Zomato IPO subscribed 40x on day 3
- The portion set aside for retail investors was subscribed 7.87 times, non-institutional investors 34.80 times, and qualified institutional buyers 54.71 times, while that for employees was subscribed the least at 62%.
The initial public offering (IPO) of food delivery unicorn Zomato Ltd closed with a subscription of 40.4 times on Friday, bringing the curtains down on one of India’s most awaited public issues.
On the third and final day of bidding, the Zomato IPO received bids for 29.04 billion equity shares against an IPO size of 719.23 million.
The portion set aside for retail investors was subscribed 7.87 times, non-institutional investors 34.80 times, and qualified institutional buyers 54.71 times, while that for employees was subscribed the least at 62%.
Analysts say Zomato’s success at tapping the capital market will help upcoming IPOs of new-age companies such as Paytm, Mobikwik and PolicyBazaar.
Nilesh Shah, group president and managing director, Kotak Mahindra Asset Management Co., said, “IPOs of new-age companies in the Indian market can attract global investors who have burnt their hands in Chinese new-age companies (Chinese new-age companies have lost $800 billion market cap from top). New-age companies’ successful listing can re-rate many existing companies, which can pull the market higher from the current level.”
The Zomato IPO, which aimed to raise ₹9,375 crore at the top of the price band of ₹72-76, opened for subscription on July 14. Zomato’s is the tenth most-subscribed IPO in 2021.
MTAR Technologies was the highest subscribed IPO of the year with more than 200 times, followed by Nazara Technologies with 175.5 times.
The Zomato IPO comprised sales of new shares worth ₹9,000 crore and a sale of existing shares worth ₹375 crore by Info Edge (India), the parent company of Naukri.com.
The proceeds from the fresh issue will be used towards funding organic and inorganic growth initiatives and for general corporate purposes, according to the information in the red herring prospectus of Zomato.
Zomato is yet to turn profitable. Over FY18-21, the company grew its revenue at a compound annual growth rate of 62%. While business is at a nascent stage and began gaining traction since FY18, Ebitda losses have come down significantly. In FY21, Zomato recorded 32.1 million average monthly active users, of which 6.8 million MTUs (monthly transacting users) placed transactions. It is present in 525 cities in India, with almost 150,000 active food delivery restaurant listings and 170,000 active delivery partners at the end of FY21.