Zomato IPO is getting launched for subscription on Wednesday 14, July 2021, and will be available for subscription till Friday, July 16, 2021.
The company is looking to raise Rs.9,350 crore through public issue which includes fresh issuance of shares worth Rs.9000 crore and offer-for-sale (OFS) of shares worth Rs.350 crore by existing investor Info Edge (India), which is the parent company of Naukri.com, currently trading around Rs.5,159 on NSE.
Ahead of the IPO, the anchor portion of the offer will be open today, July 13, 2021. Baillie Gifford, BlackRock, Capital Research, CPPIB, GIC, T Rowe Price are some of the top foreign investors in the company’s anchor book.
Whereas domestic investors includes names such as Axis MF, HDFC MF, Birla MF, Nippon, HDFC Life, ICICI Pru Life.
Zomato will raise almost half its issue size of around $560 million from institutional investors at the upper end of the price band of Rs 76 per share.
The equity shares of Zomato are proposed to be listed on both BSE and NSE.
The Zomato IPO issue will be sold in the price band of Rs 72-76 per share and the minimum lot quantity is 195 shares and in multiples thereof translating to a minimum investment of Rs 14,820 at upper end.
The latest Grey market premium price (GMP) for Zomato IPO were seen up by more than 26% and were trading around Rs.20-25 as of today, This means people are expecting it to open on listing day to be at least at Rs.95 or more.
Having said that GMP does not mean in anyway a recommendation for an IPO, the financials of a company and its future prospectus tells a lot.
Here is the thing no one can tell you whether the IPO will going to make a stellar debut or not, it is you who have to decide based on available information about the company.
Moreover the IPO’s now a days are very hot market every one wants to earn some quick money on listing day itself and there is nothing wrong about it.
One must not forget to check the financials and do not fall for any recommendation from anyone, it is you hard earned money, you should decide whether to opt for the IPO or not.
You may have watch various YouTube channels or read on different websites about recommendation for stocks and IPO, it is my humble suggestion and request please do not ever fall prey to it. Better than this is to invest in ETF’s?.
Therefore, whenever you are buying IPO make sure the money invested is not the one which you my need it urgently, always use extra money which you may not require in near future, Otherwise stay away completely.
Now, coming back to the Zomato IPO let us talk about in brief about the company and its financials and other details step by step.
About Zomato Limited:
Founded by Deepinder Goyal and Pankaj Chaddah in August 2008, Zomato was initially launched as Foodiebay. It gained instant media attention when Info Edge founder Sanjeev Bikhchandani offered to fund the company.
Zomato is currently present in 525 cities in India and 23 countries outside India. Its technology platform connects customers, restaurant partners and delivery partners, serving their multiple needs.
The company also provides restaurant partners with industry-specific marketing tools, which enable them to engage and acquire customers to grow their business while also providing a reliable and efficient last mile delivery service.
It also operates a one-stop procurement solution, Hyperpure, which supplies high quality ingredients to restaurant partners. Zomato has consistently gained market share over the last four years to become the category leader in the food delivery space in India in terms of gross order value (GOV).
In India, Zomato competes with other food delivery companies, such as Swiggy, chain restaurants that have their own online ordering platforms, such as Pizza Hut, McDonalds and Dominos, cloud kitchens like Rebel Foods, other restaurants that own and operate their own delivery fleets and companies that provide point of sale solutions and restaurant delivery services.
Zomato has made significant investments in marketing and promotions to accelerate customer adoption of food delivery and promote their brand. All these investments have resulted in customers coming back to their platform
organically for repeat purchases.
As a result, their advertisement and sales promotion expenses per order have reduced over time. Further, with rapid growth in the business since 2019, the unit economics of the food delivery business has also improved consistently.
Over the past 12 years, it has grown from food discovery platform to a food service platform with four major segments
- Food delivery (B2C) – The company is a leader as per RedSeer,
- Dining out (B2C) – Provides tools for restaurant owners to acquire customers,
- Hyperpure (B2B) – Started in 2019, it provides ingredients and kitchen products to restaurant partners and
- Zomato Pro – It is a paid membership programme which unlocks flat percentage discounts for its customers.
