Life Insurance Corporation of India (LIC) may invest in the issue of an online food delivery platform. Sources with knowledge of the matter gave this information. Zomato’s IPO is opening this week on July 14.
Accordingly, sources on the condition of anonymity said that LIC is also expected to bid for Zomato’s IPO. LIC usually invests in the shares of listed companies in the secondary market. In the primary market, it buys only if it is part of the government’s disinvestment program. But this time LIC is taking interest in the issue of a private company for the first time.
According to Mint, a source said, “Growth of Zomato so far shows how fast India has grown in the internet economy.”
Zomato’s valuation has jumped from around $5.4 billion in January to over $8 billion in June, as the pandemic stokes the popularity of the online platform and people avoid going out for fear of infection.
India’s largest online food ordering platform seeks to raise Rs 9,375 crore in a public issue. This will be the first group of Indian consumer internet unicorns to list on July 14. Zomato shares are priced between ₹72 and ₹76 and will open for subscription on July 14.
Another person said, “The investment committee of LIC will meet soon to take a final decision on the plan to invest in Zomato’s IPO.” However, there is no statement or reaction from LIC on this matter yet.
For the quarter ended March 31, LIC’s stake in listed companies fell to the lowest level of 3.66% of the market value of 296 companies, with LIC holding more than 1% in these companies. It was 3.7% till December 31.
Zomato’s food-ordering platform connects customers with restaurants and delivery partners. According to RedSeer, Zomato is one of the leading foodservice platforms in India in terms of the value of food sold by March 2021.
What do experts say?
Earlier, Gaurav Garg of CapitalVia Global Research, in an interview to MoneyControl, said that the Rs 9375 crore IPO of Zomato, which opened on subscription on July 14, may be listed at a premium of 30-35 percent, but for the company, there are some challenges too.
The first of these is that it has to face a strong opponent like Swiggy. Apart from this, there is a dispute with the restaurants regarding its discount.
Zomato’s IPO is expensive compared to similar investment opportunities in the global market. Karvy Capital CEO Kunj Bansal said that the reason for such valuation is the offerings from this segment and it is not based on the financial position of the company.
Kunj Bansal said that the company is running at loss and in view of this, its public offer is definitely expensive. Such companies are better suited to raise funds through private equity. Given some relaxation in the regulatory environment and good demand for new public offerings, perhaps the company has seen a good opportunity to bring this IPO.
