Zomato IPO: Subscription begins today, Grey Market premium on decline; Should you invest?

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Zomato IPO: Subscription begins today, Grey Market premium on decline; Should you invest? 

Zomato IPO, Zomato IPO Grey Market Premium: Food delivery platform Zomato’s initial public offering (IPO) will open on Wednesday for retail subscription. The issue will close on July 16. At Rs 72-76 per share price band, the company aims to raise Rs 9,375 crore through the offer.

Zomato on Tuesday said it has raised a little over Rs 4,196 crore from anchor investors ahead of its initial share sale. The company has decided to allocate 552,173,505 equity shares to anchor investors at Rs 76 apiece.

The company backed by Jack Ma’s Ant Group Co will be among the first from a long list of Indian unicorn startups to launch an IPO. It will also be the first among Indian online food aggregators.

The Rs 9,375 crore IPO is India’s biggest this year. The IPO will give Zomato a valuation of Rs 64,365 crore. It is being touted as the second-biggest since SBI Cards and Payment Services’ Rs 10,341 crore issue in March 2020. It will surpass Indian Railway Finance Corp offering in January.

The Zomato IPO comprises a fresh issue of equity shares worth Rs 9,000 crore and an offer-for-sale (OFS) worth Rs 375 crore by existing investor Info Edge (India), which is the parent company of Naukri.com. The Zomato IPO will have 75 per cent reservation for qualified institutional buyers (QIBs) and 15 per cent for non-institutional investors (NIIs). The remaining 10 per cent of the issue will be available for retail investors.

Zomato IPO Grey Market Premium, Zomato IPO GMP

In the grey market, the unlisted shares of Zomato have lost some ground. Its grey market premium has dropped from Rs 18-20 on the day of IPO announcement to Rs 10-11.

Post IPO, the valuation of Zomato will be more than the combined market capitalisation of five listed fast food and restaurant companies. Jubilant FoodWorks Ltd, which is the master franchise for Domino’s Pizza in India, had a market capitalisaiton of Rs 40,770. 52 crore on Tuesday, according to BSE data. Burger King India Ltd had Rs 6,659.88 crore m-cap, fast food restaurant holding company Westlife Development Ltd (Rs 8,380.89 crore), Barbeque-Nation Hospitality (Rs 3,375.48 crore) and Speciality Restaurants had Rs 336.69 crore m-cap.

Zomato has said that it will utilise the net proceeds from the fresh issue for funding organic and inorganic growth initiatives (Rs 6,750 crore) and general corporate purposes.

Zomato’s 2019-20 revenue had jumped over two-fold to USD 394 million (around Rs 2,960 crore) from the previous fiscal year, while its earnings before interest, taxes, depreciation and amortisation (EBITDA) loss was around Rs 2,200 crore. In February, Zomato had raised USD 250 million (over Rs 1,800 crore) in funding from Tiger Global, Kora and others, valuing the online food ordering platform at USD 5.4 billion (around Rs 40,000 crore).

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