Super Friday, when Zomato delivered millions

Ayushi Kar/Palak Shah Mumbai | Updated on July 23, 2021

Ajit Shah is a Mumbai-based intraday stock market trader who does not hold on to his bets for more than a few minutes. On Friday, Mehta earned ₹15,000 when he bought 1,000 shares of Zomato at ₹120 a piece in the morning trade and sold them at ₹135. During the day the share price hit a high of ₹138 on the BSE and the NSE.

“Risk-hai to ishq hai. Zomato was listed at ₹115. Since the past one year, I have noticed that every tech company IPO has sharp gains post listing. From the bidding frenzy, I knew Zomato would be no different. The risk was worth it,” Shah told BusinessLine.

Huge gains

Like Shah, retail investors participating in the Zomato initial public offering (IPO) made huge gains on Friday. Take Vipin Yadav, a 21-year-old policeman hailing from Uttar Pradesh. Yadav booked a profit of ₹12,158 from buying into the IPO and selling Zomato scrips on Day 1. That is an 82 per cent return to the initial lot of 195 shares Yadav bought at ₹14,820. Yadav, who started trading in stocks only recently, was not expecting such extraordinary returns when he put his money in, on July 14. “I did some initial research and thought the company had strong financials, but my expectations were for a 30 per cent premium, at best,” an excited Yadav told BusinessLine.

Allotment of shares

Stockmarket data show that most of those who were allotted Zomato shares in the IPO sold it on the first day of the listing. On the NSE, of the nearly 70 crore Zomato shares traded, 60.51 per cent shares were marked for delivery. On the BSE, 50 per cent of the 4.51 crore shares traded were marked for delivery. This simply means that the majority of those who got an allotment in the IPO got out on the first day itself.

“We were advising all our clients to exit Zomato as the profits were good. After all, the company does not have any track record of profit and may not even make any in the foreseeable future. But the listing day gains were good for a company that has negative price-to-earnings ratio,” said Kishor Ostwal, MD, CNI Global Research.

Uttam, an engineering student at IIT Ropar, had discussed this IPO amongst his friends. While keen on investing, there was speculation in the group that the IPO would crash and burn the moment the market opens. Uttam, however, took a risk; looking at the grey market premium of the public offer he was sure of “making some profits”. Indeed, clocking a 53 per cent return, Uttam made ₹6,000.

He, expectedly, regrets pulling his punches, swayed by his friends’ speculation. “I sold the stock the moment it was listed, and the stock has closed on a 66 per cent premium. I could have made more money,” Uttam told BusinessLine.

There were also many disappointed over the heavy subscription to the Zomato issue, which meant no allotment. Daksh Gupta, a data scientist hailing from Bengaluru, missed out on windfall gains because he could not get hold of any shares . “By the virtue of oversubscription, getting to participate in the IPO was almost a lottery,” he rued.

On the market exuberance, Arun Kejriwal of KRIS Research and Investment, said: “Just 700 investors including 186 QIB allottees and the rest HNIs, managed to corner 75 per cent of Zomato shares. But five lakh retail investors got only 10 per cent shares. Delivery figures indicate that most retail investors got out by raking in listing gains. This is extreme euphoria for primary markets.”

“I expect it to continue and dozens of loss-making start-ups like Zomato to hit the market.”

Published on July 23, 2021

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