After blockbuster listing, what should you do with Zomato stock? | Business Standard News

Clipped from: https://www.business-standard.com/article/markets/after-blockbuster-listing-what-should-you-do-with-zomato-stock-121072300395_1.html

Zomato IPO has opened the doors for new-age tech businesses to tap primary markets. Paytm, PolicyBazaar and Mobikiwik are some other names gearing up to tap the primary maket

delivery workers, zomato, delivery

Shares of Zomato listed at a hefty premium on Friday. The company’s market capitalisation (market-cap) vaulted past the Rs 1-trillion mark, pipping some of the big players like Tata Motors, Shree Cement, Indian Oil Corporation Limited (IOCL), Tata Consumer.

On National Stock Exchange (NSE), the stock listed at a 53 per cent premium against its issue price of Rs 76 per share. On the BSE, the stock listed at Rs 115, a 51 per cent jump over its issue price. READ HERE

After a bumper debut, analysts advise short-term investors to book profit though long-term investors, they suggest, should continue to hold on to the counter and accumulate on a dip.

“This is a blockbuster opening for investors. Short-term participants, who applied in the offer from a listing gain perspective, can book profit. It is unlikely for the stock to give significant returns from here for some time now,” Jyoti Roy, DVP, Equity Strategist at Angel Broking said.

At the fundamental level, analysts believe the new-age tech companies like Zomato will take several years to come to profit. Amid this, they believe, short-to-medium term fundamentals look pessimistic which can keep the stock under pressure for some time. “This is the right time to book profits and exit in a phased manner, starting today,” G Chokkalingam, founder at Equinomics Research noted.

Zomato’s FY21 business was impacted due to the pandemic but there has been a steady recovery. FY21 food delivery gross order value (GOV) ended at $1.3 billion compared to $1.5 billion in FY20, with YoY growth in H2FY21. The pandemic led to a sharp rise in average order value (AOV) along with higher delivery charges in FY21, which resulted in a positive contribution margin in FY21.

That said, A K Prabhakar, head of research at IDBI Capital expects the counter offer good trading opportunities. If the stock drops to Rs 70-80 levels, investors can consider buying. The current levels offer a good opportunity to exit, he observed.

Zomato IPO has opened the doors for new-age tech businesses to tap primary markets. After the food delivery giant, the likes of Paytm, PolicyBazaar and Mobikiwik are some other names gearing up to hit the primary market. Going by global trends, analysts believe these companies can be good bets.

Amid hopes of following in the footsteps of global peers, analysts say, long-term investors, having a time horizon of over 3 years, should stay put in the company.

“We should not look into valuations. At the current juncture, they are expensive. Rather one should wait for the quarterly numbers to come out. One of the main reasons that gives us the confidence to hold is that the company has shown improvement in margins. Street hopes that they will come to profit in the next two three years. And hence, investors can accumulate in case of a correction today but no point for long-term investors to sell,” Vinod Nair, Head of Research at Geojit Financial Services said.

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