Zomato's IPO opens for subscription: Should you invest?
What's the story
Indian restaurant aggregator and food delivery service Zomato is set to launch its Rs. 9,375 crore initial public offering (IPO) today (July 14). Shares from the company's IPO are expected to be in the price range of Rs. 72 to Rs. 76 each.
The company's post-IPO valuation is expected to stand at Rs. 64,365 crore. Here are all the details.
Colossal scale
Zomato's IPO is expected to be the largest this year
Zomato is the first food delivery aggregator start-up to be listed. Its IPO is expected to be the largest in India this year and the second-largest since SBI Cards and Payment Services' issue worth Rs. 10,341 crore in March 2020.
Zomato's post-IPO valuation will be more than the combined market cap of the last five listed fast food and restaurant companies.
Breakdown
10 percent of issue to be available for retail investors
Hindustan Times reported that the IPO has received a strong response from global institutional investors. There will be 75 percent reservation for qualified institutional buyers (QIBs) and 15 percent for non-institutional investors.
Meanwhile, retail investors will get 10 percent of the issue. The IPO comprises freshly issued shares worth Rs. 9,000 crore and existing investor Info Edge's offer-for-sale worth Rs. 375 crore.
Anchor Investors
Industry stalwarts become anchor investors in Zomato ahead of IPO
Data from stock exchanges reportedly showed that ahead of the IPO, the offer's anchor portion opened on July 13, 2021, and the company raised north of Rs. 4,196 crore from 186 anchor investors against 55.2 crore equity shares priced at Rs. 76 each.
Anchor investors included Tiger Global, BlackRock, JP Morgan, Morgan Stanley, Government of Singapore, and Franklin Templeton, among others.
Using funds
Zomato will use funds for organic, inorganic growth initiatives
In February this year, the start-up had raised over Rs. 1,800 crore in funding from Tiger Global and Kora, among others, taking its valuation to approximately Rs. 40,000 crore.
Zomato reportedly said that it will use the proceeds from the IPO for general corporate purposes, while Rs. 6,750 crore will be kept aside to fund organic and inorganic growth initiatives.
Twitter Post
Zomato's cheeky sense of humor is intact!
mereko to aisa dhak dhak horela hai
— zomato (@zomato) July 14, 2021
Competition building
Zomato's poor profitability, Amazon's segment entry has market analysts worried
Meanwhile, Mint reported that analysts are optimistic about the listing gains but remain wary of long-term risks since Zomato hasn't been turning profits recently and e-commerce giant Amazon is set to enter the segment as well.
During FY 2021, Zomato recorded 32.1 million average monthly active users, of which 6.8 million users placed transactions. The company currently operates in 525 Indian cities.