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Four major myths about Indian investors junked by Zomato IPO
When Zomato listed ahead of schedule on 23 July, it created a few records. But it also busted 4 major myths that we harbored about the Indian investors and digital IPOs of loss-making stocks.
Written By Bani Thakkar
Table of Content
Who wants digital IPOs?
Don’t ever ask that question again. The Zomato IPO met with solid response as the overall issue got subscribed 38 times and this was not a small IPO. Even retail investors showed enthusiasm but it was the institutional investors; both FPIs and DFIs, who literally went overboard to get allotment. The QIB portion got subscribed over 52 times and HNIs also queued up in large numbers on the last day to even borrow and invest. Zomato did underline a simple fact that the days of digital IPOs had finally arrived here.
Who wants loss making stocks?
Most sceptics had warned that Zomato should do a combined IPO in India and the US as India may not have any great appetite for loss making companies. It is common in the US for investors to pick loss making companies, but it was not heard of in India. Zomato changed all that. Every investor putting money in the Zomato IPO knew fully well that it was a loss-making company and would continue to make losses for few more years. But, it did not deter the retail or the institutional investors. Hopefully, this should set the paradigm and get more digital IPOs hitting the market.
No appetite for mega IPO?
In the last few years, the experience was that mega IPOs typically attracted tepid interest from HNI, QIB and retail investors. We have seen that in the past in Coal India, ONGC and even in NHPC. However, Zomato proved all of them wrong as the elevated levels of interest was evident from the anchor placement day before the IPO opened. In fact, the retail investors took the lead in filling up the book before the HNIs and QIBs joined the bandwagon on the last day. The Zomato IPO eloquently proved that Indian markets in general and Indian investors in particular, do have massive appetite for mega IPOs. Size is no real constraint for the success of an IPO.
Exit IPOs on listing
For a long time, the IPO rule was to exit on listing. In most cases, not much was known about the company so the only opportunistic answer was to exit on listing. This time, retail investors also showed willingness for a longer-term view on the stock. This is an interesting departure but it can be attributed to the stellar show put up by IPOs in the last one year. Most of the IPOs have done extremely well post listing and ironically, this has been the case even in the midst of the pandemic. The Zomato IPO was a digital IPO, it was loss making and it was a large IPO. Yet, investors are showing patience. In a way, Zomato could be the IPO market watershed!