Zomato IPO: Issue fully subscribed on Day 1; retail portion booked 2.7x

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Zomato’s IPO has received bids for 75.64 crore equity shares against the IPO size of 71.92 crore equity shares.

Zomato IPO: Issue fully subscribed on Day 1; retail portion booked 2.7x
The initial public offering (IPO) of online food delivery platform Zomato has been fully subscribed on July 14, the first day of bidding. The offer has received bids for 75.64 crore equity shares against the IPO size of 71.92 crore equity shares.
The issue has received huge interest from retail investors as the portion reserved for them has been subscribed 2.7 times, while non-institutional investors have put in bids for 13 percent against their reserved portion, as per the subscription data available on the exchanges till 5:00 pm.
The portion set aside for employees is subscribed 18 percent, while that of qualified institutional buyers have seen 98 percent subscription.
The IPO size has been reduced to Rs 5,178.49 crore from Rs 9,375 crore earlier as Zomato already raised Rs 4,196.51 crore from 186 anchor investors on July 13, a day before the public opening of the issue.
The price band for the offer, which closes on July 16, is Rs 72-76 per share.
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Analysts believe the company has certain positive factors like asset-light scalable business model, expanded target market post the pandemic, first-mover advantage in the food delivery business, etc.
But its operations in an almost duopoly market may attract regulatory actions, which would be negative for the company.
“The IPO is expected to generate a lot of interest given the company uniqueness, large opportunity size, and some evidence of scale economies, but the valuations look expensive on conventional parameters at 25x FY21 EV/sales vs 10x for global peers and 12x for Indian QSRs, with the path to profitability also unclear,” said Yes Securities.
The brokerage has recommended subscribing the IPO for listing gains.
“While the current frenzy should deliver some listing gains, we would await more clarity on capital allocation plans, competitive activity, and unit economics over the next few quarters to provide a more nuanced fundamental view of the company,” it added.

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