Rediff soars 61% in first day trading on Nasdaq

In one of the most successful internet IPOs in weeks, Indian portal Rediff.com saw its American depositary receipts jump 61% in their first day of trading on Nasdaq.

Rediff.com, a popular Indian web portal, saw its stock jump 61% in its first day of trading on Nasdaq, a sparkling performance that's becoming increasingly rare for newly listed internet companies.

Mumbai-based Rediff sold 4.6 million American depositary receipts (ADR) for $12 each to raise $55.2 million. It is the first Indian web service to be listed on Nasdaq. The company's ADRs rose $7.03 to $19.03 yesterday, with more than 6 million ADRs trading hands. Each ADR represents two underlying Rediff shares.

Rediff, which was formed in 1996, provides information, e-mail, chat-rooms, job search sites and educational tools to Indian internet users around the world. It also sells books, movie tickets, music and other products online. The company is benefiting from a surge in internet use in India.

"We expect there will be continued encouragement from the Indian government for businesses to become internet enabled and also to promote the adoption of internet usage in homes and educational establishments," said research firm IDC in a recent report.

The number of Indian internet users is forecast to increase to 17.2 million by the end of 2004 from 950,000 in 1999,  while the value of business conducted over the web is expected to rise to $4.3 billion by 2004 from $9.68 million in 1999, according to IDC.

60 million hits

Rediff claims the pages on its web site are accessed about 60 million times a month. The company plans to use part of the money raised in its lPO to acquire companies that can add to its content. Rediff's content is targeted at non-resident Indians as well as the domestic population. Earlier this month US sports shoemaker Nike said it would partner with Rediff to sell its sports shoes and sportswear online in India.

Even though it is off to a flying start with its IPO, some analysts argue that it has a tough road ahead. The Indian market for internet companies is overcrowded and ripe for consolidation, argues Matei Mihalca, an analyst at Merrill Lynch in Hong Kong. Even though Rediff attracts more traffic to its site than many of its competitors, it uses more personnel and spends more on advertising to do so, he says. The company lost $6.7 million in the year ended 31 March. It had sales of $1.9 million.

Rediff's IPO was managed by Goldman Sachs.