Zomato online food delivery platform is looking to raise a whopping Rs 8,250 crore with its highly anticipated Initial Public Offering (IPO). In its DRHP, filed today with the Securities and Exchange Board of India (SEBI), the capital markets regulator, Zomato said its IPO would be a merger of a new share issue. and an offer to sell (OFS) by the existing shareholder Info Edge Ltd the parent company of Naukri.com. With this, Zomato began the work of one of the most anticipated public issues of Dalal Street in recent years. Zomato’s IPO could be the biggest to hit Dalal Street since SBI Cards and Payment Services in March 2020.
Details of the problem
Zomato will raise Rs 8,250 crore, of which Rs 7,500 crore will be a new issue, while another Rs 750 crore will be an OFS per Info Edge. Tuesday evening, Info Edge, which owns more than 18% of Zomato’s capital, informed the stock exchanges that its board of directors had given its agreement to participate in Zomato’s OFS. Zomato also said he might consider a private placement of Rs 1,500 crore ahead of the IPO. Such a move is likely to reduce the size of the new problem that the company has proposed so far.
Zomato has stated that it will use the funds raised from this issue for organic and inorganic growth, as well as for general business purposes. In the financial year ending March 2020, Zomato’s total income stood at Rs 2,742 crore. Meanwhile, during the 2020 pandemic, the company’s revenue was Rs. 1,367 crore. Zomato continues to remain a loss making entity from now on.
Valued at $ 5.4 billion
Zomato, an online food delivery company, counts Ant Financials, Info Edge, Sequoia and Uber among its investors. The company strengthened its position in the two-player food delivery market with the last round of funding in February this year. Zomato received $ 250 million in its last round of investment for a post-monetary valuation of $ 5.4 billion, Info Edge had said in an exchange brief. In recent fundraising rounds, Tiger Global, Fidelity and Kora Management were among those who issued checks for the company.
“Foodservices is a big market in India with ~ $ 80 billion (~ 50% organized). Online food delivery is expected to experience strong growth to reach $ 22 billion by 2025, with a CAGR of 40%. Online penetration will drop from 7% today to ~ 10% in 2022 and ~ 20% by 2025, ”Bernstein said in a report last year. Zomato controls a 50% market share.
In a recent report, CLSA said Swiggy and Zomato are fighting for India’s $ 11 billion online food delivery pie. Profitability now takes center stage in the industry as Zomato and Swiggy strive to improve their unit economy. CLSA believes profits will increase as volumes increase.