Infibeam Incorporation Limited – Avoid

The company provides domestic e-commerce products and solutions in India. Unlike other e-commerce startups, Infibeam has opted to raise Rs.450cr directly from the primary market.

Mar 18, 2016 02:03 IST India Infoline Research Team

Issue Opens: 21-Mar-16, Issue Closes: 23Mar16, Price Band: Rs360-432
 
Infibeam is promoted by  Ajit Mehta, Vishal Mehta, and Malav Mehta. The company provides domestic e-commerce products and solutions in India. Unlike other e-commerce startups, Infibeam has opted to raise Rs.450cr directly from the primary market. 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. Furthermore, the exit of two investment bankers just before RHP calls for concerns. It will be a challenge for Infibeam to compete with the existing e-commerce giants. 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. Post listing Market Cap of ~Rs.2300cr appears expensive based on annualized FY16 sales of ~Rs.350cr, PAT of ~Rs.13cr.
 
Issue
Infibeam is offering a fresh issue of ~1.04cr equity shares at a price band of Rs.360-432. This values the company at ~Rs.2300cr at the upper price band, including ~Rs.450cr to be raised from fresh issue. Promoters holding will reduce from c56.63% to 45.61% post the IPO.
 
Expensive valuations
At the upper band of issue, the stock is priced at 6.5x (annualized) H1 FY16 EV/sales. ROE and ROCE is at 3% and 10%, respectively, as of H1 FY16. We envisage better profitability on the back of the upcoming cloud data centre and improvement in technology infrastructure and overseas growth. However, Infibeam issue seems highly expensive at current valuations. Investors should give the IPO a miss.
Financial Highlights
Y/e 31 Mar (Rs cr) FY12 FY13 FY14 FY15 H1 FY16
Turnover (net) 128 151 207 288 171
EBIDTA (excl other income)* (10) (22) (20) (2) 12
EBITDA Margin (%) (7.7) (14.6) (9.8) (0.8) 6.7
Net profit (11) (25) (26) (10) 7
Net Profit Margin (%) (8.5) (16.5) (13.0) (3.4) 3.6
EPS (Rs) ** (3.7) (6.6) (6.8) (2.3) 3
Source: RHP, India Infoline Research, * EBIDTA – Earnings before interest, depreciation, tax and amortization,
**H1 FY16 Annualized EPS

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