Missed Zomato share allotment and should you buy now? Here is what analysts say
Zomato shares today registered bumper listing at NSE and BSE delivering more than 50 per cent premium to its lucky bidders. However, there is huge number of applicants, who failed to get Zomato share during allotment process. Such bidders are thinking of whether they should buy Zomato share after listing or not. For such investors, stock market experts have suggested to wait for some correction as profit-booking in the counter is strongly awaited. They advised such investors to buy Zomato shares at around ₹100 and hold it for long-term as it is expected to go up to ₹210 by the end of 2021.
On possibilities after Zomato share price listing; Avinash Gorakshkar, Head of Research at Profitmart Securities said, “The way public issues have been performing in the last 2-3 months, I am expecting sharp correction in the counter and Zomato share price may come around ₹95 to ₹100 as some selected type of investors who invest in public issues and come out of it after listing are expected to book profit. If this happens and Zomato share price comes in this range, only then one should buy the counter and maintain buy, hold and forget strategy as it would give better returns in long-term.”
Advising Zomato share holders to book listing gains; Kapil Goenka, Director at CM Goenka Stock Brokers said, “One of the most awaited and much-talked-about Initial Public Offering (IPO) in recent times, Zomato has filed for its IPO with pre open volume of over 19 crore. At a fantastic market capitalization of over 1 lakh crore, Zomato is backed by Sanjiv Bhikchandani led Info Edge India Group. The IPO made a fantastic entry, with a bumper listing up by 73 percent. For the investors who are looking to gain from this IPO, Zomato might prove a gem. Moreover, in the backdrop of the Coronavirus pandemic, Zomato IPO and enthusiasm around this has undoubtedly boosted the investors’ confidence in the IPO market. However, we advise that successful allottees must book full profit and must wait for some time to buy again.”
Saurabh Jain, AVP-Research at SMC said, “Zomato has announced that its market capital to sale value will become 15 times in next three years. So, it will be important to see how they are going to achieve this target and one need to keep an eye on its upcoming quarterly results.”
On what should be the strategy for those Zomato IPO subscribers who failed to get shares during allotment Ravi Singhal, Vice Chairman at GCL Securities said, “Those who couldn’t make into the list of lucky bidders of Zomato IPO, they should buy with 50% of their portfolio amount and keep on accumulating till it’s above ₹100 mark maintaining stop loss at ₹90. The counter is a long-term portfolio stock and it is expected to go up to ₹190 to 210 by the end of 2021.”
Zomato share price is currently trading at ₹123.30 (at 11:18 AM today) after making its intraday high of ₹138.90 per share levels.
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Zomato listing HIGHLIGHTS: Share price ends first day of trade at Rs 126; jumps 66% from IPO price
Zomato ended the initial day of trade on the stock exchanges in the green. Image: Zomato Twiiter
Zomato IPO share listing HIGHLIGHTS: Zomato shares made a strong stock market debut on Friday, closing the initial day of trade at Rs 126 per share on the NSE. Zomato’s stock price was up 66 per cent or Rs 50 from IPO price of Rs 76. On opening, Zomato shares hit 20 per cent upper circuit at Rs 138, nearly doubling IPO investors money. The total market capitalisation of the online food ordering platform stood at Rs 98,211 crore on the closing bell, down from Rs 1 lakh crore earlier in the day. While on BSE, Zomato shares closed 65 per cent or Rs 49.86 higher at Rs 125.85 apiece. In traded volume terms, 451 lakh shares have exchanged hands on BSE, while 69.48 crore units traded on NSE. The Rs 9,375-crore IPO was sold in a price band of Rs 74-76 a share during 14-16 July. The mega public issue of the food-tech unicorn saw a subscription of over 38 times, receiving a robust response from all pockets of investors. Zomato’s IPO is the first Indian internet unicorn to make its stock market debut. This much-awaited public issue is the largest to hit Dalal Street since SBI Cards and Payment Services’ Rs 10,341-crore IPO in March 2020.
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Zomato IPO listing | Food delivery giant makes a stellar debut with nearly 66% premium, at Rs 125.85
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India’s leading food delivery company Zomato made a stellar debut on Dalal Street on July 23 as the stock opened at Rs 116 on the NSE, a 52.63 percent premium to its final offer price of Rs 76. The listing price on the Bombay Stock Exchange was at Rs 115, up 51.32 percent.
