Subscription status and Falling Grey Market Premium of Zomato IPO

The rising content on social media for ongoing Zomato IPO must have surprised the founder Deepinder Goyal. He himself might not have thought about the galloping popularity of its digital food delivery startup. The ongoing IPO is demanding aggressive premiums on their listings which can be observed from the price band of 72-76 at which Enterprise Values/Sales of the company stands at 20x. Its unlisted peer Swiggy demands EV/Sales of 7.5x on the basis of its recent round of funding while the global peer Delhiveroo carries the same at 4.4x.

Market regulator SEBI has reduced the retail participation quota to 10% in order to safeguard the retail investors from high risk exposure. This has reduces the chances of getting Zomato IPO allotment for retail investors. As per the recent subscription status, retail quota has been subscribed 2.35 times. There is a strong attachment between Zomato and the general public which is why an overwhelming response has been received from retail investors. While, the Non Institutional Investors (NII) portion and Qualified Institutional Placement  quota is subscribed 0.09 and 0.20 times respectively. Employee reserved quota has been subscribed 0.08x that reaches to a total subscription of 0.56 times.

Must Read: Growth drivers, investment in Grofers, competitors and everything you need to know about Zomato IPO

Earlier Zomato has announced a price band of Rs. 72-76 for subscription. The IPO is offering a minimum lot of 195 shares and multiples thereafter. This makes a minimum investment of Rs. 14,820 for a single lot. The IPO has fixed a listing date of July 27, 2021

Sluggish response from the institutional investors has reduced the ongoing grey market premium of the Zomato IPO. The grey market premium has been slipped from Rs. 13-18 to Rs. 7.2-8.5 only. A slippage by 50% in the grey market premium is not hinting for strong listing gains. Although, grey market premium is not a ‘fit and proper’ indicator to dictate the listing prices but this has provided reliable insights of the listing price. Heavy slippage in the grey market premium might have taken place on the fading popularity of Zomato. No doubt, Zomato has a special place in the life of investors but investments are dictated by financials, which are not promising. Moreover, the entrance of Amazon in the food delivery space is expected to delay the Zomato’s financials for turning profitable. Zomato will require burning more cash on advertisement expenditure and sales promotion through discount offerings to contain the competition.

Also Read: Zomato IPO is coming soon! It’s time to deep dive into its financials.

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