Zomato IPO updates
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 4.79 times on July 15, the second day of bidding. The offer has received bids for 344.76 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 4.73 times, while non-institutional investors have put in bids for 45 percent against their reserved portion. The portion set aside for employees is subscribed 36 percent and that of qualified institutional buyers subscribed 7.06 times.
Brokerage View:
"At the upper price band of Rs 76, the issue is offered at Market Cap/Sales of 29.9x to its FY21 sales of Rs 1,994 crore. The company does not have any listed peers," said Arihant Capital Markets.
The brokerage likes the company because of 1) Widespread and well organized on-demand hyperlocal delivery network.,2) Acknowledge consumer brand equity across India.,3) Among the leading Food Service Delivery platforms with 4) A strong network of 131,233 restaurants and 161,637 delivery partners, whom fulfilled 94.9% of order delivery.,5) Zomato is highly personalized, intuitive, simple to use, visually appealing, and are designed to drive high engagement with the customers. "We recommend investors to subscribe for the long term buy for investors with higher risk appetite," said the brokerage.
Zomato IPO updates
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 4.79 times on July 15 so far, the second day of bidding. The offer has received bids for 344.55 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 4.72 times, while non-institutional investors have put in bids for 45 percent against their reserved portion. The portion set aside for employees is subscribed 36 percent and that of qualified institutional buyers subscribed 7.06 times.
Zomato offers to its customers:
Discovery: Basic listing is free for restaurant partners, helps to restaurant partners increase in demand for food delivery and dining out.
Hyperlocal delivery network: food delivered to customers reliably and quickly by delivery partners.
Sales and Promotion channel: offers brand marketing, sales & promotion campaign helps to target high intent customers who are looking for food delivery and services offered by restaurant partners.
Suite of business support services: Provides multiple tools to restaurants partners including analytics, dashboards, table reservations and payments processing etc., helps to run their business in better manner. (Source: Arihant Capital Markets)
Zomato IPO updates
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 4.77 times on July 15 so far, the second day of bidding. The offer has received bids for 342.96 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 4.66 times, while non-institutional investors have put in bids for 43 percent against their reserved portion. The portion set aside for employees is subscribed 35 percent and that of qualified institutional buyers subscribed 7.05 times.
Zomato IPO updates
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 4.76 times on July 15 so far, the second day of bidding. The offer has received bids for 342 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 4.64 times, while non-institutional investors have put in bids for 42 percent against their reserved portion. The portion set aside for employees is subscribed 32 percent and that of qualified institutional buyers subscribed 7.05 times.
Expert's Take
KR Choksey believes Zomatois very richly valued at around $9 billiongiven its status of a company which is yet to make any profit. "However, as it is the first start-up in the Indian Food Aggregator space to be listed on the bourses, the enthusiasm among the investors about the IPO is tremendous. Also, the company has a unique status of a UNICORN in the Indian Food Delivery space," the brokerage said.
From the valuation perspective, "we are not very comfortable with the sky-high valuation that the IPO is valued at. As a result, we recommend our investors to subscribe to the issue only for listing gains," the brokerage said.
Zomato IPO updates
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 4.74 times on July 15 so far, the second day of bidding. The offer has received bids for 341 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 4.57 times, while non-institutional investors have put in bids for 39 percent against their reserved portion. The portion set aside for employees is subscribed 32 percent and that of qualified institutional buyers subscribed 7.05 times.
Zomato IPO updates
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 2.26 times on July 15 so far, the second day of bidding. The offer has received bids for 162.42 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 4.52 times, while non-institutional investors have put in bids for 37 percent against their reserved portion. The portion set aside for employees is subscribed 26 percent and that of qualified institutional buyers subscribed 2.48times.
Zomato IPO updates
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 2.16 times on July 15 so far, the second day of bidding. The offer has received bids for 155.66 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 4.47 times, while non-institutional investors have put in bids for 37 percent against their reserved portion. The portion set aside for employees is subscribed 26 percent and that of qualified institutional buyers subscribed 2.33times.
