Food delivery platform Zomato has filed a draft red herring prospectus (DRHP) with market regulator SEBI to raise around Rs 8,250 crore via an initial public offer in one of the most eagerly anticipated internet listings in the country. Moneycontrol has a reviewed a copy of the DRHP and was the first to report the filing of papers with SEBI earlier today.
According to the DRHP, the offer consists of a fresh issue amounting to Rs 7,500 crore and a secondary component of Rs 750 crore. Earlier, investor Info Edge had announced that it would sell a stake worth Rs 750 crore as part of the IPO.
In consultation with its advisors, Zomato may also consider a private placement of up to Rs 1,500 crore before the filing of the red herring prospectus with the RoC, according to the papers filed with SEBI.
Other than Info Edge, the leading restaurant aggregator and food delivery firm is backed by marquee investors such as Temasek, Ant Financial, and Tiger Global, among others.
“If the pre-IPO placement is undertaken, the minimum offer size (comprising the fresh so reduced by the amount raised from the pre-IPO placement, and the offer for sale) shall constitute at least 10 per cent of the post-offer paid-up equity share capital of our company,” the DRHP said.
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.
Kotak Mahindra Capital, Morgan Stanley, Credit Suisse, BofA Securities and Citi are the investment banks working on the Zomato IPO. Law firm Cyril Amarchand Mangaldas is the company counsel, Indus Law is the bankers counsel, Latham & Watkins is the international counsel while J Sagar Associates is the advisor to the selling shareholder Info Edge.
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
Later on November 6, 2020, Moneycontrol reported that advisors had been taken on board by the firm for its IPO and early preparations had begun.
ZOMATO DRHP ON THE USAGE OF IPO PROCEEDS
The proceeds of the Zomato IPO will be used towards the following objects: Funding organic and inorganic growth initiatives and general corporate purposes.
“We are an asset-light organization not required to make substantial investments into fixed assets. Our core asset is the technology infrastructure that we have built, created and developed over the years, and we expect it to be one of the drivers for our business in the future. As we have done in the past, in the future we may adapt and further expand our platforms to cater to other services and business offerings as well, in line with our strategic initiatives and priorities. Regular and frequent initiatives in the form of advertising and sales and promotional activities are key to ensure that the platform participants are attracted to our technology. This requires us to invest into marketing initiatives to ensure there is a brand recall for our various services and product offerings,” the firm said.
It further added, “ We need to continue to invest in three core areas for the growth of our business which include a) customer and user acquisition, b) delivery infrastructure, and c) technology infrastructure. We have made these investments in the past, and we expect these to continue to be critical for the growth of our business in the future.”
ZOMATO DRHP ON THE FOOD SERVICES MARKET OPPORTUNITY
Food consumption, at $670 billion (Rs 46.9 lakh crore) in 2019 constitutes around a quarter of India’s GDP. Most of this though is driven by home-cooked food. Food Services, defined as non-home cooked food or restaurant food currently contributes only approximately 10 percent to the food market. This is substantially low when compared to global economies like the United States and China which have approximately 54 percent and 58 percent contribution from Food Services respectively (of the total food consumption), the DRHP said.
According to RedSeer, we have a large total addressable Food Services market opportunity of $65 billion (Rs 4.6 lakh crore) growing at 9 percent per annum to $110 billion (Rs 7.7 lakh crore) in 2025 with highly under-penetrated restaurant food-eating behaviour today.
“While Food Services in India is highly under-penetrated, it is likely to grow steadily, taking share away from homecooked food as has been the trend in the past as well. Growth will be driven by changing consumer behaviour, reduced 146 dependence of millennials on home-cooked food/kitchen set-up, increasing consumer disposable income and spending, and higher adoption among the smaller cities,” the DRHP added.