Zomato takes big step towards IPO, turns a public limited firm

Foodtech giant Zomato has converted itself into a public limited company from a private company, taking another step ahead towards initial public offering (IPO). The company is likely to go public this year.

The food-delivery app is planning to raise $750 million to $1 billion via primary stake sale. The company, which started off as a restaurant discovery and review platform, recently closed a $250 million primary funding round with another $250 million of shares being sold by existing investors like China’s Ant Financial, ET reported on January 27.

Regulatory filings showed Zomato is readying to file a draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (Sebi) and relevant stock exchanges within this month.

It has passed another special resolution to issue Rs 247.6 crore equity shares as bonus shares to existing shareholders in the 6699:1 ratio. The share allotment has been made to 17 shareholders, including Fidelity Group, ESOP Trust, Temasek, InfoEdge as well as Zomato co-founders Deepinder Goyal and Pankaj Chaddah.

“Different investors infused capital at different valuations. According to our calculation, average price per equity is likely to be in the Rs 40-50 range. However, the company may bring the IPO at a higher price,” said Rajesh Singla, Founder & CEO of pre-IPO consultancy firm Planify India.

The company has allotted 4,430 crore worth of equity shares to all the preferential shareholders — investors, promoters, Esop holders and others — upon conversion of the compulsorily convertible preference shares (CCPS) held by them.

“This is a common equity-resizing practice, undertaken by companies prior to an IPO to comply with listing regulations,” said Umesh Paliwal, Co-founder, Unlisted Zone.

Analysts expect Zomato to hit the primary market as and when sentiment improves on Dalal Street. The second wave of coronavirus pandemic has spooked the investors, sending fundraising plans of companies haywire.

“The company has enough time to float the offer, but broader market conditions will definitely determine the timing,” Paliwal said.

Zomato has reportedly finalised Kotak Mahindra Bank, Morgan Stanley, Citi Bank, Credit Suisse and Bank of America as lead merchant bankers for the IPO.

“We expect the IPO to thrill investors, as it is a good business format,” said Singla. “With loyal subscription-based customers, the company has brilliant growth opportunities. Also, Covid-19 has turned home delivery of food and essentials the new normal,” he said.

Besides Zomato, even omnichannel retailer Nykaa and online insurance platform PolicyBazaar are looking to go public this year following in the footsteps of Nazara Technologies and EaseMyTrip that got listed in the first four months of the 2021.