Zomato IPO updates
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 1.73 times on July 15 so far, the second day of bidding. The offer has received bids for 124.62 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 4.43 times, while non-institutional investors have put in bids for 35 percent against their reserved portion. The portion set aside for employees is subscribed 26 percent and that of qualified institutional buyers subscribed 1.55 times.
Key Data Points on Zomato
Zomato IPO updates
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 1.72 times on July 15 so far, the second day of bidding. The offer has received bids for 123.58 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 4.39 times, while non-institutional investors have put in bids for 35 percent against their reserved portion. The portion set aside for employees is subscribed 26 percent and that of qualified institutional buyers subscribed 1.54 times.
Zomato has three key stakeholders
Customers: The Company has created an entire food ecosystem on its platform where a customer can search and discover restaurants, read and write customer generated reviews and view and upload photos, order food delivery, book a table and make payments while dining-out at restaurants.
Restaurant Partners: The platform also helps the restaurant partners with industry-specific marketing tools to generate better visibility and attract more customers to grow their business.
Delivery Partners: The third stakeholders are independent delivery partners who earn their livelihood through food deliveries where the company provides them with transparent and flexible earning opportunities. (Source: LKP Securities)
Zomato IPO updates
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 1.67 times on July 15 so far, the second day of bidding. The offer has received bids for 119.81 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 4.37 times, while non-institutional investors have put in bids for 32 percent against their reserved portion. The portion set aside for employees is subscribed 26 percent and that of qualified institutional buyers subscribed 1.46 times.
Zomato Enjoys The First Move Advantage
Zomato is a growth oriented company focused on increasing its presence further into every part of the country. FY21 revenues fell by 24 percent to Rs 1,993 crore, the number of orders declined by 41 percentto 239 million, but order value increased by 43 percent YoY to almost Rs 400. Increase in frequency and number of food delivery by customers due to lockdowns along with lower customer discounts and fees to delivery partners led to contraction in losses in FY21 to Rs 490 crore (excluding exceptional item) from Rs 2,251 crore in FY20. "Zomato’s unit economic cost has seen an improvement in last four quarters which increased to Rs 20.5 in FY21 from loss of Rs 30.5 in FY20. Zomato is being listed at a revenue multiple of 27x its FY21 revenues whereas global peers trade in the range of 3-19x price to sales. However, the opportunity and scope of further growth is significant for Zomato," said LKP Securities.
Grey Market Premium
Zomato shares traded at a premium of Rs 10 i.e. a price of Rs 86 against the issue price of Rs 76, in the grey market, the IPO Watch data showed. The grey market is an unofficial platform, wherein trading takes place with effect from the announcement of price band till the listing of shares on the bourses.
Zomato IPO updates:The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 1.65 times on July 15 so far, the second day of bidding. The offer has received bids for 119crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 4.33 times, while non-institutional investors have put in bids for 31 percent against their reserved portion. The portion set aside for employees is subscribed 26 percent and that of qualified institutional buyers subscribed 1.46 times.
Food services industry is highly underpenetrated in India, Zomato to lead the category growth, said IDBI Capital
"Only 8-9 percent of food consumption in India is from restaurants while rest is from home-cooked food. However, in countries like China and USA food consumption from restaurants stands at 42-50 percent. Further; online food delivery users as percent to total number of users accessing internet for India is only 8 percent as compared to 53 percent in China and 38% in USA. These data points highlights that there is large headroom for increase in food delivery adoption in India. We like zomato’s ability to drive and hence, create this category by improving convenience to customers. We expect zomato to outperform in food delivery domain driven by content and network effects," said the brokerage.
Zomato IPO updates:The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 1.53 times on July 15 so far, the second day of bidding. The offer has received bids for 111.6 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 4.30 times, while non-institutional investors have put in bids for 31 percent against their reserved portion. The portion set aside for employees is subscribed 26 percent and that of qualified institutional buyers subscribed 1.28times.
