Zomato IPO Day 1: Retail portion subscribed 2.7x
The initial public offering of Zomato — the first by an Indian unicorn — saw more demand than the shares on offer on Wednesday, the first day of the issue. According to the data provided by stock exchanges, Zomato’s maiden offering has so far attracted bids for
756 million shares, worth ~5,700 crore, as against 719.2 million on offer.
The initial public offering (IPO) of Zomato — the first by an Indian first unicorn — saw more demand than the shares on offer on Wednesday, the first day of the issue. According to the data provided by stock exchanges, Zomato’s maiden offering, so far, has attracted bids for 756 million shares, worth ~5,700 crore, as against 719.2 million on offer in the IPO, which closes on Friday.
The bulk of bids on the first day came from retail and institutional investors. The retail portion was subscribed 2.7 times, while the so-called qualified institutional buyer (QIB) segment was bought 98 per cent. The high net-worth individual (HNI) and employee portions were subscribed 13 per cent and 18 per cent, respectively. Usually, the bulk of bids in any IPO come on the last day of the issue.
On Tuesday, Zomato had allotted shares 552 million shares worth ~4,195 crore to anchor investors. Around 186 investors, which included a host of domestic, as well as foreign names, were allotted shares under the anchor book.
Market players said marquee names in the anchor book were a big confidence booster. Besides, young investors are showing a lot of interest in the IPO of a brand they relate with, they said.
"Looking at retail applications, it is clear that many young investors have applied for the IPO. If there is an IPO of a company whose service you are using every other day, you prefer to go by the familiarity of the product or service, rather by numbers,” said Ambareesh Baliga, markets analyst.
Broking officials said the industry has seen millions of accounts being opened by relatively young people, many of whom are showing an inclination towards investing in Zomato’s IPO, given the buzz it has created on social media.
But experts like Baliga said many
"JUST ORDERED A TRIPLE BREAKFAST @ZOMATO. STRESS EATING" DEEPINDER GOYAL, FOUNDER, ZOMATO
may be investing without looking at the financials. “Rational investors differentiate between using and investing.
Zomato gives me good service and the best discount, but I am concerned about losses they are incurring as an investor,” he said.
Zomato’s losses widened every year between FY18 and FY20 from ~107 crore to ~2,386 crore. However, the cash burn helped the company grow its top line by five times, from ~466 crore to ~2,605 crore. "Although the company's plan of growth is dynamic, it needs to be reflected in the financials, too. Young investors must financially educate themselves before investing, no matter how much hype IPOS have," said Prateek Singh, founder and CEO of Learnapp.com.
As Zomato is the first IPO by a domestic e-commerce major, it is being looked at as a test case. Experts said the response to its IPO and post-listing performance will have a bearing on other companies, such as Paytm, Nykaa, Policybazaar, and Mobikwik, which are looking to go public soon.
As Zomato doesn’t meet the profitability track record laid down by Sebi, the portion reserved for retail investors is just 10 per cent, as against 35 per cent for IPOS by profitable companies.