Zomato, the country’s largest meal delivery website, will have a post-money valuation of 59,623 crores at 76 per share, the upper end of the price band of 72-76 declared on Thursday by Zomato.
The much-anticipated initial public offering (IPO) of Zomato Ltd might vault the 13-year-old meal delivery company into India’s top 80 most valuable companies.
Zomato, the country’s largest meal delivery platform, will have a post-money valuation of 59,623 crores at 76 per share, the upper end of the price band of 72-76 disclosed on Thursday by Zomato, giving it the 78th position among listed companies in India by market value. The subscription period for the share sale will begin on July 14.
Long-established and well-known names such as Hero MotoCorp Ltd, India’s largest two-wheeler manufacturer; drugmaker Aurobindo Pharma; Piramal Enterprises; Apollo Hospitals, Biocon Ltd, and Bandhan Bank will be surpassed by Zomato’s valuation.
The offering, which ends on July 16, includes a 375-crore offer for sale by the company’s early investor, Info Edge, as well as an Rs. 9,000-crore fresh issue. The stock is expected to go public on July 27.
The company said that proceeds will be used for organic expansion, such as client acquisition, expanding the technological platform, and expanding the delivery infrastructure.
The second category is for inorganic activities, such as minority share purchases or complete buyouts. The third bucket is for general company reasons, where we want to invest up to 25% of the proceeds,” said Zomato’s chief financial officer, Akshant Goyal.
He noted that Zomato will have nearly $2 billion in cash in the bank after the IPO, or roughly Rs 15,000 crore. Zomato’s revenue from operations fell by 23.5 percent to 1,993.7 crore in FY21 due to lockdowns, but the company claims that order numbers have recovered.
CEO said that their meal delivery company saw the largest gross order volume ever in Q4. From an economic sense, we are in good shape,” Goyal added.
Due to most states relaxing Covid prohibitions and eateries opening up, Gaurav Gupta, co-founder of Zomato, claimed the company hasn’t observed an impact on order levels. In their experience, if a customer orders from a restaurant 2-3 times, it becomes a habit for them.
Another thing is that the growth in our tier-II, -III, and -IV markets have pleasantly surprised us. Food delivery has become commonplace among consumers. They feel there is still a sizable market of people who haven’t used meal delivery apps.
As of December 31, Zomato had active restaurant listings of 3,50,174 restaurants. In the fiscal year 2020, 12.2 million covers were booked through this platform in terms of table reservations. Zomato had 131,233 active meal delivery restaurants each month on average in fiscal 2020.
The IPO of Zomato will be India’s first meaningful Internet listing. Food delivery is the bedrock, accounting for more than 80% of sales, and is now a two-player industry, though the additional competition is possible. Covid-19 had a negative impact on revenues, although it improved unit economics, and its long-term viability is unknown.
Clarity on the use of the 45 percent revenues for M&A, nutraceutical ventures, and other purposes is required. In a message to its investors, Jefferies India stated that “technical considerations may boost investor interest, which may have border consequences.”
