The initial public offering (IPO) of Zomato will open for subscription today, July 14, 2021, at a price band of Rs 72-76 per share. The offer will be available for subscription till Friday, July 16th, 2021.
The restaurant discovery and food delivery platform aims to raise Rs 9,375 crore through the IPO which comprises a fresh issue of equity shares worth Rs 9,000 crore and an offer for sale (OFS) worth Rs 375 crore by existing investor Info Edge (India), the parent company of online job search platform Naukri.com.
The IPO size of Rs 9,375 crore marks an increase from Zomato’s previously announced Rs 8,250 crore when it filed preliminary documents with market regulator Sebi. Zomato had filed preliminary papers with Sebi in April this year and received its approval last week to float the IPO.
Zomato will be the first in a series of consumer-centric internet companies and startups in India to raise public money in a post-pandemic era. The online food delivery segment has seen significant growth over the last few years with Zomato and Swiggy competing head-to-head to grab market share.
The Zomato IPO will have 75 per cent reserved for qualified institutional buyers (QIBs) and 15 per cent will be reserved for non-institutional investors (NIIs). The remaining 10 per cent of the issue will be available for retail investors.
The proceeds from the fresh issue will be used towards funding organic and inorganic growth initiatives and for general corporate purposes, according to the information in the red herring prospectus.
Before heading into the IPO, Zomato raised over Rs 4,196 crore (Rs 41,96,51,86,380) from 186 anchor investors in lieu of 55,21,73,505 equity shares at Rs 76 each, data from the stock exchanges showed.
The anchor investors include the likes of Tiger Global Investment Fund, Blackrock, Fidelity, JPMorgan, Morgan Stanley, T Rowe Price, Canada Pension Plan Investment Board, Government of Singapore, SBI Mutual Fund, Axis Mutual Fund, Kotak Mutual Fund, UTI Mutual Fund, Motilal Oswal AMC, HDFC Mutual Fund, ICICI Prudential Mutual Fund, Tata Mutual Fund, Goldman Sachs India, Abu Dhabi Investment Authority, Franklin Templeton, HSBC Asset Management (India) among others.
Investors who wish to subscribe to the Zomato IPO can bid in a lot of 195 equity shares and multiples thereafter. At the upper price band, they will be shelling out Rs 14,820 to get a single lot of Zomato. The shares will be listed on both BSE as well as the National Stock Exchange (NSE).
The applicants also must note that the cut-off time for UPI mandate confirmation is Monday, July 19, 2021, upto 12:00 pm. If they fail to do so then their application may not be considered.
Kotak Mahindra Capital Company, Morgan Stanley India Company, Credit Suisse Securities (India), BofA Securities India and Citigroup Global Markets India are the book-running lead managers to the IPO while Link Intime India is the registrar of the issue.
Zomato’s 2019-20 revenue had jumped over two-fold to $394 million (around Rs 2,960 crore) from the previous fiscal year, while its earnings before interest, taxes, depreciation and amortisation (EBITDA) loss was around Rs 2,200 crore. In February, Zomato had raised $250 million (over Rs 1,800 crore) in funding from Tiger Global, Kora and others, valuing the online food ordering platform at $5.4 billion (around Rs 40,000 crore).
The research team at Motilal Oswal Financial Services, YES Securities, LKP Securities and Anand Rathi Share and Stock Brokers in their respective IPO notes have recommended a “Subscribe” to the offer for a short term period while those at HDFC Securities haven’t given any rating to the IPO
Anand Rathi Research in its IPO note said, “At the upper end of the IPO price band, the offer is valued at 29.9x of its FY21 market-cap to sales. Going forward, industry delivery percentage to net-revenue stands at ~5 per cent and with the Zomato average order value of Rs 400 (i.e. Rs 20 per delivery) the company is well poised and it is also placed at a sweet spot as the first mover advantage in the online food delivery market. Additionally, given the strong network effects, increasing frequency of order, huge scope for growth in tier-II and tier-III cities and large addressable market, we recommend a Subscribe (Short Term) rating to the IPO.”
Motilal Oswal Financial Services in its report noted, “Zomato with first mover advantage is placed in a sweet spot as the online food delivery market is at the cusp of evolution. It enjoys couple of moats and with economics of scale started playing out, the losses have reduced substantially. However, predicting the growth trajectory at this juncture is little tricky for next few years. The valuation also appears expensive at 25x FY21 EV/Sales compared to average of 9.6x for global peers and 11.6x for Indian QSRs. Though, valuing such early stage businesses on plain vanilla financial matrix might not give the right picture and may look distorted. Investors with high risk appetite can Subscribe for Listing Gains given fancy for unique and first of its kind listing in the food delivery business.”