Zomato’s $1.3 billion stock offering was oversubscribed almost eight times before the offer closed later on Friday. India’s first food delivery space’s IPO brought the valuation for Zomato to as much as $7.98 billion as investors raved on the fast-growing sector.
Zomato’s share is sold at 72 to 76 rupees per share. Accordingly, market data showed that big institutional investors’ bids grew 12 times bigger than the shares on offer for their category.
Previously, Zomato managed to raise $562 million from 186 notable financial investors. Included in the lineup are Tiger Global, Blackrock, JPMorgan and Morgan Stanley, Reuters notes.
Investors are placing bets on Zomato even though it has flagged in its IPO draft prospectus that its costs and losses would continue to rise as it ramps up investments towards business growth.
“There is insane demand and a lot of excitement,” said Jimeet Modi, founder of Indian brokerage Samco Securities. “Retail investors are looking at this from a listing gains point of view.”
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India’s markets are currently near their all-time highs. More and more digital companies have also started to show their interest to list on bourses.
Paytm also revealed its intention to go public on Friday. The Alibaba-backed financial payments app filed draft papers for a $2.2 billion IPO. Additionally, Walmart’s e-commerce giant Flipkart reportedly is planning to follow the IPO rally soon.
Similar to US-based Doordash, Zommato focuses its service on food delivery. According to Reuters, Zomato has about 350,000 restaurants and cafes over 526 Indian cities under their app. Customers can easily book tables for dine-in, write food reviews and upload photos through the app.
Zomato’s app records 41.5 million users on average every month. Orders on its platforms also soared to 403.1 million in the year 2019-2020 in comparison to the 30.6 million in 2017-2018, its draft IPO prospectus showed.
Through investors’ interest on Zomato is relatively strong, some analysts argue that the company’s valuations were too high. The fact that Zomato has not generated profits further support the argument.
One analyst at India’s Yes Securities, Himanshu Nayyar, for example, said through a research note that Zomato’s IPO price range was “really expensive”, as “its path to profitability is still not clear.”
Read also: Zomato IPO Next Week: What to Know