Internet holding firm Info Edge Ltd. has revised its quantum of share sale in the upcoming Zomato public offering to INR 375 Cr, which is almost 50% lower than the originally planned INR 750 Cr stake sale that was announced in April.
Food aggregator Zomato had filed its much-awaited draft red herring prospectus (DRHP) with the market regulator securities and exchange board of India (SEBI) on April 28, for INR 8,250 Cr ($1.1 Bn) initial public offering (IPO) this year. According to that filing, the offer consisted of a fresh issue of shares amounting to INR 7,500 Cr and a secondary component of INR 750 Cr, the company’s largest stakeholder Info Edge.
However, in a filing with the Bombay Stock Exchange (BSE) on July 4, Info Edge the executive board of directors has now decided to lower the stake sale amount.
“The Committee of Executive Directors of the Company, having been duly authorized in this regard, have considered and given their approval today for a reduction in the size of the Offer for Sale by the Company to the extent permitted under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, such that the revised Offer for Sale by the Company would comprise of such number of Equity Shares held by the Company in Zomato, as would aggregate upto INR 3,750 million,” the filing said on July 4.
Zomato’s upcoming IPO is one of the most closely watched public offering in the Indian startup ecosystem. The much-awaited IPO, however, will not provide any major exit to existing investors in the company.
Zomato cofounder and CEO Deepinder Goyal, in a recently held town hall, reportedly told employees that no existing shareholder is willing to sell any share in the company’s IPO. “People think that Zomato will be a $50 billion company in five years (I hope) and it will be unwise to sell shares right now,” he was quoted as saying.
Besides Info Edge, the DRHP filing revealed that Uber is the second-largest stakeholder in Zomato with shareholdings of 9.13%. Uber shareholdings was a result of Zomato’s acquisition of Uber Eats India business in January 2020.
Chinese investors like Alipay and ANT Group (formerly known as Ant Financials) were the second and third largest stakeholders, respectively, in the company. But Zomato decided to give them a partial exit, reducing their shareholdings to 8.20%-8.33%, due to rising geopolitical tension between India and China.
Though Zomato has about 75 shareholders as of April 28, only 18 of them hold more than 1% shares in the company. Zomato’s CEO Deepinder Goyal holds 5.51% shares in the company.
According to earlier regulatory filings in April, Zomato had also allotted INR 4,430 Cr equity stake to all of its preferential shareholders — investors, promoters, ESOP holders and others — upon the conversion of compulsorily convertible preference shares (CCPS) held by them. It had also passed another special resolution to issue 247.6 Cr equity shares as bonus shares to existing shareholders in a ratio of 6699:1.
Zomato had also capitalised INR 235.4 Cr from its security premium account to facilitate this allotment. The allotment has been made to 17 shareholders including Info Edge, Fidelity Group, ESOP Trust, Temasek as well as Zomato’s cofounders Deepinder Goyal and Pankaj Chaddah.
Besides this, Zomato will also be raising capital from both new and existing investors in order to build a war chest of $1 Bn. As a part of this plan, the food aggregator business raised $250 Mn (over INR 1,800 Cr) from Tiger Global, Kora and others, increasing its valuation to $5.4 Bn. It is now looking to increase its valuation to about $8 Bn with the planned IPO. The company has raised over $2.1 Bn to date, with a $660 Mn round that was closed in December 2020.