Zomato IPO Dazzled On Debut; Listed 66% Premium At Rs 125.85

The most talked-about IPO of recent time, Zomato IPO, made a stellar debut in the stock exchanges. On listing, the shares rallied 66 percent and debuted at Rs 125.85 premium against the issue price of Rs 76. The offer received a 38x overall subscription.

With the substantial listing gain, the company’s market capitalization value crossed the Rs 1 lakh crore mark to stand at Rs 1,08,067.35 crore.

• IPO dates: Zomato IPO opened on July 14, 2021, and ran till July 16, 2021.
• IPO price band: Initially, the shares launched in the bar of Rs 72-76 for an IPO size of Rs 9,375 crores.
• IPO lot size: The IPO lot size was 195 shares. And investors could buy up to 13 lots comprising 2535 shares, amounting to a final investment of Rs 192,660.
• IPO listing date: Zomato IPO made a debut on the stock exchanges on July 23, 2021.

The listing is mainly in the line of analysts’ valuation, who expected Zomato IPO to have a rich listing experience. According to them, Zomato IPO capitalised from the factors that it is the first listing in the food-delivery segment. Additionally, favourable market sentiment, healthy demand from the investors, stability in gaining market shares, and expectation to break out in the profit range have attributed to the rich listing gains by the offer.

Incorporated in 2010, Zomato is a technology platform that connects customers, restaurants, and partners to create a chain that caters to the various needs of different segments. They have two core business-to-customer offerings of food delivery and dining out and one business-to-business offering, Hyper pure, a one-stop procurement solution that provides high-quality ingredient supplies to Zomato’s restaurant partners. Besides, they offer industry-specific technology tools to its restaurant partners to help them engage and acquire new customers and grow business. Another segment of Zomato is Zomato Pro, a customer loyalty program for both its food delivery and dining out.

Though the company is currently making losses, it consistently increased market shares in the last four years to become the leader in gross value order (GVO) in October 2020. Their revenue generation is primarily through food delivery and the commission charged from its revenue partners.

What to do next with Zomato IPO after the stellar debut

If you have been allotted a Zomato IPO, you may wonder about the next best step with the shares. According to market specialists, long term investors should hold onto their investment. The FoodTech market has shown considerable prospects in attracting investors in the Indian online food delivery segment. The revolution is triggered by India’s changing customer preference, lifestyle and eating habits, as the fast-paced schedules pushed more people to adopt ready-to-eat. The trend is stronger among millennials due to the rising population of working women. They would continue to order food online at a discounted rate. Zomato is in an advantageous position to tap into the market as it transforms. They already operate in a discounted food-delivery model.

Zomato was able to revive its business after the initial dent caused by the outbreak of the pandemic. They reported significant growth and revival in their revenue to pre-COVID level when the economy unlocked.

As of March 2021, Zomato is catering to 525 cities in India and 23 countries globally, with 389932 active restaurants boarded on their platform, per the report. The company increased its order number by 7.8 times, from 3.06 crores in FY18 to 23.89 crores in FY21. Their GOV grew 7.1 times from Rs 1334 in FY18 to 9482.9 crores in FY21.

Their revenue declined 23.5 percent in FY21 to Rs 1993.8 crore as a pandemic effect, but at the same time, their loss declined to Rs 816.4 crore from Rs 2385.6 crore in FY20. The growth is expected to pick up sharply in FY22.

The bottom line

Zomato IPO was one of the most anticipated IPOs of the season, and as expected, it made a stellar debut in the D-street. Zomato shares listing at a premium rate indicates the strong market forces and positivity currently keeping the market buoyant. Despite COVID-19 scares, the Indian IPO market registered a strong performance in the last financial year hauling USD 4.09 billion from 43 IPOS. The trend may continue for the rest of 2021.

Regarding the shares, the Zomato IPO GMP is likely to remain high. The company is currently making losses, but experts think that the company shares can generate profit in the long run as it continues to enjoy the economics of scale. Long term investors may see generous returns on their investment if they remain invested for an extended period.

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