IndiaMART IPO Opens Today: Know What These Five Brokerage Firms are Saying
The company has fixed a price band of Rs 970-973 per share and the minimum order size is 15 equity shares.
Image for representation.
The initial public offering (IPO) of IndiaMART InterMESH Ltd, India’s largest online business-to-business marketplace, opens for subscription today. The company has fixed a price band of Rs 970-973 per share and the minimum order size is 15 equity shares. A day before the issue opened, IndiaMart had already raised more than Rs 213 crore from 15 anchor investors including ICICI Mutual Fund, HDFC Mutual Fund, SBI Mutual Fund, Birla Mutual Fund, Hornbill Capital Advisers LLP, etc. The response to the anchor book was strong, but brokerage firms are mixed in their opinion while recommending the issue. Read what these five brokerage firms are suggesting investors to do:
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.
This type of technological and scalable business model companies should not be valued merely on the profitability but also on the future market potential and the capabilities of the management to work towards achieving the potential. Thus, we assign a subscribe rating for the issue.
IndiaMart is India’s largest online B2B market place for business products and services with approximately 60% market share. The company earns revenue from the sale of subscription packages, sale of request for quote or 'RFQ' credits, advertising from IndiaMART's digital platforms and
payment facilitation services.
On the valuation front, at the upper end of the price band, IndiaMART InterMESH is valued at a PE of 140x to its FY19 earnings, which is aggressively priced given the intense competition from emerging players and new entrants. Considering the overall industry environment, we give an ‘avoid’ rating on this issue.
IndiaMART has a first mover advantage in offering a B2B online trading platform to MSMEs. But the company depends on third-party service providers for a significant portion of its outsourced operational services, and its business may be adversely affected if it faces operational or system disrupts. The issue appears aggressively priced. However, a long-term investor may consider investment for the issue.
At the upper end of the price band, IndiaMart demands PE multiple of 33 times of FY19 EPS. Considering the investment concerns, we believe investors should wait for price discovery before taking any investment decision. Hence, we have a NEUTRAL view on the issue.
At the upper price band of Rs 973, IndiaMart is available at an EV/EBITDA of 34 times FY19, which seems premium. This is because the company turned profitable recently, not providing a clear glimpse of its current and future financial credentials.
Given the lack of analysis on comparable peers, the situation for investors remains unclear. As a result, we have a neutral rating for the stock after factoring the weak undercurrent in the broad equity market and economic data. But the company should be considered in the long term given the sustainability of its profitability due to strong market share, healthy balance sheet, rich in cash, nil debt and healthy return on assets.
Keywords: IndiaMart, IndiaMart IPO, IPO, Shares, IndiaMart shares, IndiaMart share price, IndiaMart stocks, BSE, Sensex, Nifty, NSE, stocks, market
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