Zomato | Representative image: mrinalpal via Shutterstock
The Securities and Exchange Board of India (SEBI) has formally approved food delivery giant Zomato's application for an initial public offering (IPO), paving the way for one of the most keenly awaited share sales in recent history.
Moneycontrol was the first to report about SEBI clearing the application on July 2, and that the official approval may come by July 5.
Sources had earlier told Moneycontrol that Zomato is eyeing a listing valuation of $8.7 billion based on the huge demand from global tech specialist funds and emerging funds. The restaurant aggregator, backed by China’s Ant Group, has also increased its primary fund raise through the IPO by 20 percent to $1.2 billion and reduced the secondary portion, or OFS, by 50 percent to $50 million.
According to the Draft Red Herring Prospectus (DRHP) filed by Zomato, the company will offer equity shares aggregating up to Rs 7,875 crore (nearly $1.1 billion). Of this, Rs 7,500 crore will be fresh issue, while Rs 375 crore will be an offer for sale for its existing investor InfoEdge.
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 had 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.
After that, InfoEdge, one of Zomato's earliest investors, said its effective stake in Zomato is now 18.4 percent. InfoEdge informed exchanges on July 4 that it is reducing its stake in Zomato.
This was on top of the $660 million-primary round that it closed in December 2020, at a valuation of $3.9 billion from ten new investors including Tiger Global, Kora, Luxor, Fidelity (FMR), D1 Capital, Baillie Gifford, Mirae and Steadview.
After the initial COVID-19 shock in March 2020, Zomato had said in September that the online food delivery space has recovered and even exceeded pre-pandemic levels in a number of large pockets in India, as more people embrace online ordering.
Read: Here's how Zomato makes money
Deepinder Goyal, Zomato's Co-founder and CEO, 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-mass vaccination. 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 dine out revenue.
The food delivery and restaurant aggregator platform was founded by Goyal and Pankaj Chaddah as Foodiebay in 2008 and was renamed Zomato in 2010.
India has seen just a handful of Internet companies going public in the last two decades. Apart from Zomato, Paytm, 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 United States.
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.
Last week, the company also signed up a deal to invest $120 million
in online grocery firm Grofers. The approval for the deal is pending with the Competition Commission of India (CCI).