Limited Period Offer:Be a PRO for 1 month @Rs49/-Multiple payment options available. Know More
you are here: HomeNewsBusinessIPO

Zomato IPO | Lockdown likely to impact business, losses may continue: Company

Zomato said that the company anticipates an increase in expenses and the losses may continue.

April 28, 2021 / 12:08 PM IST
Zomato anticipates an increase in expenses and the losses may continue.

Zomato anticipates an increase in expenses and the losses may continue.

Zomato, on April 28, filed the much-awaited Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). The company will offer equity shares of up to Rs 8,250 crore (nearly $1.1 billion). Of this, Rs 7,500 crore will be a fresh issue, while Rs 750 crore will be an offer for sale for its existing investor Info Edge.

The online food delivery segment has seen significant growth in the last few years with Zomato and Swiggy competing head-on to grab the biggest pie of the market share.

Read | Zomato IPO: Food delivery platform aims to raise Rs 8,250 crore, Info Edge will sell a part of its investment

In the DRHP, under a section titled 'Risk Factors', Zomato said that it anticipated an increase in expenses and the losses may continue.

Zomato incurred a restated loss of Rs 1,069.16 million, Rs 10,102.33 million, Rs 23,856.01 million and Rs 6,821.99 million in 2018, 2019 and 2020, and in the nine months ended December 31, 2020, respectively.

Close

Read: All you wanted to know about the Rs 8,250-crore Zomato IPO: We decipher the internet economy’s most awaited DRHP!

"We expect our costs to increase over time and our losses will continue given significant investments expected towards growing our business," it said.

The firm plans to use "substantial financial and other resources" on advertising, sales promotion, developing the platform, developing or acquiring new platform features and services, expanding into new markets in India, and expanding our delivery partner network.

Detailing the impact of the COVID-19 pandemic, Zomato said that the imposition of lockdown-like curbs might impact its business further.

Read | Zomato files for IPO: Here is why it is a landmark moment for the startup ecosystem

"While our food delivery business has recovered since lockdowns eased in India, our dining-out business is still recovering. In addition, further government actions and lockdowns to contain the spread of COVID-19 could adversely impact us," it said in the DRHP.

If we are unable to generate adequate revenue growth and manage our expenses and cash flows, we may continue to incur significant losses in the future, it added.

The company also said that the public's hesitant approach towards restaurants may also impact the cash flow and revenue. "Even if a virus or other disease does not spread significantly and such measures are not implemented, the perceived risk of infection or significant health risk may adversely affect our business," it added.

The food delivery aggregator said that it may also experience a decline in revenue growth rate due to factors such as slowing demand for Zomato, insufficient growth in restaurant partners and customers, increasing competition, increasing regulatory costs.

Zomato's FY20 revenue jumped over two-fold to $394 million (around Rs 2,960 crore) from the previous fiscal, while its Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) loss was around Rs 2,200 crore.

In February, Zomato 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.
Moneycontrol News
first published: Apr 28, 2021 11:59 am

stay updated

Get Daily News on your Browser
Sections