Zomato’s Huge IPO Reception and What it Means for the Indian Stock Market Trading

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With the pandemic shaking things up for traditional businesses (the ones that require customers to physically visit shops), new-age businesses like Zomato are riding the digital wave. After all, everybody wants things delivered to their doorsteps. As a result, investors have been zeroing in on these companies. Now, these investors want an exit for their funds; the easiest way to do that is through an IPO. 

Founded in 2008, Zomato is one of India’s top food delivery and review platforms. The company has several achievements under its belt such as being the most downloaded food-and-drinks application in India for three fiscal years (2019 to 2021) on both Android and iOS. It also has a presence in 525 Indian cities and as of March 2021 had a footprint across 23 countries outside India. In the previous year (2020-21), the company faced a revenue of Rs 2,118.4 crore and a net loss of Rs 816.43 crore. Keeping all this in mind, investors seem to be betting on growth opportunities. 

It’s no surprise, then, that Zomato’s IPO, within the first few hours of opening, was subscribed nearly 100 percent by the retail investor segment! Towards the end of the three-day trading, the retail investor quota was subscribed 7.87 times. The quota reserved for QIBs was subscribed a total of 51.79 times during this period. As for the quota reserved for the Non-Institutional Investors, it was booked 32.96 times. In the history of the Indian stock market, this is the largest IPO to hit. That’s saying something, considering Reliance Power’s IPO in 2008 and Coal India’s offering in 2010.  What’s interesting is that Zomato is among the first high-profile tech start-ups to list in the Indian stock markets in recent times. The market’s response has been nothing short of jubilant. After all, this comes in the wake of the Bombay Stock Exchange’s Sensex rise to over 80% in roughly 15 months. A State Bank of India report, too, illustrated this. It showed that over 140 lakh new investors joined the stock markets in 2020-21, a year when the economy was heavily affected by COVID-19. What’s more, the country has witnessed a surprising 11 start-ups attaining unicorn status in the first four months of 2021 alone!

According to a Reuters report, the company will be worth approximately $8 billion after this IPO, which is no mean feat. Zomato is going to use these funds to grow its inorganic and organic segments as well as other general corporate uses, according to Zomato’s Draft Red Herring Prospectus (DRHP). Allotments for the company will conclude on July 22, refunds on July 23, and equity share will be credited on July 26. Share trading would most likely begin on July 27.