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Investors Wary At Infibeam’s IPO Debut, Bankers Bow Their Way Out Over Equity Prices

Infibeam
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Infibeam Incorporation Ltd, the Gujarat-based e-commerce startup that recently gained limelight by becoming the first Indian e-commerce portal to going for an IPO, is witnessing a rather cautious run of its IPO — contrary to expectations.

The IPO, which started today, was supposed to bring in a sum of 450 crores to the company’s coffers. However, two of the four participating banks have bowed their way out, even before the IPO took place.

The two banks that have withdrawn their offer, citing concerns over pricing and the timing of the issue, include Kotak Mahindra Capital and ICICI Securities. The sudden withdrawal leaves the company in a lurch, with SBI Capital Markets Ltd and Elara Capital (India) Pvt. Ltd the only two remaining bankers.

According to sources, Infibeam’s pricing range per share, which was in the North of INR 350, may have caused this sudden split. The investors deemed the price too expensive for an IPO, although Infibeam quite obviously thinks otherwise.

Speaking on the topic, IIFL analysts Saptarshi Mukherjee and Amod Joshi said,

Notably, there were some instances in recent times, wherein valuations of e-commerce companies were either marked down in the unlisted space or have corrected in the global listed space. However, Infibeam has not compromised on its valuations,

A veiled finger that also points at the recent markdown of Flipkart. Meanwhile, with investors drawing their purse strings on e-commerce portals, public investments have suddenly gained in importance.

The analysts also remarked on the possibility of equity dilution to raise funds. While no company likes to dilute its stakes, the need to raise investments may just over ride all other concerns.

Furthermore, to raise additional funds in the future, the company may go in for equity dilution or increase its debt. This can be a cause of concern for investors. In addition, future cash flow generated from the high margin service business could be utilized by the e-commerce business,

Infibeam meanwhile, has been showing steady profits since the last few quarters. The funds raised via the IPO are meant to strengthen it’s tech and logistics sectors. However, the loss of its two prominent backers may hit the company hard.

Exactly how hard, we will find on the 23rd, which is when the IPO is slated to conclude. The company hopes to have INR 450 crores in its kitty by then and reach a value in the north of 2000 crores.


 

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