Zomato IPO: Is FOMO bothering you? Don't fret

Retail investors seem gung-ho on the much-hyped initial share sale of Zomato Ltd as the portion reserved for them has been subscribed more than 3.50 times on the second day of the offer so far. Overall, the public offer has subscribed 1.24 till 12.20 pm on Thursday. Considering the response for the IPO, there are chances that few of you may not get shares of Zomato on the allotment day. However, market analysts believe that it is not a missed  opportunity if you do not get shares of Zomato on the allotment. Deepak Shenoy, founder and chief executive, Capitalmind told Money9 that retail investors should avoid IPOs.

Cautious approach

He goes further to state that observing the newly listed stock for even three months may be wise. “Wait for three months because anchor investors are locked in only for one month. If they decide to exit the investment after the first month, prices are bound to fall. At that moment, you should decide if you want to invest,” he said.

Zomato is a technology-based food delivery company that started its journey as a content and discovery platform for restaurants. Customers use this platform to search and discover restaurants, read or write reviews, view or upload photos, order food delivery, book a table, and make payments while dining out at restaurants.

The company serves its customers right from the start of a dining out option to its logical end of serving food at their very doorstep. It has consistently gained market share over the last few years to become the leading player in its segment. At present, the company is operating in a duopoly in the food delivery space in India.

Growth prospects

Zomato has been growing faster than the industry in terms of gross order value growth. The interesting fact is that, after IPO, the valuation of the company is expected to be around Rs 65,000 crore. It is higher than the combined market cap of all listed QSR players. Jubilant (Rs 42,000 crore), Westlife (Rs 7,900 crore), Burger King (Rs 6,400 crore), Barbeque Nation (Rs 3,400 crore) and Speciality (Rs 300 crore).

In his message to investors, Gaurang Shah, senior vice president, Geojit Financial Services, said: “We have a Subscribe recommendation on the IPO. Although valuation is the tricky part for new entrants which have no peers. The price band of Rs 72-76 is decent to attract investors interest and the long term growth prospects are very very strong as India only has a penetration of only 8% as far as the food delivery is concerned. In the developed world, it is 30-50%. There is a huge potential to capture the market share. ”

“Even if you don’t get the allotment, one can look at dips to enter as it is definitely a long term growth story,” he said.