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| Market expects flurry of internet IPOs |
| Ashish Rukhaiyar / Mumbai Mar 12, 2010, 00:34 IST |
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When Info Edge, which runs job portal naukri.com, came out with its initial public offer (IPO) in 2006, investors lapped up the issue as there were no close competitors whose core revenues came from the internet. However, the coming months may see many internet entities look at the next level of expansion after getting listed.
Intrasoft Technologies, which owns 123greetings.com, has filed an offer document with the Securities and Exchange Board of India (Sebi). Industry players say that in the last few years, India, where internet penetration is still low, has seen emergence of portals offering travel, shopping and matrimonial services. A number of such entities will tap the capital market in the next 12-18 months.
Some leading travel portals in India are Cleartrip, Makemytrip, Yatra and IXIGO. The matrimonial arena is dominated by Bharatmatrimony and Shaadi. Travel and martimonial websites are a huge hit.
Alexa, a web traffic monitoring company, says these are among the country’s top websites. Naukri, for example, is the 21st most visited website in India.
Not surprisingly, the investment banking community is looking at this space for business. Roy Rodrigues, head (investment banking), Anand Rathi Financial Services, expects to see several internet companies from India go public over the next 18 months. “These have taken their time to attain critical mass. Indian consumers also took a while to overcome fears about entering credit card information and other personal details online. We can expect to see some travel and social networking/matrimonial websites raise capital shortly,” he said.
People who manage these websites share his views. While the time-frame is not clear, the companies agree that they will have to go public some time.
“Many internet companies will make it to the listed space in the next 12-18 months,” said Yatra Online Chief Executive Dhruv Shringi. “At present, we are adequately capitalised, but we may start exploring this avenue if we have to raise more capital,” he said.
Shringi’s views are shared by his competitor Sandeep Murthy, the chief executive officer of Cleartrip. “The internet industry is maturing and online travel portals are getting a lot of attention in India,” he said. “We are not in a hurry to raise capital but will definitely evaluate the option when the timing is right,” he said.
The rise in business volumes for internet portals can be gauged from the numbers reported by Infinite Computer Solutions, which owns 123greetings.com. The company reported a net profit of Rs 45.1crore in 2008-09 compared to Rs 17.5 crore a year ago. Its income was Rs 4,95.9 crore compared to Rs 3,41.5 crore in 2007-08. For the nine months ended September 30, 2009, the company reported an income of Rs 318. crore and a net profit of Rs 37.1 crore. The online travel industry has been growing at a healthy pace for the last few years. According to industry estimates, online transactions have risen nearly ten times between 2006 and 2010. While last year was considered a subdued one due to global economic factors, online portals saw a 40 per cent rise in business.
“Our annual gross turnover is around Rs 1,500 crore,” said Shringi of Yatra. The turnover of most other leading travel portals is close to this number, with a deviation of a couple of hundred crores.
“In all, these travel portals see around 25,000 bookings every day,” said Shringi.
Another trigger is that internet companies bank on private equity (PE) investors and venture capital (VC) entities for seed funding. These investors, according to industry players, want the company to go public so that they get an attractive exit opportunity. “PE investors and VC funds generally look at an exit opportunity after four-five years,” said Shringi.
“Institutional investors are showing a lot of interest in such companies,” said Nikhil Khattau, managing director, Mayfield Advisors. “Internet companies typically have a high return on capital employed and are rewarded by good market valuations once they attain a certain size and scale. Some of the internet companies in India are making good money,” he said.
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