Ecommerce company IndiaMART shares soar on debut in rare IPO | Financial Times

Financial Times

Enthusiasm for Intel-backed platform reflects investor hunger for new listings

Shares of ecommerce company IndiaMART rose 25 per cent from their issue price on their Thursday debut in what marked the end of a drought for Indian initial public offerings following national elections in May. 

IndiaMART is India’s largest online platform for selling products directly to businesses, backed by foreign investors such as Intel Capital, part of Intel Corp, and UK-based Amadeus Capital.

The company sought to raise $70m on Mumbai’s National Stock Exchange at an equity valuation of $400m, with its IPO 36 times subscribed. 

Analysts said the demand for IndiaMART’s shares showed that Indian investors had become hungry for IPOs after the drought, with the country’s marathon elections in April and May pushing them to the sidelines.

The $1.5bn raised through IPOs in India in the first half of 2019 was down 65 per cent from $4bn the same time a year earlier, according to data from EY. 

Dinesh Agarwal, IndiaMART’s founder, said that investor sentiment suffered after infrastructure group IL&FS defaulted on debt in September last year, sparking a liquidity squeeze that made companies reluctant to list. But he said the re-election of Prime Minister Narendra Modi with a stronger mandate helped to cure those blues. 

“After last year’s IL&FS disaster, the economy has seen a problem, which can also be seen a little in IndiaMART buyer traffic numbers,” he said. “We do not see our revenues to be affected for long . . . [The crisis] ended by . . . May, when the government got re-elected.” 

Indian shares rose to record highs in late May on the back of Mr Modi’s re-election, as investors bet his victory would provide the impetus for continued economic reforms. 

But the economy has continued to show signs of stress. Gross domestic product growth fell to 5.8 per cent in the first quarter of 2019, a five-year low and down from 6.6 per cent in the final quarter of 2018. Consumption has also suffered, with car sales falling to multiyear lows.

Some analysts expect IPO activity to gather steam now that elections are over. “Last year the market environment was not very conducive,” said Rusmik Oza, head of research at Kotak Securities. “We might see larger . . . companies tapping the market this year.” 

Others pointed to warning signs. Saurabh Mukherjea, founder of Marcellus Investment Managers, said the Indian stock market had become disjointed from the economy, with the country’s Nifty 50 index lagging behind GDP growth over the past decade. IPOs had become less effective as a source of growth capital for companies, he said. 

“The link between economic growth and corporate profitability has also been broken in our country,” he said. “The relevance of the stock market from the perspective of economic growth has really gone now. It’s sad but that’s what it is.”