IndiaMart IPO Opens: should you invest?

IndiaMart IPO Opens: should you invest?: IndiaMart InterMESH Limited’s Initial Public Offer (IPO) opened for subscription today and would close on June 26. 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 the financial year 2018-19, the company had 55 lakh sellers listed on its platform with products across 97,000 categories. Angel Broking informed that the number of suppliers using paid services has increased from 72,000 in the financial year 2015-16 to 130,000 in 2018-19.

IndiaMart’s IPO is worth Rs. 476 crore and comprises an offer for sale (OFS) by promoters. According to the red herring prospectus filed with the SEBI, 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 Angel Broking, the promoter holding of Dinesh Chandra Agarwal and Brijesh Agrawal will fall to 53 percent from 58 percent after the IPO.

IndiaMart is selling equity shares of the 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.

On Friday, IndiaMart said that it has raised more than ₹213 crore from 15 anchor investors by allotting 21,95,038 equity shares at a price of ₹973, the upper band of its IPO. Several mutual funds like ICICI Mutual Fund, HDFC Mutual Fund, SBI Mutual Fund, and Birla Mutual Fund are among the 15 anchor investors. ICICI Securities, Edelweiss Financial Services and Jefferies India are the book running lead manager to the offer.

The equity shares of IndiaMart will be listed on the BSE and the National Stock Exchange. Link Intime India Private Limited is the registrar for the issue.

According to the IndiaMart’s offer document, the maximum number of retail individual investors who can be allotted the minimum bid lot is computed by dividing the total number of equity shares available for allotment to retail individual investors by the minimum bid lot.

10% of the net offer, or 487,786 equity shares, is available for allocation to retail individual investors. Under the retail category, investors can invest up to ₹2 lakh in IndiaMart IPO.

At the upper end of the price band, IndiaMart demands a price to earnings (PE) multiple of 33 times of FY19 EPS. According to Angel Broking, 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.