Food delivery company Zomato made its stock market debut, with its shares listing at a 51 per cent premium on Friday, helping it enter the club of top 100 companies by market valuation.
After 10:00am, when normal trading in the stock began, Zomato shares surged and by 10:08am it had hit a high of Rs 138, which is over 81 per cent premium to its issue price and close to 20 per cent higher than its opening price. Its market valuation at this price was over Rs 1.07 lakh crore on the BSE.
However, by 10:40 some profit booking had set in, pulling back the stock price to Rs 121.45, still up 60 per cent to its issue price and 5.6 per cent over its opening price. At this level, its market cap stands at Rs 96,339 crore.
Zomato had gone public to raise Rs 9,375 crore earlier this month. The IPO consisted of an offer for sale of Rs 375 crore by Info Edge India, one of the early investors in the company. The fresh issue comprised Rs 9,000 crore. Zomato plans to use these funds for organic as well as inorganic growth opportunities and general corporate purposes.
Zomato is the first among the technology unicorns to go public in the domestic bourses and its listing is a historical moment for India’s stock exchanges.
“The Zomato listing is going to be an eventful moment for Indian dot com companies and going to be a big shot in the arm for the app-based economy. While all the value investment proponents could keep cribbing about Zomato’s valuations, if you compare this with the response to Kakao Bank IPO in Korea, one realises that these companies are in a different league and so are their investors. Only time will tell who gets it right,” said Sageraj Bariya, vice president – institutional sales at East India Securities.
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On Thursday, South Korea’s digital bank Kakao Bank Corp said it would raise $3.2 billion in its IPO and shares were priced at the top of the range it had announced earlier.
Zomato’s success will be closely eyed by the wider startup community and could give a big boost to others who plan to go public later. Fintech giant Paytm has already filed papers for its IPO. Several others including Nykaa, Policybazaar and Delhivery are likely to launch their IPOs this year.
Zomato’s IPO had got a strong response from retail investors and the issue was subscribed 40.38 times generating a demand of Rs 2.13 lakh crore, which was reportedly the most in 11 years.
“Street might not see fundamental sense on the valuation against their burn due to traditionally valuing companies on a 1-2 year forward earnings basis. Here, the approach is not only paying the premium for long-term growth, but betting on a company, which can further penetrate different needs of the consumer. Their recent delivery model for groceries is an indicator,” Abhishek Agarwal, Managing Partner, Rockstud Capital, pointed earlier.