Zomato’s Rs 9,375-crore initial public offering (IPO) has been subscribed 5.27 times on the third and final day of bidding. The mega public issue of the food-tech unicorn has seen a rousing response from investors with Qualified Institutional Buyers (QIB) and Retail investors having oversubscribed their quota. Zomato’s IPO is the first domestic internet unicorn to attempt to make its stock market debut. The public issue is the largest to hit Dalal Street since SBI Cards and Payment Services’ IPO in March 2020 just ahead of the market crash.
Subscription data shows QIBs have so far bid for 7.71 times the reserved portion. Meanwhile, Non-Institutional Investors (QIB) have so far not managed to fully subscribe their portion of the issue, bidding for only 0.63 times the quota. Retail investors were the first to oversubscribe their portion, bidding for the entire lot on day one. So far retail investors have bid for 5.22 times their quota. Employees of Zomato have also not managed to subscribe to their reserved portion so far, bidding for only 0.39 times the quota. Overall bids have been placed for more than 379 crore shares against the 71.92 crore shares on offer. In the grey market, Zomato’s shares were still quoting a weak premium of just Rs 16.5 per share, according to dealers in the unlisted space. This has increased from below Rs 10 per share on Wednesday.
Zomato is still a loss-making company but that has shown no impact on IPO investors. “The valuations are not on the investor’s side, but investors who have a longer-term horizon can consider the moats of the business and growth potential and invest in the company,” Divam Sharma, Co-founder of Green Portfolio, told Financial Express Online. He added that Zomato caters to a two-player industry with high growth technology business; and the potential to diversify the business into other areas of logistics, marketing and consultancy.
The food delivery business in India has a low penetration of only 10%, leaving enough opportunity for Zomato to grow. “Due to urbanization, increase in choice, and convenience, there is a massive growth opportunity for Zomota in the coming years,” SEBI-registered investment advisor INDmoney said in a report. They added that at the higher end of the price band, Zomato IPO is roughly priced at a Mcap/ Sales of 28 times (based on FY21 data), higher than global peers DoorDash and DeliveryHero.