Continuing the Startups’ IPO frenzy, Zomato and Paytm are soon to hit the Indian stock exchange. But what time has told us is that – “Do not get excited too soon”. Let’s take a quick dig at these companies.
How are these IPOs structured & when they are coming to market?
Zomato is all set to enter the market in Mid July. According to the draft red herring prospectus (DRHP) filed by Zomato, post its approval from SEBI, it is all set to go ahead with the issue on 14th July(closing on 16th July). The bulk of this share would be issued at INR 72-76 each. The Chinese Ant-backed startup is expecting to raise INR 9,375 Cr from its IPO(375 Cr coming from Offer for Sales of current investor InfoEdge PVT ltd.). In Feb, Zomato had raised $250 million in funding from Tiger Global and others, valuing the platform at $5.4 billion.
On the other side, Paytm aims to enter the market by the end of the year. Another Ant-backed startup, recently went through a board restructure(major Chinese exiting the board) and is expecting to hold a major general meeting to put IPO resolution in motion, Paytm aims to raise INR 12,000 Cr from this fresh sale alongside OFS of INR 4,600 Cr from existing shareholders.
Should you invest?
One of the biggest problems with these big tech giants is their long-standing poor financials. But, the pandemic enabled swifter digitalization adding some sweetness to the poor financials.
Zomato currently holds 50% of the market share in the ever-growing food delivery ecosystem in India. Additionally, with the recent acquisition of Grofers, Zomato plans to reinvent its failed attempt to cater to the online grocery market. Zomato’s 2019-20 revenue had jumped over two-fold to $394 million from the previous fiscal year.
As per a report from CNBC, “On Tuesday, Zomato shares were seen quoting at a premium of Rs 15-20 apiece, over the tentative price band of Rs 70-72 a share, reports said. The shares were trading at Rs 88.5 apiece, implying a premium of 23 percent over the tentative IPO price.”
Thanks for Reading!
Shubham Agarwal (CFA L2 Candidate | Incoming MBA candidate at University of Cambridge, UK)