Zomato IPO

Zomato IPO Review That You All Need to Know

Last week the Indian stock market was very interesting! The reason is the Zomato IPO. Needless to say, the much-awaited IPO knocked at your door last week!

Started as Foodiebay Online Service Private Limited, in 2008 by two IIT students Deepinder Goyal and Pankaj Chaddah, the company has grown much which is now extended to 24 countries.

As per the sources, Zomato brought a revolution to the Indian stock market. An Indian startup is a leading Online Food Service Company in terms of food sold as of December 31, 2020.

The company offers business customer services mainly food delivery and dine out where customers can search and find out the location of restaurants, restaurant menu, order food delivery, make payments for the online delivery etc.

Before we move ahead, we want you to go through the complete analysis of Zomato DRHP. It will give you an idea of the company’s business and financials.

In this blog, we take a dig deep into Zomato’s IPO.

Brief Profile on Zomato IPO

Zomato Ltd is a leading online food service company in India that connects restaurants, customers and delivery partners. Zomato mainly works on business to consumer segment or B2C that offers online food delivery and dining out services. It allows customers to easily search, find restaurants, reserve a table, order online food and make payments through Zomato’s mobile application.

Zomato’s other B2B or business-to-business services generate revenue from Hyper pure. It supplies high-quality ingredients and kitchen products and restaurants. Also, it enables restaurants to buy fruits, vegetables, groceries, poultry, meat, seafood and beverages.

Hyperpure has direct contact with farmers, producers, and processors to source these products.

On August 1, 2020, Zomato offered a facility called Zomato Pro, a customer loyalty program. The subscription-based program offers discounts on the best restaurants across dine out and delivery.

Due to the highly successful business model, Zomato is able to generate more revenue, which helps restaurants to drive more sales. Furthermore, the company also host Zomaland, India’s greatest food carnival that brings some of the top eateries, DJs, musicians, and stands up comedians under one roof.

Due to its vast services that spread across the world, the Zomato brand is widely recognized across India. They are widespread and recognized across India. In 2020, the company popped up in the headlines when it acquired UberEats.

Ona recent basis, the company received approval from the CCI or Competition Commission of India to acquire a 9.3% stake in Grofers, an online delivery platform.

Now, they also ventured into cloud kitchen space in which multiple brands/restaurants can prepare food for takeaway or delivery.

Facts About Zomato

As of 2020, Zomato App has been the most downloaded application under the food and drink category in India. Keeping this in mind, restaurants pay a significant amount of fees to the company so that they can be easily available on Google Playstore and iOS App store.

Now, the company has 3.89 lakh active restaurant listings and more than 1.69 lakh delivery partners. It has 15 Lakh Zomato pro members and ~ 3.2 crore monthly active users.

The members are present in more than 500 cities in India. The company’s operations are also spread across 24 countries including Canada, Australia, New Zealand, United Arab Emirates. Due to its vast spreading of operations, the company has decided to start the usage of Electric vehicles (EV) for delivery by 2030.

About the IPO

The issue was publicly opened on July 14 and closed on July 16. The price of Zomato IPO per lot was fixed at Rs 72-76 per share. The fresh issue of shares (of the face value of Re 1 each) aggregates to Rs 9000 Crore.

The IPO consists of an OFS or Offer For Sale by a promoter called Info Edge India Ltd, which aggregates up to Rs 375 Crore. Investors who want to invest in the Zomato IPO, are required to go through a bidding process with minimum equity shares of 195 (1 lot). You will need a minimum of Rs 14,820 to apply for the Zomato IPO. Retail investors apply for 2,535 equity shares (13 lots).

Zomato Utilizes the Income Generated from IPOs for the following purposes:

  1. It is estimated that 75% of the issue will be used for the funding of organic and inorganic initiatives.
  2. 25% of the net issue will be used to meet corporate purposes.

If we look at the overall structure of the IPO then, we will get to know that Zomato firmly prioritizes its duties towards the growth of the company. At the same time, the promoters of the company will continue to hold a fixed stake in the firm, which makes sense in the company’s future prospectus.

Financial Performance of Zomato IPO

FY 2018 FY 2019 FY 2020
Revenue 487.0 1,397.7 2,742.7
Expenses 594.0 3,607.9 5,006.3
Comprehensive Income -104.1 -1013.1 -2,362.8
Margin % -21.4 -72.5 -86.1

Risk Factors of Zomato IPO

One of the primary risk factors in Zomato DRHP is:

Zomato has seen exponential growth over the years. However, the company said that it may not be able to sustain its historical growth rate. At the same time, its historical performance may not depend on its future growth and financial results.

The company has experienced huge losses in the past few years. It expects a rise in costs and losses in the future.

The financial performance and operations of the company could be adversely affected if they are unable to increase revenue, growth and maintain cash flows.

The COVID 19 pandemic has impacted the company’s online food ordering business to a greater extent. It has been seen that many restaurants were temporarily closed due to heavy lockdown.

Zomato’s business would be negatively affected if they fail to retain the existing restaurant partners or food delivery partners.

The Bottom Line

Zomato’s IPO is heavily subscribed by the HNI and retail investors on the launching of its first day. This is because it is a brand that everyone loves, admires and depends on. As per the interview, Zomato delivery partners gave us a satisfactory note that they are happy with Zomato’s perks and remuneration.

Because of its oversubscription and GMP (Grey Market Premium), investors of the IPO received huge benefits through listing gains.

Applying for an IPO is quite subjective and if you are planning to buy Zomato’s shares, don’t’ forget to check all the pros and cons.

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