Let us now move on to know the financials aspects of Zomato Ltd.
Zomato Limited Financials:
Zomato have processed 30 million orders in 2018 whereas close to 400 million orders in 2020.
They have made Rs.1,400 crores in 2019 to earning upwards of Rs.2,700 crores the very next year i.e. 2020. They have partner with over 4 lakh restaurants as of now.
They also recently invested in Grofers, and will possibly start processing with online groceries soon enough.
Let us see how Zomato performed in all four segments it operates in India:
1.Food delivery (B2C) – The company is a leader in this segment as per RedSeer. It has seen a rapid growth with orders increasing by 13.2x from 3.06 crore in FY18 to 40.3 crore in FY20.
However, it came down to 23.9 crore in FY21 due to Covid. The company has 1,69,802 delivery partners and 1,48,384 active food delivery restaurants
2.Dining out (B2C) – Provides tools for restaurant owners to acquire customers. The company has 3,89,932 active restaurant listings on its platform and in FY21.
Dining-out services were severely impacted by the Covid-19 pandemic in FY21 and the resultant lockdowns in the country.
3.Hyperpure (B2B) – Started in 2019, it provides ingredients and kitchen products to restaurant partners via direct sourcing from farmers. In March 2021, the company supplied to over 9,225 restaurant partners across six cities in India.
Revenue from sale of traded goods, which includes revenue from Hyperpure operations, was 14.9 crore, 107.6 crore and 200.2 crore in FY19, FY20 and FY21, respectively.
4.Zomato Pro – It is a paid membership programme, which unlocks flat percentage discounts for its customers. It allows Pro Restaurant Partners to market themselves to a select audience.
As of March 2021, it had 1.5 million Pro Members and over 25,443 Pro restaurant partners in India. Revenue from sale of subscription product, Zomato Pro for FY19, FY20 and FY21 was 56.2 crore, 87.9 crore and 57.5 crore, respectively.
Zomato is yet to turn profitable, although they are turning a profit on each order, but this doesn’t include fixed costs like advertising and marketing expenses.
If we talk about Zomato revenues in last three years, it has moved up from Rs.487 cr in FY Mar-18, Rs.1,398 cr in FY Mar-19, to Rs.2,743 cr in FY Mar-20.
Where as Zomato total Asset in last 3 years has seen significant drop, it was Rs.1374 cr in FY Mar-18, Rs.3,413 cr in FY Mar-19, to Rs.2,900 cr in FY Mar-20
On the other hand Zomato Profits have also been in negative zone from last three years, it was Rs.-107 cr in FY Mar-18, Rs.-1,010 cr in FY Mar-19, to Rs.-2,386 cr in FY Mar-20.
The average order value rose from ₹264 for the period between March and June 2019, to about ₹400 during the last 3 months of 2020. That means the average customer on Zomato is now spending more money than they used to.
Having said that, financials of Zomato does look attractive, if not profitable yet. The company is going to list at a Mcap/S (Price to Sales) multiple of 29.9 based on its FY21 sales with a market cap of ₹5,96,234 million.
But valuation appears little expensive at 25x FY21 EV/Sales compared to average of 9.6x for global peers and 11.6x for Indian QSRs (Quick service restaurant).
However, As there are no listed peers in India, so valuations cannot be compared on a relative basis, hence this new-age digital platform offers strong growth potential, which at present is evolving on the back of favourable macroeconomics, changing demographic profile, rising adoption of tech infrastructure etc.
Therefore, Investors with high risk appetite can subscribe for listing gains and if you are thinking to invest for long term than keep an eye on other unlisted peers in future such as Swiggy, Amazon, DotPe, Thrive, Peppo etc that are offering better pricing terms and data sharing and they may take away some market share from Zomato.
Zomato Peers Comparison:
As there are no listed peers in India, so valuations cannot be compared on a relative basis but Zomato will joins the likes of U.K. based Deliveroo, U.S based Doordash, China based Meituan.
