Zomato, one of the most popular food delivery service platforms in India, is all set to hit the market on Friday. The shares will be listed on both the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) at 10 am on July 23. The initial public offering (IPO) of the leading food aggregator witnessed a massive interest from retail and institutional investors with 40 times subscription, the third highest in the history of Indian capital market. Experts believe that the stock could list at over Rs 100 per share, more than 30 per cent premium over final issue price.
The overwhelming response from investors, rise in grey market premium, positive sentiment and the euphoria around first internet company to get listed — analysts suggest a strong listing gains for India’s favourite food delivery application in spite of higher valuation.
“As per the financials of the company, Zomato IPO listing gain can be expected around 25 per cent or roughly near ₹15 per Zomato shares on the listing date of the public issue,” said Ashok Holani, Director at Holani Consultants Private Limited. The analysts predict at least 15 per cent premium on the listing day.
Ahead of the listing, the unlisted shares of Zomato saw significant jump in the unofficial market. The grey market premium of Zomato share was doubled to the range of Rs 20-22 on July 22, compared to Rs 10 a week earlier. This improvement indicates a strong buying interest in the primary market, the analysts mentions. “Zomato to start the day with 20-25 percent and 25-28 percent premium respectively on Friday,” said Astha Jain, Senior Research Analyst at Hem Securities.
Zomato IPO opened for subscription July 14-16 with a price range of Rs 72-76. The issue consisted of an offer for sale (OFS) of ₹375 crore by the company’s early investor Info Edge and a fresh issue worth ₹9,000 crore. The quota reserved for qualified institutional buyers was subscribed 54.71 times. The portion set aside for non-institutional investors was booked 34.80 times. The retail quota was subscribed 7.87 times. Ahead of the IPO, the unicorn raised ₹4,196 crore from 186 anchor investors by allocating 552.2 million shares at Rs 76 apiece.
The company eyes a market capitalisation of about Rs 64,500 crore at the issue price. It will be will be higher than the combined market value of India’s half a dozen listed quick-service restaurant chains.
“Zomato is one of the two leading players in India and the first of the new age unicorns to list on the exchanges. Given strong investor demand for the IPO we expect a good listing for the company. While we expect decent listing gains in the Zomato IPO we also remain positive on the long term growth prospects of the company given strong delivery network, high barriers to entry, expected turnaround and significant growth opportunities in tier-II and tier-III cities and had given a SUBSCRIBE rating to the IPO,” said Jyoti Roy DVP-Equity Strategist, Angel Broking Ltd.
“Zomato’s listing on Indian exchanges is a watershed moment for Indian capital markets and investors who can now own a large and scalable new age tech companies. It not only sets the ball rolling for Zomato but also for similar new age tech companies as India is now considered to be an emerging hub for startups and unicorns, of which many are lined up for IPO,” said Hemang Kapasi, Head of Equities, Sanctum Wealth Management.
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