Big appetite for Zomato IPO as retail portion is subscribed over 2 times

The issue comprises an offer for sale of ₹375 crore by the company’s early investor, Info Edge, and a fresh issue worth ₹9,000 crore

Research firm CLSA estimates the online food delivery market size at $11 billion over the next five years, and Zomato is hoping to account for a substantial chunk of it | Photo: PTI

Home-grown food tech company Zomato’s three-day share sale opened for subscription on Wednesday, with the offer price fixed at 72-76 per share.

The retail portion of the IPO was subscribed nearly 100 per cent within an hour of opening. At around 2pm the 10 per cent retail quota was oversubscribed around 2.28 times, data compiled by stock exchanges showed.

The Qualified Institutional Buyers (QIBs) portion was subscribed 0.17 times while the portion reserved for non-institutional investors subscribed 0.09 times. Overall the issue has currently been subscribed nearly 0.53 times.

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Also read: Food for thought: Zomato’s promise of an IPO, bigger market

Zomato on Tuesday said that it had raised 4,196 crore from several institutional investors as part of an anchor book allocation. It has allocated 552.17 million equity shares to anchor investors, at a price of 76 per share. Government of Singapore, BlackRock, Goldman Sachs, Abu Dhabi Investment Authority are some of the investors.

The issue comprises an offer for sale of 375 crore by the company’s early investor, Info Edge, and a fresh issue worth 9,000 crore.

Zomato shares are expected to list on both NSE and BSE on July 27.

The COVID-19 pandemic and the resultant lockdowns have irreversibly changed the business paradigm in India, and riding the wave are e-commerce firms like Zomato, promising delivery of services and goods with minimum social contact and maximum hygiene. Gurugram-based Zomato started out as a restaurant review site and has expanded to become a leading food aggregator and deliverer.

Research firm CLSA estimates the online food delivery market size at $11 billion over the next five years, and Zomato is hoping to account for a substantial chunk of it.

According to its Draft Red Herring Prospectus (DRHP), filed with market regulator Securities and Exchange Board of India ahead of the IPO, Zomato has been posting losses for the past four financial years. However, e-commerce companies are mostly loss-making the world over. Hence prospective investors may be advised not to worry too much about Zomato’s balance sheet. Encouragingly, according to the DRHP, Zomato’s average order value (average bill) has risen from about 378 in the first quarter of fiscal 2020-21 to about 408 in the third quarter of that year.

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