Zomato closes Day 1 of listing with 65 per cent gains
Investor willingness to bet on new age companies behind sharp rise in valuation, say analysts
Food delivery platform Zomato has made its debut on the stock market, listing at ₹115 – a premium of around 51 per cent on BSE – against its issue price of ₹76. After making further gains to reach a high of ₹138, it hit the ₹1-trillion mark in m-cap.
It closed at ₹125.85, up ₹49.85 or 65.6 per cent over the IPO price on the BSE. On the NSE, it closed at ₹125.30, up ₹49.30 or 64.8 per cent. Despite the stellar debut, analysts remain cautious.
According to Vinod Nair, Head of Research at Geojit Financial Services, "For a successful IPO allocation, though the listing is much above expectations, current investors can hold on to their shares as this new business is forecast to grow at a high digit in the early stage of the cycle."
"New and existing investors can accumulate on a short to medium-term basis, as the trend of stock prices stabilises. A key factor for the stock price to sustain this euphoria would be to demonstrate improvement in profitability in the coming quarters. The company is expected to turn profit-making from current loss, else the performance will be impacted," added Nair.
At closing, Zomato recorded a M-Cap of ₹98,731.59 crore on the BSE.
Palka Chopra, Senior Vice-President, Master Capital Services, said: The food services industry contributes 8-9 per cent to the food market in India as compared to the US and China, which contributes 40-50 per cent of the food market. Therefore, Zomato has a lot of room for growth, but a lot of the listing gains can be attributed to current investor sentiments in the market."
S Ramesh, Managing Director and CEO, Kotak Mahindra Capital Company, said, “The stellar debut of Zomato on the domestic bourses after attracting robust subscription is a testimony to the fact that investors are willing to bet big on new-age technology companies, which have a disruptive business model. With growing Internet penetration and the smartphone user base increasing month after month, the entire private digital ecosystem will enable wealth creation and further deepen our capital market in the coming years."