But here’s the thing , These foreign companies can’t be compared on apple to apple basis with Zomato. As they operate in different economy which is already developed, among more matured market and group of peoples.
Still, If we see, Deliveroo plunged 30% in its public debut due to concerns on how it treat its workers and governance, whereas Doordash surged nearly 85% in its stock-market debut last year.
Zomato has the smallest reach among global peers. Meituan, the largest aggregator in China, has 68 lakh restaurants listed on its platform.
Zomato, however, has the highest orders per restaurant globally. As of now, Meituan is the only profitable food-delivery firm.
While Zomato narrowed its losses after cutting discount and cost per order, to Rs 812 crore in the year ended March from a loss of Rs 2,363 crore a year earlier.
Restaurant food or food service in India contribute only 8-9% of food consumption market vs. 54%, 58% for US, China, respectively.
According to Redseer, India has an addressable food service market of $65 billion (4.5 lakh crore), set to grow to 7.7 lakh crore in 2025 as millennials depend less on home cooked food/kitchen set-up with rising disposable incomes and spending.
Zomato IPO Details:
Zomato limited will sell shares at Rs 72-76 per share in its 3 day initial public offering starting on July 14 to July 16, 2021.
The shares of Zomato IPO will be allotted on 22 July 2021, The tentative date of Zomato IPO listing is around July 27, 2021.
Zomato Objects of the Offer:
For organic & Inorganic growth initiatives Rs.6,750, General purpose To be finalised.
Zomato Post Issue implied market cap:
At lower price band = Rs.56,959.0 Crore, i.e. around 7.6 $ Billion
At higher price band = Rs.59,623.4 Crore i.e. around 8.0 $ Billion
Shareholding Pattern (%) of Zomato Ltd:
Promoter – NA
Public – 95.8%
Employee Trust – 4.2%
Total – 100.0%
Promoter – NA
Public – 96.4%
Employee Trust – 3.6%
Total – 100.0%
The Zomato IPO will have 75% reserved for qualified institutional buyers (QIBs) and 15% will be reserved for non-institutional investors (NIIs). The remaining 10% of the issue will be available for retail investors.
Frequently Asked Question (FAQ):
1.What Is The Symbol For Zomato Limited ?
Ans: The Symbol is Zomato
2.When Zomato IPO Coming?
Ans: The Issue Period for Zomato IPO is 14-July-2021 to 16-July-2021.
3. Post Modification Period For Zomato IPO?
Ans: The Post issue Modification Period for IPO is 19-July-2021 (10.00 A.M. to 11.00 A.M.).
4. What Is The Cut-off Time Period For UPI Mandate For Zomato IPO?
Ans: The Cut-off time for UPI Mandate Confirmation is 19-July-2021 (upto 12:00 PM).
5. What Is The Issue Type For Zomato IPO?
Ans: The Issue Type is 100% Book Building.
6.What Is The Price Band For Zomato IPO?
Ans: The Price (Band) Range for Zomato is Rs.72 to Rs.76 per equity share.
7. What Is The Lot Size For Zomato IPO?
Ans: The Bid Lot i.e. Minimum Order Quantity (lot size) for Zomato IPO is of 195 Equity Shares and in multiples thereof 195 Equity Shares.
8. Who Are The Book Running Lead Managers For Zomato IPO?
Ans: The Book Running Lead Managers are, Kotak Mahindra Capital Company Limited, Morgan Stanley India Company Private Limited, Credit Suisse Securities (India) Private Limited, BofA Securities India Limited and Citigroup Global Markets India Private Limited
9. What Is The Face Value For Zomato IPO?
Ans: The Face Value is of Rs.1 whereas The Tick Size is of Rs.1
10. What Is The IPO Market Timings For Zomato IPO?
Ans: The IPO Market Timings is 10.00 a.m. to 5.00 p.m.
