Technology

 

On 14th July 2021, the much awaited Zomato IPO finally got listed with an aim to raise Rs.9375 crores.
But isn’t Zomato the same company that has been continuously suffering losses? So how is it possible for a loss making company to list its IPO? What actually one means while referring to investing in an IPO?
Did your mind also hustled between these questions, the moment we mentioned the Zomato IPO?

In that case, you must read the entire article and learn what we actually mean while referring to IPOs and other related queries.

What is the Zomato IPO all about?

Zomato as we all know is the one of the largest food aggregators whose main services range from delivering food, customer reviews, restaurant reservations and an endless list of other services.
To read in-depth about the Zomato business model, you should definitely check out our content on the same.

 

Coming back to the point, suppose you are a regular customer of Zomato and spend a considerable amount every month using their services.
Given the current scenario of the ongoing pandemic and digitalization skyrocketing and also human nature for a second, its natural that you too would want to benefit from the growth of Zomato. Right?

 

Here’s the point where an IPO comes into play. The Initial Public Offering, abbreviated as an IPO, is the process through which a company like Zomato goes PUBLIC and gets listed on the Stock Exchange.

The company goes public in order to raise a particular amount from the market for various purposes, in most cases it remains to strengthen the current business growth.

Before going public, a company has to ensure proper adherence with the financial regulators of a particular country, in India’s case it’s SEBI(Securities and Exchange Board of India)

 

So basically in layman terms, Zomato’s IPO served as a medium through which the five major type of investors such as,

  • Retail Individual Investors
  • Non-Institutional Investors
  • Qualified Institutional Bidders
  • Anchor Investors
  • Foreign Institutional Investors 


could purchase shares of Zomato and invest in the company on the basis of several financial factors.
Out of the five types of investors, me and you come under the category of Retail Individual Investors.

Without going too deep into the financial gerunds, it translates simply that we as individuals coming under the category of Retail Individual Investors cannot purchase shares of more than Rs. 2 Lakhs of a particular company.

 

Once the IPO gets listed, all types of investors bid for the shares and the shares get allocated accordingly.

 

The allocated shares depend upon the oversubscription of the IPO and you may not get the exact number of shares as you bidded.

For example, in the case of the Zomato IPO the maximum limit for a retail investor in one slot was 195 shares, ranging at ₹ 72-76 per share.
On the top of it the IPO was oversubscribed 38.25 times! That in layman terms means that if you bidded for around 190 shares, you may have been allocated less than 4 shares.

 

One needs to understand that firstly WE DO NOT ENCOURAGE OR INFLUENCE YOU TO BUY SHARES OF ANY COMPANY.
That’s something you need to discuss thoroughly with the experts in the field, because such investments carry a considerable amount of risk.

Performance of the Zomato IPO  

Before the second wave of coronavirus started getting ferocious, in March 2021, Barbeque Nation IPO opened on 24th March and got subscribed 5.98 times on its Final Day.

 

For our readers who didn’t get the previous line,  An IPO getting subscribed, let us say ‘X times’ means that when the IPO went live, the investors’ demand for the shares exceeded by ‘X times’ as compared to the total number of shares.

So coming back to the topic, after the Barbeque IPO went live, the financial experts and enthusiasts turned their attention toward Zomato.
Before it’s listing, people were in a mixed state of feeling to invest in Zomato as the company has been a loss-making company, whose losses marginally surpassed its revenue in FY20.

Amid all the murmurs, Zomato IPO opened on 14th July 2021 and closed on 16th July 2021, becoming the First Indian delivery platform to go public.

Talking about the performance of the IPO, it went huuuuge! The Rs.9375 crores offer of the IPO was subscribed 38.25 times! That translates to that against the 71.92 crores shares (total issue size), the IPO received 2751.25 crore shares!

The IPO offered the shares at ₹ 72-76 per share. After the success of the IPO, the company will get valued at almost Rs 60,000 crore. As the firm stays committed to delivering the best services to its customers, it would utilize the net proceeds of the IPO for enhancing its services and business even more.

Amid several questions running through your mind, I am sure that you must be wondering, how come a company like Zomato that has been suffering losses for a long time, suddenly launched its IPO.
The answer to that simple, yet important question is that Yes Zomato has been a loss making aggregator to an extent that in FY2020 their losses amounted to Rs.2363 crores.
Still despite being a loss making company, as per the SEBI’s guidelines a loss making company can qualify for an IPO, provided some modifications in allocation reservations of the shares.

When a profit making company applies for an IPO, the retail investors can get allocated 35% of the total number of shares, whereas the Qualified Institutional Buyers get 50% and others get the remaining 15 %.
In the case of a loss making company, to safeguard the common people’s money, SEBI capped the allocation reservation to only 15% for the retail individual investors and 70% for the QIBs and 15% for the rest.

 

One also needs to notice that with the Zomato IPO receiving bids of around a whopping Rs. 2 trillion, it has paved a robust path for other upcoming startups. Also, as per various financial analysts, the performance of the IPO of Zomato underscores the maturity of the Indian stock market.

We hope that you must have liked our finance beginner friendly content on the Zomato IPO.
Don’t forget to comment down your views on the IPO of Zomato.