Zomato shares made a strong stock market debut on Friday, closing the initial day of trade at Rs 126 per share on the NSE.
Zomato’s stock price was up 66 percent or Rs 50 from the IPO price of Rs 76. On opening, Zomato shares hit 20 percent upper circuit at Rs 138, nearly doubling IPO investor’s money.
The total market capitalization of the online food ordering platform stood at Rs 98,211 crore on the closing bell, down from Rs 1 lakh crore earlier in the day. While on BSE, Zomato shares closed 65 percent or Rs 49.86 higher at Rs 125.85 apiece.
In traded volume terms, 451 lakh shares have exchanged hands on BSE, while 69.48 crore units traded on NSE. The Rs 9,375-crore IPO was sold in a price band of Rs 74-76 a share during 14-16 July. The mega public issue of the food-tech unicorn saw a subscription of over 38 times, receiving a robust response from all pockets of investors.
Zomato’s IPO is the first Indian internet unicorn to make its stock market debut. This much-awaited public issue is the largest to hit Dalal Street since SBI Cards and Payment Services’ Rs 10,341 crore IPO in March 2020.
Zomato’s initial public offering (IPO), the first by an Indian unicorn, had received a strong response from investors and generated bids worth Rs 2 trillion as it was subscribed over 38 times last week. The issue price was set at Rs 72-76 apiece. The IPO comprised a fresh issue of equity of as much as Rs 9,000 crore and an offer for sale (OFS) worth Rs 375 crore by existing investor Info Edge (India).
Nearly three-fourths of the bids came from institutional investors, with the qualified institutional buyer (QIB) portion garnering 52 times subscription. The high net-worth individual (HNI) portion was subscribed nearly 33 times, and the retail portion by over seven times.
As per initial schedule, Zomato’s listing was to take place on July 27. However, investment banks managed to complete the share allotment and listing formalities ahead of the deadline. Under the Sebi framework, the timeline between IPO closing and listing has to be six working days. Zomato’s IPO had closed on July 16.
The issue proceeds will be used for funding organic and inorganic growth initiatives. After the IPO, Zomato will have cash of around Rs 15,000 crore on its balance sheet, which the company says will give it a long runaway to pursue growth.
Given the lack of profitability track record and uncertainty around when the company would turn profitability, some investors had given Zomato’s IPO a miss. Most brokerages, however, had recommended their clients to subscribe to the IPO.
The company’s campaigns, community, and content have created a strong consumer brand in India. In FY21, 68 percent of their new customers were acquired organically and not through any paid advertisements. The company will continue to invest in its branding activities to increase its brand awareness and leverage its current capabilities into expanding other related businesses like the grocery, fitness, and nutraceutical segment.
Zomato is yet to turn profitable. However, this new-age digital platform offers strong growth potential, which at present is evolving on the back of favorable macroeconomics, changing demographic profile, rising adoption of tech infrastructure, ICICI Securities had said in an IPO note.
Zomato has a history of net losses and it anticipates increased expenses in the future. The company may not be able to sustain its historical growth rates, and its historical performance may not be indicative of its future growth or financial results, which are among key concerns according to HDFC Securities.
The COVID-19 pandemic, or a similar public health threat, has had an impact and could further impact the business, cash flows, financial condition, and results of operations. If the Company fails to retain its existing restaurant partners, customers, or delivery partners or fail to add new restaurant partners, delivery partners, or customers to its portfolio in a cost-effective manner, its business may be adversely affected, the brokerage firm said in an IPO note.
If Zomato fails to retain its existing restaurant partners, customers, or delivery partners or fail to add new restaurant partners, delivery partners, or customers to our portfolio in a cost-effective manner, its business may be adversely affected, it said.