Zomato allots shares worth Rs 4,195 cr to anchor investors ahead of IPO

Sources said the anchor book saw over 30x more demand than the shares on offer. The total interest generated was in excess of Rs 1 trillion

Online food delivery company Zomato on Tuesday allotted shares worth Rs 4,195 crore to anchor investors. The firm allotted a total of 552.17 million shares to close to 200 foreign as well as domestic investors at Rs 76 apiece. Some of the investors that received anchor allotment include New World Fund, Tiger Global, and BlackRock. Among the domestic investors Axis Mutual Fund, SBI MF, and HDFC MF received the allotment.

According to sources, the anchor book saw over 30 times more demand than the shares on offer. The total interest generated was in excess of Rs 1 trillion, they added.

Anchor allotment, which is done a day prior to an initial public offering (IPO), provides cues to investors about the demand and the quality of the issue. Only institutional investors are eligible to subscribe to shares under the anchor quota. Up to 60 per cent of the shares reserved for qualified institutional buyers (QIBs) can be allotted under the anchor book.

Zomato’s Rs 9,375-crore IPO opens on Wednesday and closes on Friday. The price band for the IPO is Rs 72-76 per share. The IPO comprises Rs 9,000 crore of fresh fund-raise and Rs 375 crore of secondary share sale by Info Edge. At the top-end of the price band, the company will be valued at nearly Rs 60,000 crore.

Institutional investors will have to subscribe to at least 75 per cent of the IPO as Zomato doesn’t meet the profitability criteria laid down by the market regulator. For IPOs that meet this criteria, the QIB portion is 50 per cent, high net worth individual (HNI) portion is 15 per cent, and retail portion is 35 per cent. In the case of Zomato, the retail quota is only 10 per cent, while the HNI portion remains unchanged at 15 per cent.

Zomato is the first large new-age company to tap the domestic IPO market. Experts said investors with high-risk appetite can subscribe to the IPO given that the company is incurring substantial losses and may continue to incur losses in near future.

“Zomato with first mover advantage is placed in a sweet spot as the online food delivery market is at the cusp of evolution. It enjoys a couple of moats and with economies of scale started playing out, the losses have reduced substantially,” said a note by Motilal Oswal.

However, predicting the growth trajectory at this juncture is a little tricky for the next few years.