Zomato’s IPO Oversubscribed By 38 Times With 2,751 Cr Bids

Food delivery startup Zomato’s initial public offering (IPO) was oversubscribed by 38.96 times on the final day of bidding, data with stock exchanges showed on July 16. 

Overall, the INR 9,375 Cr Zomato IPO received 2,751.27 Cr bids for a total issue size of 71.92 Cr equity shares, according to data from the National Stock Exchange (NSE).

The Qualified Institutional Buyers (QIBs) portion of Zomato IPO was oversubscribed the most at 51.79 times the size of the offering. Foreign Institutional Investors (FIIs) led the QIB portion, followed by banks, financial institutions, and mutual funds companies. 

On the other hand, the retail individual investors (RII) portion which consist of 10% of the overall IPO offering was oversubscribed by 7.45 times. 

According to new SEBI norms, loss-making companies are required to restrict their retail investors’ quota at 10% when going public. Around 75% of the Zomato IPO quota is reserved for QIB (including anchor investors), while 15% is reserved for non-institutional investors (NIIs).

Within the NII base, individual investors (other than retail investors) were the biggest subscribers, followed by corporate investors. The NII base was subscribed by 32.96 times on the final day of bidding. The NII base consists of those investors who typically purchase shares worth more than INR 2 Lakhs. Individual investors and corporations who subscribe below this limit are by default considered as retail investors.

Zomato’s employees’ subscriptions to the public issue were at just 0.62 times. As per the prospectus that was issued last week, the total quantum of shares reserved for employees is at INR 500 Cr.

Zomato had earlier disclosed that it had raised INR 4,196 Cr from 186 anchor investors ahead of the opening of its much-anticipated. The anchor investors include names such as Tiger Global Investment Fund, Blackrock, Fidelity, JPMorgan, Morgan Stanley, T Rowe Price, Canada Pension Plan Investment Board, Government of Singapore, SBI Mutual Fund, Axis Mutual Fund, Kotak Mutual Fund, UTI Mutual Fund, Motilal Oswal AMC, HDFC Mutual Fund, ICICI Prudential Mutual Fund, Tata Mutual Fund, Goldman Sachs India, Abu Dhabi Investment Authority, Franklin Templeton, HSBC Asset Management (India) and others.

The company informed the stock exchanges that it allotted 55.22 crore equity shares to anchor investors for INR 76 per equity share. As per Zomato, the fresh funds raised through the anchor investors are almost 45% of the total issue size in the IPO. 

Further, a total of 18.41 crore shares were allotted to 19 Indian mutual funds such as SBI, Axis, Aditya Birla, Kotak, Mirea, Motilal, UTI, Nippon India, HDFC, IIFL, Sundaram, Tata, and Principal, among others.

One of the key concerns for market observers is the valuation sought by Zomato through its public offering. The company is targeting a valuation north of INR 60,000 Cr at the higher end of the issue price. This is a revenue multiple of 27x of its FY21 revenue of INR 1,994 Cr, which was 25% lower than FY20. But at the same time, the company’s losses also narrowed from INR 2,363 crore in FY20 to INR 812 crore in FY21.