Shares of Indian food delivery start-up Zomato jump over 70% in market debut

Shares of Indian food delivery start-up Zomato jumped more than 70% in their stock market debut Friday.

The initial public offering price was set at 76 rupees a share and the stock opened at 116 rupees on the National Stock Exchange of India — a 52.63% premium. That valued the company at about 910 billion rupees ($12.2 billion).

Zomato shares are also trading on the BSE, India’s other stock exchange, where they opened at 115 rupees per unit.

As of 12:55 p.m. HK/SIN, Zomato shares traded at 130.7 rupees, slightly off an earlier session high of 138.90 rupees.

The company filed to go public in April, saying it plans to use the proceeds to fund growth, which may include mergers or takeovers. Zomato is offering 1.23 billion shares, valuing the IPO at 93.75 billion rupees. That includes issuing fresh shares worth up to 90 billion rupees as well as up to 3.75 billion rupees worth of stock sold by existing shareholders.

Reuters reported that last week Zomato’s IPO drew $46.3 billion in bids and was more than 38 times oversubscribed, with big institutional investors placing major bets.

Zomato, along with rival start-up Swiggy, dominates India’s $4.2 billion food delivery market, which is highly competitive but also very fragmented.

Apart from food delivery, Zomato also lets users book tables and aggregates reviews for restaurants. Tech giant Uber sold its India food delivery business to Zomato last year in an all-stock transaction that gave the U.S. company a stake in the start-up. Zomato’s other prominent backers include Indian internet company Info Edge, Alibaba-affiliate Ant Group and Singapore state investor Temasek.

In its prospectus, the Indian tech company said it faces intense competition from chain restaurants that have their own online ordering platforms. Other competitors include cloud kitchens and restaurants that operate their own delivery fleets, as well as offline ordering done by phone.

For the year ended March 31, Zomato reported a loss of 8.16 billion rupees — an improvement from the previous year’s 23.86 billion rupee loss. But, the company’s revenue from operations slipped 23.46% on-year to 19.94 billion rupees.

Zomato is the first of a slate of prominent local start-ups to go public at a time when Indian markets have shown their resilience despite economic uncertainty from the pandemic.

Payments giant Paytm has filed for a $2.2 billion IPO while others like e-commerce firm Flipkart and ride-hailing start-up Ola are exploring listing options. One venture investor previously told CNBC that 2021 would “herald the beginning of a new era for the Indian start-up ecosystem,” with a number of significant IPOs to come.