Zomato on Wednesday filed for a Rs 8,250-crore initial public offering, kicking off the first in a series of IPOs expected from India’s largest startups. The company aims to raise Rs 8,250 crore by way of a fresh issue of shares and offer for sale.
An Offer for Sale is where promoters can sell their shares and reduce their holdings. According to its Draft Red Herring Prospectus (DRHP) filed with the Securities and Exchanges Board of India (SEBI), only Info Edge, one of Zomato’s early backers, will be selling its shares.
In a filing with the stock exchanges on Tuesday, Info Edge said as part of Zomato’s IPO, the company will be selling shares worth Rs 750 crore. Info Edge is Zomato’s largest shareholder and owns 18.5%, followed by Uber at 9.13% (after the sale of Uber Eats).
Zomato aims to use the proceeds from the IPO to fund organic and inorganic growth initiatives and for general corporate purposes. “We need to continue to invest in three core areas for the growth of our business which include a) customer and user acquisition, b) delivery infrastructure, and c) technology infrastructure. We have made these investments in the past, and we expect these to continue to be critical for the growth of our business in the future,” it said.
Zomato said in the DRHP that its revenue from operations has grown from Rs 466 crore in 2017-2018, Rs 1,312 crore in 2018-19 and Rs 2,604 crore in fiscal 2019- 2020. Its revenue from operations for the nine months ended December 31, 2020, was Rs 1,301 crore.
Meanwhile, Zomato uncured a loss of Rs 1,069.16 million in FY18, Rs 10,102.33 million in FY19, Rs 23,856.01 million in FY20 and 6,821.99 million in the nine months ended December 31, 2020.
Outlining risks, the company said that it cannot assure that its historical growth rate can be sustainable in the future.
“We expect our costs to increase over time and our losses will continue given significant investments expected towards growing our business,” Zomato added.
It also added that it will continue to spend substantially on resources such as advertising and sales promotion to attract customers and restaurant partners, on developing its platform, while also expanding its offerings, features and services. It also intends to continue spending on into new markets in India, and expanding its delivery partner network.
Zomato added that its food delivery business was “significantly impacted” during Q1 of the 2021 fiscal because of lockdowns and customers unwilling to order from restaurants. “Similarly, our revenues from our dining-out services were severely impacted by the COVID-19 pandemic. While our food delivery business has recovered since lockdowns eased in India, our dining-out business is still recovering as customers are still reluctant to dine-out as a precautionary measure,” it said.
In February, Zomato raised $250 million from five investors — Kora Management - $115 million; Fidelity Management & Research Company - $55 million; Tiger Global Management - $50 million; Bow Wave Capital Management - $20 million; and Dragoneer Investment Group - $10 million. This was at a post-money valuation of $5.4 billion.
Recently, it hired five independent directors for its eight-member board, four of whom are women.