticals. Its businesses include a multi-category online retail website called Infibeam.com, a platform that helps merchants set up online storefronts called Infibeam BuildaBazaar, and an e-ticketing solution called Incept.

It also owns Indent—a technology platform for music labels, brands and original equipment makers—in which Sony Music bought a 26% stake last year. There’s also a photo printing portal called Picsquare, which it had acquired in 2008.

During financial year 2014, Infibeam had a revenue of Rs207.34 crore ($31.8 million) and booked a loss of around Rs26 crore ($4 million). In the nine months that ended on Dec. 31, 2014, the company’s revenue stood at Rs214.35 crore ($33 million), with a loss of around Rs10 crore ($1.53 million).

“Our revenue from operations increased at a CAGR (compounded annual growth rate) of 27.33% between fiscal 2012 and fiscal 2014,” the company said in its draft red herring prospectus (pdf) filed with SEBI.

Infibeam plans to use the funds raised through the IPO for setting up a cloud data centre, buying an office space, setting up 75 logistics centres, purchasing some software and other general corporate purposes.

As on March 31, 2015, Infibeam had 13 logistics centres across 12 Indian cities, and six warehouses located each at Delhi, Gurgaon, Bengaluru, Ahmedabad, Mumbai and Kolkata.

“Lack of track record and past precedence has been a problem for the sector. So it is a very exciting move but a very challenging and brave one at the same time,” Anand of Khaitan & Co said.

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