Food delivery giant Zomato's Rs 9,375-crore initial public offering (IPO) will open on July 14. It is the first Indian food aggregator to go public and will be followed by other unicorn startups including PayTm, Policy Bazaar among others.
Zomato IPO will be the second-biggest IPO since SBI Cards and Payment Services’ Rs 10,341-crore issue in March 2020, just before the COVID-19 pandemic struck.
The firm is expected to finalise the basis of allotment by July 22 and is likely to list by July 27.
Here's all you need to know about the issue:
Opening Date: July 14, 2021
Closing Date: July 16, 2021
Price Band: The price band is set at Rs 72-76 per equity share.
About the firm: Zomato ltd, one of the leading online Food Services platforms in India, in terms of the value of food sold, connects customers, restaurant partners and delivery partners, serving their multiple needs. During FY21, 32.1mn average MAU (monthly active users) visited Zomato’s platform, of which 6.8 million MTU (monthly transacting users) placed transactions. It is present in 525 cities in India, with almost 1.5lakh Active Food Delivery Restaurant Listings and ~1.7 lakh Active Delivery Partners as of FY21 end. As per RedSeer, Zomato has consistently gained market share over the last four years to become the category leader in India in terms of GOV (Gross Order Value).
Size of the issue: The issue comprises fresh issuance of shares, aggregating up to Rs 9,000 crore. Additionally, there’s an offer for sale of up to Rs 375 crore by current shareholders. The total offer size has been raised from Rs 8,250 crore at the time of filing the draft red herring prospectus in April this year. The fresh issue size increased to Rs 9,000 crore from Rs 7,500 crore earlier.
Reservation: Zomato has reserved up to 75 percent of the total offer for qualified institutional buyers, up to 10 percent for retail investors, and the rest 15 percent for non-institutional buyers. Also, as many as 65 lakh equity shares will be offered to employees who are eligible.
Objective: The net proceeds from the IPO will be utilised towards funding organic and inorganic growth initiatives and meet general corporate purposes.
Bidding: Investors can subscribe to this IPO by betting for a lot of 195 shares or multiples. Retail investors will be able to bid for a maximum of 13 lots at the higher end of the price band. At the upper end of the price band, it will amount to Rs 14,820.
Book Runners: Kotak Mahindra Capital Company, Morgan Stanley India Company, and Credit Suisse Securities (India) are the global coordinators and book running lead managers to the issue. BofA Securities India and Citigroup Global Markets India are the books running lead managers to the offer.
Financials: Zomato's FY20 revenue had jumped over two-fold to $394 million (around Rs 2,960 crore) from the previous fiscal, while its earnings before interest, taxes, depreciation, and amortisation (EBITDA) loss was around Rs 2,200 crore. Over FY18-21, Zomato grew its revenue at 62 percent CAGR. While business is at a nascent stage and has just started gaining traction since FY18, the EBITDA losses have reduced substantially with the scale-up in the business and per-unit economics turning profitable.
Peers: It has no listed peers.
Outlook: Most analysts have not rated the IPO while some like Motilal Oswal have has advised subscribing to the IPO for listing gains. Zomato with first-mover advantage is placed in a sweet spot as the online food delivery market is at the cusp of evolution. It enjoys a couple of moats and with the economics of scale started playing out, the losses have reduced substantially. However, predicting the growth trajectory at this juncture is a little tricky for the next few years. Investors with high-risk appetite can Subscribe for Listing Gains given fancy for unique and first of its kind listing in the food delivery business, said MOSL.