Online food delivery giant Zomato’s initial public offering (IPO) opened for subscription on Wednesday.
As of December 31, 2020, Zomato Limited, which was founded in 2010, is one of the biggest online food service platforms in terms of the value of food sold. Customers can search and discover restaurants, order food delivery, book a table, and make payments for dining out at restaurants through its B2C offerings, while it generates revenue from Hyperpure (supply of high-quality ingredients and kitchen products to restaurants) and Zomato Pro, a customer loyalty programme, through its B2B offerings.
The Rs 9,375 crore initial public offering is one of the year’s most anticipated IPOs. Interested investors will have until July 16 to subscribe to the public offering.
The company distributed shares worth Rs 4,195 crore to anchor investors ahead of the IPO.
Nearly 200 foreign firms and domestic investors received a total of 552 million shares at a price of Rs 76 per share. It’s worth noting that anchor allotment occurs the day before an IPO’s public subscription period begins.
Zomato IPO Details
|IPO Opening Date||14-Jul-21|
|IPO Closing Date||16-Jul-21|
|Issue Type||Book Built Issue IPO|
|Face Value||Rs 1 per equity share|
|IPO Price||Rs 72 to Rs 76 per equity share|
|Market Lot||195 Shares|
|Min Order Quantity||195 Shares|
|Listing At||NSE and BSE|
|Issue Size||Rs 9375 Cr ( at face value of Rs 1/share)|
|Fresh Issue||Rs 9000 Crore|
|Offer for Sale||Rs 375 Crore|
Zomato IPO Time Schedule
|IPO Open Date||14 July 2021|
|IPO Close Date||16 July 2021|
|Basis of Allotment Date||22 July 2021|
|Initiation of Refunds||23 July 2021|
|Credit of Shares to Demat Account||26 July 2021|
|IPO Listing Date||27 July 2021|
How Company Plans use funds (as per DRHP)
The proceeds from the Zomato initial public offering will be used to fund organic and inorganic growth plans, as well as general business objectives.
“As an asset-light firm, we are not obligated to make significant investments in fixed assets. Our technology infrastructure, which we have built, created, and expanded over the years, is our most valuable asset, and we expect it to be one of our business’s main drivers in the future. We may modify and further expand our platforms in the future, as we have in the past, to cater to various services and business offers, in keeping with our strategic ambitions and priorities.
To ensure that platform participants are drawn to our technology, regular and frequent actions in the form of advertising, sales, and promotional activities are critical. This necessitates investing in marketing initiatives to guarantee that our varied services and product offers are remembered,” the company stated.
Zomato DRHP on the Food Services Market Opportunity
In 2019, food consumption accounted for over a quarter of India’s GDP, totaling $670 billion (Rs 46.9 lakh crore). The majority of this, though, is fueled by home-cooked meals. Food services, which are defined as non-home prepared food or restaurant food, currently account for only around 10% of the total food market. This is significantly lower than in global countries such as the United States and China, where Food Services contributes around 54 percent and 58 percent of total food consumption, respectively, according to the DRHP.
(i) Because of its unique content and transaction flywheels, it has strong network effects. According to RedSeer, their end-to-end food services strategy makes it the world’s most unique food services platform, combining the offerings of platforms like Yelp, DoorDash, and OpenTable in a single mobile app.
(ii) It has a widespread and effective hyperlocal on-demand delivery network.
(iii) The company is a technology-first organisation that uses artificial intelligence, machine learning, and deep data science to drive platform advancements for its consumers, delivery partners, and restaurant partners.
(iv) Zomato is a strong consumer brand recognized across the length and breadth of India.
(i) It intends to maintain a constant focus on unit economics and growth.
(ii) Across its three businesses – meal delivery, eating out, and Hyperpure – it plans to build and deepen community.
(iii) For the benefit of its customers, it will invest in new goods, technology, and features.
(iv) It will continue to invest in developing a strong consumer brand that is known throughout India.
The food delivery company’s consolidated loss at Rs 2,385.6 crore in financial year ended March 2020 widened from loss of Rs 1,010.2 crore in previous year. But revenue nearly doubled to Rs 2,604.7 crore from Rs 1,312.58 crore in the same period.
Trendy Invest take on Zomato
Zomato is the first unicorn company of India which is going to be listed in the stock market but even after that big investors are not interested in this company. Zomato spending is very much high and if we see company’s financial numbers then its also not very impressive. Zomato has been posting consistent loss in the last 3 financial years and their operation activity is not so impressive at this moment. More importantly a loss making company listing its share at such high valuation and at face value of Rs 1, doesn’t look good to us. We have a view that Investor may apply for IPO just get some listing gain and get out from it.
All the data presented in this analysis were taken from Company’s Red Herring Prospectus. All presented analysis is given for educational purpose and should not be taken as advise. Investors must consult their financial advisers before making any investment decision.