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Zomato will enter the stock market on Friday, four days before the scheduled time

India’s first unicorn Zomato will make its stock market debut on Friday, marking a historic moment for the domestic capital market.

As per the initial schedule, Zomato’s listing was to take place on July 27. However, the investment banks managed to complete the share allotment and listing formalities before the deadline. Under the SEBI framework, the time frame between the closing and listing of the IPO should be six working days. Zomato’s IPO closed on July 16.

The stock is expected to perform well due to high demand in the IPO. Zomato’s public offering saw nearly 40 times higher demand than shares and the highest ever bid for a domestic IPO of over Rs 2 trillion.

Market players said the gray market premium for Zomato shares has increased from 15 per cent during the IPO to 30 per cent at present, following the overwhelming response. If gray market activity is anything to go by, the stock is expected to list around Rs 100 per share. The online food delivery company has fixed the issue price at Rs 76 per share, which will value the company around Rs 60,000 crore.

Zomato has raised Rs 9,000 crore in fresh capital through IPO. The proceeds from the issue will be used to finance organic and inorganic development initiatives. Post the IPO, Zomato will have ~15,000 crore cash on its balance sheet, which the company says will give it a long run to drive growth.

Zomato’s loss has increased from Rs 107 crore to Rs 2,386 crore between FY18 and FY20. However, the cash burn has helped the company grow its top line five-fold from Rs 466 crore to Rs 2,605 crore.

Zomato’s IPO was missed by some investors, given the lack of a profitability track record and the uncertainty surrounding the company’s profitability. However, most brokerage firms advised their clients to subscribe to the IPO.

At Rs 76 per share, Zomato is valued at 29.9 times FY21 sales. Going forward, the industry distribution percentage to net revenue is 5 per cent and Zomato average order value is Rs. 400 (Rs 20 per delivery) The company is well poised and has been placed in a sweet spot as the first mover advantage in the online food delivery market.

Additionally, considering the strong network impact, increasing frequency of orders, huge growth potential in Tier-II and Tier-III cities and large addressable market, we recommend subscribe (short term) rating to the IPO,” said Anand Rathi had said in an IPO note.

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