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Business News/ Markets / Stock Markets/  Zomato shares continue to rise. Should you hold at current levels?
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Zomato shares continue to rise. Should you hold at current levels?

Zomato shares made a strong debut on the exchanges by listing at 53% premium over its issue price of ₹76

Zomato delivery rider on a motorcycle in Mumbai, India (Bloomberg)Premium
Zomato delivery rider on a motorcycle in Mumbai, India (Bloomberg)

Zomato share price continued to extend gains on the second day on Monday after India's first unicorn to go public made a strong debut on the stock exchanges on Friday. Shares of Zomato surged as much as 13% on the BSE, hitting an intra-day high of 143 per share in Monday's deals.

Its market capitalization remained above the 1 lakh crore mark which it had crossed soon after listing, making it one of the top 50 most valuable publicly traded firms in India. Zomato shares listed at 116 on the the National Stock Exchange (NSE) on Friday, a 53% premium over the IPO price of 76, and closed at 125.8 per share on its first day.

Jyoti Roy of Angel Broking said that the stock has continued to move up despite expensive valuations given strong investor demand which will continue to drive the stock prices for some more time. ''While valuations may seem expensive at current levels we remain positive on the long-term growth prospects of the company given the strong delivery network, high barriers to entry, expected turnaround, and significant growth opportunities in tier-II and tier-III cities,'' he said.

''We would recommend investors hold the stock at current levels. While the Q1FY22 results would have been impacted by the second Covid wave we believe that management commentary around future growth prospects post the second Covid wave will be one of the key drivers for further rerating,'' Roy added.

The stock jump on debut turned Zomato's founder and Chief Executive Officer (CEO) Deepinder Goyal into a poster boy for India’s fledgling startup scene, pushing his fortune close to the $1 billion mark. Goyal is worth $650 million based on his current 4.7% stake in Zomato, according to the Bloomberg Billionaires Index.

Ahead of the listing, Zomato IPO shares allotment was finalised on Thursday and its stock market debut was preponed given it was initially expected to list on July 27. The 9,400 crore initial public offering (IPO) of the food delivery startup, India's biggest since IPO March 2020, closed on 16 July with a subscription of over 38 times.

Zomato has said it will utilise the net proceeds from the fresh issue for funding organic and inorganic growth initiatives and general corporate purposes. The home-grown food delivery platform, launched in 2008, operates in about 525 cities in India and has partnered with close to 390,000 restaurants. The company, which is yet to turn profitable, posted a consolidated loss of 816 crore in FY21 as compared to loss of 2,385 crore in the previous year.

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Published: 26 Jul 2021, 10:55 AM IST
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