The stock closed at Rs 125.85 on BSE, up 65.59 percent with respect to the issue price, while on NSE, the stock closed at Rs 125.30, up 64.87 percent against the stock’s issue price of Rs 76.
“The response from institutional investors has been strong. This suggests that the overall float available for trading might be limited leading to a higher GMP. We issued a Subscribe with Caution rating for this IPO, keeping in mind the long investment horizon required for high-growth companies that are currently loss-making,” said Rajnath Yadav, Research Analyst at Choice Broking.
“For retail investors who have the capacity to hold for a long term, we would recommend they hold on to their investment. While investors with shorter time constraints can sell if they see listing gains. Our outlook for Zomato is positive in the long run,” he added.
The share price moved to Rs 138 intraday after listing at Rs 116 against the final offer price of Rs 76.
“Despite the large size of IPO at Rs 9,375 crore and rich valuations, Zomato saw healthy overall subscription of 38x. There is lot of fancy for such unique and first of its kind listing in the market,' said Sneha Poddar, Research Analyst, Broking & Distribution, Motilal Oswal Financial Services.
“It enjoys couple of moats and with economics of scale started playing out, the losses have reduced substantially. Though, predicting the growth trajectory at this juncture is little tricky, but it’s a good bet from long term perspective,” she added.
Dalal
The Rs 9,375-crore initial public offering, which opened for subsciption during July 14-16, had seen a stellar response from investors with 38.25 times subscription - highest in last 13 years among IPOs valued more than Rs 5,000 crore each.
The market capitalization of the company has crossed Rs 1 lakh crore mark, as it stood at Rs 1,08,067.35 crore after a stellar debut onStreet, racing ahead of IOC, BPCL, Shree Cements.
Largely, the listing was in line with analysts' expectations despite rich valuations. First listing in the food delivery segment, positive market sentiment, healthy demand from investors, consistency in gaining market share, and expected improved financial performance attributed to the debut premium.
Also read: Zomato founder and CEO Deepinder Goyal: Today is a new Day Zero.
Incorporated in 2010, Zomato through its technology platform connects customers, restaurant partners and delivery partners, serving their multiple needs. On the other hand, it provides restaurant partners with industry-specific marketing tools which enable them to engage and acquire customers to grow their business. It also operates a one-stop procurement solution, Hyper-pure, which supplies high quality ingredients and kitchen products to restaurant partners.
It has two core business-to-customer (B2C) offerings – Food delivery, and Dining-out, in addition to its business-to-business (B2B) offering Hyperpure. Another part of its business is Zomato Pro, its customer loyalty program encompasses both food delivery and dining-out.
Zomato has consistently gained market share over the last four years to become the category leader in India in terms of gross order value (GOV) from October 2020 to March 2021. It generates a majority of its revenue from food delivery and the related commissions charged to its restaurant partners for using platform.
Analysts said the FoodTech market has shown huge prospects and attracted heavy investments as India online food delivery market. Hence they believe India is going through a revolutionary phase in the last few quarters.
Factors propelling India’s online food delivery market are changing lifestyle and eating habits, and hectic schedule and growing disposable income in India pushes people towards ready-to-eat food at a discounted rate, analysts said, adding rising digitalization among millennials and increasing proportion of working women in India are also driving the online food delivery trends in India.
Zomato is taping the same trends effectively, analysts feel.
As of March 2021, Zomato was present in 525 cities in India, with 3,89,932 active restaurant listings along with presence in 23 countries outside India.
The food delivery giant is going to utilise net proceeds from fresh issue for funding organic and inorganic growth initiatives.
The company’s orders grew by 7.8x from 3.06 crore in FY18 to 23.89 crore in FY21 and its GOV grew 7.1x from Rs 1,334 crore in FY18 to Rs 9,482.9 crore in FY21.
Post a 23.5 percent decline in revenues in FY21 to Rs 1,993.8 crore (compared to Rs 2,604.7 crore in FY20) due to the Covid-19 pandemic, analysts expect growth to pick up sharply from FY22.
The loss declined to Rs (816.4) crore in FY21 from Rs (2,385.6) crore in FY20, while the earnings before interest, tax, depreciation and amortisation (EBITDA) loss dropped significantly year-after-year, to Rs (23.4) crore in FY21 from Rs (88.5) crore in FY20 and Rs (170.9) crore in FY19.