Zomato plans to raise up to Rs 8,500 crore via a qualified institutional placement (QIP) of equity shares, it said on Tuesday, October 22.
The company's board has approved "issue of equity shares through qualified institutions placement(s) under applicable laws, for an aggregate consideration of up to Rs 8,500 crore," Zomato said in a stock exchange filing. The food tech giant will decide the details such as price or discounts in due course, it added.
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Zomato's board has approved up to Rs 8,500-crore fundraising via the issue of a qualified institutional placement (QIP) at a time when the competitive intensity has gone up. Zomato is raising additional capital despite having a strong balance sheet and the business turning in profits quarter after quarter.
Zomato's cash balance has reduced from Rs 14,400 crore in July 2021 to Rs 10,800 crore now.
"While the business is now generating cash, vis-a-vis a loss making business
at the time of IPO, we believe that we need to enhance our cash balance given the competitive landscape and the much larger scale of our business today. We believe that capital by itself does not give anyone the right to win, and that service quality is the key determinant of success, but we want to ensure that we are on a level playing field with our competitors, who continue to raise additional capital," Goyal added.
This will be the first fundraise by Gurugram-headquartered Zomato since its stock market debut three years ago in November 2021 and will come at a time when arch rival Swiggy is headed for an initial public offering (IPO).
Swiggy’s IPO, which is slated to go live next month, will be one of the largest for a new-age company in recent years. The Bengaluru-based company is preparing to raise over $1.4 billion and is targeting a valuation of $11.7-12.7 billion, which is more than half of Zomato’s current market capitalisation of $27 billion.
Apart from Swiggy and its rapid delivery arm Instamart, Zomato also competes with Zepto, which has been on a fundraising spree, through Blinkit in the red-hot quick commerce industry.
Zepto has raised a total of $1.05 billion in the last two months and is again in talks to raise another $150 million from Motilal Oswal’s Raamdeo Agrawal, Indian family offices and a clutch of other high networth individuals (HNIs), Moneycontrol had reported earlier.
“Zomato’s move to raise money is a likely signal to competitors and investors that even though the company is listed and public, it can still raise money. It’s not just the private ones who can mop up funds,” a person aware of the developments told Moneycontrol.
The fundraising will be subject to approval from shareholders, which Zomato plans to seek through a postal ballot, and any necessary regulatory clearances. The board has also constituted a fundraising committee to handle the specifics of the issuance, including its structure, pricing, and any applicable discounts.
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