After NBFC liquidity crisis fears led to subdued sentiment in stock markets for the last few days, the freaky Friday saw internet and e-commerce firm Infibeam Avenues close 70% down in a horrific session. Ahead of its annual general meeting, the company’s shares just nosedived, and in the process destroying thousands of crores of investor wealth. The reason for the fall is apparently a Whatsapp rumour about questionable accounting practices followed the company, which was attributed to an analyst in a securities firm, according to this report.
The fall have impacted not only the retail investors, but certain mutual funds would also be making huge losses on this holding. According to data, as many as nine schemes held shares of Infibeam at the end of August. Unless they have exited by September 27, this sudden crash in Infibeam shares is bound to hit them. Infibeam was the first e-commerce firm to test waters on D-Street with a Rs 450 crore-IPO in March 2016.
|MF Exposure to Infibeam|
|Fund||% Net Asset||Investment (Cr)||No. of Shares|
|Axis Arbitrage Fund||4.79||91.28||4000000|
|Axis Equity Saver Fund||8.78||68.46||3000000|
|Aditya Birla Sun Life Arbitrage Fund||1.72||63.44||2780000|
|Aditya Birla Sun Life Equity Savings Fund||4.23||62.07||2720000|
|Axis Dynamic Equity Fund||1.95||52.49||2300000|
|Edelweiss Arbitrage Fund||1.1||49.47||2168000|
|Indiabulls Arbitrage Fund||9.26||22.82||1000000|
|Edelweiss Equity Savings Fund||9.6||13.05||572000|
|ICICI Prudential S&P BSE 500 ETF||0.09||0||165|
Source: Value Research Online; as of Aug 31, 2018
In a clarification to the exchanges on Friday afternoon, Infibeam has said there is no pending information or announcement from its side which may have a bearing on its scrip movement. However, the clarification did not help. The stock, which fell 50% at a time, moved even lower to close at Rs 58.80 as nearly 2 crore shares exchanged hands on the BSE alone.
Just in July 2018, Payments Council of India (PCI), the apex body representing the companies in the payments and settlement system, in its latest Annual General Meeting, announced the appointment of Vishwas Patel, director, Infibeam Avenues, as its new Chairman.
According to Value Research data, many arbitrage funds took positions in Infibeam by August 31.
The Indiabulls Arbitrage Fund had 10,00,000 shares worth Rs 22.82 crore in Infibeam as on Aug. 31. This was interestingly over 9.2% of the fund’s assets. Axis Arbitrage Fund held 40,00,000 shares of Infibeam worth Rs 91.28 crore or 4.8% of assets. Edelweiss Arbitrage Fund too held 21,68,000 shares of Infibeam worth Rs 49.47 crore as on Aug. 31. This was 1.1% of its assets. There is no latest data to show if the arbitrage schemes have exited or added positions.
Update: Reacting to reports on Edelweiss AMC exposure to Infibeam shares, the fund house CEO Radhika Gupta said: “There are some rumours that @EdelweissAMC funds have exposures in Infibeam. This is a fully hedged arbitrage position, not a naked exposure. I hope this clarifies, and request everyone not to spread rumours and panic at this time.”
There are some rumours that @EdelweissAMC funds have exposures in Infibeam. This is a fully hedged arbitrage position, not a naked exposure. I hope this clarifies, and request everyone not to spread rumours and panic at this time.
— Radhika Gupta (@iRadhikaGupta) September 28, 2018
Arbitrage funds usually hedge all their calls so the loss can be minimised when the direction of the call goes wrong.
Equity savings funds
Some equity savings funds too had exposure to Infibeam. Axis Equity Saver Fund with 30,00,000 shares or Rs 68.46 crore stake in Infibeam had as high as 8.78% stake in the e-commerce company registered in Gujarat’s Gandhinagar GIFT City. Aditya Birla Sun Life Equity Savings Fund’s exposure was through 27,20,000 shares or 4.23% stake. Edelweiss Equity Savings Fund had exposure worth Rs 13.05 crore or 9.6% assets in Infibeam.
According to data, a dynamic asset allocation fund and a multicap fund also were exposed to Infibeam shares as on Aug. 31. ICICI Prudential S&P BSE 500 ETF had a mere 165 shares. Axis Dynamic Equity Fund’s roughly 2% assets were in Infibeam via the 23,00,000 shares.
Infibeam’s founder Vishal Mehta and director Vishwas Patel and their families (Patel’s Avenue Payments was acquired by Infibeam last year in a stock deal) were among the rich people featured in the Barclays Hurun India Rich List 2018. It featured 831 Indians having a net worth of Rs 1,000 crore plus. Patel and his family at that time had Rs 2,300 crore to their name, driven by Infibeam valuation. Promoter group of Infibeam as on June 30 shareholding had 37.90% stake in the company.