Shares of Indian food delivery start-up explode in its early days

Shares of Indian food delivery start-up Zomato jumped more than 70% when they debuted on Friday.

The initial public offering price was set at Rs 76 per share and the share opened at Rs 116 on the National Stock Exchange of India, a premium of 52.63%. This valued the company at around 910 billion rupees ($ 12.2 billion).

Zomato’s shares are also trading on the BSE, India’s other stock exchange, where they opened at Rs 115 each.

At 12:55 HK / SIN, Zomato shares were trading at Rs 130.7, slightly below a previous high of Rs 138.90.

The company filed for an IPO in April, saying it plans to use the proceeds to fund growth, which may include mergers or acquisitions. Zomato offers 1.23 billion shares, valuing the IPO at 93.75 billion rupees. This includes the issuance of new shares worth up to Rs 90 billion as well as up to Rs 3.75 billion of shares sold by existing shareholders.

Reuters reported that Zomato’s IPO last week attracted $ 46.3 billion in bids and was more than 38 times oversubscribed, with large institutional investors placing large bets.

Zomato, along with rival start-up Swiggy, dominates India’s $ 4.2 billion food delivery market, which is highly competitive but also highly fragmented.

Besides food delivery, Zomato also allows users to book tables and aggregate restaurant reviews. Tech giant Uber sold its food delivery business in India to Zomato last year in an all-stock transaction that gave the American company a stake in the start-up. Zomato’s other main backers are Indian internet company Info Edge, Alibaba Ant Group subsidiary, and Singaporean state investor Temasek.

In its flyer, the Indian tech company said it faced intense competition from restaurant chains with their own online ordering platforms. Other competitors include cloud-based kitchens and restaurants that operate their own delivery fleets, as well as offline orders made over the phone.

For the fiscal year ended March 31, Zomato reported a loss of Rs 8.16 billion, an improvement from the loss of Rs 23.86 billion the previous year. But, the company’s operating income fell 23.46% year-on-year to 19.94 billion rupees.

Zomato is the first in a list of top local start-ups to go public at a time when Indian markets have shown their resilience despite the economic uncertainty associated with the pandemic.

Payments giant Paytm has filed for a $ 2.2 billion IPO while others, like e-commerce company Flipkart and rideshare startup Ola, are exploring listing options. A venture capitalist previously told CNBC that 2021 “will herald the start of a new era for the Indian start-up ecosystem,” with a number of significant IPOs to come.