Zomato, the food delivery is planning to raise up to Rs. 9,375 crore through an IPO, which opens tomorrow (July 14) and closes on Friday, July 16, 2021. The IPO consists of fresh issue comprises of Rs 9,000 crore, and an offer for sale of shares worth Rs 375 crore by Info Edge (India) Limited.
The price band is Rs 72 - 76 per share.
Bids can be made for a minimum of 195 equity shares and in multiples of 195 equity shares thereafter.
Zomato has over 74 shareholders, of which 18 hold more than 1 percent share.
The shares will be listed on BSE and NSE.
Zomato is going to list at a P/S (Price to Sales) of 29.9X based on its FY21 sales with a market cap of Rs.5,96,234 million. As there are no listed peers in India, valuations cannot be compared on a relative basis.
What works, what does not
Zomato has continuous focus on unit economics and growth at the same time. Its three businesses – food delivery, dining-out and Hyperpure, helps expand and grow its offerings. The food delivery platform invests in new products and technologies and continues to build a strong consumer brand recognized across India.
However, the company has a history of net losses and increased expenses are expected in the future. Unfavourable media coverage could harm business, financial condition, cash flows and results of operations, say brokerages.
Not a promoter-led company
Deepinder Goyal is the Founder and the Managing Director and the Chief Executive Officer of the company. Prior to founding Zomato, he worked with Bain and Company.
The company was incorporated as DC Foodiebay Online Services Private Limited on January 18, 2010. It is a professionally managed company and does not have an identifiable promoter in terms of the SEBI ICDR Regulations and the Companies Act. Consequently, there are no members forming part of the ‘promoter group’ in terms of the SEBI ICDR Regulations.
Zomato has one of India’s largest hyperlocal delivery networks in terms of number of delivery partners as of March 31, 2021. Their delivery network collected food from their restaurant partners and delivered it to customers with a median delivery time of less than 30 minutes in fiscal 2021.
B2B, B2C offerings
Zomato is one of the leading food services platforms in India in terms of the value of food sold as of March 31, 2021. The company’s technology platform connects customers, restaurant partners and delivery partners, serving their multiple needs.
Its B2C offerings include food delivery and dining-out services where customers can search and discover restaurants, order food delivery, book a table, and make payments for dining out at restaurants.
Under the B2B segment, it generates revenue from Hyperpure (supply of high-quality ingredients and kitchen products to restaurants). Zomato Pro, an exclusive paid membership program is also offered by Zomato to its customers.
The business is built around the core idea that over time, people in India are going out to eat at restaurants more than they cook at home. To capture value out of this shift in customer behaviour, they have two core business-to-customer (B2C) offerings: Food delivery and, Dining-out. In addition to their business-to-business (B2B) offering Hyperpure, another important part of their business is Zomato Pro. Their customer loyalty program encompasses both food delivery and dining-out.
Monthly active users
During FY-21, 32.1 million average MAU (Monthly Active Users) visited their platform in India. On average, 6.8 million customers ordered food every month on their platform in India in Fiscal 2021 with an average monthly frequency of approximately 3.0 times.
As of March 31, 2021, they were present in 525 cities in India, with 389,932 Active Restaurant Listings. While the company had a footprint across 23 countries outside India as of March 31, 2021, they have taken a conscious strategic call to focus only on the Indian market going forward.
As of March 31, 2021 Zomato has a footprint across 23 countries outside India.
Zomato's mobile application is the most downloaded food and drinks application in India in each of the last three fiscal years on iOS App store and Google Play combined.
Monetization dining-out offerings
Zomato currently monetizes its dining-out offering through advertisement sales through which restaurant partners pay them for enhanced visibility on their platform. In fiscal 2021, 2,512 restaurant partners paid for their advertising sales product in India compared to 8,064 restaurant partners in Fiscal 2020. Zomato currently do not monetize table reservations or dining-out payments.
Zomato operates their businesses primarily through arrangements with their restaurant partners, delivery partners, other intermediaries such as call center operators who assist in customer service operations and wallet and payment gateway operators to facilitate payment on their platform. In addition, they have also entered into an agreement with a global data management system service provider for primarily hosting of their platform, billing, collection of payments and data storage.