Zomato rallies 65% on listing day; should you buy, sell or hold now?

Zomato shares made a fantastic entry on Dalal Street with a rise of 64.74% on listing day against the issue price of Rs 76. Shares of the online food delivery firm settled at Rs 125.20 on the BSE and at Rs 125.30 on NSE. Earlier, the company’s initial public offering got subscribed by 38 times last week. The public offer was opened for subscription between July 14-16. The company, backed by Jack Ma’s Ant Group, is the first from a long list of Indian unicorn startups to launch an IPO.

Will the euphoria sustain? Market analysts believe that a key factor for the stock price to sustain the momentum is to demonstrate improvement in profitability in the coming quarters. Some of the market watchers believe that the company will continue to narrow down its losses and may turn profitable by FY23. Considering the robust listing and hopes of a turnaround going ahead, is it the right time to invest in Zomato shares or one should book profit? Money9.com collated views of various brokerages to understand the further movement of Zomato’s share price. Have a look:

S Ramesh, MD and CEO, Kotak Mahindra Capital Company

The stellar debut of Zomato on the domestic bourse after attracting robust subscription is a testimony to the fact that investors are willing to bet big on new-age technology companies which have the characteristics of a disruptive business model. It is also a tribute to Indian entrepreneurship. With growing internet penetration and the number of smartphone user base increasing month after month, the entire private digital ecosystem will enable wealth creation and further deepen of our capital market in the coming years.

Vinod Nair, head of research, Geojit Financial Services

For successful IPO allocation, though the listing is much above the expectations, current investors can hold on to their shares as this new business is forecasted to grow at the 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 price stabilises. A key factor for the stock price to sustain this euphoria is to demonstrate improvement in profitability in the coming quarters. The company is highly expected to turn into profit from the current loss, else the performance will be impacted.

Sneha Poddar, research analyst, broking and distribution, Motilal Oswal Financial Services

There is a lot of fancy for such a unique and first of its kind listing in the market. 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 couple of moats and with economies 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.

Jyoti Roy, DVP-equity strategist, Angel Broking

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.

Kapil Goenka, director, CM Goenka Stock Brokers

In the backdrop of the coronavirus pandemic, Zomato IPO and enthusiasm around this has undoubtedly boosted the investors’ confidence in the IPO market. However, we advise that successful allottees must book full profit and must wait for some time to buy again.

Naveen Kulkarni, Chief Investment Officer, Axis Securities

Zomato debuted in the Indian market with a strong listing gain of more than 50%. The stock price has further jumped to Rs 138 after a strong listing, making a debut to a club of one lakh crore of market cap. This signifies a strong risk appetite for the new and next-generation business models. Today’s listing performance will provide a positive signal to the Indian start-up ecosystem. We could see this trend to continue in the upcoming IPOs, as the present market conditions are conducive for the primary market.