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Zomato IPO opens for subscription today, all you need to know
- Zomato has fixed the price band of its IPO at Rs 72-76 per share of the face value of Rs 1 each
- The company is expecting to raise Rs 9,375 crore through the offer
- Amid the expectations, analysts have expressed apprehension about the firm’s long-term risks
The much-awaited Initial Public Offering (IPO) of Zomato, the food delivery platform, will launch at 10 am today. The IPO – India’s biggest this year – will be open for subscription till July 16, 2021. Zomato has fixed the price band of its IPO at Rs 72-76 per share of the face value of Rs 1 each. The company is expecting to raise Rs 9,375 crore through the offer.
Ahead of Wednesday’s IPO, the anchor portion of the offer was opened on Tuesday and Zomato raked in over Rs 4,196 crore from 186 anchor investors in exchange for 55,21,73,505 equity shares at Rs 76 each, according to data available from stock exchanges.
Also Read: Why Zomato IPO is a ‘watershed moment’ for Indian markets
Among the anchor investors are JP Morgan, Morgan Stanley, Tiger Global Investment Fund, Blackrock etc.
According to the RHP(Red herring prospectus) filed by Zomato, the company will use nearly Rs 7000 crore for funding organic and inorganic growth initiatives and the rest of the capital will go into general corporate purposes. In the financial year ending March 2020, Zomato’s total earnings stood at Rs 2,742 crore.
The food delivery platform, like other businesses, took a hit during the pandemic and its income dropped to nearly half at Rs 1,367 crore. As of now, Zomato is a loss-making company, something that has analysts worried.
Analysts wary
Amid all the expectations from the IPO, analysts have expressed apprehension about the firm’s long-term risks. Their main concern is that the food delivery service company is still making losses and will face tough competition with Amazon’s entry into the segment.
“Predicting growth trajectory at this juncture is a little tricky for the next few years. The valuation also appears expensive at 25 times FY21 enterprise value to sales compared to an average of 9.6 times for global peers and 11.6 times for Indian quick-service restaurants (QSRs). Though, valuing such early stage businesses on plain vanilla financial matrix might not give the right picture and may look distorted,” said Sneha Poddar, a research analyst at Motilal Oswal Financial Services Ltd, according to livemint.com.
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