Indian grocery company Zomato files for $ 1.1 billion initial public offering – Free Press of Jacksonville

CHENNAI, India – Indian food delivery startup Zomato, which entered the US market after acquiring Seattle-based restaurant recommendation service Urbanspoon in 2015, has filed for an IPO for INR 8,250 crore (1, 1 billion USD). .

Zomato has a presence in almost every US state such as California, Alaska, and Texas, according to its website.

The startup will expand in its core areas such as customer acquisition, delivery and technological infrastructure according to a draft prospectus filed with the Indian market regulator, the Securities and Exchange Board of India.

The company is supported by well-known investors such as Ant Financial, Tiger Global Management and Sequoia Capital. According to the company data platform Tracxn, the value was last 5.4 billion US dollars.

The Gurugram-based startup plans to list on both Indian stock exchanges – BSE and the National Stock Exchange of India. However, according to the prospectus, the company is particularly a loss-making company.

The company’s adjusted annual loss increased to INR 2,385 billion (US $ 325.4 million) for the fiscal year ended March 31, 2020, compared to a loss of INR 1,010 billion (US $ 136.4 million) in fiscal 2019 reported a loss of INR 682 crore ($ 93 million) for the nine months ended December 31, 2020.

“We have recorded net losses in the past and assume that costs will rise in the future,” said Zomato in the prospectus.

The 12-year-old food tech startup’s earliest shareholder, Info Edge, will sell INR 750 billion (US $ 102.3 million) of shares in the IPO. Zomato will issue INR 7,500 crore (US $ 1 billion) of shares in the offering.

While Indian startups have raised millions of dollars in funding, Zomato’s listing is one of the few internet tech offerings to go public.

The last company was the B2B company IndiaMart, which went public in 2019. Companies like Softbank-backed logistics company Delhivery and beauty brand retailer Nykaa are other internet startups looking to go public soon.

In January 2020, Zomato acquired the Uber Eats business in India for $ 206 million to expand its customer base and market share. (Sean Gallup / Getty Images)

Walmart’s Flipkart, one of India’s largest e-commerce companies, is also planning an IPO soon. Despite the pandemic, Indian startups have successfully raised donations.

Thirteen companies like the social networking service ShareChat and the online pharmacy PharmEasy have achieved unicorn status this year, according to Venture Intelligence.

Only nine startups achieved unicorn status in 2020 – companies worth $ 1 billion or more.

Zomato’s revenue from operations in fiscal 2020 increased from 1,313 crore ($ 179.2 million) in the prior year to INR 2,604 billion ($ 355.3 million), despite total costs increasing 38.9 percent over the same period rose.

“Unlike old-fashioned companies, what you invest in internet companies is not something tangible, but something intangible like user acquisition and branding,” Vivekanand Subbaraman, research analyst at Ambit Capital, told Zenger News.

“More users, more orders, and more restaurants ready to deliver to you. After that, more users sign up for the increased offering, which is a unique dynamic for internet businesses. “

Food consumption accounted for around a quarter of India’s gross domestic product (GDP) at $ 670 billion in 2019, but restaurants and food services only account for about 10 percent of that market, the company said.

Despite the lower prevalence of food and services in restaurants compared to countries like the US and China, food delivery in India is a competitive environment.

In January 2020, Zomato acquired the Uber Eats business in India for $ 206 million to expand its customer base and market share. The deal gave Uber a 9.99 percent stake in Zomato. As of December 31, 2020, the company was represented in 526 Indian cities and 23 countries abroad.

Zomato has deeply pocketed competitors. Naspers-backed Swiggy, valued at $ 5 billion after $ 800 million in an April funding round, is Zomato’s biggest rival, according to Tracxn data.

Another reason is e-commerce major Amazon, which dared to deliver groceries last year after the lockdown in India triggered by the pandemic.

The pandemic disrupted several industries in India, but e-commerce and food delivery saw an increase in users. Grocery deliveries suffered during last year’s lockdown, but Zomato’s business rebounded in the third quarter of fiscal 2021 when the lockdown wore off, the company said.

However, the company’s restaurant business is still recovering as customers are reluctant to eat outside.

“The number of orders and the number of orders per customer is important,” Satish Meena, an independent research analyst, told Zenger News.

“The number of orders per customer is falling across the industry, but the positive is that the order size has increased. That’s because you are ordering for the family and the ticket size has increased. “

Grocery delivery has low order values ​​and customers tend to get discounts over loyalty to a single platform. In the “Risk Factors” section, Zomato said that users tend to switch to the most cost-effective service.

“In addition, there are low barriers to market entry in our industry and the costs for switching between offers are low.”

However, Zomato’s potential lies beyond its profitability on paper. “They raised $ 700 million in the past six months. Those funding rounds changed the game for Zomato, ”said Subbaraman.

“Unlike Swiggy, they didn’t have a large investor to back them up. Many investors like Alibaba and Tencent have made money from Chinese internet companies. Despite the lack of profit on paper, there will be significant interest for these companies. “

“E-commerce has been around for so long. Grocery delivery is a new business. Zomato didn’t start delivering groceries until 2017 after taking over Runnr. They were a different business. You need to attract users in smaller markets and spend them on ads, discounts and promotions, ”he said.

(Edited by Amrita Das and Gaurab Dasgupta)

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