Zomato to raise `8.2k cr thro' IPO

Bengaluru FOOD delivery aggregator Zomato on Wednesday filed a Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (Sebi) to raise Rs 8,250 crore (around $1.1 billion) through its Initial Public Offering (IPO).

While the IPO offer includes a fresh issue worth Rs 7,500 crore, it also has an offer for sale by its shareholder Info Edge. Info Edge is the parent company of recruitment platform Naukri.com and is the largest investor of Zomato.

The company also mentioned that it will consider a private placement of up to Rs 1,500 crore, prior to filing of the red herring prospectus.

In the run up to its IPO, Zomato has already converted itself to a public limited company a couple of weeks ago from a private company. It has so far raised funding of around $900 million from clutch of private equity investors. Sources in the know said the company is likely to be valued at around $7-8 billion in the pre-IPO round.

Zomato is one of the first internet companies which will go public by listing in Indian exchanges.

According to market research firm RedSeer, the total food services market opportunity stands at $65 billion growing at 9 per cent annum and is likely to reach $110 billion in 2025.

"While food services in India is highly under-penetrated, it is likely to grow steadily, taking share away from home-cooked food as has been the trend in the past as well," Zomato said in the draft prospectus.

It, however, flagged concerns relating to its growth prospects going ahead.

"Covid-19 pandemic, or a similar public health threat could impact our business, cash flows, financial condition and results of operations," the company said. During April-December period of last financial year, Zomato's revenue from operations was at Rs 1,301.3 crore. "During the third quarter of FY21, we recorded the highest GOV (gross order value) in any quarter. The accelerated growth of our business stemming from the effects of the Covid-19 pandemic may not continue in the future," it said in the draft prospectus. The food delivery platform also said that it has a history of posting net losses. "We have a history of net losses and we anticipate increased expenses in the future," it said. Zomato reported Rs 1,367.65 crore in revenue for the period April 1 to Dec 31, 2020, while its losses in the same period added up to Rs 684.15 crore, as per the draft IPO prospectus. However, the company has emerged as the category leader in the food delivery space by consistently gaining market share over the last four years. "We have experienced rapid growth in food delivery in India with our orders increasing by 13.2 times from 30.6 million in FY18 to 403.1 million in FY20 and our GOV growing 8.4 times from Rs 1,334 crore in FY18 to Rs 11,220.9 crore in FY20," the company said.