Zomato Share Price Jumps As It Opens Rs 8,500 Crore QIP, Set Floor Price; Sensex Inclusion Fuels Gains

Zomato's share price has been on an upward trajectory, gaining nearly 5% in the last two trading sessions. The stock opened Tuesday's session at Rs 274.50 on the BSE, slightly higher than its previous close of Rs 273.60, before rising to an intraday high of Rs 278.60, marking a 2% gain. By mid-session, Zomato shares were trading at Rs 277.59 on the NSE.

Key Drivers

Inclusion in the BSE Sensex

Zomato is set to join the elite 30-stock BSE Sensex, replacing JSW Steel as part of the index's reconstitution, effective December 23, 2024. Companies are included in the Sensex based on their six-month float-adjusted market capitalisation, a metric indicating strong investor interest and market performance.

This inclusion has boosted investor confidence, positioning Zomato as the first new-age tech stock to enter the benchmark index. Being part of the Sensex often increases a company's visibility and attracts investments from institutional players, particularly passive funds tracking the index.

Approval for Rs 8,500 Crore QIP

Zomato has also received shareholder approval to raise Rs 8,500 crore through a Qualified Institutional Placement (QIP). On November 25, the company announced the opening of the issue, setting a floor price of Rs 265.91 per share and an indicative price of Rs 252.62, representing a 7.6% discount to Tuesday's closing price of Rs 272.90.

The QIP involves the sale of approximately 33.65 crore shares, equating to 3.8% of Zomato's equity. The funds will be used to strengthen the company's balance sheet and support business operations and strategic initiatives.

Zomato noted that its cash reserves declined by Rs 1,726 crore in the previous quarter due to a Rs 2,014 crore deal for acquiring Paytm's entertainment ticketing business. The fundraising will help the company manage its financial goals more effectively.

Market Momentum

Zomato's recent inclusion in the Sensex and its QIP announcement have acted as twin triggers for the stock's rally. The company's entry into the Sensex not only marks a milestone for new-age technology firms but also indicates Zomato's growing stature in the Indian equity market.

In the past year, Zomato has delivered multibagger returns, surging nearly 145%, with a 125% rise in 2024 alone. This performance has drawn the attention of both retail and institutional investors, making it one of the standout performers in the Indian stock market.

Details of the QIP Offering

Under the QIP, equity shares with a face value of Rs 1 each are being offered in accordance with SEBI's (Issue of Capital and Disclosure Requirements) Regulations, 2018, and relevant provisions of the Companies Act, 2013. Zomato has stated that it may offer a discount of up to 5% on the floor price, subject to shareholder approval.

The company has not disclosed detailed plans for the QIP proceeds but indicated that the funds will be directed toward business operations and strategic initiatives. This includes addressing financial challenges arising from its recent acquisitions.