Apart from above points:
The Maximum Subscription Amount for Retail Investor is Rs. 2,00,000
The Maximum Subscription Amount for Eligible Employee is Rs.500,000
The Name of the Registrar is Link Intime India Private Limited
The Contact person name number and Email id is Mr. Shanti Gopalkrishnan, 022 49186200, [email protected]
The Address of the Registrar is C 101, 247 Park, L.B.S. Marg Vikhroli (West), Mumbai 400 083 Maharashtra, India
Where To Check Zomato IPO Application And Allotment Status?
As an investor or trader generally we are curious and anxious to know the results of the application as soon as possible. To ease the anxiety, both Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) have come up with dedicated pages and links which investors can use.
The NSE has an IPO bid verification module. It can be used to verify the IPO application details uploaded on the exchange bidding system by your member/bank. The data of the bid details uploaded by the member/bank would be available on T+1 day (where T would be date receipt of bid on NSE platform).
In addition, the data would be available until six days after the issue closure date. This gives the investor enough time to verify the data and instruct the member/bank to make any changes, if required.
Exchange will also provide allotment information as provided by the registrar to the issue.
An investor can avail this facility by registering using his/her PAN details. After registration, the investor will receive an email notification from NSE on the registered email address. That email will provide the login details.
The following link can be used for the same:
The BSE has also come up with a similar platform.
This unique facility allows investors to verify the status of their application submitted to a Trading Member or a SCSB (Self-Certified Schedule Banks).
The investor can check his application status/information on the website until one week after issue close.
The following link can be used by investors:
Important Things To Keep In Mind Before Applying For IPO’s:
- Try to fill for the same IPO online from different DP ID i.e. if in your family have more than 1 account you can possibly get the allocation done in case of over subscription.
- You should have a good knowledge of the sector and the company you are planning to invest.
- Analysis of the company’s balance sheet is very crucial. A clear understanding of the company’s future projects and vision is very necessary to know whether it will have a sustainable future.
- Investment decision has to be taken carefully and not in a hurry.
- Read as much as you can about the company, its objectives for launching the IPO, its past history in business and its futures prospectus.
- Don’t go for hype in the news, your analysis should be based on facts rather than gossips and rumors.
- Many IPOs are oversubscribed. What this means is that the demand for shares is much higher than the shares available for sale. In such a situation, it is no surprise that many investors fail to get any shares allotted to them. This is why it is advisable to apply for IPO shares on the last day of bidding. This way, one can have a good estimate on how large the subscription will be. Also, in that case, one should bid for just one lot and not unnecessarily lock up their capital.
Zomato campaigns, community and content has created a strong consumer brand in India. In FY21, 68% of their new customers were acquired organically and not through any paid advertisements.
The company will continue to invest in their branding activities to increase their brand awareness and leverage its current capabilities into expanding other related businesses like grocery, fitness and nutraceutical segment.
According to RedSeer, as of 2019, there is a large total addressable food services market opportunity of US$65 billion (4.6 trillion) growing at 9% per annum to US$110 billion (7.7 trillion) in 2025 with highly underpenetrated restaurant food-eating behaviour today.
However, due to Covid19, the size of the food services market opportunity reduced to US$32-35 billion (2.2–2.5 trillion).
While food services in India are highly underpenetrated, it is likely to grow steadily, taking share away from home cooked food.
Let us checkout some of the strengths and risk factors for Zomato Ltd.
Some of the qualitative factors and strengths of Zomato:
- Strong network effects driven by unique content, transaction flywheels
- Consistent gain in market share in competitive market
- Focus on unit economics
Some of the Risk Factor for Zomato:
- Competition from Amazon, DotPe, IRAI, cloud kitchen firms (Rebel Foods) and quick service restaurants (QSRs).
- Zomato expects costs to increase over time alongside losses as it will invest in growing its business.
Therefore, it is always advisable to go through Zomato IPO – RHP to know in detail about the company.
The only thing which should be bothering you is the research you did before applying for the IPO. Investing in IPO is risky as well as profitable.
Having said that you also need to keep in mind important things mentioned above before applying to IPO’s as the risk is always involved.
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All investments are subject to risks, which should be considered prior to making any investments. The above details are compiled from information available on public platforms. These are not buy or sell recommendations.
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