Much awaited Zomato initial public offering (IPO) will hit Dalal Street on July 14 next week. The Online food delivery platform is looking to raise Rs 9,375 crore through the issue, at the price band of Rs 72-76 per share. The offer will consist of a fresh issue of equity shares and an offer for sale (OFS) by Naukri.com’s parent company Info Edge. The food delivery giant would be the first of many Indian tech startups to list on the stock exchanges. The company counts Ant Financials, Info Edge, Sequoia, and Uber as some of its investors and does not have a promoter.
Zomato’s mega IPO will have 75% of the portion reserved for qualified institutional buyers (QIB) while 15% is reserved for non-institutional investors (NII). Only 10% of the public issue is open for retail investors to bid, translating to merely Rs 937 crore. Investors can bid for the issue in the price band of Rs 72-76 per equity share of face value Re 1. Bids can be made for a minimum of 195 equity shares and in multiples thereafter. The IPO will also have 65 lakh equity shares reserved for employees of the company. Zomato received SEBI’s nod in the previous week.
The food delivery platform will receive Rs 9,000 crore from the IPO. According to the RHP filed by Zomato, the company will use Rs 6,750 crore for funding organic and inorganic growth initiatives while the remaining will be used for general corporate purposes. In the financial year ending March 2020, Zomato’s total income stood at Rs 2,742 crore. During the pandemic, the company’s income was recorded at Rs 1,367 crore. Zomato continues to remain a loss-making entity as of now.
In the recent round of fundraising, Zomato was valued at $5.4 billion post-money. Tiger Global, Fidelity, and Kora Management were among the latest investors in Zomato pumping in $250 million.
“Zomato IPO would mark the first meaningful Internet listing in India. With >80% contribution to revenues, food delivery is the bedrock, a two-player market now although more competition is possible,” said foreign brokerage and research firm Jefferies earlier this year. The brokerage firm highlighted that out of the total food consumption in India, which is nearly a quarter of the country’s GDP, just 10% is on food services. This compares with more than 50% spends in China and the US. Following the consolidation wave, food delivery is now a two-player market with broadly similar shares for Zomato & Swiggy, they added.
As the company tried to gain more market share and expand operations, volumes are set to increase for Zoamto as well as its rival Swiggy. With this, according to a recent report by CLSA, profitability has taken a center stage in the industry as both the companies try to improve their unit economics.