THE OUTLIER
A billion dollar valuation with no leveraging ( zero debt company). Profits in the books and promoters sitting pretty with a comfortable 45 per cent stake. A successful pathbreaking IPO with no dependence on private equity money. And, not to forget, no layoffs so far! It's a unique phenomenon in the Indian e-commerce industry. The outlier is Infibeam Incorporation, a company founded by former Amazon employee Vishal Mehta a decade ago. Mehta is now stepping on the gas to further expand the scale and size of its e-commerce business. By March end, this Ahmedabad-based start-up is expected to close the year with ` 40 crore profit on revenue of ` 400 crore revenues.
So how is Mehta’s little known Infibeam not burning cash? "We are solving one of three things – demand, supply and capacity – using technology all the time," says Vishal Mehta, Founder and Chief Executive, Infibeam.
Mehta has two growth engines firing at the same time. Mehta has pure e- commerce play ‘ Infibeam’ where merchants sells directly on its platform without hefty discounts. There is also a services driven model ‘ Buildabazaar’ that provides cloud based infrastructure services to small and medium enterprises. The company provides end- to- end IT backbone, marketing and logistics support and also payment gateway facility for online sales. There are already 66,000 SME and MSME businesses enrolled with buildabazaar. The big names includes Cannon, Imagica, Canon, Hidesign, Blackberry, etc. This is where Mehta’s business model is working as his company earns by way of monthly fee as well as commission per transactions. In the nine months ( April-December) of 2016/ 17, the sale of products through e- commerce amounted to
` 214 crore and a loss before interest, depreciation and tax of ` 3.45 crore. But the sale of software or services was ` 105 crore and profit before interest, depreciation and tax of ` 61 crore. There is a very high EBITDA margin in the services business. This business is actually compensating the loss in the products business. The company expects the services business to grow further. In the last three years, the share of services revenues has grown from 18 per cent of the business to over 30 per cent. As it grows, the profitability will only rise because of higher EBITDA margins.
Mehta’s company looks to be in a sweet spot as it is flush with IPO money of over ` 400 crore. A bulk of the money is going for setting up a cloud data centre. The company has already spent ` 144 crore of the IPO proceeds on that project. This investment will create a large capacity to handle more online retailers under buildabazaar. The company is also planning to set up 75 logistics centre to help its merchants. The company has set aside ` 37.50 crore from the IPO for logistics expansion. "Consumption story is very strong in India. The online consumption is already getting a fillip because of higher penetration of Internet through mobiles, more fibre helping in speed, digital payments and the spread of logistics. Going forward, the GST is only going to make crossing border easier with a much simplified tax structure," says Mehta. There is every reason to bet on Mehta’s business model as it is totally focused on building a sustainable business model. His stock price has jumped 220 per cent in the last once year. “It is not what you raise, but what you return matters ,” Mehta had told us two years back. His new family of shareholders will surely vouch for that .