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Though turmoil in the broader markets had an adverse impact on IPOs last week with only two out of eight scheduled deals completed, volume remains high with seven additional deals on the IPO calendar for this week. With the NASDAQ experiencing its largest intraday gain in over a year on Monday in response to news of the European Union's $1 trillion bailout package, increased risk appetite could bode well for this week's crop of deals. Two deals likely to generate interest among IPO investors are Express (NYSE:EXPR), the sixth largest specialty retailer in the US, and TeleNav Holdings (NASDAQ:TNAV), a leading provider of mobile navigation services. Though Express is the larger of the two companies, TeleNav has a more aggressive growth outlook and could be well-positioned to ride the wave of successful tech IPOs that took place in March.

The Terms

TeleNav plans to raise $84 million by offering 7 million shares at a range of $11-$13. At an IPO price of $12 per share, TeleNav will command a market capitalization of $541 million and an enterprise value of $437 million. The Sunnvale, CA-based software firm plans to list on the NASDAQ under the symbol TNAV. J.P. Morgan and Deutsche Bank Securities are the lead underwriters on the deal.

Business Overview

Founded in 1999, TeleNav Holdings provides location based services (LBS) for mobile devices, including the carrier-branded applications offered by Sprint (NYSE:S) and AT&T (NYSE:T). Its scalable web-based platform supports more than 500 types of phones and the company has rapidly built an installed base of 14.5 million current users with 15 different carriers in 29 countries. These carriers, which bill users either on a bundled or stand-alone basis, pay TeleNav monthly fees, providing the company with recurring revenues and strong cash flows. The increase in end users has continued to drive impressive financials with a 59% year-over-year jump in revenue to $122 million for the nine months ended March 2010, which was partially offset by the decline in monthly ARPU due to more bundled (vs. stand alone) packages and fee negotiations by carriers.

Going forward, TeleNav hopes to further penetrate the large and growing US mobile navigation market (estimated $2 billion by 2012) and grow its current 20-25% share, as well as make a move into the emerging mobile advertising market.

Competition

The biggest threat to this company is competition, both from those who offer navigation services for free, such as Google (NASDAQ:GOOG) and Nokia (NYSE:NOK), as well as personal navigation device providers, such as Garmin (NASDAQ:GRMN) and TomTom (OTCPK:TMOAF). In the past, TeleNav has relied heavily on its relationships with Sprint (55% of sales) and AT&T (34%), which could lose exclusivity this December and next March, respectively, making it even more difficult for the developer to navigate its tough competitive landscape. These concerns have adversely impacted the performance of TeleNav's peers, causing them to underperform the broader market over the past month; its closest comparable, TeleCommuncation Systems (TSYS), which supports Verizon's "VZ Navigator" application, is down over 50% year-to-date.

Furthermore, TeleNav's planned foray into the fast-growing $416 million US mobile advertising market will also be squeezed by larger and more diversified companies such as Apple, which is planning to launch a new advertising network dubbed iAd later this year, and Google, which recently acquired the world's leading mobile advertising company, AdMob, for $750 million.

The Outlook

Overall, TeleNav is a company with a track record of growth and profitability, and its scalable, web-based platform is only used by 10% of its wireless carrier partners' combined subscriber base, giving it ample opportunity for further penetration. Additionally, these carrier relationships provide TeleNav with the ability to leverage their marketing and distribution networks at low cost. However, looming obstacles will force investors to make a halftime decision and choose between TeleNav's solid past performance and risky future prospects when the company comes to market this Thursday, May 13th.

Source: TeleNav Will Try Navigating a Tough IPO Market