UPDATED: July 14, 2021, 02:26 PM IST
Online food delivery giant Zomato’s initial public offering (IPO) opened for subscription on Wednesday.
The Rs 9,375 crore public offering is one of the most-anticipated IPOs of the year. Interested investors will be able to subscribe to the public issue till July 14.
Ahead of the IPO, the firm allotted shares worth Rs 4,195 crore to anchor investors.
A total of over 552 million shares were allotted to nearly 200 foreign companies as well as domestic investors as Rs 76 per share. It is worth mentioning that anchor allotment is done a day before an IPO opens for public subscription.
ZOMATO IPO KEY DETAILS
The Zomato public offering comprises fresh issuance of equity shares worth Rs 9,000 crore and an offer for sale of Rs 375 crore by its largest shareholder Info Edge India Limited. Around 65 lakh equity shares have been reserved for employees of the company.
Zomato has fixed the price band of the IPO at Rs 72-76 per share and investors can subscribe to a minimum of 195 equity shares and in multiples thereafter.
It may be noted that up to 75 per cent of the total public offering has been reserved for qualified institutional buyers, up to 10 per cent for retail investors and the rest 15 per cent for non-institutional investors. At the upper band, the company will be valued at nearly Rs 60,000 crore.
Banks managing the IPO sale are Kotak Mahindra Capital, Morgan Stanley India, Credit Suisse Securities, BofA Securities and Citigroup Global.
Zomato plans to utilise the funds raised from the IPO for funding organic and inorganic growth initiatives and other general corporate purposes.
WHAT ANALYSTS SAY
Analysts tracking the Zomato IPO are optimistic about the firm’s listing gains but remain uncertain about long-term risks that depend on economic revival.
Many brokerages have also raised concerns about the high valuation set by Zomato as the company has seen a de-growth in revenues in FY21 due to the Covid-19 pandemic.
The company’s IPO is valued over 28x of the FY21 enterprise value (EV) to sales, according to Reliance Securities, which has termed the valuation as stretched.
Sneha Poddar, a research analyst at Motilal Oswal, said predicting the growth trajectory at this juncture is a “little tricky”. Poddar also noted that the valuation of the Zomato IPO appears expensive compared to global peers and domestic quick-service restaurants (QSRs).
While Zomato enjoys many advantages — from being a new-age digital company to strong domination in online food delivery — there are some risks associated.
As the company has plans to expand its business rapidly, it could lead to higher costs and losses. This is another reason why analysts are uncertain about the future profitability of the company for the next few years.
On the other hand, analysts also suggest that Zomato has a strong growth potential like most other new-age digital companies. As the situation stands, there is an air of uncertainty around the IPO, with mixed reactions from analysts.
Some of the brokerage firms that have given a ‘subscribe’ rating to Zomato include Motilal Oswal Financial Services, ICICI Direct and Ventura Securities. All of them have cited listing gains.
Meanwhile, Kotak Securities and Axis Securities have not given any rating to the Zomato IPO.