The stock offering of food delivery startup Zomato attracted bids worth US$46.3 billion (approximately Rs 34.6 billion) as it was oversubscribed by more than 38 times on Friday, indicating that investors are optimistic about this fast-growing industry.
Zomato’s US$1.3 billion (approximately 97.38 billion rupees) IPO, backed by the Chinese Ant Group, is an IPO for the Indian food delivery industry. Its price is Rs. 72 rupees. At 76 US dollars per share, the valuation is as high as 7.98 billion US dollars (approximately 59,780 crore rupees).
The stock exchange data after the end of the subscription on Friday showed that large institutional investors also made major bets, with the subscription rate of the category being 52 times that of the stocks on sale.
Jimeet Modi, founder of Indian brokerage Samco Securities, said: “Demand is strong and excited.” “Retail investors are looking at this from the perspective of listing earnings.”
Although Zomato stated in its draft IPO prospectus that as investment increases, its costs and losses will continue to rise, investors are still betting on Zomato.
Before the IPO this week, Zomato raised US$562 million (approximately Rs 421 crore) from 186 large financial investors, including well-known companies such as Tiger Global, BlackRock, JPMorgan Chase and Morgan Stanley .
Zomato’s IPO was conducted when the Indian market was nearing its highest point in history, and digital companies were increasingly interested in listing on exchanges.
Alibaba-backed financial payment application Paytm submitted a draft of a US$2.2 billion (approximately Rs 16,480 crore) IPO document in India on Friday, and Wal-Mart’s e-commerce giant Flipkart is also planning to do one.
Like DoorDash, which is headquartered in the United States, Zomato is primarily a food delivery app that works with 350,000 restaurants and cafes in 526 cities in India. It also allows customers to reserve tables for meals, write food reviews and upload photos.
Zomato competes with local competitor Swiggy, which is backed by SoftBank, while Amazon is still in its infancy in the food delivery market. The Boston Consulting Group predicts that the market will reach 8 billion U.S. dollars by 2023, compared to only 4 billion U.S. dollars last year. 29,965 crore).
The draft IPO prospectus shows that the Zomato app has an average of 41.5 million customers using its services every month, and orders on its platform surged to 403.1 million in 2019-2020, compared to only 30.6 million in 2017-2018.
Although the Zomato IPO has aroused great interest from investors, some analysts said that the company’s valuation is too high, especially because the company is not profitable.
Himanshu Nayyar, an analyst at Yes Securities in India, said in a research report that Zomato’s IPO price range is “very expensive” because “its path to profit is still unclear.”
The research report added that Zomato’s enterprise value is 25 times its sales in 2021, while the average value of its peers worldwide is 10 times.
© Thomson Reuters 2021