Stunning market debut as Zomato shares soar
FOOD APP STOCK GAINS SET PRECEDENT FOR OTHER START-UPS
INDIAN food delivery firm Zomato Ltd surged 65.8 per cent in its stock market debut last Friday (23), giving the start-up a valuation of `988.49 billion (£9.54bn) and setting the stage for other domestic start-ups that are waiting in the wings with listing plans of their own.
The 13-year-old company belongs to the first generation of big, homegrown start-ups in the country to go public successfully on Indian bourses.
Zomato, which counts subsidiaries of Chinese tycoon Jack Ma’s Ant Group and Uber among its shareholders, dominates India’s booming app-based food-delivery space alongside rival Swiggy. Its shares debuted at `115 (£1.11) on the Bombay Stock Exchange’s Sensex Index, 51 per cent higher than its issue price after its IPO was subscribed 40.38 times at the end of last week.
The stock then rocketed up 80 per cent in the opening 10 minutes, taking Zomato’s market capitalisation across the one trillion rupee mark.
“Zomato is definitely a big event for the startup community, and for the other technology companies that are waiting to come to the capital market,” said Siddhartha Khemka, head of retail research, broking & distribution at Motilal Oswal Financial Services.
Zomato is mainly a food delivery app, having partnered with about 390,000 restaurants and cafes in 525 Indian cities. It also allows customers to book tables for dining-in, write food reviews and upload photos.
India’s economy has taken a battering during the pandemic, recording its worst annual recession since independence in 1947. But its start-up sector has been a rare bright spot.
This year alone, around 20 “unicorns” – firms valued at more than a billion dollars – have been created, including half a dozen in four days in April. This year is set to be India’s best for IPOs. Others set to list include digital payments firm Paytm, backed by Japan’s SoftBank and Ma.
China’s Ant Group holds a 16.53 per cent stake in Zomato, while its top shareholder with an 18.55 per cent stake is online technology company
Info Edge (India). Many of the startups, though, are loss-making and struggling to recruit qualified employees, with some reportedly offering incentives such as free motorbikes and tickets to cricket matches to lure talent.
Zomato for instance, which operates in 525 Indian cities, is yet to turn profitable and reported a loss of `8.16bn (£ 78.8 million) in the financial year ending March 2021.
“We are going to relentlessly focus on 10 years out and beyond, and are not going to alter our course for short-term profits at the cost of long-term success of the company,” Zomato’s chief executive Deepinder Goyal said last Friday.
The 38-year-old founder, an engineer from the esteemed Indian Institute of Technology in Delhi, said the “tremendous response to our IPO gives us the confidence that the world is full of investors who appreciate the magnitude of investments we are making, and take a long term view of our business.”
Analysts agreed, hailing the success of the IPO as a testament to changing appetite by investors and an ability to support risk-taking.
The Gurugram-based company said it will use the money raised from its listing to better its delivery infrastructure and acquire more users.
Berkshire Hathaway Inc-backed Paytm, hospitality company Oyo Hotels and ride-hailing firm Ola, both backed by SoftBank, are among other Indian start-ups that are set to enter stock markets.