Food delivery service provider Zomato's ₹ 9,375 crore share sale via initial public offering (IPO) was subscribed 1.05 times on the first day of the issue, according to subscription data on the exchanges. The IPO opened today- July 14 and will close on Friday, July 16, remaining open for investors for a period of three days. Zomato shares today were in high demand among the retail individual investors as the portion reserved for them was oversubscribed within hours of opening.
The portion reserved for retail investors in the IPO was subscribed 2.70 times on Wednesday by 5:00 pm. The portion set aside for the non-institutional investors (NII) was subscribed 0.13 times, while the portion reserved for qualified institutional buyers (QIB) was subscribed 0.98 times. The retail investors can bid in lot size of 195 shares, extending up to a maximum of 13 lots.
The Gurugram-headquartered company has fixed the price band of the primary market offering at ₹ 72-76 per share. The IPO consists of a fresh issue of ₹ 9,000 crore and an offer for sale of ₹ 375 crore by the promoter - Info Edge India.
Zomato IPO is likely to pave the way for other digital companies to go public such as Ola, Paytm, and Flipkart. Its shares are likely to be listed on stock exchanges BSE and NSE on July 27.
Ahead of the public offer, Zomato raised ₹ 4,196.51 crore from 186 anchor investors, including BlackRock Global, American Funds, Tiger Global Investments Fund, JPMorgan, Canada Pension Plan Investment Board, Morgan Stanley Investment Fund, among others.
The company is now one of the leading online food service platforms in terms of the value of food sold. Zomato will utilise the proceeds of the IPO to fund organic and inorganic growth initiatives and for general corporate purposes and is also the first Indian mega startup to go public.
''Zomato charged 75 per cent more on delivery and earned 44 per cent more commission in the previous fiscal. This was mainly due to a rise in orders, and fall in discounts. The food or restaurant business in India only accounts for 10 per cent of India's spend on food. Due to urbanization, increase in choice, and convenience, there is a massive growth opportunity for Zomato in the coming years,'' SEBI-registered Investment Advisor INDmoney said in a report.
''At the higher end of the price band, Zomato IPO is roughly priced at a Mcap/ Sales of 30 times (based on FY21 data). This is much higher than its global peers DoorDash and DeliveryHero. As the online delivery space remains under-penetrated, Zomato is expected to command a higher valuation in India (scarcity premium).
However, investors looking to invest should bear in mind that it is a loss-making company and the company has clearly indicated that it will continue to report losses over the medium-term.
Given the company's market leadership status, strong topline growth, robust outlook, and positive sentiment due to marquee investors, investors who wish to take exposure to an under-penetrated online delivery industry could consider investing in this issue,'' added INDmoney.