India: Food delivery giant Zomato’s IPO fully subscribed on first day of bidding

Photo: Zomato

The 9,375 crore initial public offering (IPO) of online food delivery platform Zomato  Ltd got fully subscribed on the first day of bidding, on the back of overwhelming response from retail investors.

The issue received bids for 746.97 million shares against an IPO size of 719.23 million shares. The portion reserved for retail investors was subscribed 2.65 times. While the qualified institutional buyer category was subscribed 98%, employees category was subscribed 18% and the non-institutional investor category was subscribed 12%.

For FY21, Zomato recorded 32.1 million average monthly active users (MAUs), of which 6.8 million monthly transacting users (MTUs) placed transactions. It is present in 525 cities in India, with almost 150,000 active food delivery restaurant listings and 170,000 active delivery partners at the end of FY21.

Naveen Kulkarni, chief investment officer, Axis Securities, said, “Zomato has a robust operating model and a strong market penetration, making it one of the leading food service platforms in India. Its mobile application is the most downloaded application in India in each of the last three fiscal years. A better service mix and a robust operating model will accelerate the revenue growth momentum. With growth expected to pick up in the forthcoming years after the covid-19 pandemic, and the rising use of online platform, the company could break even at operating levels in FY22, making the IPO more lucrative.”

The IPO comprises a fresh issue of equity shares worth 9,000 crore and an offer for sale (OFS) worth 375 crore by existing investor Info Edge (India), which is the parent company of Naukri.com, according to the information provided in the red herring prospectus.

The proceeds from the fresh issue will be used for funding organic and inorganic growth initiatives, and for general corporate purposes, according to the information in the red herring prospectus of Zomato.

Anand Rathi, in an IPO note said, “At the upper end of the IPO price band, the offer is valued at 29.9 times of its FY21 market-cap to sales. Going forward, industry delivery percentage to net-revenue stands at approximately 5% and with the Zomato average order value of 400 the company is well poised and it is also placed at a sweet spot as the first mover advantage in the online food delivery market.”

Additionally, given the strong network effects, increasing frequency of order, huge scope for growth in tier-II and tier-III cities, and large addressable market, the brokerage added.

This article was first published on livemint.com.

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.