Update: Let’s see what happens tomorrow, when the IPO opens for subscription. The Hindu Business Line suggests that the share is avoidable, and that net profits would have been less had it not been for stringent cuts in employee costs. Scalability and ability to attract advertising are key issues. A report in the Economic Times brands it as ‘risky’, saying that the revenue depends on a volatile online advertising environment.
Earlier today: IntraSoft Technologies, which promotes online cards website 123Greetings.com, has fixed a price band of Rs 137 to Rs 145 for its IPO: the company will issue 3.7 million equity shares of face value Rs 10 each and will open for subscription from March 23 to March 26, 2010. In case you weren’t aware, March 23rd, according to 123Greetings.com, is Cuddly Kitten Day.
Post IPO, the company will be listed on the NSE and the BSE. The company is profitable: for the year ended 31st March 2009, Intrasoft reported revenues of Rs. 230 million, and a net profit of around Rs 53 million.
Utilization Of Funds – 201.56 M For Branding & Promotion!
123Greetings expects to raise Rs 506.9 million on the lower end of the price band, and Rs 536.5 million at the upper end. Their plan is to to invest as much as Rs 201.56 over FY 2011 and 2012 for branding and promotion:
— Rs 95.8 million will be utilized for online advertisements
— Rs 88.14 million for Television advertisements, and
— Rs 17.63 for radio advertisements primarily for their key market, the US.
Only Rs 20 million will be invested in technology infrastructure, while Rs 130 million of the proceeds from the IPO will be used by the company to purchase a corporate office in Kolkata.
The issue will constitute of 25.12 percent of the post issue paid up capital of the company. 50 percent of the Issue will be available to QIBs, 15 percent to Non-Institutional bidders and 35 percent to retail individual bidders.
Post Issue, promoters Arvind Kajaria and Sharad Kajaria’s stake in the company will fall from 25.38 percent to 19.01 percent each. Intel Capital (Mauritius) Limited’s stake will also dip from 16.30 percent to 12.20 percent.
Download: IntraSoft Technologies’ Red Herring Prospectus
— Online Advertiser Dependent: 123Greetings depends heavily on advertisers, which are their only source of revenue, give the lack of a subscription model. Also, given the nature of their business, and the fact that it is dependent on the popularity of e-cards, and the resulting traffic, the revenues for the company are difficult to predict.
— Growing influence of other devices: The company also needs to address the situation that other devices like smartphones are increasingly becoming influential means of access to the Internet, particularly in the US, and the mobile advertising market isn’t yet as developed as the online advertising one: they’ll need to face up to this situation soon, and look to attract both users and advertisers.
— Loss making subsidiaries: Group company Intrasoft Animations Private Limited and subsidiaries of the company 123Greetings.com, Inc and 123Greetings (Singapore) Pte Limited are loss making units. For the fiscal 2008, 123Greetings (Singapore) incurred a loss of Rs 3.39 million and 123Greetings.com, Inc incurred a loss of Rs 91,000. For the financial years 2008 and 2009 Intrasoft Animations incurred losses of Rs 22,000 and Rs 6,000 respectively.
— Legal issues: 123Greetings.com, Inc has received three legal notices including alleged infringement of third party patent, and two claims by users in relation to advertisement in the website. There is also a taxation case against the company pending before the revenue authorities.
According to comScore, 123Greetings.com is the largest e-greeting card website in India and second largest in the world.