Growth drivers, investment in Grofers, competitors and everything you need to know about Zomato IPO

Historically, no IPO has got so much popularity that upcoming IPO of Zomato has received. It would not be wrong to say that the social media platforms are flooded with Zomato IPO and its associated information. There are people who might not know about IPO but what they know is that Zomato IPO is coming. The digital food delivery platform IPO is expected to turn various readers into investors. IPO of Zomato is one of the most-awaited issues in the primary market and finally it is going to material on July 16.

Zomato IPO Details:

  • Issuer Company: Zomato
  • Industry: Hospitality
  • IPO Size: 9,375 cr.
  • Price Band: 72-76
  • Issue Open Date: 14 July, 21
  • Issue Close Date: 16 July, 21
  • Listing Date: 27 July, 21
  • Minimum Lot Size: 195 shares
  • Face Value: 1 Rs. Per share
  • Employee Discount: NA
  • Retail Allocation: 10%
  • Listing Exchange: NSE, BSE

Composition of Issue Size

The issue size of 9,375 crores is a mix of fresh issue of Rs. 9,000 crores and offer for sale of Rs. 375 crore.

  • Offer for Sale comprises sale of up to 4.93 crore shares by Info Edge.
  • According to Draft Red Herring Prospectus, the issue comprises of Rs. 9,000 crores from issuance of fresh equity will be utilized for funding organic and inorganic growth.

Organic Growth: When a company increases its capacity utilization. Zomato will spend on technology, expand its delivery infrastructure, add more delivery partners and ties with more restaurants for customer acquisition.

Inorganic Growth: When a company undertakes mergers and acquisitions to achieve synergy.

Must Read: Zomato IPO is coming soon! It’s time to deep dive into its financials.

Industry Growth Drivers

  • Country of 2nd largest population promises to provide huge opportunity.
  • Rising penetration of smartphones will increase the reach of Zomato platform.
  • Rising trend of contact-less dining due to Covid-19 pandemic.
  • Increase in per capita income will push people for dining due to high purchasing power.
  • Higher standard of living will raise preference for food ordering from digital platforms.
  • Indian market size of food ordering business will increase to $11 billion in FY2026.

Investment in Grofers

With intentions of becoming a food distributor platform whose operations are not restricted to food had acquired Hyperpure and now it delivers fresh fruits, vegetables, meat and dairy products to various restaurant partners. Now, Zomato has made $100 million investment in Soft Bank-backed-Grofers, a digital grocery delivery platform that has strong footprints in the Indian markets. Zomato will launch a grocery delivery feature on the application that will help him to widen their revenue sources and build a food delivery ecosystem for it. This will provide synergy in their operations and both applications are expected to gain a healthy amount of traffic.

Peers Comparison                                             

In times when Zomato had entered into food delivery industry there were plenty of competitors such as Foodpanda, Snappfood, Swiggy, Uber Eats Dingdong Maicai and TinyOwl. The rising popularity of Zomato due to heavy spending on advertising and distribution of discount coupons had forced the other players to shut down their operations from the Indian market except Swiggy and Uber Eats. In 2020, Zomato acquired assets of Uber Eats. Only Swiggy is a legitimate competitor of Zomato.

The entry of world’s largest digital platform Amazon into food delivery business is a terror itself. Bezoz-led-Amazon claims that its food delivery segment is serving in 62 pin codes across Bengaluru. More than 2,500 restaurants and cloud kitchens are now serving customers on its platform. The tech giant is flooded with a lot of funds and his entry into the arena has shaken other players.

Also Read: Why should you stick to investing in market leaders only?

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