Zomato’s Rs 8,250-cr IPO set to hit D-street; Naukri.com parent to sell Rs 750-cr shares via OFS

Online food delivery platform Zomato is looking to raise a massive Rs 8,250 crore through its much-awaited initial public offering (IPO).

Online food delivery platform Zomato is looking to raise a massive Rs 8,250 crore through its much-awaited initial public offering (IPO). In its DRHP, filed with the capital markets regulator Securities and Exchange Board of India (SEBI) today, Zomato said its IPO will be an amalgamation of fresh issue of equity shares and an Offer For Sale (OFS) by existing shareholder Info Edge Ltd — the parent firm of Naukri.com. With this, Zomato has begun the proceedings of one of the most awaited public issues on Dalal Street in recent years. Zomato’s IPO could be the largest to hit Dalal Street since SBI Cards and Payment Services in March 2020.

Issue details

Zomato will raise Rs 8,250 crore, of which Rs 7,500 crore will be a fresh issue, while another Rs 750 crore will be an OFS by Info Edge. On Tuesday evening, Info Edge, which holds over 18% stake in Zomato informed the bourses that its Board of Directors has given approval to participate in the OFS of Zomato. Zomato has also said that it might consider a private placement of Rs 1,500 crore ahead of the IPO. Such a move is likely to trim the size of the fresh issue that the company has so far proposed.

Zomato said it will utilise funds raised through the issue for organic as well as inorganic growth, along with general corporate purposes. In the financial year ending March 2020, Zomato’s total income stood at Rs 2,742 crore. Meanwhile in the pandemic struck 2020, the company’s income was at Rs 1,367 crore. Zomato continues to remain a loss-making entity as of now.

Valued at $5.4 billion

Zomato, an online food delivery company, counts Ant Financials, Info Edge, Sequoia, and Uber as some of its investors. The company has strengthened its position in the two-player food delivery market with the latest round of funding coming in February this year. Zomato received $250 million in its latest investment round at a post-money valuation of $5.4 billion, Info Edge had said in an exchange filing. In the latest rounds of fundraising, Tiger Global, Fidelity, and Kora Management were among those writing cheques for the company.

“Food services is a large market in India with ~$80 Bn (~50% organized). Online food delivery is expected to grow strongly to reach $22 billion by 2025 growing at 40% CAGR. Online penetration to increase from 7% today to ~10% in 2022 and ~ 20% by 2025,” Bernstein had said in a report last year. Zomato controls a 50% market share.

In a recent report, CLSA said that Swiggy and Zomato are fighting for India’s $11 billion online food delivery pie. Profitability is now taking the center stage in the industry as both Zomato and Swiggy try to improve their unit economics. CLSA believes profits will expand as volumes increase.