IndiaMart turns second most loved IPO so far in 2019, oversubscribed by 35.91 times on Day 3

On the final day of IPO, IndiaMart which is currently India’s largest B2B marketplace for business products and services, saw robust response from investors. Data given on NSE showed that, cumulatively IndiaMart IPO received bids of 9,66,86,235 equity shares, which is a whopping 35.91 times higher than the total issue size of 26,92,824 equity shares. It would be Day 3 where IndiaMart's IPO received massive buying, as on Day 2 the issue was just subscribed by 1.04 times. IndiaMart planned to raise near Rs 475 crore from the issue, by offering one equity share on stocks exchanges at lower band of Rs 970 per piece and upper band of Rs 973 per piece.

Objective of this IPO issue is to avail benefits of listing the shares on stock exchanges and for the offer for sale (OFS). The company expects that listing of shares will equity shares will enhance its visibility and brand image, at the same time providing liquidity to shareholders. Notably, proceeds arriving from this IPO will not be availed by the company, however, will be transferred to the selling shareholders in the issue. 

75% of the IPO issue is set aside for QIB which includes both foreign and domestic institutional investors, while 15% is meant for non-institutional investors (NII) who are companies and individuals other than retail investors. While remaining 10% is kept for retail individual investors (RII) aka common man. 

With such blockbuster performance, IndiaMart becomes the second most loved IPO so far in 2019. In less than six months, there have been 8 companies who have opted for IPO route on exchanges. These are Neogen Chemicals Limited, Polycab India Limited, Metropolis Healthcare Limited, Rail Vikas Nigam Limited, MSTC Limited, Chalet Hotels Limited, Xelpmoc Design and Tech Limited and IndiaMart. From these only Neogen has received massive response from investors, as the IPO of this company was oversubscribed by 41.18 times. Remaining others saw subscription between 1 to over 5 times. This makes IndiaMart second highest subscribed IPO in 2019. 

Here's why IndiaMart is better than its peers.

Soumati Chatterjee and Omprakash Kavadi, Research Analyst at Spark Capital states that, Just Dial is the only comparable company with IndiaMart.

The duo says, "While Info Edge (recruitment, real estate and marriage classifieds) and Matrimony (marriage classifieds) are vertical players, Just Dial and IndiaMART are horizontal players and operates in the SME classified segment with just one exception - IndiaMART operates in the B2B segment while Just Dial operates in B2C segment and are hence comparable on growth profile, margins, balance sheet, return ratios and metrics. Therefore IndiaMART offers investors an additional option to play the Indian Internet sector. IndiaMART is the largest online B2B marketplace for business products and services with approximately 60% market share of the online B2B classifieds space in India (FY17 data)."

Further, IndiaMART’s growth in billings is significantly higher than that of Just Dial. According to the analyst, companies in the Indian internet segment enjoys a negative working capital cycle, as subscriptions are collected upfront and services are delivered over the tenure of the contract, which could be one year or even more. Thus, the cash generation (pre tax OCF as % of EBITDA) is higher than 100%. The flip side of this negative working capital argument is slowdown in revenue growth, which impacts deferred revenue growth and consequently cash generation negatively. Thus, the metric to look into is growth in billings,
which is the balancing figure computed using opening and closing deferred revenue and revenue accounted in the quarter/year. IndiaMART’s growth in
billings has been 36% over the last two years, which is higher than Just Dial’s 8% in FY18 and 15% in FY19. 

After the IPO, soon IndiaMart will be available for investors across India to trade anytime during market hours.