Zomato IPO: Stellar listing gains delivered, should you re-order?

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The wait to participate in India’s booming start-up ecosystem and invest in new-age companies is finally over with Zomato listing on the bourses. After making a strong debut at Rs 116 per share marking a premium of 52.63% or Rs 39, the scrip rallied further and was quoting at Rs 126.70 (at 12:27 pm) with gains of 66.71% over its issue price of Rs 76 per share on the NSE. On an intraday basis, the stock made a high of Rs 138.90 apiece.

The rally took the company’s market capitalisation to Rs 1,08,969.54 crore surpassing Tata Motors, Indian Oil Corporation, Bharat Petroleum Corporation and Coal India to become one of  top 50 elite and most valuable companies in the country.

Analysts review

Many retail investors were disappointed on non-allotment given just 10% of the issue was reserved for the retail investors. So, would it be right for investors to buy the shares from the open market at such a high premium or not. To find answers to this, Money9 spoke to multiple analysts to find out how are they reviewing the listing gains and listing strategy.

“Given a strong delivery network, high barriers to entry, expected turnaround and significant growth opportunities in tier-II and tier-III cities we continue to remain positive on the stock from a long term perspective. Post the stellar listing, we recommend that short-term investors that were looking for listing gains can exit the stock while long-term investors can book partial profits,” said Jyoti Roy of Angel Broking.

Even Siddhartha Khemka, VP – Head of Research (Retail) at Motilal Oswal Financial Services is positive on Zomato. Investors can plan to accumulate at current levels and at declines around 115. “Zomato with first-mover advantage is placed in a sweet spot as the online food delivery market is at the cusp of evolution. It has consistently gained market share over the last four years to become the category leader in India in terms of GOV (Gross Order Value). It enjoys a couple of moats and with the economics of scale started playing out, the losses have reduced substantially. Though predicting the growth trajectory at this juncture is a little tricky, but it’s a good bet from a long term perspective,” added Khemka.

While Saurabh Joshi of Marwadi Shares and Finance is of the opinion that the run up on the stock price has further stretched the valuations, one should consider taking the invested amount by selling the appropriate number of shares and remain invested for the remaining shares. The company’s continuous focus on unit economics and growth at the same time keeps the long-term growth story intact.

On the contrary Kapil Goenka, Director at CM Goenka Stock Brokers advises successful allottees must book full profit and must wait for some time to buy again.

(Disclaimer: The recommendations in this story are by the respective research and brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)