The fund raising committee of Zomato board will decide the structure, form of issuance, price, discounts, terms and conditions of the QIP
Zomato CEO Deepinder Goyal said that the company needs to enhance its cash balance given the competitive landscape and the much larger scale of the business now
Goyal said that the company doesn't have any plans for minority investments or acquisitions and the fresh capital will strengthen Zomato's balance sheet
Foodtech major Zomato
has received its board’s nod to raise up to INR 8,500 Cr (about $1 Bn) via qualified institutional placement (QIP).
In an exchange filing, the foodtech giant said that the board has constituted and authorised the fund raising committee of the board to decide the structure, form of issuance, price, discounts, terms and conditions of the QIP.
In Zomato’s shareholder letter for the second quarter of the fiscal year 2024-25 (FY25), founder and CEO Deepinder Goyal said that the company is undertaking its first fundraise post listing to enhance its cash balance.
“… We believe that we need to enhance our cash balance given the competitive landscape and the much larger scale of our business today. We believe that capital by itself does not give anyone the right to win (and that service quality is the key determinant of success), but we want to ensure that we are on a level playing field with our competitors, who continue to raise additional capital,” Goyal said.
Further, Goyal also said that the company doesn’t have any plans for minority investments or acquisitions with the fundraise. He said that the capital will strengthen Zomato’s balance sheet.
It is pertinent to note that Zomato’s cash balance took a hit this quarter due to its acquisition of Paytm’s entertainment ticketing business. The company’s cash reserve for the quarter reduced to INR 1,726 Cr on account of the INR 2,014 Cr investment that fuelled the acquisition.
Zomato posted a net profit of INR 176 Cr in the September quarter of 2024, down 30% from the INR 253 Cr PAT it raked in the previous quarter. Operating revenue stood at INR 4,799 Cr, up 14% from INR 4,208 Cr in Q1 FY25.
Goyal said that the company’s quick commerce arm, Blinkit, continues to operate at an adjusted EBITDA break-even and the margins for Zomato’s bread-and-butter food delivery business has been steady. While Blinkit reported an adjusted EBITDA loss of INR 8 Cr, Zomato’s food delivery business reported an adjusted EBITDA profit of INR 341 Cr.
Earlier, reports said that the QIP will see the company’s domestic shareholding increase to over 50%. The details of the shareholders who will partake in the round is unclear at the moment.
As Goyal mentioned, the company’s plans to raise funds come at a time when its competitors are also raising capital. Swiggy, Zomato’s archrival, recently filed its updated draft red herring prospectus (DRHP) for an IPO of $1.4 Bn.
Meanwhile, its quick commerce competitor Zepto is eyeing a fresh fund raise even after raising over $1 Bn this year. Zepto’s latest fundraise will likely see it net $150 Mn by the end of October.
