LIC may invest in Zomato IPO; key things to know

The country’s biggest institutional investor Life Insurance Corporation (LIC), which has a stake in more than 300 listed companies, is mulling to invest in the upcoming Zomato IPO. According to a Mint report, the insurance behemoth, which typically invests in secondary markets unless the public issue is a part of the government’s divestment programme, is expected to bid for shares in the upcoming IPO of Zomator.

Here are the other key things that you should know about the IPO.
Issue date

Food ordering platform Zomato last week said it plans to raise Rs 9,375 crore through an initial share sale that will open for subscription from July 14 to 16.

Price band

The price band for the issue has been fixed at Rs 72 to 76 per share.

About the issue

The total IPO size is Rs 9,375 crore, comprises a fresh issue of equity shares worth Rs 9,000 crore and an offer-for-sale to the tune of Rs 375 crore by Info Edge (India) Ltd.

Objective

Going by the draft papers, proceeds from the fresh issue would be used towards funding organic and inorganic growth initiatives and general corporate purposes.

Financials

Zomato’s FY20 revenue had jumped over two-fold to $394 million (around Rs 2,960 crore) from the previous fiscal, while its earnings before interest, taxes, depreciation and amortization (EBITDA) loss was around Rs 2,200 crore.

Valuation

According to reports, Zomato’s valuation post-IPO on a fully-diluted basis will be Rs 64,365 crore, far more than the other listed companies in the food segment such as Jubilant FoodWorks (market capitalisation of Rs 41,006 crore) and Burger King India (Rs 6,627 crore). The online food delivery segment has seen significant growth in the last few years with Zomato and Swiggy competing head-on to grab market share.

Should you subscribe?

Brokerage Ventura Securities has a ‘Subscribe’ rating on the issue. “With 1.2 billion smartphone users by FY2030 and having access to globally lowest-cost data packs, we forecast online food delivery user numbers to scale to 170-190 mn (14.2-14.3% CAGR, 14-16% internet penetration). Triggers for this rapid growth are rapid urbanisation with increasing nuclear families and busy lifestyle with both husband and wife being part of the working population,” the brokerage said. It also believes that the company may report a profit of Rs 227.60 crore in FY23 and Rs 479.10 crore in FY24. Zomato has reported a loss of Rs 2304 crore, 816 crore and Rs 577 crore in FY20, FY21 and FY22, respectively.