IndiaMart InterMESH Limited's Initial Public Offer (IPO) opened for subscription today. Delhi-based IndiaMart InterMESH is an online marketplace and a business-to-business (B2B) classifieds platform connecting buyers with suppliers. The company enables the discovery of products across 50 industry categories. IndiaMart provides lead-generation services to sellers listed on its platform and earns revenue through subscription fee paid by the sellers. As of financial year 2018-19, the company had 55 lakh sellers listed on its platform with products across 97,000 categories. The number of suppliers using paid services has increased from 72,000 in fin ancial year 2015-16 to 130,000 in 2018-19, Angel Broking said in a note.
IndiaMart's IPO is worth Rs 476 crore and comprises an offer for sale (OFS) by promoters. IndiaMart promoters Dinesh Chandra Agarwal and Brijesh Agrawal along with Intel Capital (Mauritius), Amadeus IV DPF Limited and Accion Frontier Inclusion Mauritius are selling 2,076,190 shares, according to the red herring prospectus filed with the SEBI. After the IPO, the promoter holding of Dinesh Chandra Agarwal and Brijesh Agrawal will fall to 53 per cent from 58 per cent, Angel Broking said.
IndiaMart is selling equity shares of face value of Rs 10 each in the price band of Rs 970-973 per share between June 24 and 26. The issue size at the upper band of the price band values the company at Rs 476 crore. Investors can bid for shares in the IPO in the lot size of 15 shares.
IndiaMart IPO Investment Concerns
- Despite being the first mover, IndiaMart has not been able to monetize the full benefit, given that it has turned profitable only in FY2018.
- IndiaMart has to completely depend on adding new subscriptions, as it does not get any fee from deal value.
- The entry of large player (Google) having huge database poses a threat for company's growth.
- Over the last 4-5 years, a couple of new ventures have come up in the online marketplace space like Ninjacart (connects farmers to retailers), Power2SME (an online wholesale raw material buying platform for SMEs) and recently entered Udan. We believe IndiaMart will face competition in the respective fields where these have presence.
Source: Angel Broking
IndiaMart IPO Outlook and Valuations
At the upper end of the price band, IndiaMart demands price to earnings (PE) multiple of 33 times of FY19 EPS. Considering the investment concerns, we believe investors should wait for price discovery before taking any investment decision. Hence, we have 'Neutral' view on the issue, according to Angel Broking.
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