Zomato witnessed a stellar listing on Friday as the stock jumped 53% from its IPO price of Rs 76 with bids at Rs 115. After hitting an intra-day high of Rs 138 on BSE, the stock finally closed at Rs 126. , giving the company a market valuation of Rs 98,732 crore, ahead of traditional giants like Tata Motors, M&M and Coal India.
Zomato’s strong debut proved many pundits and skeptics on Dalal Street wrong as well, who questioned the Rs 60,000 crore pre-IPO valuation of the new age company. Even those who believed in the valuation of the loss-making company expected its listing profit to be limited to 25%-30%.
On July 16, the company closed its IPO bidding process with oversubscription over 38 times and extended its listing date by at least four days to Friday.
S Ramesh, MD & CEO, Kotak Mahindra Capital Co., one of the merchant bankers who took the company public, said such a strong market opening was a testimony to the fact that investors “go big on new-age technology companies”. are willing to place bets, which are characteristics of a disruptive business model”.
“With increasing internet penetration and increasing number of smartphone user base month by month, the entire private digital ecosystem will enable wealth creation and further deepen our capital markets in the years to come,” Ramesh said.
Market stalwarts said that in 1993, Infosys was on the verge of withdrawing its IPO, until the market stalwarts recognized its future growth prospects and pulled it out. The rest, as they say, is history. Over the past 30 years, Infosys has been ranked among the top wealth creators in the Indian market.
Industry players said the success of Zomato will give new-age tech companies the confidence to go public with their merchant bankers. Digital payment solutions companies PayTM and Mobikwik, online auto classifieds company CarTrade and e-commerce logistics startup Delhivery have already applied for the IPO. There are also several other tech-enabled companies that are in their final stages of PE-powered development, for which Zomato was a test-case. All these companies are likely to go to D Street to go public, he said.
Before Zomato’s IPO, there was a split between top fund managers and investors. On one hand, Nilesh Shah, MD, Kotak Mutual Fund, backed the recent trend of Indian new-age companies going public, adding that the trend has the potential to attract global investors who have burnt their hands in China.
On the other side of the spectrum was billionaire investor Rakesh Jhunjhunwala who expressed doubts about the valuation of these new age companies and said that Zomato had an upside risk of 10%-15% while downside risk was 50%-60%.
With a market valuation of around $13.3 billion, Zomato is one of the top 50 most valuable companies in India. On a global scale, it’s still a tiny bit. Meituan, the Chinese giant, which also has businesses other than food delivery service, is valued at $215 billion, while its US counterpart, the recently listed DoorDash, is valued at $58 billion. A recent Ambit Capital report on Zomato stated that the company was in a sweet spot compared to its global peers as it operated in a growing market.
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