NEW DELHI: A day after Zomato formally announced the launch date and details of its upcoming IPO, its shares are trading at a premium of over 20% in the grey market. According to data available on IPO Watch on Friday, Zomato shares were trading at a premium of Rs 16 per share on the upper IPO price band of Rs 76. The unlisted shares of the company were available on the grey market at Rs 92 per share, signalling high subscription and listing gain.
“Going by size it is going to be the second biggest IPO after SBI Cards. We believe that investors will get a decent listing gains as the grey market premium is around Rs 14-17 which is around 21% more than the price band,” said Gaurav, head of Research, CapitalVia Global Research. SBI Cards’ IPO was subscribed by over 26 times in March last year. However, it opened 13% down from the issue price as Covid-19 was about to wreck global economy.
Garg added that the success of Zomato would depend on its ability to derive operational efficiencies and turn profitable quickly. If Zomato is able to do so, it can be one of the biggest wealth creators, he said. Founded in 2008, Zomato continue to incur losses and has never reported profit. Last fiscal, Zomato’s net losses stood at over Rs 800 crore. This, according to some analysts, is a big concern.
Jyoti Roy, deputy vice president (Equity Strategist) at Angel Broking, said that the IPO is being valued at a price/sales of 28.3x to 29.9x of FY21 revenues of Rs 1,993 cr, which is at a premium to other global food delivery platforms like Meituan, Doordash, Delivery Hero.
“we believe that FY21 was an aberration as business was impacted significantly due to the first Covid wave and the ensuing lockdowns. However, given the strong growth prospects, high barriers to entry and duopoly nature of the food delivery business, in India we believe that Zomato will command a premium to global peers and hence are positive on the future growth prospects of the company,” Roy said.