India’s one of the leading food services platforms, Zomato's long-awaited IPO will open today. The share sale is expected to earn Rs 9,375 crore for the company. The three day share sale opened for subscription today with the offer price for the IPO fixed at ₹72- ₹76 per share.
Initially, Zomato’s offer size was Rs 8,250 crore when it filed draft documents with the market regulator SEBI in April, however, is now revised to Rs 9,375 crore. Qualified institutional buyers (QIBs) will get 75% of the IPO's profits, while non-institutional investors would receive 15%. Retail investors will receive 10% of the issue.
Zomato raised Rs 4,197 crore from 186 anchor investors on Tuesday, a day before the IPO. Nearly 200 international businesses and domestic investors were allotted a total of 552 million shares at a price of Rs 76 per share.
The funds raised from anchor investors account for about half of the entire amount raised (45 percent). The subscription period for the IPO will end on July 16.
On July 22, shares will be allocated, and the stock is expected to be listed on the BSE and NSE on July 27.
Zomato's initial public offering (IPO) has a lot size of 195 shares for which an investor would have to pay Rs 14,820. For Rs 192,660, a retail individual investor can apply for up to 13 lots (2,535 shares).
Through the IPO, the business hopes to achieve a valuation of about $8.5 billion.
The share sale includes a fresh issue of 375 crore shares and an offer for sale of Rs 9,000 by the company's present promoter, Info Edge India Ltd. A total of 65 lakh shares have been set aside for company employees.
Each equity share has a face value of Rs 1.00. SEBI received Zomato's draft red herring prospectus (DRHP) in April 2021.
Also Read: Zomato's Much Awaited Rs.9375 Crore IPO Opens Its Subscription from July 14
Due to high local demand, the Zomato IPO has been preponed from July 19 to July 14.
Kotak Mahindra Capital, Morgan Stanley India, Credit Suisse Securities, BofA Securities, and Citigroup Global are the banks that are managing the IPO sale.
The funds raised from the IPO will be used to fund organic and inorganic growth initiatives, as well as other general corporate purposes.
Here's what brokerages and analysts have to say about the IPO's prospects.
Analysts monitoring the Zomato IPO are optimistic about the company's listing gains but are concerned about long-term risks that are dependent on economic revival.
Many brokerages have voiced concern about Zomato's high valuation, citing the company's revenue decline in FY21 owing to the Covid-19 epidemic.
According to Reliance Securities, the company's initial public offering (IPO) is priced at more than 28 times its FY21 enterprise value (EV) to sales. While Zomato has numerous advantages, such as being a cutting-edge digital firm with a strong hold on online food delivery, it also has major downsides.
Motilal Oswal Financial Services, ICICI Direct, and Ventura Securities are among the brokerage companies that have given Zomato a 'subscribe' rating. They've all mentioned listed gains. Meanwhile, neither Kotak Securities nor Axis Securities have given the Zomato IPO a rating.
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ICICI Direct has given a ‘subscribe rating’ to Zomato IPO
Zomato is yet to turn profitable, however, it has significant development potential which is now growing in favor of macroeconomics, changing demographic profile and increasing technological infrastructure adoption. ICICI Direct recommends subscribing.
Choice Broking recommends to subscribe but with caution
The company is currently losing money. Furthermore, no domestic peer with the same line of business as the company is listed. The company has several advantages, such as an asset-light scalable business model, a larger target market following the pandemic, and a first-mover advantage in the food delivery sector, among others.
However, its operations in almost duopoly market may result in regulatory action, which would be unfavorable to the firm.
Choice broking stated, "We believe that this IPO is not suitable for retail investors, but it may be suitable for investors with a larger risk appetite and a longer investment horizon. As a result, we give the issue a 'Subscribe with Caution' rating."