Zomato IPO updates
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 1.41 times on July 15 so far, the second day of bidding. The offer has received bids for 101.6 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 4.06 times, while non-institutional investors have put in bids for 28 percent against their reserved portion. The portion set aside for employees is subscribed 22 percent and that of qualified institutional buyers subscribed 1.12 times.
Financials
Zomato IPO updates:
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 1.35 times on July 15 so far, the second day of bidding. The offer has received bids for 96.76 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 4.04 times, while non-institutional investors have put in bids for 28 percent against their reserved portion. The portion set aside for employees is subscribed 22 percent and that of qualified institutional buyers fully subscribed.
Zomato IPO updates:
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 1.33 times on July 15 so far, the second day of bidding. The offer has received bids for 95.44 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 3.96 times, while non-institutional investors have put in bids for 26 percent against their reserved portion. The portion set aside for employees is subscribed 22 percent and that of qualified institutional buyers fully subscribed.
Revenue streams of Zomato
Zomato IPO updates:
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 1.32 times on July 15 so far, the second day of bidding. The offer has received bids for 95.03 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 3.94 times, while non-institutional investors have put in bids for 26 percent against their reserved portion. The portion set aside for employees is subscribed 22 percent and that of qualified institutional buyers fully subscribed.
COVID pushed Zomato towards a positive contribution margin:
Zomato’s ability to scale up the business 8 times over FY18-20 is commendable. However, in FY21 business got impacted (-15 percent total income) due to COVID induced restrictions on mobility, said IDBI Capital.
"Positively, in FY21, EBITDA losses have reduced significantly to 44mn USD (versus 300mn USD in FY20). The food delivery business has been contribution positive during all four quarters of FY21 driven by lower discounts, higher delivery charges and an increase in gross order value (GOV). In 4QFY21, Zomato achieved highest ever gross order value (GOV) at Rs 451," the brokerage said.
Zomato IPO updates:
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 1.30 times on July 15 so far, the second day of bidding. The offer has received bids for 93.61 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 3.90 times, while non-institutional investors have put in bids for 25 percent against their reserved portion. The portion set aside for employees is subscribed 21 percent and that of qualified institutional buyers 98 percent.
Drivers of key business segments of Zomato
Zomato IPO updates:
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 1.29 times on July 15 so far, the second day of bidding. The offer has received bids for 93.04 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 3.87 times, while non-institutional investors have put in bids for 24 percent against their reserved portion. The portion set aside for employees is subscribed 21 percent and that of qualified institutional buyers 98 percent.
Elara Capital on Zomato IPO
Shift to normalcy post-COVIDmay lower average order values (AOVs) as consumers may want to pay higher to partake in the overall dine-in experience. Delivery charges, too, may not offer huge growth potential as they are already at about 9 percent of AOV (steady-state) – Global average 10-12 percent.
Take-rates too are high at about 17 percent, much more than the global average, with capped growth scope. A large entrant is a risk as the Indian market is under-penetrated, attractive for food delivery. These risks may counter-check Zomato’s scarcity premium.
Zomato IPO updates:
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 1.28 times on July 15 so far, the second day of bidding. The offer has received bids for 91.92 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 3.80 times, while non-institutional investors have put in bids for 23 percent against their reserved portion. The portion set aside for employees is subscribed 21 percent and that of qualified institutional buyers 98 percent.
Zomato IPO updates:
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 1.26 times on July 15 so far, the second day of bidding. The offer has received bids for 90.57 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 3.72 times, while non-institutional investors have put in bids for 21 percent against their reserved portion. The portion set aside for employees is subscribed 21 percent and that of qualified institutional buyers 98 percent.
Zomato IPO updates
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 1.23 times on July 15 so far, the second day of bidding. The offer has received bids for 88.73 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 3.62 times, while non-institutional investors have put in bids for 18 percent against their reserved portion. The portion set aside for employees is subscribed 21 percent and that of qualified institutional buyers 98 percent.
