Food delivery platform Zomato files for £820 mn IPO

Wednesday 05th May 2021 06:17 EDT
 
 

Food delivery platform Zomato filed a draft red herring prospectus (DRHP) with markets regulator Sebi for an initial public offering (IPO) to raise £820 million. This would be one of the first major IPOs from the new generation of Indian internet startups. Of the total, nearly $1 billion will be through the issue of fresh shares. Zomato’s early investor Info Edge will sell shares worth $100 million (around £75 million) through an offer for sale (OFS). Zomato, according to the filings, may also consider raising $200 million (about £150 million) more in a pre-IPO round. This would be on top of over $900 million it raised in the last 12-18 months.
Info Edge, parent firm of online portal Naukri, first invested in Zomato in 2010 and still holds about 19%. The Gurgaon-based firm was valued at $5.4 billion after the last financing round. Sources said Zomato could go public at a valuation range of $7-9 billion.
If successful, Zomato’s IPO would also set the stage for other local startups aiming to go public this year and the next. Zomato’s rival Swiggy, which is valued at $5 billion, is in the final stages of talks to raise around $450 million from SoftBank. Zomato says its competitors include Swiggy, Domino’s, McDonald’s, Pizza Hut and cloud kitchen major Rebel Foods. Among its risk factors, it has said there is “intense competition in food delivery and other businesses”.
“We expect our costs to increase over time and our losses will continue given significant investments expected towards growing our business,” Zomato, founded by Deepinder Goyal and Pankaj Chaddah in 2008, said in its filing. Zomato said it saw revenue of nearly $184 million in the first nine months of the last fiscal (between April and December, 2020), while its losses were close to $92 million.
It has identified advertisement and sales & promotional expenses as key to acquiring new users and building its brand among consumers. It spent around 49% of its total income for advertising and promotions in the financial year ended March 2020, while the same in the April to December 2020 period was under 23%.
Zomato plans to use 75% of its IPO proceeds for organic and inorganic expansion in five years. “We expect to utilise at least 40% of the proposed deployment towards funding organic growth initiatives,” the company said. This would be largely in the areas of customer and user acquisition, delivery and technology infrastructure. “We have made these investments in the past, and we expect these to continue to be critical for the growth of our business in the future,” it added.


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