Zomato gets Sebi's go-ahead to float Rs 7,875 crore IPO

New Delhi: Food delivery giant Zomato has obtained market regulator Sebi’s green light to launch its Rs 7,875-crore initial public offering (IPO). This paves way for one of the most keenly awaited share sales in recent history giving the retail investors an opportunity to participate in India’s booming start-up and new economy businesses.

According to the Draft Red Herring Prospectus (DRHP) filed by Zomato, the company will offer equity shares aggregating up to Rs 7,875 crore (nearly $1.1 billion). Of this, Rs 7,500 crore will be a fresh issue, while Rs 375 crore will be an offer for sale for its existing investor InfoEdge.

The proceeds obtained from the fresh issue would be used towards funding organic and inorganic growth initiatives; and general corporate purposes, Zomato had mentioned in the draft papers.

Current shareholders

Info Edge (18.55 per cent) is one of Zomato’s leading investors, along with Uber BV (9.13 per cent), Alipay Singapore Holding Pte Ltd (8.33 per cent), Tiger Global (6 per cent), Sequoia Capital (5.98 per cent), co-founder Deepinder Goyal (5.51 per cent), Temasek Holdings subsidiary (3.65 per cent) are among top shareholders in the company.

Global marquee investors like T Rowe Price, Fidelity Investments and Capital Group have expressed interest in investing in Zomato’s IPO.

Financials

Zomato is one of the leading online food service platforms in terms of the value of food sold as of Dec 31, 2020. Its B2C offerings include food delivery and dining-out services where customers can search and discover restaurants, order food delivery, book a table, and make payments for dining out at restaurants while under the B2B segment, it generates revenue from Hyperpure (supply of high-quality ingredients and kitchen products to restaurants) and Zomato Pro, customer loyalty program.

As of December 31, 2020, Zomato has established a strong footprint across 23 countries with 131,233 active food delivery restaurants, 161,637 active delivery partners, and an average monthly food order of 10.7 million customers.

For nine months ended December 31st, 2020, the company reported total revenue of Rs 1,367.65 crore compared to Rs 487.04 crore in FY18. It is a cash-burning company as it posted a loss of Rs 682.2 crore as of December 31, 2020, compared to a loss of Rs 106.91 crore in FY18.

Listing plan & grey market premium

As reported by The Economic Times Zomato’s much-awaited initial public offer (IPO) is expected to open for subscription on July 19 at a price band of Rs 70-72 per share.

In the unofficial market for unlisted shares, the stock is trading at Rs 88-90, around 25% or Rs 18 above the projected IPO price of Rs 70-72.

Kotak Mahindra Capital Company, Morgan Stanley India Company Pvt Ltd and Credit Suisse Securities (India) Pvt Ltd are the global coordinators and book running lead managers to the issue.

BofA Securities India Ltd and Citigroup Global Markets India Pvt Ltd have been appointed as merchant bankers to the public issue. The shares of the company will be listed on BSE and NSE.

IPO lineup

Besides Zomato, the processing status of the draft red herring prospectus (DRHP) filed on the regulator’s website showed Chemplast Sanmar and Tatva Chintan Pharma received observation letters from Sebi last week.

That apart companies like Glenmark Life Sciences, Seven Islands Shipping, Utkarsh Small Finance Bank, Nuvoco Vistas Corp, Shriram Properties, Arohan Financial Services, Aadhar Housing Finance, Vijaya Diagnostics, Ami Organics are at an advanced stage of launching their IPOs.

Other companies that are likely to launch their IPO include Sansera Engineering, Devyani International, Cartrade Tech, Penna Cement Industries, Fincare Small Finance Bank. Apart from these, several other startups and businesses like LIC, Nykaa, PolicyBazaar and Lava Mobiles are said to be readying to approach the capital markets regulator to file their DRHP in preparation for IPO launch.

Meanwhile, One97 Communications Ltd., the parent of digital payments firm Paytm, is likely to file its draft IPO papers soon after its extraordinary general meeting on July 12, according to reports.

IPO in H12021

The first half of 2021 was action-packed for primary markets as two dozen initial public offers (IPOs) raised Rs 38,961 crore, compared to just 16 IPOs raising Rs 31,128 crore through IPOs in the entire 2020. Fundraising via IPOs in H1CY21 (first half of the calendar year 2021) was highest in over a decade thanks to a flood of funds from FIIs, DIIs and unprecedented participation from retail investors as well.

Six of the 24 IPOs were subscribed over 100 times. While 19 IPOs delivered positive returns at the end of H1CY21, of which eight rallied over 50%. On the other hand, 4 issues Suryoday Small Finance Bank, Kalyan Jewellers, Indian Railway Finance Corporation and Brookfield India Real Estate Trust REIT gave negative returns in H1CY21.