Zomato has a bumper listing! What investors should do now?

Technology-driven food delivery platform is listed today. The market participants who were allotted Zomato IPO are witnessing more than 50% returns post listing. The IPO of Zomato is listed at Rs. 116, a premium of 52.6% on the upper price band of issue price at Rs. 76. The listing of digital food delivery platform has crossed the market capitalization of Rs. 1 lakh crores. Investors will get surprised but it is a fact now that a startup founded in 2008 by Mr. Deepinder Goyal backed by Chinese Ant Financial has crossed a lot of companies with long track record. IOC, Shree Cements, ICICI Prudential, ICICI Lombard, SBI Life and SBI Cards and Payments have spent a lot of time in the unlisted and listed markets but didn’t manage to surpass the benchmark of Rs. 1 lakh crore.

Earlier, the IPO of Zomato was subscribed 38.25 times. Retail participants were very much excited for the issue, which was clear in their response to the defined quota. The retail quota was subscribed 7.5 times while the Non-Institutional Investors and Qualified Institutional Buyers subscribed the IPO 32.96 times and 51.79 times respectively.

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Before listing, grey market premium of the issue had a roller-coaster ride. Once it were swinging high when retail participation was strong while there was a time when premium fell sharply after sensing weak response of employees towards IPO as employee quota was subscribed 0.65% only.

The delicious Zomato IPO has satisfied the hungriness of investors. Retail participants are going to enjoy meals from Zomato by paying out from their listing gains. More than anticipated premium on Zomato listings has put investors in a dilemma whether to stay invested in the issue or book partially or full.

Money-losing company with strong rivalry from Swiggy and upcoming competitor Amazon has crossed the market cap of Rs. 1 lakh crores. Zomato fetch 88% of their total revenues from sale of services from platform such as Food ordering, zomato pro and dining out. The food-delivery platform has invested $100 million in Grofers-a grocery delivery platform to achieve synergy in their operations and both applications are expected to gain a healthy amount of traffic. EBITDA figure of the company is negative which stated that company is unable t pay out their direct cost only. Market cap of Rs. 108,000 crores has pushed the Enterprise Value/Sales parameter to 51 times, which seems expensive but monopoly as a single listed platform will keep providing higher valuations. Investors should book profits partially and enjoy meals from Zomato with them while half of the stocks should be kept for long term.

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