SoftBank-backed OfBusiness in talks for a secondary funding round at valuation of $8-9 billion ahead of IPO

Asish Mohapatra, OfBusiness co-founder & CEO (Image: Moneycontrol)

SoftBank-backed OfBusiness, which runs an online marketplace for construction materials and financing for small and medium enterprises, is in talks to do a secondary fundraise ahead of its potential IPO (initial public offering) next year, giving some of its existing investors an exit at a valuation of $8-9 billion, according to sources, making it a rare instance of an up round for startups in these difficult times.

OfBusiness is raising $50-$100 million from a slew of family offices, who will buy shares from some of the business-to-business (B2B) commerce and lending platform's investors, people aware of the matter told Moneycontrol.

The round may give an exit to some of OfBusiness' early angel investors and institutional investors, the people added, requesting anonymity.

In secondary fundraises, shares of companies are exchanged among investors. Existing shareholders typically sell their shares to new or other existing investors, resulting in a partial or total exit from the company. In contrast to primary fundraises, secondary share sales do not generate any funds for the company. It also does not issue new stock.

The new investors will come in at a valuation of $8 billion to $9 billion, a nearly 80 percent increase from the company's current valuation of $5 billion, and would serve as a benchmark for the company as it prepares to go public within the next year, the sources added.

OfBusiness has been considering an IPO since December 2021, when it raised $325 million from existing investors Alpha Wave Global, Tiger Global Management, and SoftBank, increasing its valuation to $5 billion from $1.7 billion.

Initially, the SoftBank-backed firm planned an IPO in 2022, but Asish Mohapatra, its co-founder and CEO (chief executive officer), announced in August on CNN-News18's Bits to Billions that it had postponed its plans by at least three months. Mohapatra said that OfBusiness intends to go public in the first quarter of 2023. He also said that the December 2021 round was OfBusiness's last private market fundraise.

Mohapatra did not respond to email queries or messages for this story and was not reachable for comment.

OfBusiness, founded in 2015 by Asish Mohapatra, Vasant Sridhar, Bhuvan Gupta, Nitin Jain, Ruchi Karla, and Srinath Ramakkrushnan, has raised nearly $900 million in 11 funding rounds to date. It raised $802 million in 2021 alone. The company is one of India's few profitable unicorns, with consolidated revenue of Rs 1,757.4 crore in FY21 (2020-21), up from Rs 860 crore in FY20 (2019-20). It reported a profit of Rs 55.7 crore for FY21, up from Rs 32.3 crore in FY20.

OfBusiness' commerce arm will have quadrupled revenue to $1.7 billion with a net profit of $42.5 million for FY22 (2021-22), while its lending arm will have doubled revenue to $360 million with a profit of $21.6 million, Mohapatra told Moneycontrol in a December interview.

In October, news agency Entrackr reported, citing an internal document, that OfBusiness reported a revenue of Rs 7,270 crore and a profit of Rs 201 crore for FY22. The company is yet to officially file FY22 results.

OfBusiness' valuation boost comes at a time when the country's startups, including some of the largest, are facing down and flat rounds due to macroeconomic headwinds. A few niche categories, however, are defying the trend. The B2B marketplace for manufacturing and construction goods seems to be one.

In September, Mint reported that Zetwerk, which operates a similar platform and has experienced a similar journey, was in talks to raise $100-125 million at a higher valuation. It is currently valued at $2.7 billion.

According to media reports, Infra.Market, another company that operates in similar segment, raised $50 million in growth capital from Liquidity Group's MARS Unicorn Fund at a valuation of $4 billion, up from $2.5 billion previously.

Infra.Market is also profitable, with a net profit of Rs 186 crore in FY22, a six-fold increase over FY21.  Its revenue increased fivefold to Rs 6,236 crore in FY22 from Rs 1,242 crore the previous year.