Zee Research Group/Delhi
The recent multi-million dollar fundraisings, including Flipkart’s plan to raise funds worth over 1000 million dollars, have paved the way for stock market listing of internet-based companies. With only two listed internet firms in India, it is expected that more companies would hit the capital markets within the next two years.
The hypothesis seems to gain traction after six out of top 10 global largest internet IPOs have come in the last three years. As per Macquarie, Facebook raised maximum 16 billion dollars in 2012, followed by Twitter (1.8 billion dollars) in 2013, Yandex (1.3 billion dollars) in 2011, Zynga (1 billion dollars) in 2011, Renren (0.7 billion dollars) in 2011, Groupon (0.7 billion dollars) in 2011.
Rising internet penetration augurs well for the internet-based companies and has helped them (especially e-tailers) to achieve a milestone. While Flipkart’s turnover breached the 1 billion dollar mark in March 2014, Snapdeal expects revenues to cross 1 billion dollar mark in FY15.
Sounding optimistic about the hypothesis, Macquarie stated, “In our conversations with various founders and top management leaders in Indian e-commerce companies, we got a sense that most companies would be hitting relevant milestones with regards to revenues and profitability in 12-24 months’ time frame. This should clear the way for multiple IPOs from this segment.”
Further, higher private equity participation also make a case for increased exits through IPO route. According to Bain & Company, out of the 225 IT and ITES deal in India in 2012, 98 deals were in the e-commerce space. Since 2011, this space has been witnessing a strong pick-up in private equity deals.
Flipkart which was founded in 2007 has received several rounds of funding since 2009. If its latest plan (to raise over 1 billion dollars) fructifies then company is expected to have raised over 1.7 billion dollars so far. Flipkart’s existing investors include Accel Partners, Tiger Global, MIH, Iconiq Capital etc.
Similarly, Snapdeal, founded in 2010 has received several rounds of funding since 2011. Till date, Snapdeal has raised 340 million dollars including an investment by eBay. Snapdeal’s existing investors include Kalaari Capital, Nexus Venture Partners, Bessemer Venture Partners, Intel Capital and Saama Capital.
Snapdeal, unlike Flipkart, has emulated the market place model of Chinese e-commerce giant Alibaba. Alibaba plans to launch the largest ever initial public offering in US within next two months.
Likewise, Kunal Bahl, co-founder and CEO of Snapdeal has plans of listing the company’s stock on US bourses within two years.
Other unlisted players in this space includes: Yatra.com, Jabong.com, Fashionandyou.com, etc. Interestingly, in India, only two internet-based companies are listed on the bourses, including Info Edge and Just Dial. Info Edge is the first internet-based company which got listed on Indian bourses in 2006. Further, Just Dial got listed on the bourses in 2013.
While Info Edge is the leader in online recruitment segment through naukri.com portal, Just Dial is India’s largest local search site. With regards to the stock performance of internet companies, so far this calendar Info-edge has risen by 52.4 percent and has outperformed the stock markets. However, Just Dial has generated positive returns of 11.8 percent when compared to 24.1 percent returns delivered by Sensex.