Zomato crosses Rs 1,00,000-crore mark on listing day. What should investors do now?
New Delhi: The food delivery major, debuted with a listing premium of more than 50 percent on July 23, making it the 13th IPO since 2020 to record listing gains of more than 50 percent in the opening tick.
The stock opened at Rs 116 on the NSE, a 52.63 percent premium to its final offer price of Rs 76. The listing price on the Bombay Stock Exchange was at Rs 115, up 51.32 percent.
Until 12.30 pm, Zomato had hit an intraday high of Rs 138 that pushed its market-capitalisation to more than Rs 100,000-crore, making it the 46th stock in the list of 50 most valued counters. The other names that have a m-cap of Rs 100,000 crore-Rs 200,000 crore include IOC, Tata Motors, Shree Cements, Dabur, Tech Mahindra and Bajaj Auto.
The startup briefly breached the market-cap of some prominent Nifty50 names like IOC and Tata Motors but cooled off towards the mid-morning trade. Zomato surpassed the market-cap of Info Edge in the opening tick, which holds a 15 percent stake in the unicorn.
The listing was in line with analysts’ expectations despite rich valuations. Zomato marks one of the first listings in the food delivery segment in India and a good start for the tech-based startup universe.
Buy, sell or hold?
The big question for investors now is what should they do–book profits in case they got an allotment. For those who missed the allotment, should they buy in the secondary market?
Experts feel that the ones who got the allotment can look at booking profits and the ones who were not that fortunate can buy the stock on dips from a long-term perspective.
“For the investors who are looking to gain from this IPO, Zomato might prove a gem. Moreover, in the backdrop of the coronavirus pandemic, Zomato IPO and enthusiasm around this has undoubtedly boosted the investors’ confidence in the IPO market,” Goenka said.
“However, we advise that successful allottees must book full profit and must wait for some time to buy again,” he added.
The Rs 9,375-crore public issue of Zomato was subscribed 38.25 times during July 14-16, the biggest subscription among IPOs of more than Rs 5,000 crore size each in the last 13 years.
The food delivery giant is going to utilise the net proceeds from the fresh issues for funding organic and inorganic growth initiatives.
The company’s orders grew by 7.8x from 3.06 crore in FY18 to 23.89 crore in FY21 and its GOV grew 7.1x from Rs 1,334 crore in FY18 to Rs 9,482.9 crore in FY21.
Despite the near-term challenges, Zomato has a lot of potentials and some experts feel that it could be part of the Nifty50 amid high free-float market capitalisation.
“Few largecap internet platform companies like Zomato with high free float market cap due to zero promoter holdings could be serious contenders for entry into the benchmark indices going ahead,” ICICI Securities said in a report.
Over FY19-21, Zomato reported negative cash flow from operating activities, with an average negative cash flow of Rs 1,635 crore. But the online food delivery business is on the cusp of evolution.
Zomato has consistently gained market share over the last four years to become the category leader in India in terms of gross order value (GOV) from October 2020 to March 2021.