Food delivery and quick commerce leader Zomato Ltd has picked investment bank Morgan Stanley and begun working on its proposed qualified institutional placement (QIP) offering of up to Rs 8,500 crore (approximately $1 billion), people aware of the matter told Moneycontrol.
Zomato is looking at launching the QIP in December, depending on market conditions, they added.
One or two more investment banks may be added to the syndicate, the sources said. The eventual deal size could be in the $800 million to $1 billion range, they said.
A spokesperson for Zomato declined to comment. An email sent to Morgan Stanley did not elicit a response.
The Zomato QIP plan comes immediately after the mega Rs 11,327 crore IPO of its rival Swiggy Ltd, which listed on the bourses on November 13 with a 7.69 percent gain.
The stock debuted at Rs 420 per share on the NSE over the IPO price of Rs 390.
While Zomato’s stock price is down 9.6 percent from its 52-week high of Rs 298.2 as on September 24, so far this calendar year, the Zomato stock has seen an appreciation of almost 118 percent. Zomato’s stock closed at Rs 269.6 per share on the BSE on November 14, up 4.27 percent.
Zomato is currently seeking shareholder approval for the fundraising plan. Shareholders can vote their approval or disapproval till November 22.
Fundraising rationale
Explaining the need for the $1 billion fundraise, Zomato informed its investors that the fundraise is meant to strengthen its balance sheet at this point and that there is also no plan for any minority investments or acquisitions.
“Zomato’s consolidated annualised Adjusted Revenue has grown 4x in a period of about three years - from Rs 4,640 crore at the time of our IPO in July 2021 to Rs 20,508 crore now (Q2FY25 annualised). In the same time period, our cash balance has reduced from Rs 14,400 crore to about Rs 10,800 crore (mainly on account of funding past quick commerce losses and some equity investments and acquisitions),” Zomato told its shareholders in a notice requesting their vote on the fundraising proposal.
It added that while the business is now generating cash (vis-a-vis a loss making business at the time of IPO), the company believes that it needs to enhance its 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,” the company said.
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