On Wednesday (April 28, 2021), Zomato, the online food ordering delivery platform, filed a draft of its much-anticipated red herring prospectus (DRHP) with market regulator SEBI, this becoming India's first major domestic consumer internet start-up to go public.
In its filing, Zomato stated that it plans to collect Rs. 8,250 crores in capital by selling the company's equity shares, with Rs. 7,500 crore coming from new issue. The remaining Rs. 750 crore will be offered for sale by Zomato's initial sponsor, Info Edge. The parent company of Naukri.com revealed its intention to sell its shares in Zomato's forthcoming public offering in a stock exchange filing.
According to the financials shared in the prospectus, Zomato earned Rs. 1,367.65 crores in revenue from (April 1 to December 31, 2020), while losing Rs. 684.15 crore over the same time.
Preparations For Big-Bang IPO
The transition comes only a few weeks after Zomato renamed itself Zomato Limited and changed its name from a private entity to a public limited corporation by amending its Memorandum of Association. It expressed its intention to file the DRHP with SEBI and related stock exchanges in order to list its equity shares on one or more of the stock exchanges.
The company's profits were Rs 2,742.74 crore in the fiscal year ended March 31, 2020, while losses were Rs 2,362.8 crore, indicating that despite a substantial drop in revenues in the first nine months of FY21, the company was able to slash losses thereafter.
“As the COVID-19 pandemic-related lockdowns in India began to ease toward the end of May 2020, our food delivery sector began to rebound, and in the third quarter of fiscal 2021, we received the highest GOV achieved by us in any quarter before December 2020,” Zomato said in its statement.
Zomato however expects the losses to continue. “We expect our costs to rise over time, and our losses to persist, considering substantial investments needed to expand our business. Zomato's IPO is estimated to generate $750 million to $1 billion. Zomato expanded its board members to include five additional independent members, four of whom are women, in the run-up to the IPO.
According to the company's most recent regulatory filings, Info Edge holds about 18.5 percent of the company, valued at Rs. 7,270 crores. Swiggy, Zomato's main competitor, is set to raise $450 million from SoftBank Vision Fund, valuing the firm at $5 billion.
The much-anticipated public listing of Zomato arrives at a period when the Indian entrepreneurship ecosystem is seeing a surge in investment.
In the first four months of this year, eleven unicorns (private companies estimated at over a billion dollars or more) have already emerged, compared to 11 in all of 2020. The boom is being fueled by a number of factors: post-pandemic digitisation has resulted in an increase in online services, there is plenty of money available, Tiger Capital is booming again, India is one of the largest user markets still open, and upcoming Internet IPOs in India are raising expectations of an exit route.
However, the second round of coronavirus infections has dampened market appetite for stocks and initial public offerings (IPOs) since late March. The stock market lists of very well domestic brands and names like Barbeque-Nation Hospitality Ltd and Macrotech Developers Ltd received a subdued reply. The lead book running managers for Zomato's IPO are Kotak Mahindra Capital, Credit Suisse Securities India, BofA Securities India, and Citigroup Global Markets India, Morgan Stanley India.
