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Zomato ropes in Kotak Mahindra Capital, law firms for blockbuster IPO in 2021

Food delivery company Zomato and its key investors are aiming for a listing in India. If plans fructify, it will be India’s first internet IPO since IndiaMart Intermesh in 2019

November 06, 2020 / 07:17 AM IST
Zomato | The food ordering aggregator raised $250 million from Kora Management, Tiger Global and Temasek in August 2020.Zomato | The food ordering aggregator raised $250 million from Kora Management, Tiger Global and Temasek in August 2020. (Image: Zomato)

Zomato | The food ordering aggregator raised $250 million from Kora Management, Tiger Global and Temasek in August 2020.Zomato | The food ordering aggregator raised $250 million from Kora Management, Tiger Global and Temasek in August 2020. (Image: Zomato)

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Food delivery company Zomato is preparing to appoint merchant banks and law firms as it braces to become the first modern consumer internet IPO to list on the Indian bourses, people familiar with the matter told Moneycontrol.

If Zomato’s plans fructify, it will be the first internet IPO since B2B online player IndiaMart InterMesh made its debut on D-street in June 2019. Local search engine company Just Dial ( in 2013) and Info Edge ( an investor in Zomato which debuted way back in 2006) are two other instances of internet IPOs on the domestic bourses. Online travel company MakeMyTrip listed overseas on the Nasdaq in 2010.

“Zomato has picked Kotak Mahindra Capital as the left lead merchant bank for the proposed IPO in 2021. Additional merchant banks, both domestic and international, are likely to be added at a later stage. Law firms Cyril Amarchand Mangaldas and Indus Law are on board as legal advisors,” one of the persons cited above told Moneycontrol. A second person confirmed the same.

To be sure, the left lead merchant bank has the key responsibility in the documentation of an IPO and leads the interaction with the market regulator.

Zomato’s listing plans come as other Indian internet giants such as Flipkart, Paytm and BigBasket too are considering listings in the next few years.

Moneycontrol first reported on August 9, 2020, that Zomato was looking to clinch big-ticket investments from the likes of Tiger Global and Temasek ahead of a targeted IPO next year. The report also indicated that the firm was looking to reduce its cash burn and get closer to profits.

India’s leading restaurant aggregator and food delivery firm is backed by marque investors such as Info Edge, Temasek, Ant Financial, and Tiger Global, among others.

“After deliberations, Zomato has opted for a domestic IPO as compared to an overseas listing. Its key investors are also comfortable with an India IPO,” said a third person.

Overseas listings are believed to have advantages in terms of a diverse pool of investors and better benchmarking of business models, but can also involve higher liabilities and compliance costs.

In a huge boost for the startup community, in May 2020, the government cleared the decks for direct overseas listing of Indian firms in permissible jurisdictions. The fine print of the norms is awaited.

“Many bankers feel one can get the same valuations in India as several Asian and Indian investors are keen to diversify from financial and consumer companies to technology and internet firms. Look at Indiamart Intermesh for instance,” added the first person cited above.

The B2B online platform launched its IPO with an issue price of Rs 973 in July 2019. The stock price has since surged multi-fold to Rs 4,891 at the end of the day’s trade on November 4, 2020. Indiamart has a market cap of Rs 14,240 crore.

While Zomato is valued at around $3.3 billion based on its last round of funding, analysts at HSBC have pegged it at $5 billion.

In September, Zomato co-founder and CEO Deepinder Goyal told the firm’s employees in an internal mail that the firm was planning an IPO in the first half of 2021. "Our finance/legal teams are working hard to take us to IPO sometime in the first half of next year. The value of our business is going up dramatically, all thanks to the hard work and commitment of our team,” Goyal said in the mail, according to reports.

“The IPO plan is on in full steam. They may look at filing the DRHP with Sebi between April–June 2021 and look to launch the deal later in the year post October,” shared the third person cited above.

All the three persons spoke to Moneycontrol on the condition of anonymity. Zomato, Cyril Amarchand Mangaldas, and Indus Law declined to comment.

Moneycontrol is awaiting an email response from Kotak Mahindra Capital.

COVID-19 pandemic and its impact on the food delivery segment

Gurugram-based Zomato and its main competitor Swiggy have struggled like other businesses because of the COVID-19 downturn. The company was forced to lay off workers, cut salaries, and withdraw from a raft of cities, but has since recast its business, including sharply reducing discounts for food delivery and introducing contactless dining, to survive the economic fallout of the pandemic. In July, Goyal said he estimated the firm’s monthly burn rate to fall below $1 million.

Last month, Goyal tweeted that business was back to pre-Covid levels. He said India’s food-delivery volumes have reached 100 percent, and a few cities were showing 120 percent of original food-delivery volumes. Goyal said he expected food delivery to grow by 15-25 percent month-on-month for the foreseeable future.

Swiggy, which is backed by Naspers, too said it has is seeing signs of recovery across food, medicine, grocery and other categories since the lockdown. The company said it is seeing total order value at 80-85 percent of the pre-COVID numbers.

The ongoing Indian Premier League (IPL) and the festive season have boosted food delivery volumes. The average ticket size of orders has also gone up substantially since the outbreak of COVID-19.   

Launched in 2008, Zomato is one of the largest food aggregators in the world and is present in 24 countries with more than 1.5 million restaurants listed across the world on its platform. It has also expanded into other verticals, including a privileged membership subscription programme called Zomato Pro and B2B supplies as part of which it procures raw food materials from famers and sells it to restaurants.

In January 2020, it acquired rival Uber Eats in an all-stock transaction.  According to reports, in FY 20, Zomato said its revenue surged 105 percent, to $394 million, compared to the year before, while its losses at EBIDTA-level rose to $293 million, up from $277 million the year before.
Ashwin Mohan
first published: Nov 5, 2020 10:33 pm