re days of high valuation for technology companies over? Are investors looking at such companies in a more realistic manner minus the exuberance surrounding the sector?
Recently, a Morgan Stanley managed fund marked down its investments in ecommerce major Flipkart by 27 per cent, valuing the company at approximately $11 billion, from an earlier $15 billion.
The initial public offer (IPO) of Infibeam Incorporation, which manages marketplace infibeam.com, saw the institutional portion of the offer remaining undersubscribed. Data on the website of the National Stock Exchange (NSE) shows that the institutional portion was subscribed 0.86 times even as the overall issue was subscribed 1.11 times.
Though Infibeam was touted as the first ecommerce company to be listed in India, there are existing listed companies that deal in ecommerce or internet space. And if the share price movement is a barometer, then investors are indeed not keen on betting on such entities.
Intrasoft Technologies, which owns 123.greetings.com and 123stores.com, was listed on the stock exchanges in April 2010. The stock has lost 11.75 per cent in the current calendar year when the benchmark Sensex has shed less than three per cent.
In February, the company raised Rs 34.5 crore for expansion and growth activities related to its ecommerce business. According to Alexa, a web traffic data analytics company, the global rank of 123stores.com is 2,11,759 and has fallen 71,914 places in the last three months. The website 123greetings.com fares better with a global rank of 6,651.
Palred Technologies is another listed company from the sector that operates latestone.com, which offers deals in technology space including mobile, tablet and computer accessories along with headsets, smart watches, cables, etc. According to Alexa, the rank of latestone.com has improved 1,042 places in the last three months and is currently at 22,668.
The stock of Palred Technologies has lost nearly 48 per cent in 2016. It was trading at Rs.113.7 on January 1 and since then has fallen to Rs 59.85. The current market capitalisation of the company is less than Rs 100 crore, the data on the BSE show.
Vaibhav Agrawal, vice president and head of research, Angel Broking, says that technology is not an easy sector to operate in and there are many dynamic challenges. “These companies are not leaders in their respective segments and we all know the ecommerce and internet segment is very competitive. People might be interested in investing in the leaders, like Flipkart and Snapdeal, whenever they come to list, but ecommerce is predominantly a private space right now. The segment seems more suited for institutional investors like private equity or venture capital funds.”
Apart from Intrasoft and Palred, there are a couple of other listed entities that operate in this space; not strictly ecommerce but have still significant value in the recent past.
Shares of Info Edge (India) Ltd, which manages the job portal naukri.com, have lost a little over 10 per cent this calendar year. Just Dial Ltd has also lost 11.15 per cent in 2016, thereby falling nearly four times compared to the benchmark Sensex.
Interestingly, the fall in the share price of companies operating in the internet and ecommerce space comes at a time when various reports suggest that ecommerce players are finding it relatively tough to get funding and the valuations are being questioned by investors. None of the leading Indian ecommerce players, including Flipkart and Snapdeal, have made profits till date and have been burning cash to attain scale.
“The segment seems more suited for institutional investors like private equity or venture capital funds”
