IndiaMART IPO subscribed 50% on Day 1

Economic Times

On Friday, the company raised Rs 213 crore by allotting 21,95,038 shares to 15 anchor investors.  

NEW DELHI: The Rs 475-crore initial public offer (IPO) by IndiaMART InterMESH received bids for 13,57,365 shares by Monday afternoon, which was around 50 per cent of the total issue size of 26,92,824 units. 

On Friday, the company raised Rs 213 crore by allotting 21,95,038 equity shares to 15 anchor investors, including ICICI Mutual Fund, HDFC Mutual Fund and SBI Mutual Fund, at the upper limit of the price band Rs 970-973. 

At this price, the issue demands a valuation multiple of 139.68 times at FY19 EPS of Rs 6.97. The P/B ratio would work out to 17.51 times at FY19 book value of Rs 55.57, which looks unreasonable, analysts said. 

While brokerages largely have an ‘avoid’ ratings on the issue, a few of them believe the stock could be a good long-term bet. 

IndiaMART has a first mover advantage in offering a B2B online trading platform to MSMEs, which helps strong brand recognition. But the company depends on third-party service providers for a significant portion of outsourced operational services, and its business may be adversely affected if it faces operational or system disruptions, said SMC Global.

“The issue appears aggressively priced. A long-term investor may consider investment for the issue,” the brokerage said. 

Unlisted firms TradeIndia, Exporters India, Alibaba India and JD Business are some of the online B2B classified peer platforms of IndiaMART. In the listed space, companies such as JustDial and Infibeam Avenues can be said to be proxy peers for reference. They have an average PE of 23.8 times. 

At 140 times valuation, the issue is aggressively priced, getting intense competition from emerging players and new entrants, said BP Wealth, which has ‘avoid’ rating on the issue. 

Choice Broking said if one excludes the negative impact of non-cash items, the demanded P/E is around 32.8 times to its adjusted EPS of Rs 29.6. 

“Based on FY20E and FY21E EPS, the stock is valued at a P/E multiple of 35.1 times and 25.9 times, respectively, which again is at a premium to the peer average of 21.5 times and 15.3 times. But considering the growth outlook coupled with dominant market position and expected benefit from the operating leverage, we feel that the future benefits outweigh the target share price derived from various traditional valuation multiples,” it said. 

Such types of technological and scalable business models should not be valued merely on profitability, but also on future market potential and capabilities of the management to work towards achieving the potential, the brokerage said, assigning a ‘SUBSCRIBE’ rating to the issue. 

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