Are Zomato employees giving a miss to the IPO?

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More and more retail investors are trying to gulp down as many shares of Zomato as they can in the IPO. The much-talked-about issue has been subscribed 1.35 times as it received bids for 96,79,15,065 shares versus 71,92,33,522 shares on offer as of 2:30 pm on the second day of the issue.

According to BSE data, the shares which are to be allocated for the qualified institutional buyers (QIBs) was subscribed 100%, while those of non-institutional investors was  subscribed nearly 28% and that of the retail individual investors (RIIs) 4.04 times. However, the portion reserved for employees remained the least subscribed at just 22%.

Red flags

The low employee subscription raises some red flags since they are most aware of the company’s functioning. “There’s a lot of exuberance about the IPO outside but we are still in double mind as to whether we should apply or not. There is somehow less clarity on whether the stocks will give us great returns,” said a Zomato employee on the condition of anonymity.

Commenting on low employee subscription G Chokkalingam, founder, Equinomics Research and Advisory said that “so far employee not having confidence on the IPO is a concern. Investors can wait and watch till tomorrow afternoon and then decide. If the employee quota is not sufficiently subscribed one can avoid.”

Likewise, Deepak Shenoy, founder and chief executive of Capitalmind told Money9 that retail investors should avoid IPOs. He goes further to state that observing the newly listed stock for even three months may be wise. “Wait for three months because anchor investors are locked in only for one month. If they decide to exit the investment after the first month, prices are bound to fall. At that moment, you should decide if you want to invest,” he added.

In the grey market, the issue is quoting at a premium of Rs 13.25 almost 26% lower than the premium of Rs 18 that was quoting at the time of the price band announcement. “This is mostly due to Zomato being the first mover in the space so it’s difficult for the market to ascertain valuations as the company is still posting losses,” explained Abhay Doshi, Founder, Unlisted Arena.