Zomato's IPO is undoubtedly a big buzz on the street, but, is it hot? That remains a big concern as the grey market and some analysts suggest otherwise.
2 Pronges Problem for Zomato: Price & Peers
Zomato being a loss-making company remains the biggest concern as the valuation is a pricey one.
Peers: Zomato faces intense competition from Swiggy and in order to maintain customers and also to attract new customers it has to burn loads of cash in marketing and promotions. This puts a heavy impact on its bottomline as the company remains in the net losses.
Price: At the higher end of the Rs 72-76 price band, Zomato IPO is demanding a trailing 12-month price-to-sales of 29.9 times, which is at a premium over the global peer average
So why are Anchor investors so excited?
Zomato's orders increased by 13.2 times from 3 crores in FY18 to 40 crores in FY20. Its Gross Order Value grew 8.4 times from ₹1,334 crore in FY18 to ₹11,221 crore in FY20. Average 1 crore customers ordered food every month in FY20. These numbers indicate a sharp recovery across operational metrics.
ALSO WATCH: Zomato IPO | Anchors order 30x of offer
Should you invest?
This IPO may be a 'slow cook' for retail investors. But investors with a higher risk appetite and a long-term investment horizon can apply, seems to be the general consensus on the street.
ALSO WATCH: You can now pre-book IPO via Paytm Money, just in time for the Zomato order