Anand Rathi on Zomato IPO
"At the upper end of the IPO price band, Zomato offer is valued at 29.9x of its FY21 marketcap to sales. Going forward, industry delivery percentage to net-revenue stands at around 5 percent and with the Zomato average order value of Rs400 (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," said Anand Rathi.
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," the brokerage added.
Zomato IPO updates
The public offer of Zomato, the largest food delivery company in India, has oversubscribed by 1.22 times on July 15, the second day of bidding.
Investors have put in bids for 87.53 equity shares against the offer size of 71.92 crore equity shares, the subscription data available on the exchanges showed. The offer size has been reduced after the company garnered Rs 4,197 crore from anchor investors on July 13, a day before issue opening.
The portion set aside for qualified institutional buyers, which helped the issue get fully subscribed on the day 1 itself, has subscribed 98 percent, and that of non-institutional investors 18 percent.
Retail investors seems to be remained excited to invest in the first tech start-up, putting in bids 3.54 times their reserved portion, while a part set aside for employees was subscribed 21 percent.
Anchor Book's Details
Of total issue size of Rs 9,375 crore, Zomatoon July 13 raised Rs4,196 crore by allotting 55.2 crore shares to anchor investors at Rs76 per share. Some of the key Marquee investors who were allotted shares in the anchor book include Tiger Global Investments Fund, BlackRock Global, Fidelity Funds, JPMorgan, Morgan Stanley Investment Fund, and T Rowe Price. Along with global investors the anchor portion witnessed strong participation from domestic mutual funds who were allotted 18.4 crore shares aggregating to Rs. 1,399 crore out of the Rs4,196 crore anchor book.
"Strong participation by institutions in the anchor book bodes well for the IPO and we expect continued strong demand for the IPO from both institutional and retail investors alike. Given strong delivery network, high barriers to entry, expected turnaround and significant growth opportunities in tier-II and tier-III cities, we believethatZomatowill command a premium to global peers and hence have a subscriberecommendation on the IPO," saidJyotiRoy, DVP- Equity Strategist atAngel Broking.
Zomato IPO updates
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 1.21 times on July 15 so far, the second day of bidding. The offer has received bids for 86.89 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 3.50 times, while non-institutional investors have put in bids for 17 percent against their reserved portion. The portion set aside for employees is subscribed 21 percent and that of qualified institutional buyers 98 percent.
Expert's Take
"Full marks for popularity butZomato’s financials are unable to stand the benchmarks of investment bet. There is a heat for theZomatoIPO in the market due to consumer-friendly offerings which is expected to deliver at most 5% of listing gains as retail quota will invest more in the IPO. The IPO is aggressively priced and demanding an EV/Sales of almost 20x," saidKaushlendraSinghSengarFounder & CEO at INVEST19.
"No doubt, the IPO is one of a kind and expected to carry healthy valuations due to the unavailability of listed peers but that aggressive pricing won’t delight the institutional investors. Historically, IPOs with large issue prices have not performed well on the Indian bourses and a similar performance is expected from the food delivery platform," he said.
Therefore, "a subscription ofZomatofor long term investment is not a ‘fit and proper’ bet as it needs to prove itself on various parameters. There is no need to gung-ho over the company and subscribe to the IPO as the investors can get the platform in their investment basket at similar or lower prices as well as post a listing," he added.
Zomato IPO updates
The public offer of Zomato, the largest food delivery company in India, has oversubscribed by 1.20 times on July 15, the second day of bidding.
Investors have put in bids for 86.09 equity shares against the offer size of 71.92 crore equity shares, the subscription data available on the exchanges showed. The offer size has been reduced after the company garnered Rs 4,197 crore from anchor investors on July 13, a day before issue opening.
The portion set aside for qualified institutional buyers, which helped the issue get fully subscribed on the day 1 itself, has subscribed 98 percent, and that of non-institutional investors 17 percent.
Retail investors seems to be remained excited to invest in the first tech start-up, putting in bids 3.44 times their reserved portion, while a part set aside for employees was subscribed 21 percent.
