The aftermath of Zomato IPO’s opening and co-founder Deepinder Goyal’s reaction.
On July 23rd 2021, Zomato, a food logistics company, became the first unicorn to launch an Initial Public Offering (IPO) in India. The IPO opened for subscription on July 14th and closed on July 16th. It was oversubscribed 38.25 times. At its debut on Dalal Street, the issue price was Rs. 76 (1.03 US$) per share, with the minimum order quantity of 195 shares. Soon after its opening, the share price jumped by 66%, thanks to the number of people interested in buying its stock. Finally, it listed at more than 50% premium. The IPO stocks opened at Rs. 116 (1.56 US$) per share, increased to Rs. 138 (1.86 US$) and finally closed at Rs. 125 (1.69 US$) per share for the day. After the IPO, Zomato is valued at 13 billion US$.
The company’s goal is to be an investor-friendly company. In keeping with that, they decided on the issue price of Rs. 76 for their IPO opening. According to the co-founder Deepinder Goyal, Zomato wanted to keep enough money on the table so that everybody who decides to join in has an upside.
Goyal is worth 650 million US$ after the IPO opening, making him an ultra-tech millionaire in the startup economy – an exhilarating feat. In a letter to his shareholders post the success of the company’s IPO, he said, “The tremendous response to our IPO gives us the confidence that the world is full of investors who appreciate the magnitude of investments we are making, and take a long term view of our business.” On what urged him to finally take Zomato public in July 2021, he credits his team’s “why not now” mindset.
The credit of its success, in part, goes to Goyal’s mindset and determination; he knew that it was the natural next step for Zomato. In September 2020, Goyal sent out a letter to Zomato’s stakeholders informing them about the company’s plans to go public. The letter noted, “We are going to relentlessly focus on 10 years out and beyond, and are not going to alter our course for short term profits at the cost of long term success of the company.”
The IPO was backed by renowned companies, like Morgan Stanley, Tiger Global and Fidelity Investments. In addition to catering to its shareholders, Zomato is also making special provisions for their employees to share in the listing. Goyal, in a letter to his employees, said, “Our finance/legal teams are working hard to take us to IPO sometime in the first half of next year. We hope to create a lot of value for our current employees who have ESOPs (employee stock ownership plans) sometime in the next year.”
The success of Zomato sets a noteworthy precedent for other Indian startups, encouraging them to go public. In the coming months, we can look forward to startups like Nykaa and PayTM launching their IPOs too.
