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Shares in Zomato, a food delivery company and the first of India’s technology groups to go public, rose to 80 per cent at the debut in a vital test of investors ’appetite for money-burning start-up scene in the country.
Zomato shares have risen to a high of Rs138.90 ($ 1.87) from its Rs76 issue price in the first trading on Friday. The initial public offering, which was about 40 times underwritten, had been closely followed by a number of other highly valued companies that are expected to be public in the coming months.
India’s fast-growing technology groups had previously relied on foreign venture capitalists to finance their often-losing businesses. But regulatory changes that allow nonprofit listed companies have encouraged many start-ups, led by Zomato, to seek out public markets instead.
“This is the first company in India, in my memory, that has gone for an IPO in India without turning a profit rupee,” said SR Srinivasan, an independent investment advisor. “It shows the level of maturity in the market.” Hopefully it will be positive, but I’m watching. ”
It has been a rollicking year for Indian stocks, which have followed global stock markets to this year’s records. The Bombay Stock Exchange’s Sensex index climbed more than 10 percent, hitting an all-time high last week.
The bullish mood has encouraged a flow of listings, with companies grossing $ 3.9 billion in the first half of 2021, according to Refinitiv, mostly from the global financial crisis.
Zomato’s IPO, the largest in more than a year, was followed by that of Paytm, a New Delhi-based payment group that unveiled a prospectus project last week. As with Zomato, Paytm is backed by Chinese billionaire Jack Ma’s Ant Group. It’s also loss.
It is believed that several other Indian tech groups are waiting in the wings, including Walmart Flipkart’s trading group.
Supporters hope the listing chain will give shareholder investors the opportunity to participate in the growth of India’s technology sector, as U.S. shareholders have enjoyed through companies like Amazon or Facebook.
They also speculate that Indian companies will indirectly benefit from a regulatory crackdown by Chinese technology groups that could encourage global investors to look for opportunities elsewhere.
Chinese authorities hit the Didi business with a data security probe days after it collected $ 4.4 billion at a New York IPO last month, sending Chinese technology stocks into tumbling and threatening what had been said. a lucrative market for Wall Street banks.
But Zomato and his peers face challenges of their own. For one, analysts are skeptical that Zomato, which reported a net loss of $ 110m in the year to March, has a plausible path to profitability.
Its economy has improved thanks to the push to food delivery groups during the coronavirus pandemic, but order values remain low by world standards. Some analysts believe the brand could drop even more when Covid outbreaks decrease and people return to eating out.
Indian technology companies have to contend with their regulatory challenges as the government seeks to exercise more control over user data and foreign investment.
Last year the government introduced boards requiring Chinese investors to seek official approval, which prevented Zomato from receiving new funding from Ant.
“There’s a lot of money. But we have to look at the basics: is there a profit, is society good?” said Roopa Venkatakrishnan, director of Sapient Wealth Advisors and Brokers in Mumbai.
“Profitability, due to the way things are done, can be two, three, four years.” But it’s something where people have to invest in the long run, “he said.” Today, with euphoria, people invest with a short-term vision. “
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