Zomato IPO: Indian Food Delivery Startup Files for $1.1 Billion Offering

Zomato Files for IPO, Signaling a New Phase for Indian Tech Startups

Indian food delivery company Zomato submitted its application for an initial public offering (IPO) on Wednesday, marking a significant moment for tech “unicorn” startups within India’s rapidly expanding internet market.

The Gurgaon-based startup, operating for 12 years, intends to generate $1.1 billion through the IPO, with approximately $1 billion coming from the issuance of new shares. Key investors in Zomato include Info Edge and Ant Group, as detailed in the filing with the local market regulator.

Funding and Valuation

Zomato, which functions across 24 markets globally, plans to list on both the NSE and BSE stock exchanges. To date, the company has secured over $2.2 billion in funding, according to research from Tracxn. Its most recent valuation reached $5.4 billion during its last fundraising round.

Prior to its public listing, Zomato is also considering raising an additional $200 million to further bolster its financial position.

Impact on the Indian Startup Ecosystem

The success of Zomato’s listing is anticipated to motivate a multitude of other Indian unicorn startups to pursue public market opportunities. A positive outcome could accelerate their efforts to access capital through IPOs.

While Indian startups have attracted substantial investment over the past decade, many have been hesitant to go public. Recent successful listings, such as IndiaMart and Nazara, demonstrate a growing investor appetite for tech stocks within the country.

Key Insights from the Filing

Zomato’s filing revealed several important details about its business and market position:

• Zomato asserts a leading position in the Indian food delivery sector.
• The company identifies Swiggy, backed by Prosus Ventures, as a primary competitor, alongside restaurants like Domino’s, McDonald’s, Pizza Hut, and cloud kitchen operators such as Rebel Foods. Notably, Amazon is not currently considered a direct competitor.
• Between April 1 and December 31, 2020, Zomato reported revenue of $183.6 million, with losses totaling $91.8 million during the same period.
• The startup acknowledges a history of net losses and anticipates future increases in expenses.
• Info Edge intends to divest shares valued at $100 million, as stated in a stock exchange filing.
• Zomato has identified potential risks to its business, including evolving regulations in India, challenges in securing foreign investment, and potential political shifts.
• The company, employing 3,469 individuals globally as of December 31, plans to allocate 75% of the IPO proceeds to expand its Zomato Pro membership program and its B2B supplies business, Hyperpure, while also strengthening relationships with restaurant partners.
• Zomato reports a recovery from the initial impact of the COVID-19 crisis by the third quarter of last year, measured by Gross Order Value (GOV). However, its dining-out business is still in the process of recovery as customers remain cautious about dining in public.
• As of December 2020, Zomato had 161,637 active delivery partners and 350,174 active restaurant listings, with 132,769 of those restaurants actively fulfilling delivery orders.
• The company has demonstrated improvements in the unit economics of its food delivery operations in recent years.
• Zomato acquired Uber Eats’ India business last year, receiving a 9.9% stake in Zomato from Uber as part of the agreement.