Next Orbit Ventures Pumped In $17.2 Mn In Infibeam’s IPO For A 5% Stake

Infibeam’s IPO had a slow start but was later oversubscribed at 1.11 times,  and saw a maximum chunk of investment come from Mumbai-based venture capital firm, Next Orbit Ventures.

As per ET reports, Next Orbit Ventures invested about INR115 Cr ($17.2 Mn), picking up a stake of 5% in the ecommerce firm. The investment has been made from $140 Mn (INR700 Cr) fund constituted by the firm.

Ajay Jalan, founder & MD, Next Orbit Ventures stated, “When other online-retail companies in the market are making losses, we are very confident about our investment on a company which is ready to IPO and will be making profits in next 6 months.”

Though Infibeam raised close to INR450 Cr in its IPO, earning the distinction of the first Indian ecommerce firm to do so, it was hardly without smooth sailing. The first hitch was the exit of two investment banks- Kotak Mahindra and ICICI bank- from the IPO over apparent disagreement with the company on the valuation and pricing of the offer and the timing of the launch, given the lull in the ecommerce sector.

Secondly, the IPO was also rated as risky by many brokerages, who mostly advised investors to avoid the issue on account of the downturn in the ecommerce sector, with marked down valuations and funding drying up in the sector. This raised serious questions over Infibeam’s  expensive issue and whether it would be able to post profits like it has done in the first half of FY 2016. Infibeam reported losses for four consecutive financial years ending FY 2015, but turned profitable in the first half of FY 2016. In the first half of FY 2016, it reported a profit of INR 6.22 CR on revenue of INR 171.27 Cr.

Issues were also raised on its unproven track record of profitability, its smaller scale of operations as compared to other players, absence of funding, intense competition in the ecommerce sector, and lack of the customer mindshare that the other larger players like Flipkart have garnered.

Inspite of these hurdles, however, the IPO which was undersubscribed at a measly 21% on the opening day, later rose to 63% subscription level on the second day. And finally closed at 1.11 times, receiving bids for 1,38,30,894 shares against the total issue size of 1,25,00,000 shares. Given the size of Next Orbit’s investment, it seems it had a big role to play, as the amount invested is almost 25.5% of the total proceeds raised.

Infibeam plans to use INR 235 Cr out of the IPO proceeds to set up a cloud data centre and purchase property to shift the registered and corporate office(Ahmedabad). It also wants to use INR 67 Cr to purchase software and INR 38 Cr for setting up 75 logistics centres. The IPO will also add to the INR 70 Cr worth cash it already has on its books.

Meanwhile, Next Orbit’s investment comes from its first fund, which has largely been used in making sector-agnostic investments in consumer products & services and internet & technology support services. The second fund, launched in November, called the ‘$750 Mn dollar Fund II’ totalling $750 Mn (INR 4875 Cr.), will be used to invest in semiconductor fabrication (fab), fab science park, solar and LED fab, IoT, healthcare and other Electronic System and Design Manufacturing (ESDM) products.

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