We are living in an age of a global pandemic, and as is expected, food delivery services are our lifelines in these dark times. Among the forefront of them is Zomato’s IPO or Initial Public Offer. Opening up for a subscription model on the 14th of July, 2021, the said IPO has been priced at Rs 9,375 crores on Dalal Street, making it understandably massive and second only to the offer by SBI Cards and Payment Services worth Rs 10,340 crores in March the previous year. The issue which is scheduled to be closed on the 16th of July, 2021, includes an earlier offer worth Rs 375 crores by the company’s initial investor Info Edge while it also establishes a completely fresh issue priced at Rs 9,000 crores. Offered to the public at a range of prices between Rs 72 to Rs 76 a share, the stock is estimated to appear on the list of exchanges on the 27th of July, 2021.
Zomato is a name that is not unknown to many people. With a presence that encompasses around 525 cities in India and which also includes about 6.8 million customers engaged in ordering food every month, the company is valued at an overall margin of 8 billion USD. In other words, it falls immediately below the upper end that is Rs 60,000 crores. Right now, given the national economy is in a substantial slowdown, is the best time to invest your hard-earned money in fields with the potential to make it grow.
If you are still unsure about whether this is a worthy enterprise, here are a few clarifications to queries that are common in this context.
1. What is the upcoming Zomato IPO (Initial Public Offer) in actuality and why is it drawing so much attention in the media?
If you are wondering as to the trigger for its popularity, there are two main reasons for it. The first is its nature of execution. Since India is a country where anything remotely related to the digital medium is treated as a field meant for intellectuals to indulge in, the fact that Zomato was among the first to launch in the digital space of the nation made it widely popular among the masses. What further boosted its name was the fact that it did not restrict itself to specific age groups. From the younger users to the middle-aged and even the elderly, the portal came with an easy-to-access interface that appealed to everyone. Secondly, it managed to elevate itself to a benchmark position wherein it came to be heralded as an example by other companies in the market on how to approach customers and conduct oneself in the digital space.
2. What does an IPO mean in general and how would a first-timer go about investing in it? Should they invest at all?
IPO, as has already been covered prior, is short for Initial Public Offering. Since a country like India does not work wholly on the digital network, there are quite a few businesses that are privately held and, as a result, not listed online. This is where IPOs come into play. The stock market is the one place that gives rise to a multitude of opportunities both for the said companies and the public at large. Some of the said opportunities include the listing of the unlisted companies so that money managers can participate in the companies as shareholders. To conclude, the purpose of an IPO is for an unlisted company to sell itself to the public (in segments) so it can be listed in the stock market.
But that is what happens on the bigger platform. If an individual feels hesitant to invest in shares they are not obligated to do so. In fact, buying shares comes with a lot of risks, risks that one can learn to navigate around by consulting professional advisors who are qualified to elaborate on the intricacies of the market. For example, the experienced shareholder does not invest in multiple assets but in a single one after weighing its potential and predicting its growth in the near or far future.
3. Investing in stocks is a risky ordeal, but how far can an investor go? Is it wiser to go for a start-up IPO or is a heavyweight stock hiding more promise?
To be fair, potential lies in both the aforementioned options. There exist small and strictly local businesses that we as Indians have almost no knowledge of. This is where the digital space can be capitalized on. Retaining the potential to be transformed into an unfiltered hub for merchants, the said digital space gets a benchmark pricing at its own pace. Historically speaking, the year 1994 saw an influx of numerous IT companies in the stock market, consequentially getting listed one by one. Initial Public Offers or IPOs at that specific point in time was an understandably fresh concept.
What the companies did was set their own pace for growth. Needless to say, they ultimately achieved success by gradually showcasing their relevance over the years. During the 2004 to 2008 boom, several real estate companies managed to take the spotlight. Following that, they too grew significantly over time resulting in the multiplication of the wealth of the investors. The takeaway here is the fact that given time, anyone can grow irrespective of their history. Whether you decide to invest in a brand with a big name or you take a calculated step by investing in a newly blooming banner, the choice ultimately lies in your hands. 4. Since Paytm will soon be following the example of Zomato, what are the factors that should be considered or calculated before an investor chooses their shares?
Before one moves forward with their investment, there are three basic steps they should go through if they want to succeed in the long run.
(i) From the point of view of a retail investor, is the field of business and the revenue generation method of the target company transparent enough to be trusted?
(ii) Is the retail investor willing to accept at least 20 to 30 percent of downside that may or may not occur over time, since equity as an asset class is understandably volatile? Does he acknowledge the risks and challenges that come with the potential of profit?
(iii) Since one error in calculation can sway the gain from as high as 100% to as low as a negative 20%, is the retail investor prepared to be vigilant regarding the time frame?
All in all, we are in the dead center of a pandemic with global repercussions. That has given rise to a higher rate of volatility. For example, while vehicle manufacturers are experiencing stagnancy in the market, repeated lockdowns have urged people to invest in long-term items like the GTRACING Gaming Chair (with attached a headrest, armrests, and a footrest) to make spending time at home seem less tiring. Online banking and food delivery services are blooming, so all an investor needs now are patience. Stepping backward merely due to minor fluctuations results in big failures since success is a long-term enterprise.
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