One of the much anticipated IPOs of the year 2021 is almost upon us. Zomato, one of India’s largest food delivery companies, is planning to issue its shares to the public in a bid to raise capital to fund its business operations. The IPO is slated to go live in the month of July, 2021 and the grapevine is already abuzz with excitement. If you’re planning to subscribe to the upcoming Zomato IPO, here are a few key things that you need to know.
1. Reduction In The Offer For Sale (OFS) Component
The upcoming IPO from Zomato is a mix of both a fresh issue of shares as well as an Offer For Sale (OFS) from one of the promoters of the company. According to the Draft Red Herring Prospectus (DRHP) filed by the entity, Info Edge, the promoter, was supposed to sell around Rs. 750 crores worth of shares through this issue.
However, through a regulatory filing, the promoter notified that it would only be selling around Rs. 375 crores. This is likely to bring down the total issue size of the upcoming IPO 2023 to around Rs. 9,375 crores.
2. Dilution In The Share Ownership
Zomato, through both the fresh issue of shares and the OFS component of the issue, is likely to witness a stake dilution. However, the dilution is likely to be only around 10% to 15%, despite selling shares worth Rs. 7,875 crores to the public. This would not only help the company retain maximum control over the business operations, but also enable it to gain access to some much-needed funding.
3. Exceptional Revenue Growth
With the COVID-19 pandemic still in play, many individuals have resorted to ordering food online, leading to a meteoric rise in demand for food delivery. This substantial increase in demand has resulted in an exceptional growth in revenue for Zomato. In fact, the company’s revenues grew to around Rs. 2,743 crores as on 31st March, 2020, which is around 96% higher than that of the previous year, which stood at just Rs. 1,398 crores.
4. Increase In Valuation
Considering the current demand for online food orders, the company is seemingly expecting the Zomato IPO valuation to touch $10 billion. In just February, 2021, Zomato raised around $250 million from global investment firms such as Tiger Global and Kora, among others. The entity was valued at around $5.4 billion during that round of investment.
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