Online food delivery and restaurant discovery platform Zomato filed its much-anticipated draft red herring prospectus (DRHP) with the markets regulator Sebi on Wednesday, seeking to raise more than a billion dollars through a combination of fresh equity issue and sale of existing shares.
Zomato said that it intends to garner Rs 8,250 crore (about $1.1 billion) through its public listing. Of this, Rs 7,500 crore (approx $1 billion) will be through a fresh issue of equity shares. The rest amounting to Rs 750 crore will be raised through an offer for sale (OFS) by existing investor Info Edge, which is the Gurugram-based company’s earliest backer.
Info Edge, the parent company of Naukri.com, had told stock exchanges Tuesday about its intention to sell shares worth $100 million in Zomato’s IPO, ET reported earlier. Info Edge currently owns around 18.5% in the company, a stake worth Rs 7,270 crore.
The Deepinder Goyal-led Zomato also said it may consider a pre-IPO placement of equity shares aggregating to Rs 1,500 crore (about $200 million) prior to its filing of the red herring prospectus (RHP) with the Registrar of Companies.
“If the pre-IPO placement is undertaken, the minimum offer size (comprising the fresh issue so reduced by the amount raised from the pre-IPO placement, and the OFS) shall constitute at least 10% of the post-offer paid-up equity share capital of our company,” Zomato’s DRHP read.
ET was the first to report on March 3 that Zomato is expected to raise $750 million to $1 billion through its IPO. In the run-up to the IPO, Zomato added five new independent members to its board, which includes four women.
Revenue, Loss and Growth Trajectory
Zomato said that its revenue from operations has expanded from Rs 466 crore in FY18 to Rs 2,604 crore in FY20, signifying an expansion of 5.5 in three years. In the nine months ended December 31, Zomato said its revenue from operations stood at Rs 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. In the third quarter of fiscal 2021, we recorded the highest gross order value or GOV achieved by us in any quarter till December 2020,” Zomato said in the DRHP.
Zomato said that it has incurred a loss of Rs 106.9 crore, Rs 1,010 crore, Rs 2,385.6 crore and Rs 682 crore in fiscal years 2018, 2019, 2020 and the nine months ending December 31, 2020, respectively.
The company said that it has a history of net losses and expects expenses to increase in the future.
“We expect our costs to increase over time and our losses will continue given significant investments expected toward growing our business,” Zomato said in its regulatory filing.
Funding Growth Initiatives
Zomato said it would allocate 75% of the gross proceeds from the IPO, or about Rs 5,625 crore, in funding organic and inorganic growth initiatives for five years from its public listing. Its organic initiatives include customer and user acquisition, investing in its delivery infrastructure, and building its technology infrastructure.
Among its inorganic initiatives, Zomato said it would continue to evaluate opportunities for acquisitions and strategic initiatives. It said it had benefited significantly from acquiring Uber’s delivery business in FY20 and logistics provider Carthero in FY18.
“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,” Zomato said.
The company added that it would not invest more than 25% of its net proceeds for general corporate purposes.
Zomato’s main rival Swiggy is finalising a $450 million fundraise from SoftBank Vision Fund, valuing the company at $5 billion, ET reported on April 15. Among its competitors, it highlighted food delivery player Swiggy, cloud kitchens such as Rebel Foods and branded Food Services players that include quick-service restaurants – Domino’s Pizza, McDonald’s and Pizza Hut.
