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Moneycontrol Pro Panorama | Citius, Altius, Fortius, Zomato 

In today’s edition of Moneycontrol Pro Panorama: Zomato delivers, the weekly tactical, the allure of HUL, Bajaj Auto revs up, Herd Immunity Tracker, the Green Pivot, all eyes on COP26, and more

July 23, 2021 / 03:26 PM IST

Dear Reader,

The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.

US stock markets have FAANG stocks, companies that occupy different parts of the technology sector but have become world leaders in their fields, and seen their market capitalisation reach dizzy heights.

The euphoria over Zomato’s listing shows the extent to which there is pent-up demand to own a slice of India’s consumer technology stocks. As of 12.15 pm, Zomato was trading at a premium of 67 percent over its IPO price, and its market capitalisation was just a tad below the Rs 1 lakh crore mark.

The Tokyo Olympics are kicking off today, but the newest champion off the listed companies' block is beyond any doubt Zomato. It seems to have taken well to the old Olympics motto of Citius, Altius, Fortius (faster, higher, stronger).

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How long this pent-up demand for consumer tech stocks lasts is anybody’s guess, but it has certainly created a ready market for their IPOs, with names like Paytm, Nykaa, Policybazaar, Delhivery and Flipkart doing the rounds. A similar acronym for Indian tech startups listing in 2021 looks doable, but there’s one problem. We need a few listings from brands starting with vowels as the current alphabet soup is not conducive. ZPNPFD does not have the same ring to it.

The listing saw Zomato’s founder Deepinder Goyal write a blogpost, talking about their journey, how they are still on the road to becoming world class and how he has had to take difficult decisions that did not please all stakeholders.

There may be a message there for Zomato’s new shareholders. When it comes down to taking difficult decisions for Zomato, the focus will be always be on the business and supporting its longer term success. If minority shareholders don’t like it, that’s too bad. The euphoric gains on listing (which was expected because of the oversubscription) may have prompted some cautionary words. The CEO may not want the company’s strategy to become hostage to valuation and what could help or hurt this number.

He writes, “The only short term work we do is whatever will earn us the right to continue building the future.” And then, if that’s not hint enough, he adds, “We are going to relentlessly focus on 10 years out and beyond, and are not going to alter our course for short term profits at the cost of long term success of the company.”

In other words, if you are here for the long term, are prepared for the ups and downs—and some sharp downs even---and share this 10-year vision, you are welcome on board. And don’t ask him when Zomato will start making profits. He also adds that he’s not sure whether they will succeed or fail in this journey! You have been warned. But who’s listening to him while this scramble to buy is on.

That’s how the markets are at this point. They may not even consider what valuation guru Aswath Damodaran had to say about Zomato’s valuation on Twitter. He said it is fairly priced at Rs 41 and lays out the calculation he has used to come to this conclusion in a blog post. And in his words, this valuation has been arrived at using an “upbeat story of growth and profitability”.

But the good professor of finance also adds that those who invested in the Zomato IPO at Rs 72 cannot be dismissed as speculators or ill-informed. Why he says that is “…there are plausible stories that get you to values higher than 100 INR per share. That said, given my story and valuation for the company, I think that at a 70-75 INR per share price, the stock looks over valued to me.”

 

Here are investing insights from our research team:

Weekly Tactical Pick -- HDFC Bank

L&T Infotech – Why this is the right pick for growth-hungry investors

Hindustan Unilever: Cautiously optimistic, focus on next leg of growth

Jubilant FoodWorks: Why the expensive valuation doesn’t matter

Bajaj Auto is a promising candidate for long term

UltraTech – A market leader that continues to deliver

CSB Bank: Rise in NPAs in gold loans takes the shine off Q1 earnings

What else are we reading today?

Herd Immunity Tracker: Don’t get swayed by sero-survey results; long way to go

Hindustan Unilever: A burden of high expectations and unflattering delivery

Trinamool wants Tatas back in West Bengal

The Green Pivot | NTPC takes giant steps towards improving its ESG score

India’s new labour codes need to be implemented immediately

Competing thoughts on the economy of competition

With 100 days until COP26, the Paris agreement pledges are crucial (Republished from the FT)

Technical Picks: WiproAdani EnterprisesL&T and JSW Steel (These are published every trading day before markets open and can be read on the app)

Ravi Ananthanarayanan

Moneycontrol Pro
Ravi Ananthanarayanan

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