Zomato files papers for $1.1 billion IPO
IPO comprises fresh issue of ₹7,500 cr shares, ₹750 cr offer for sale by Info Edge
BENGALURU: Food tech unicorn Zomato on Wednesday filed draft documents with the markets regulator for an initial public offering (IPO) of ₹8,250 crore (or $1.1 billion) through a sale of new and existing shares.
Zomato will issue new shares of ₹7,500 crore, and its early backer Info Edge India Ltd will sell shares totalling ₹750 crore, the draft papers showed. The firm said it will also do a pre-IPO share placement of about ₹1,500 crore to anchor investors.
The company plans to use ₹5,625 crore from the net proceeds to finance organic and inorganic growth initiatives, the offer document showed. Last year, Zomato announced its intention to enter the nutraceutical segment and offer dietary supplements.
Info Edge first invested in Zomato in 2010 for a 33% stake, which it continued to dilute over several fundraises.
The company, which was valued at almost $5.4 billion after concluding its latest fundraising from 10 new investors in February 2021, may look at a valuation of $8 billion, a person in the know said seeking anonymity.
According to Zomato’s latest shareholding pattern, Info Edge is the largest shareholder, controlling 18.5% of the company, followed by Uber B.V. holding 9.13%. Alipay Singapore Holding Pte. Ltd and Antfin Singapore Holding Pte. Ltd hold close to 8.33% and 8.22%, respectively. Sequoia Capital India, across its two funds, holds more than 7% stake, and founder Deepinder Goyal holds 5.5%.
Zomato’s IPO plan comes at a time India has seen several tech firms go public over the past few months. In March, gaming and sports media platform Nazara Technologies went public with its IPO subscribed 175 times. The same month, manufacturing solutions provider MTAR Technologies saw its IPO subscribed three times on the opening day.
“With markets at all-time highs and resilient in spite of the second wave of covid, subscriptions for Zomato’s IPO could be good. In spite of these new-age firms being loss-making and operating largely on institutional funding, Indian retail investors have supported tech-based IPOs in the last six months and are opening up to this new breed of companies,” said Santosh N, managing partner, D and P Advisory Services Llp.
Santosh added that Indian investors have started evaluating tech stocks differently and are drawing parallels to similar businesses and their success in international exchanges. Further, states going into lockdown and food deliveries being considered as essentials, is likely to help boost the sentiment around Zomato’s IPO.
Zomato’s revenue from operations grew from ₹466 crore in FY18 to ₹2,604 crore in FY20. Its revenue from operations for the nine months of FY21 ended December 31 was ₹1,301 crore.
“In particular, as lockdowns in response to the Covid-19 pandemic eased in India towards the end of May 2020, our food delivery business started recovering and in the third quarter of 20202021 fiscal, we recorded the highest goods order value achieved by us in any quarter till December 2020,” Zomato said in the draft document.
The company claims to have positive unit economics of ₹22.9 on every order in the first nine months of FY21 compared to a loss of ₹30.5 on orders towards the end of FY20. Further, towards the end of third quarter of FY21 in December 2020, gross order value on the Zomato’s platform crossed pre-covid levels and stood at ₹2,981 crore.
But, overall, losses continue to mount for the startup, rising from ₹106 crore in FY18 to ₹2,385 crore in FY20.