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Zomato, Paytm, Mobikwik IPOs: Don’t let the FOMO creep in!

July 21, 2021 02:12 PM

Zomato, Paytm, Mobikwik IPOs; Don't let the FOMO creep in!
Zomato, Paytm, Mobikwik IPOs; The stock rallied for a brief period on the listing day but the stock has, till date, not gone above its listing price.

It’s raining IPOs (Initial Public Offers) in the stock market. Zomato, Paytm, Mobikwik IPOs which closed for subscription on Friday was oversubscribed 40 times. Digital payment companies, Paytm and Mobikwik have filed for IPOs this year. Other digital names like Flipkart and Ola are in line to take public route as well.

Tech start-ups using the IPO route is a first for India, which is generating lot of interest among equity investors. But, experts advise treading with caution, and not falling into the fear of missing out, or what’s called the FOMO.

“It is heartening to see the startups being able to raise money in Indian equity markets rather than list overseas. Therefore, the Zomato IPO is no doubt a healthy sign for the Indian stock markets overall. However, retail investors need to be cognizant of the fact that the risks involved in such issues is very different from what they have seen in the past,” says Tanusree Banerjee, Co-Head of Research, Equitymaster.

Also Read: Sensex Update: Sensex falls 355 points, Nifty gives up 15,650

Big and attractive names may not always reap good returns. The frenzy-filled Reliance Power IPO in 2008 was sold out in the first minute of its opening then. The issue price, on back of the strong demand for retail investors was fixed at Rs 430, upper band.

Zomato, Paytm, Mobikwik IPOs; The stock rallied for a brief period on the listing day but the stock has, till date, not gone above its listing price. The investors had to incur huge losses. The current price of the stock is Rs 13.

To evaluate IPOs of conventional businesses, investors seek safety in profits and balance sheets. For the tech unicorns you are only betting on future growth. Zomato accumulated losses of over Rs 4,000 crore in the last three years. However, its revenues have grown 50% in the last three years. So, it’s the latter that matters more in terms of its future estimates.

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