The story is rather interesting. You have a company that is changing the way people consume food, one delivery at a time. It has been competing with an archrival in a steep competition in a very competitive market. On top of that, it is a loss-making company.
But ambitions of the founders are not at all, ready to be tamed. To further their agenda, they reached out to the public to raise some funds. Many were skeptical about its prospectus. Still, many had faith in the company. They showed faith with a tremendous response to the IPO. And now, the market capitalization of this first Indian unicorn is more than one of the leading IT companies in the country, i.e. Tech Mahindra. Yes, we are talking about none other than our beloved Zomato.
Zomato reaching High Skies
The shares of the recently listed company, soared 12% on Monday. This rise is in addition to the 66% surge shown on Friday. The cumulative rise over the IPO price is now in the range of 85%.
With this surge, the company has gained a market cap of Rs 1,10,499 crore, which exceeded the Rs 1,08,340 crore market value of the fifth-largest IT firm Tech Mahindra. At the same time, Zomato is inching closer to Bajaj Auto’s Rs 1,11,262 crore market capital.
The share surged 14.22 percent to hit a high of Rs 143.75 on the BSE. Y the end of the day the share closed the day at Rs 140.85, up by 12 percent.
Zomato’s Rs 9,375 crore issue had received bids for Rs 2.13 lakh crore worth shares. This number was the third-highest in Indian Capital History.
Answers to skeptics
Even though people are skeptical about the high valuations of Zomato, analysts said, conventional wisdom does not work with internet companies.
ICICI securities had some rationale behind current events in the market.
“Historically, customer adoption in most new product categories took a long time of 15-25 years before it gained critical mass and companies became profitable in their respective businesses. In contrast, we find category adoption of some of the segments such as food-tech, payments, and e-commerce to be very encouraging despite their limited history of existence. For instance, we estimate healthy 16 percent food-tech adoption outside the urban core (Next-500 towns) despite hardly 2 years of presence of Zomato/Swiggy”, ICICI Securities notified.