Indiamart IPO Opens On 24 June, Should You Subscribe?

IPO details

Issue date: 24 to 26 June

Price band: Rs 970-973

Lot size: Bids have to be made for a minimum of 15 shares and in multiples of 15 thereof.

Book running lead managers: ICICI Securities Limited, Edelweiss Financial Services Limited and Jefferies India Private Limited.

Proposed to be listed on: NSE and BSE

A total of 4.28 million shares will be offered. Three of the company's private equity and venture capital investors will make part exits.

The IPO includes an OFS (offer for sale) of up to 2,076,190 shares by Intel Capital (Mauritius), up to 170,502 shares by Amadeus IV DPF Limited and up to 475,000 equity shares by Accion Frontier Inclusion (Mauritius).

As for the promoters, up to 852,453 equity shares are being offered by Dinesh Chandra Agarwal and up to 577,656 equity shares by Brijesh Agarwal.

An additional 137,000 shares will be offered by other selling shareholders.

Employees of the company will get shares at a discount of Rs 97 per share on the final offer price.

The proceeds from the issue will go to the selling shareholders.

 

Company background

The company primarily operates through its product and supplier discovery marketplace, indiamart.com.

IndiaMart is a B2B market place for business products and services for manufacturers, wholesalers, exporters or retailers.

The platform allows buyers to find small enterprises or larger corporates in India through its supplier listing.
It also allows the buyers to post requests for quotes called RFQs or BuyLeads.

According to the company's draft red herring prospectus, IndiaMart had a market share of around 60 percent in the online B2B classified space in India in financial year 2016-17.

The website received an aggregate 723.5 million visits in financial year 2018-19, of which 550.3 million or 76 percent were over its mobile platform.

As of 31 March 2019, the company had 82.70 million registered buyers and 5.55 million supplier storefronts in India that listed 60.73 million products.

Financials

In FY 2017, 2018 and 2019, the company's substantial revenue came from operations through the sale of subscription packages, and a minor portion of total revenue was earned through advertising, facilitation of payment and sale of RFQ credits.

Over these three fiscal years, the company reported a 26.4 percent CAGR (compound annual growth rate) in consolidated operating revenue.

In an interview in April, Dinesh Agarwal, co-founder and CEO of the company told PTI that it expects to maintain the CAGR at 29 percent for the current and the next financial year.

IndiaMART InterMESH Ltd reported EBITDA (earnings before interest, tax, depreciation and amortization) losses in FY17 and FY18. In FY19, it posted a EBITDA profit, despite having non-cash expenses, due to improved productivity.

Should you subscribe?

Choice Equity Broking has recommended a "subscribe" rating on the issue.

On valuation it said, "There is no listed entity in India comparable to the business profile of IndiaMART. At the higher price band of Rs. 973 per share, the company's share is valued at a TTM P/E multiple of 139.7x (to its restated TTM EPS of Rs. 7)."

The brokerage believes that the future benefits outweigh the target price derived from various traditional valuation multiples.

It further explained that technological business model companies like these should be valued on its future market potential and the ability of its company management to work towards achieving its potential.