Hybrid, GenNext inversed in Zomato, WHY? Zomato IPO Investment

Look at Zomato IPO

A look at the list of anchor investors for the initial public offering (IPO) of Zomato Shares reveals the names of several schemes in the mutual fund industry. 

Anchor investors have raised Rs 4,196 crore on the issue of Rs 9,375 crore. Of the 552.17 million equity shares issued to anchor investors, 184.10 million shares were issued to 19 mutual funds through 74 schemes. 

The issue price is Rs 76 per share. "This is a new-age business and we want our investors to benefit from long-term capital," said a senior fund house official, speaking on condition of anonymity.

All categories of schemes are seen allocating shares. Kotak Flexicap (2.117 per cent), Franklin India Flexi Cap (1.3 per cent), SBI Bluechip (1.7373 per cent) and Motilal Oswal Flexicap (1.88 per cent). The numbers in brackets contribute to the distribution of the anchor book.

Not only the equity scheme but also the hybrid funds applied for Zomato shares and they got the space. ICICI Prudential Equity and Debit Fund received 3.38 million shares, which is 1.3434 per cent of the anchor book.

Zomato's appetite is high. And this has led to a backlash from many advisers and investors. It is a matter of concern for a for-profit company to sell about 29 times so far. However, the fund house has an explanation for their move.

 "An established client with a strong promoter's ability to scale motivates the business to make good investments in the medium to long term," said the fund manager on condition of anonymity.

Advisors, however, gave mixed reactions to the anchor book details. “Consumer behavior is changing, as are businesses and their models. Fund managers are well aware of this and will continue to add emerging businesses once they are listed, ”says Ravi Kumar TV, founder of Gaining Ground Investment Services. "What they find attractive enough to add to their portfolio is an integral part of their stock-picking skills and they will decide whether or not to make money," he says.

The scarcity premium is making many investors, including mutual funds, go for Zomato shares. Many investors are considering stocks for listed profits.

Zomato is looking for logic in investing.

Deepak Chhabria, founder and managing director of Ixiom Financial Services, views mutual fund investments in Zomato as any other securities transaction. “They are in line with the investment objectives and asset allocation method mentioned in the scheme information document.

 Given the large number of opportunities and the few listed companies in this space, fund managers are going for Zomato shares. However, advanced assessment is a risk, he added.

Vinod Jain, Principal Advisor, Jain Investment Planner, says, “The number of shares allotted to each scheme cannot be a big part of these schemes. There can be no liquidity issues. Mutual funds benefit from long-term investments and future growth. ”

Like all other businesses, food supply is a risk in itself, and the prices offered today for future profits increase the risk to investors.

“Businesses like this are a hindrance. And like so many other businesses, it has marketed its products at low prices. It is understood that at some point, the pricing strategy will change to make a profit and support higher valuations. 

You have to live until then ... if that doesn't happen, the investor loses. As long as this uncertainty depends on the investment decision, that's fine, "says Shrikant Bhagwat, MD and Principal Advisor, Hexagon Capital Advisors.

In short, if a company is taking longer than expected to make a profit, the market cannot evaluate the stock properly. The share price may come down.

Although there is a lot of optimism about Zomato's listed premium, only time will tell whether the shares will make money for mutual fund investors.