On Wednesday, April 28, online food ordering and distribution startup Zomato filed for an initial public offering (IPO) worth up to Rs. 8,250 crores, as food delivery saw a boom amid the country’s ongoing second wave of the pandemic. Zomato was founded in 2008 and is backed by China’s Ant. It is also one of the country’s most well-known startups. According to Zomato’s official website, the company operates in 24 countries and hires over 5,000 employees. The market regulator SEBI has received Zomato’s draft red herring prospectus (DRHP).
Zomato plans to raise Rs. 8,250 crores through the initial public offering, with about Rs. 7,500 crores coming from a new issue of equity shares. The company’s top shareholder and early backer, Info Edge, will sell shares worth Rs. 750 crores through an offer for sale, or OFS.
The price band and lot sizes in which interested investors will bid for shares in the IPO have yet to be determined by Zomato. The company did not disclose the date of the initial public offering in the draft red herring prospectus.
Zomato plans to use the proceeds to finance organic and inorganic growth projects, as well as for general corporate purposes, according to the draught red herring prospectus. The sum used for general corporate purposes will not exceed 25% of the net proceeds, according to the company. Delivery infrastructure, application infrastructure, and consumer and user acquisition are all part of the organic growth plan.
Prior to the filing of the red herring prospectus, Zomato may consider a private placement of equity shares worth Rs. 1,500 crores. If a pre-IPO placement is made, the minimum offer size will be at least 10% of the paid-up equity share capital after the offering.
The pandemic, or a similar public health issue, according to Zomato, may have an effect on cash flows, industry, and overall operations. In the food delivery industry, Zomato is also up against competition. The group, along with domestic rival Swiggy, which is backed by Accel, dominates the country’s $4.2 billions food delivery industry, according to research firm RedSeer. The food delivery startup raised $250 millions in February 2021 from five investors, including hedge fund Tiger Global Management, for a $5.4 billions post-money valuation.
– Despite having some of the world’s largest tech unicorns, Indian investors have been denied access to the internet and technology space, which has seen a boom in markets such as the United States and China. The need to purchase tech securities and get involved in what seems to be a once-in-a-generation rally has prompted domestic mutual funds to introduce new fund offerings that would invest solely in such stocks or exchange-traded funds with technology stock exposure.
– The fund’s exposure to some of the biggest tech stocks in the US, such as Facebook and Alphabet, has been credited with the fund’s recent success. In China’s markets, where significant wealth development has occurred in the technology room, the influence of innovation and technology has been well-documented. It’s common for asset managers in India to experience FOMO (fear of missing out).
– Zomato’s valuations are also likely to be guided by the lack of pure-play technology stock options in portfolios. Foreign investors who have been waiting to get a piece of India’s technology sector have pushed the valuations of a few listed internet portal companies such as Info Edge India and IndiaMART Intermesh to absurd levels, and are expected to gobble up Zomato stock.
If you want to be one of the public investors in Zomato’s recent IPO, you must first open a Demat account in order to engage in online trading. With the aid of Angel One, you can open a Demat account and begin trading in less than 5 minutes. Angel One will answer any questions you have about your Demat account.
More details on the Zomato initial public offering should be available soon.
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