IndiaMART\'s IPO subscribed 36 times on final day
Photo Credit: VCCircle

IndiaMart InterMesh Ltd, which operates an online business-to-business (B2B) marketplace, received a massive response for its initial public offering (IPO) as the firm attracted demand from investors across categories.

The public offering of about 2.7 million shares, excluding the portion reserved for anchor investors, received bids for nearly 97 million shares as the issue drew to a close on the third and final day on Wednesday, stock-exchange data showed.

The overall book was subscribed 36 times.

Subscription was led by qualified institutional buyers, who bid for nearly 31 times the shares set aside for them.

Retail investors bid for about 13 times their quota while high-net-worth individuals (HNIs) bid for 62.2 times the shares reserved for them.

HNIs typically invest in very large quantities on the final day of the issue to save on the cost of interest. HNIs borrow short-term capital from various avenues, barring banks, to fund their IPO applications in what is known as IPO financing. These investors deploy a small fraction of their own capital—which is called margin money—upfront. Additional capital raised through short-tenure loans help HNIs or wealthy investors place large bids in an IPO.

On the grey market, shares of IndiaMART were quoting at a premium of Rs 150-155 apiece over its price band and perhaps explained the interest of HNI investors in IndiaMART’s IPO, two grey market dealers told VCCircle.

The grey market is a pseudo, over-the-counter market where IPO shares are traded before the official listing on a stock exchange.

The IPO had crossed the halfway mark on its first day on Monday. It picked-up pace and was  fully subscribed on the second day on Tuesday.

Ahead of the IPO, IndiaMart attracted a number of marquee institutional investors including venture capital funds, hedge funds and a sovereign wealth fund as anchor investors.

The Delhi-based firm, founded by Dinesh Chandra Agarwal, raised a total of Rs 213.57 crore (around $30.7 million) on Friday by allotting nearly 2.92 million shares to 15 anchor investors. Shares were allotted at the upper end of the Rs 970-973 price band set for the IPO, according to a stock-exchange filing.

IndiaMART is seeking a valuation of Rs 2,800 crore ($402 million at current exchange rates) from the IPO.

The offering, entirely a secondary market sale by promoters, venture capital investors and other selling shareholders, had been lowered in value terms.

Intel Corp.’s venture capital arm; Accion Frontier Inclusion Mauritius, a fund managed by venture capital firm Quona Capital; and another venture capital firm Amadeus are partially exiting their respective stakes.

The company was seeking an estimated valuation of Rs 4,000 crore at the time of filing its draft prospectus.

The markdown in estimated valuation reflects the market correction in the last one year resulting from a liquidity crunch in the shadow banking segment besides slowing economic growth.

The IPO size is now pegged at Rs 475 crore ($68 million) and will result in 17% stake dilution on a post-issue basis.

IndiaMart’s public issue size was earlier estimated at Rs 550-600 crore ($88 million then) through a secondary market sale which would see a 15% stake dilution.

IndiaMart will not get any proceeds from the share sale. The net proceeds, after deducting the issue expenses, will go to the selling shareholders.

Promoters Dinesh Chandra Agarwal and Brijesh Agrawal together planned to sell 1.43 million shares, lower than the 1.57 million shares earlier envisaged.

ICICI Securities, Edelweiss Financial Services and Jefferies India are the merchant bankers arranging and managing the share sale.

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