SUMMARY
The public offering would be a mix of fresh issue and OFS from existing investor Info Edge
In the latest round of funding, Zomato's valuation was just over $5.4 Bn
Info Edge revised its quantum of share sale in the upcoming public offering to INR 375 Cr
Foodtech giant Zomato is expected to open for subscription on stock exchanges on July 19 at a price band of INR 70 – INR 72 per share, according to news reports, following the Securities and Exchanges Board Of India submitting its observations on Zomato’s draft red herring prospectus (DRHP).
While SEBI’s observations are not privy to public, the regulator is said to have cleared the path for the Zomato IPO, which would be a mix of fresh issue and a offer for sale (OFS) from existing investor Info Edge. Zomato issue is expected for July 19 to July 22 as the market is closed on July 21 for Bakri Id, as per reports.
The price band of INR 70-INR 72 per share would put Zomato’s IPO close to INR 9,375 Cr, making it the second-biggest IPO in the last four years after SBI Cards. At the upper end of the speculated price band, the company would be valued at around INR 56,240 Cr or $7.6 Bn, according to an ET report.
Zomato’s offer will comprise fresh equity of INR 9,000 Cr, while Info Edge will sell shares worth INR 375 Cr in the OFS portion. In the latest round of funding, Zomato’s price per share was INR 55-60, for a valuation of INR 40,000 Cr or just over $5.4 Bn. Zomato filed its DRHP on April 28 and in it, the company has claimed its financial situation has improved amid the pandemic.
Info Edge revised its quantum of share sale in the upcoming Zomato public offering to INR 375 Cr earlier this month, 50% lower than the originally planned INR 750 Cr stake sale.
In particular, Zomato said that its unit economics has improved considerably. It achieved positive unit economics with a contribution margin of INR 22.9 per order on average from April to December 2020. This is a massive improvement from the negative INR 30.5 margin logged in FY20 (or March 2019 to March 2020), which means Zomato is actually making money per order on an average, rather than burning cash to fulfil deliveries.
The company has shared numbers for FY20 (the period from April 1, 2019 to March 31, 2020) and the first three quarters of FY21 (April 1, 2020 to December 31, 2020) in its IPO prospectus.
- Commission from restaurants and ad revenues increased from INR 43.6 in FY20 to INR 62.8 till Q3 in FY21
- Delivery fees paid by customers increased from INR 15.3 in FY20 to INR 26.8 in first three quarters of FY21
- Delivery cost or money paid to delivery executives decreased from INR 52 in FY20 to INR 44.6 in FY21 till Q3
- Discounts given to users reduced from INR 21.7 in FY20 to INR 14.8 in first three quarters of FY21
