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Zomato IPO: Food delivery platform likely to file DRHP today

Deepinder Goyal-led company's internal review of the IPO and other processes was completed on Thursday.

April 23, 2021 / 02:43 PM IST
Apart from Zomato, Policybazaar, Nykaa, and Delhivery are also firming up plans for a public listing [Representative image]

Apart from Zomato, Policybazaar, Nykaa, and Delhivery are also firming up plans for a public listing [Representative image]

Food delivery platform Zomato is likely to file its Draft Red Herring Prospectus (DRHP) with the market regulator on April 23, a move that will herald one of India's most anticipated internet initial public offerings (IPOs) in a tumultuous year.

Zomato, which counts Info Edge, Sequoia Capital, Temasek and Tiger Global as investors, will submit its DRHP with Securities Exchange Board of India (SEBI) for a listing of its shares today, people familiar with the development told Moneycontrol.

The company's internal review of the IPO and other processes was completed on Thursday, one of the persons cited above said. SEBI will take about two weeks to review the DRHP and the final launch will depend on the market conditions, the person said, asking not to be named.

A Zomato spokesperson declined to comment on the development. However, after the story was published, Zomato's founder Deepinder Goyal issued a denial on Twitter. He said, "This is incorrect. Wouldn't typically comment on speculation, but had to in order to stop the barrage of phone calls from the press and friends/family. Back to work."


Preparations For Big-Bang IPO

The move comes a few days after Zomato converted itself from a private company to a public limited company by amending its Memorandum of Association and renaming itself Zomato Limited. It said the move to become a public limited company was required as it plans to consider filing the DRHP with SEBI and relevant stock exchanges to list its equity shares on one or more of the stock exchanges. It was originally incorporated as a private limited company on January 19th, 2010.

DRHP is the first document that a company that wants to list its shares on a stock exchange files with SEBI. A DRHP is an exhaustive account of the vital details of a company, including date of incorporation, description of the business model, and risks, among other things.

The Economic Times reported recently that Zomato is likely to raise $750mn-$1 billion through its IPO at a valuation of $6-$8 billion. Moneycontrol first reported on August 9, 2020, that Zomato was looking to raise money from the likes of Temasek and Tiger Global ahead of a targeted IPO in 2021.

Zomato raised $250 million in its pre-IPO primary fundraise a couple of months ago at a valuation of $5.4 Billion from investors such as Kora Management, Tiger Global, Fidelity, Dragoneer, and Bow Wave. Post this, Info Edge, one of Zomato's earliest investors said its effective stake in Zomato is now 18.4 percent.

This was on top of the $660 million primary round that it closed in December 2020, at a valuation of $3.9 Billion from 10 new investors including Tiger Global, Kora, Luxor, Fidelity (FMR), D1 Capital, Baillie Gifford, Mirae, and Steadview. Goyal had said then that the company is in the process of also closing a $140 mn secondary round and that it was raising primary capital as a war-chest for future M & As and to fight off price wars from the competition.

Recovery Amid Pandemic

After the initial COVID-19 shock in March 2020, Zomato had said in September 2020 that the online food delivery space has recovered and even exceeded pre-COVID-19 levels in a number of large pockets in India, as more people embrace online ordering. Zomato co-founder and CEO Deepinder Goyal had said then that the tailwinds for food delivery businesses are clearly visible, and that he believes the growth of the sector will accelerate post-vaccine. He also said the burn rate is very low and that its market share is accelerating in all regions.

Zomato reported a revenue of Rs 2,486 crore for FY20, even as its losses widened to Rs 2,451 crore during this period, as the pandemic shrunk order volumes and dined out revenue.

The food delivery platform and restaurant aggregator platform was founded by Deepinder Goyal and Pankaj Chaddah as Foodiebay in 2008 and was renamed Zomato on 18th January 2010. In a story that is now part of startup folklore, it raised its first round of funding after Info Edge founder Sanjeev Bikhchandani sent a cold email to Goyal after using Foodiebay for many months to discover menus of restaurants in Delhi. Goyal responded in a day, they met within two days and shook hands for a deal in 72 hours of that first email.

Zomato's much-anticipated public listing comes at a time when the Indian startup ecosystem is seeing heightened funding activity The first four months of the year have already produced eleven unicorns- private firms valued at over a billion dollars or more- compared to 11 in all of 2020.

A combination of factors is driving the boom- post-pandemic digitization has led to a growth of online services, there is lots of capital available, Tiger Capital is roaring again, India is one of the largest consumer markets that are still open and upcoming Internet IPOs in India are raising hopes of an exit path.

India has seen just a handful of Internet companies going public in the last two decades. Apart from Zomato, Policybazaar, Nykaa, and Delhivery are also firming up plans for a public listing, even as there is a buzz of Flipkart and Freshworks listing in the US. These IPOs will be the indicators of how successful India's booming startup economy is and success could lead to more capital inflows into private markets.
Chandra R Srikanth is Editor- Tech, Startups, and New Economy
first published: Apr 23, 2021 10:33 am

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