Zomato is a concept stock and is still a loss-making company. Indian market typically is stringent about profitability and India does not have a great history of rewarding companies which make losses, explains Sharma.
Zomato IPO which has grabbed the eyeballs of retail as well as institutional investors does not make market veteran Shankar Sharma, who is the co-founder and vice-chairman at First Global excited.
The retail frenzy with respect to Zomato IPO is that it has touched people’s lives – so there is familiarity with the name and to that extent, people want to participate, Sharma said in a D-Street Talk podcast with Moneycontrol.
Zomato is a concept stock and is still a loss-making company. Indian market typically is stringent about profitability and India does not have a great history of rewarding companies which make losses, explains Sharma.
The data shows that typically overhyped IPOs don’t do too well in the secondary market and Burger King is a good example. The stock is down over 20% from its record high.
Globally, if you look at Grubhub, which is a similar company to Zomato, did not do well at all. If you look at global peers, the stocks in the secondary market have not done well for the overhyped startup companies, added Sharma.
If we look at global listing similar to Zomato they have been disappointing for overhyped startup companies. Another important point to note is that the valuations of global companies are far lower than Zomato as well.
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Kshitij Anand is the Editor Markets at Moneycontrol.
