Equity Analyst, LightStream Research

Oshadhi Kumarasiri

An equity research analyst with over 7 years of experience in multiple sectors. Previously worked for one of the world's largest asset managers with about USD2.5trn in AUM, covering small and micro-cap companies in the consumer sphere across Europe and developed Asia. Also experienced in covering multiple industries including banking, insurance and asset management, retail, tech, telco and REIT.

Equity Analyst

Zomato IPO Valuation: Making Losses In Most Favorable Circumstances

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Capital Markets

<ul>
<li>The subscription period for the <a href="https://www.smartkarma.com/entities/zomato-media-pvt" target="_blank" data-smartkarma-citation="entities:28820:1" rel="noopener">Zomato (ZOM IN)</a> IPO ended last Friday (16<sup>th</sup> July 2021) with books covered around 38.25x, mostly at the top end of the offer range of INR 72.0-76.0 per share.</li>
<li>The Indian IPO market is a bit different from other developed markets as there were several previous IPOs (like SBI Cards) without notable listing gains despite around 20.0-50.0x oversubscription.</li>
<li>We think Zomato needed significantly more subscriptions to guarantee a substantial listing gain as the three IPOs that popped over 100% on day one during the last two years (Burger King India, Indigo Paints, and Happiest Minds Technologies) were oversubscribed over 100.0x.</li>
<li>Moreover, the “<a target="_blank">Employees Reservation Portion</a>” of the offer (6.5m shares) was undersubscribed (0.62x), indicating that the 3,755 people who know the ins and outs of the business are less enthusiastic about Zomato’s offer than the retail and institutional investors, even with a 13.0-18.0% premium on the grey market.</li>
</ul>


The subscription period for the Zomato (ZOM IN) IPO ended last Friday (16th July 2021) with books covered around 38.25x, mostly at the top end of the offer range of INR 72.0-76.0 per share.
The Indian IPO market is a bit different from other developed markets as there were several previous IPOs (like SBI Cards) without notable listing gains despite around 20.0-50.0x oversubscription.
We think Zomato needed significantly more subscriptions to guarantee a substantial listing gain as the three IPOs that popped over 100% on day one during the last two years (Burger King India, Indigo Paints, and Happiest Minds Technologies) were oversubscribed over 100.0x.
Moreover, the “Employees Reservation Portion” of the offer (6.5m shares) was undersubscribed (0.62x), indicating that the 3,755 people who know the ins and outs of the business are less enthusiastic about Zomato’s offer than the retail and institutional investors, even with a 13.0-18.0% premium on the grey market.


Zomato IPO: Oversubscribed, But We Reckon Listing Gains Could Be Towards the Low Side