Leading online food delivery service provider Zomato’s Rs 9,375 crore share sale via initial public offering (IPO) was subscribed 4.8- nearly five times on the second day of the issue, according to subscription data on the exchanges. The much-awaited IPO opened on Wednesday, July 14, and will close tomorrow – July 16, remaining open for investors in a subscription window of three days. Zomato shares today were in high demand among the qualified institutional investors, while retail investors showed massive interest yesterday.
The portion reserved for retail investors in the IPO was subscribed 4.73 times on Thursday by 5:00 pm. The portion set aside for the non-institutional investors (NII) was subscribed 0.45 times, while the portion reserved for qualified institutional buyers (QIB) was subscribed 7.07 times – the highest today among the three groups of investors.
On the first day of the issue, the IPO was fully subscribed at 1.05 times, and the portion reserved for retail investors oversubscribed within hours of opening yesterday.
The company has fixed the price band of the primary market offering at ₹ 72-76 per share. The IPO consists of a fresh issue of ₹ 9,000 crore and an offer for sale (OFS) of ₹ 375 crore by the promoter – Info Edge India.
Domestic brokerage firm Anand Rathi maintained a ‘subscribe’ (short term) to the Zomato IPO.
”Zomato is the largest online food delivery players in India, with dominant market share in delivery and restaurant classified.
At the upper end of the IPO price band, the offer is valued at 29.9x of its FY21 marketcap to sales. Going forward, industry delivery percentage to net-revenue stands at ~5 per cent and with the Zomato average order value of Rs. 400 (i.e. Rs. 20 per delivery) the company is well poised and it is also placed at a sweet spot as the first mover advantage in the online food delivery market.
Additionally, given the strong network effects, increasing frequency of order, huge scope for growth in tier-II and tier-III cities and large addressable market, we recommend a subscribe (short term) rating to the IPO,” said Anand Rathi in its report.