Zomato, the food tech unicorn, filed draught documents with the market’s regulator on Wednesday, for an IPO worth Rs 8,250 crore ($1.1 billion) via the sale of new and existing shares. According to the draught documents, Zomato will issue new shares worth Rs 7,500 crore, and its early backer Info Edge India Ltd will sell shares worth Rs 750 crore. The company also announced that it would do a pre-IPO share placement of around Rs. 1,500 crore with anchor investors.
According to the bid paper, the company intends to use $5,625 crore in net proceeds to fund organic and inorganic growth initiatives. Zomato revealed last year that it will join the nutraceutical market and start selling dietary supplements. Info Edge made its initial investment in Zomato in 2010, for a 33 percent stake, which it managed to dilute over many fundraises.
To a person familiar with the matter who requested anonymity, the firm, which was valued at nearly $5.4 billion after its most recent funding from ten new investors in February 2021, may be valued at $8 billion.
According to Zomato’s most recent shareholding pattern, Info Edge is the company’s largest shareholder, with 18.5 percent, followed by Uber B.V. with 9.13 percent. Alipay Singapore Holding Pte Ltd. and Antfin Singapore Holding Pte Ltd., each have close to 8.33 percent and 8.22 percent of the market capitalization. Sequoia Capital India owns more than 7 percent of the company through two funds, with founder Deepinder Goyal owning 5.5 percent.
Zomato’s IPO plans come at a time when many Indian tech companies have gone public in recent months. Nazara Technologies, a gaming and sports media platform, went public in March, with its initial public offering (IPO) being oversubscribed 175 times. MTAR Technologies, a supplier of manufacturing solutions, had its initial public offering (IPO) subscribed three times on the first day.
“Subscriptions for Zomato’s IPO may be solid, with markets at all-time highs and resilient in the face of the second wave of covid. Despite the fact that these new-age companies are loss-making and depend heavily on institutional capital, Indian retail investors have backed tech-related IPOs in the last six months and are becoming more open to this new breed of companies,” D and P Advisory Services Llp managing partner Santosh N said.
Zomato’s operating revenue increased from 466 crore in FY18 to 2,604 crores in FY20. The company’s revenue from operations for the nine months ending December 31, in FY21 was 1,301 crores. According to Santosh, Indian investors have begun to evaluate technology stocks differently, drawing similarities to similar businesses and their performance on foreign exchanges. Furthermore, states going into lockdown and food deliveries being deemed essentials are likely to fuel Zomato’s IPO sentiment.
“Our food delivery company started recovering as lockdowns in response to the Covid-19 pandemic eased in India towards the end of May 2020, and in the third quarter of the 2020-2021 fiscal, we posted the highest goods order value achieved by us in any quarter until December 2020,” Zomato said in the draught paper.
In the first nine months of FY21, the company appears to have had positive unit economics of 22.9 per order, compared to a loss of 30.5 per order at the end of FY20. Furthermore, by the end of the third quarter of FY21, in December 2020, gross order value on Zomato’s platform had surpassed pre-covid levels, standing at 2,981 crore. However, the startup’s losses have increased from 106 crore in FY18 to 2,385 crore in FY20.
