The much-awaited IPO of Gurugram based food delivery startup Zomato opened for subscription at 10 am on Wednesday, July 14 with a fixed price of Rs. 72- Rs 76 per share. According to the recent regulatory filing, the company was looking to raise close to Rs. 9375 crore with this three-day IPO in Mumbai.
Nikhil Kamath, Co-founder of Zerodha and CIO of True Beacon, who is among scores of investors looking forward to investing, said that he is looking forward to the IPO especially because of the fact that it is one of a kind in the Indian market. He believes that the markets are ready to accept a good business as long as a company is able to sustain its growth and profits moving forward. Kamath also believes that the Second wave of Covid seems to be favorable for the IPOs.
“The average order value of food delivery is consistently growing at 10% for last 2 years for the company with good market share. However, Zomato’s valuation at 25x FY21 EV/sales versus 10x for global peers and 12x for Indian QSRs look on the expensive side. But, the listed peer groups of the world also trade at hefty valuations even though no profits are generated, they can sustain those market valuations based on user experience, market position, and tech platforms”, Kamath stated to MINT.
He believes that Indian markets are the best platform for stakeholders and this IPO could pave the way for other start-ups to go public.
The foodservice market in India is comparatively under-penetrated and the growing adaptation of online mobile-based food ordering services in the country. This, along with the swiftly and consistently growing value of the average food delivery order makes the IPO easy to be recommended.
Several brokerages, including ICICI Direct Research, IIFL Securities, and Motilal Oswal recommend subscribing to the initial public offering for listing gains. Zomato’s strong brand name and first-mover advantage in the Indian market along with its strong consumer brand equity, widespread network, efficient on-demand hyperlocal delivery network, and plans of diversification and expansion into new geographies make it difficult for investors to refuse or ignore the offer.
The company’s shares are expected to be listed on the stock exchanges on July 27 after the IPO closes on July 16. The IPO, which is considered to be the biggest in India this year, got fully subscribed on the first day of bidding with 10% of the retail quota being oversubscribed at 2.69 times. It comprises equity shares worth Rs. 9000 Crores and an offer for sale by the early investor- Info Edge, worth Rs. 375 crore.
The homegrown food delivery company that plans to shift focus on artificial intelligence and roll out a grocery delivery marketplace, shared that it had managed to raise over Rs. 4000 crore from institutional investors, a day prior to the launch of the IPO as part of an anchor book allocation. Around 552.7 million equity shares have been allocated to the anchor investors at a price of Rs.76 for each share. A total of 186 Investors including Tiger Global, Fidelity Funds-India Focus Fund, Baillie Gifford Pacific Fund, Morgan Stanley Asia Opportunity Fund, Canada Pension Plan Investment Board, Government of Singapore t, Kotak Flexicap Fund, and Mirae Asset Large Cap Fund participated in the anchor investors portion of the issue.
This pushes Goyal’s food delivery startup, which made waves last year by acquiring Uber Eats in India, up to the list of Unicorn companies alongside Walmart- owned Flipkart, Big Basket, Nyyka, Unacademy, and a few others.