09 Jul 2021
Posted in Business Fundamentals
Zomato takes IPO route in search of new growth prospects in India, says GlobalData
Following the news that India-based online food aggregator Zomato Limited is all set to launch its three-day initial public offering (IPO) on 14 July 2021;
Alisha Bajpai Singh, Senior Analyst at GlobalData, a leading data and analytics company, offers her view:
“Zomato’s IPO is the biggest over the last one year after SBI Cards and Payments in March 2020, which was worth INR103.55bn. Zomato, which plans to raise INR93.75bn, is expected to outstretch its cash reserves to nearly INR150bn. In the fourth quarter of FY2021, it already raised a funding of INR18bn from investors including Tiger Global and Kora. The company expects to use the funds to improve technology and delivery infrastructure; and spend on areas including new acquisitions, marketing, branding, user acquisition activities.
“Backed up by some of the big investors such as Info Edge, Ant Financial, Alipay Singapore Holding, and Tiger Global, Zomato proved its strong hold in the market with a growing market share in terms of gross order value (GOV). It experienced a boom in the number of orders and GOV, which mounted 13.2 times and 8.4 times from 30.6 million and INR13.34bn in FY2018 to 403.1 million and INR112.2bn in FY2020, respectively. It reported a decline in revenue in FY2021 but has shown almost 100% surge in revenue from operations in FY2020 reaching INR26.05bn. The company has been reporting losses for the last two years because of the COVID-19 pandemic. However, the relaxation in lockdown in May 2020 helped its revenue growth to be back on track in the third quarter of FY2021, owing to improved GOV.
“Zomato entered the grocery delivery marketplace with an investment of US$100m in online grocery delivery service provider Grofers in 2021 and further intends to expand its footprint in the market. Though the company expects its expenses to increase due to the considerable growth investments, the IPO and continuous expansion could bring new growth prospects.”