Understanding Profit from Zomato IPO: Can You Earn Listing Gains Despite Previous Financial Losses?
Zomato IPO is a significant milestone for Indian startups, with strong investor interest seen in the pre-IPO phase. As one of the first Indian tech giants to list on stock exchanges, the homegrown food delivery unicorn has captured the attention of both retail and institutional investors alike. With pre-IPO subscriptions showing robust demand, it is clear that the public may benefit from listing gains upon the IPO launch.
The Zomato Story and IPO Overview
Info Edge holds a substantial stake in Zomato. The parent company Info Edge has an 18.55% stake in the food delivery platform, making it a key player in the IPO. The average cost of acquiring equity shares for selling shareholders is Rs 1.16 per share, creating a significant margin for potential gains.
IPO Details and Subscription Trends
Following an impressive Rs 4195 crore raise from anchor investors, Zomato’s IPO saw a strong first day of bidding, with the issue size fully subscribed within a day. Retail investors were instrumental in this success, with bids for the company’s shares being 1.05 times and 5.07 times oversubscribed on the first and second days, respectively. The QIB (Qualified Institutional Buyers) segment saw the highest demand, with the portion reserved for them being subscribed 7.46 times. The employee category was also highly subscribed, with a ratio of 36. In contrast, non-institutional investors subscribed over 48 times.
Market Response and Grey Market Premium
Even before the IPO officially opened, demand for Zomato’s shares in the anchor book saw a surge. On the first day, the retail segment of the share sale was fully subscribed, and the company raised Rs 4196 crore from several prominent institutional investors. The average grey market premium (GMP) for Zomato shares has increased, reflecting positive market sentiment. Today, the GMP is in the range of 10-12%, a notable increase from the previous days’ range of 8.75-9%.
Expected IPO Timeline and Investor Ratings
Based on the promising subscription trends, Zomato is set to finalize share allotments on July 22 and is expected to list its shares on July 27. Key research and brokerage firms have provided different ratings for the IPO, with some advising to subscribe for listing gains. Motilal Oswal Financial Services and ICICI Direct have a 'subscribe' rating, encouraging high-risk appetite investors to participate. In contrast, Choice Broking has recommended to subscribe with caution, indicating a more conservative approach to the investment opportunity.
Conclusion
Despite concerns that a company with previous financial losses may not yield significant gains, Zomato’s strong pre-IPO subscription and high grey market premium suggest a favorable market outlook. Investors with high risk tolerance might find this IPO an attractive opportunity to benefit from listing gains. However, it is crucial to align with your investment strategy and risk assessment before participating in such a high-profile offering.
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