Foodtech major Zomato’s stock made a stellar debut on the Dalal Street on Friday as the stock debuted at 53% premium of the issue price. As we were filing this story, Zomato’s stock was trading at approximately Rs 115 per share.
Although it is still too early to estimate about Zomato’s future stock performance, Investors good response to its IPO will account for a good news for India’s fledging startup industry. The foodtech major’s IPO was oversubscribed by nearly 38.5 times, with both retail investors and qualified investors giving a thumping response.
Investor’s heartwarming response to Zomato’s IPO will give a buoyant confidence to flurry of startups that are waiting for their ‘D’ day on the Dalal street. The next high profile startup to take a plunge in the capital market is Paytm, whose INR 16,600 Cr IPO is the biggest IPO in country’s history. Mobikwik and Policy Bazaar, other two high profile startups, have also filed their red herring prospectus with SEBI.
The performance of these IPOs and the subsequent stock performance will test investors’ appetite for loss making startups. It is worth noting that Zomato and all other IPO bound startups are stand alone loss making companies. Zomato is expected to turn profitable or breakeven by the next 4-5 years. The Gurgaon based foodtech major made a loss of INR 812 crore in FY21.
Zomato’s ability to turn profitable will depend on many factors including external factors that can turn adversarial due to economic uncertainty. Besides, the company operates in a regulatory intensive sector and its nearest competitor Swiggy has just raised massive funding from marquee investors including SoftBank.
All said done, Zomato’s IPO listing will go done as one of the seminal moments for India’s startup industry.
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