A sneak peek at Zomato's IPO plans

15 Jun, 2021

10 min read

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Zomato IPO Plan - Smart Money
Covid-19 came and turned the world upside down – tourism, airlines, fashion, F&B have suffered tremendously but online financial gateways, video conferencing, courier services and food delivery services have thrived.

Pharmaceuticals, of course, is an evergreen sector and it thrived all the more in the current context.

A big name in the food delivery space - Zomato has filed its red herring prospectus with the Securities and Exchange Board of India (SEBI) and is now ready to go public. The Initial Public Offering is expected to take place somewhere in the middle of the year. Here are some of the most significant facts that you need to know about the upcoming IPO of one of the best known brands, probably the best-known food delivery brand in the country.

Why are investors – and newspapers – so excited about the Zomato IPO?

While there’s no telling what will happen to video conferencing once the world gets back to normal it is very likely that conveniences like online payment wallets and online food delivery services will become the norm. When people get used to conveniences, in most cases, even when out of the situation that pushed them to opt for the convenience, they will continue to utilize the convenience. Everyone loves anything that is more convenient. Hence the excitement and buzz around Zomato’s IPO plans.  Additionally, the company is known as a “unicorn company” or a company that is valued at over 1 billion.

First let’s explore how big a piece of Zomato is going to be up for grabs:

The IPO will be for a total of Rs 1.1 billion. Shares worth Rs 8250 crore will be up for grabs of which Rs 7,500 crore will be a fresh issue and the remainder Rs 750 crore will be an OFS – or offer for sale – by one of its anchor stakeholders, Info Edge.

Next up, let’s see how the brand has been preparing for the upcoming IPO:

Given that people will often explore the management team and also explore the nature of the company, not to mention his financials, Zomato has made the following three moves clearly keeping in mind the upcoming IPO-

  • The company has now converted itself from a private company to a public company. It has reworked its MoU and is now called Zomato Limited.
  • Deepinder Goyal has been named its managing director for the next five years. Goyal is an IIT-Delhi engineer and was once a Bain & Co consultant.
  • Zomato has released valuation figures that place its value at USD 5.4 billion
  • The company acquired smaller fish UberEats, but that happened in January 2020 and it may or may not have been part the dedicated strategy being rolled out in the run-up to the IPO

If all of this information has excited you and you’re seriously considering participating in the brand’s upcoming IPO, you are probably keen to understand how it has performed. While we would always recommend that you look at financials personally and with full focus and a magnifying glass, we’ve dug up a few key figures that might help you evaluate whether you’re interested in the IPO – however do conduct your own research as well.

  • For the year that ended on March 31, 2018, Zomato clocked income of USD 65 million against USD 80 million total expenses
  • Revenue at the end of December 2020, for the preceding 3 quarters, was Rs 1,301 crore
  • Net loss of USD 320 million for the year ended March 31, 2020. This is twice the net loss for the same period the previous year. Are things getting worse? Revenue admittedly grew to USD 368 million, but total expenses multiplied about six times, touching an astounding USD 672 million
  • Losses have shrunk in 2021 as compared to previous years
  • The company’s size has tripled over the last four years

  • Key company figures at a glance:

Zomato’s income at the end of 2018

USD 65 million

Zomato’s expenses for the same period

USD 80 million

Revenue from April 2017 to March 2018

Rs 487 crores

Revenue from April 2018 to March 2019

Rs 1398 crores

Revenue from April 2019 to March 2020

Rs 2743 crores

Revenue from April 2020 to December 2020

Rs 1,301 crores

Net loss for April 1 2019 to March 31 2020

USD 320 million

Market share

45%

Zomato vs competitor market share

45:47

Of course, before ever buying a stock – whether as part of an IPO or on the open market – you want to get a glimpse of the sector that the company operates in.

Current players: At the moment, there are only two real players in the sector namely Zomato and Swiggy. Swiggy holds the larger share of 47% while Zomato holds 45% share.

On the horizon: Amazon is expected to make an entry into this market. While one new player should ordinarily not make a difference, when the market only has two players and the new entrant is Amazon, it makes sense to worry about how the new player might disrupt the sector.

You should also be aware of the following headlines linked to the IPO:

  • The company is also running a USD 30 million share sale for employees in the run-up to the IPO
  • The company also has plans for a pre-IPO placement for an amount less than Rs 1,500 crore.
  • Retail investor quota – that’s investors like you -  might be restricted to only 10% on account of the losses that the company has posted.

Now for a quick reminder of the considerations that investors must keep in mind before investing in an IPO

  1. You have no stock price record to go by and as a result, at least keep an eye on the financials. Read and research as you are doing now to evaluate the actual worth of a stock.
  2. Consider waiting till the stock is listed on the market so that you can get a feeler of what the rest of the market thinks of the stock.
  3. If you are going to apply, do ensure that your paperwork is in order and that you apply on time.

Remember that any stock market investment is a risk, even when you are investing in a company as well-known as Zomato. Always invest after comparing your risk appetite to that of the company and only if there is a match. Invest only with spare capital and try to stay invested for the long term to minimize your risk. Remember that anyone can invest irrespective of age, gender or occupation – however doing your research is non-negotiable. Start your investing journey with Angel Broking. 

FAQs:

What are the open and close dates of the Zomato IPO?

The Zomato IPO dates are yet to be finalised at this point of time.

Where will Zomato Ltd get listed?

It is proposed that Zomato Ltd will be listed on both NSE and BSE.

What is the amount of the Zomato Ltd IPO?

  • The IPO will be for a total of Rs 1.1 billion.
  • Rs 7,500 crore will be a fresh issue
  • Rs 750 crore will be an OFS

What is the minimum lot size that I need to go for?

This is yet to be announced.

What is the Zomato IPO price or the Zomato IPO share price?

The face value is anticipated to be Rs 10 per share.

Is there a retail portion for the Zomato IPO?

Yes

How much is the retail allotment of Zomato IPO?

The retail allotment of the Zomato IP0 is 35%

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