Zomato IPO updates
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 1.19 times on July 15 so far, the second day of bidding. The offer has received bids for 85.42 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 3.40 times, while non-institutional investors have put in bids for 16 percent against their reserved portion. The portion set aside for employees is subscribed 21 percent and that of qualified institutional buyers 98 percent.
Zomato Operations
Zomato majorly monetizes through four sources namely 1) Food Delivery 2) Dining Out 3) Hyperpure 4) Zomato Pro. Food delivery is the largest segment and accounts for 75.2 percent of the total income. Dining out, Zomato Pro and Hyperpure account for 11.8 percent, 2.9 percent, and 10 percent of revenues.
Zomato IPO updates
The public offer of Zomato, the largest food delivery company in India, has oversubscribed by 1.18 times on July 15, the second day of bidding.
Investors have put in bids for 84.95 equity shares against the offer size of 71.92 crore equity shares, the subscription data available on the exchanges showed. The offer size has been reduced after the company garnered Rs 4,197 crore from anchor investors on July 13, a day before issue opening.
The portion set aside for qualified institutional buyers, which helped the issue get fully subscribed on the day 1 itself, has subscribed 98 percent, and that of non-institutional investors 16 percent.
Retail investors seems to be remained excited to invest in the first tech start-up, putting in bids 3.37 times their reserved portion, while a part set aside for employees was subscribed 21 percent.
Zomato IPO updates
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 1.17 times on July 15 so far, the second day of bidding. The offer has received bids for 84.40 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 3.33 times, while non-institutional investors have put in bids for 15 percent against their reserved portion. The portion set aside for employees is subscribed 21 percent and that of qualified institutional buyers 98 percent.
Zomato IPO updates
The public offer of Zomato, the largest food delivery company in India, has oversubscribed by 1.16 times on July 15, the second day of bidding.
Investors have put in bids for 83.40 equity shares against the offer size of 71.92 crore equity shares, the subscription data available on the exchanges showed. The offer size has been reduced after the company garnered Rs 4,197 crore from anchor investors on July 13, a day before issue opening.
The portion set aside for qualified institutional buyers, which helped the issue get fully subscribed on the day 1 itself, has subscribed 98 percent, and that of non-institutional investors 15 percent.
Retail investors seems to be remained excited to invest in the first tech start-up, putting in bids 3.26 times their reserved portion, while a part set aside for employees was subscribed 20 percent.
Brokerage's Take
"India’s total addressable food service market is pegged at $32-35 billion in 2020. Out of this only 8-9 percent is online food delivery market as compared to around 45-50 percent penetration in China & America. This under penetration leaves huge headroom of growth for the online food delivery segment in India. However at the current reckoning Zomato’s ask of about $8-9bn valuation is vehemently expensive given its weak fundamentals besides impending third wave of Covid," AUM Capital said.
Hence, investors with a relatively high risk taking ability can subscribe to encash on listing gains, given frenzy for one of its kind listing in food tech universe, the brokerage advised.
Company Profile
Zomato is a technology based food delivery company which started its journey as a content and discovery platform for restaurants. Zomato’s technology platform connects customers, restaurant partners and delivery partners, serving their multiple needs. Customers use its platform to search and discover restaurants, read and write customer generated reviews and order food delivery, book a table and make payments while dining-out at restaurants. On the contrary, Zomato also provide restaurant partners with industry-specific marketing tools which enable them to engage and acquire customers to grow their business.
Zomato IPO updates
The initial public offering of Zomato, one of the leading food service platforms in India, subscribed 1.15 times on July 15 so far, the second day of bidding. The offer has received bids for 82.88 crore equity shares against IPO size of 71.92 crore equity shares, the subscription data available on the exchanges showed.
The retail investors are at the forefront as the portion reserved for them is subscribed 3.21 times, while non-institutional investors have put in bids for 15 percent against their reserved portion. The portion set aside for employees is subscribed 20 percent and that of qualified institutional buyers 98 percent.
