Zomato surpasses IPO listing price; do you have it in your portfolio

The app-based food delivery aggregator company Zomato Ltd’s stock opened above its listing price of Rs 76 today, up by 1.58% from its previous day’s closing price of Rs 75.80. Yesterday stock hit the listing price for the first time a year ago and closed at Rs 75.80. Currently, the stock is trading around Rs 77.

The IPO for Zomato Ltd was launched on July 14, 2021, and the stock began trading on the exchange on July 23, 2021. By the closing day of the IPO window, it had garnered a total subscription of 38.25 times. The retail category witnessed a subscription rate of 7.45 times, the QIB category had a rate of 51.79 times, and the NII category saw a rate of 32.96 times. The final issue price was set at Rs 76, and on the listing day, the stock opened at Rs 115, with a premium of 51%, same day it reached a peak of Rs 138 and closed at Rs 125.85 on the BSE. The total size of the IPO was Rs 9375 Crore.

Regarding stock performance, Zomato Ltd has generated a 42% return over the past three months. However, in the last year, it has generated a relatively modest return of 11.90%.

The introduction of ONDC (Open Network for Digital Commerce) by the Indian government is posing significant competition to private players like Swiggy and Zomato by enabling restaurants to directly sell food to consumers without relying on third-party intermediaries. ONDC, with its platform, has a noteworthy 12 million sellers who offer their products and services to customers. Following the announcement of this news, the stock of Zomato experienced a decline of approximately 5% on that day.

During FY23, the company’s revenue surged by 69% from Rs 4192 Crore to Rs 7079 Crore while the operating loss narrows to Rs 1210 Crore from Rs 1851 Crore. The net loss for the FY23 was Rs 971 Crore seen a decline in loss from Rs 1222 Crore. The Enterprise Value to Sales is 9.26 times. The company has a debt of Rs 507 Crore while the debt-to-equity is 0.03 times. The company’s total market capitalisation is Rs 66068 Crore.

From a technical perspective on the weekly timeframe, the stock has formed a double bottom pattern and recently broke and successfully traded above the neckline price of around Rs 74. It is currently trading above all the moving averages.

In terms of trading volumes both in BSE and NSE, on June 08, 2023, the total traded volume was 9.5 Crore, with investors taking delivery of 2.6 Crore shares, accounting for approximately 28% of the total volume. Looking at the trading volume of the previous week, which stood at 6.16 Crores, around 50% of the quantity was taken as delivery, amounting to approximately 3.08 Crore shares.

On May 30, 2023, there was a block deal happened on NSE of around 2,232,081 shares. The transaction occurred for Rs 68.1, resulting in a total transaction value of approximately Rs 15.2 Crore.

The food delivery industry in India is in its early stages and has significant potential for growth. This growth is anticipated to be primarily fueled by factors such as increasing internet penetration, a rise in consumption patterns, and the ongoing process of urbanization and Zomato has the potential to grow more in the future.

Investors must keep this stock on their radar.