Food-tech platform Zomato will launch its three-day initial public offering (IPO) on July 14, making the food delivery platform one of the first Indian startup unicorns to list on the national stock exchanges.
The Gurgaon based start-up is aiming at raising as much as Rs 9,375 crore by issuing fresh stock and an offer for sale at Rs 72-76 apiece. Zomato is likely to be valued at nearly $9 billion at the upper end of this price band.
While 75% of the Zomato IPO will be reserved for qualified institutional buyers, non-institutional investors can bid for up to 15% shares on offer. Retail investors have 10% of the stock allotted to them. Employees have access to up to 6.5 million shares.
With benefits of being one of the largest food delivery platform, strong growth and expansion plan, large headroom for increase in food delivery business, Zomato is no doubt one of the top brands to invest in.
Here are six reasons why you should subscribe to Zomato IPO:
The food service industry is highly underpenetrated: There’s no denying that food service industry is still very nascent and under penetrated as compared to to global cities that tops the hospitality and entertainment chart. With factors such as urbanisation, rising income levels and improved investment climate, the food service sector holds a huge opportunity. The sector has observed tremendous development in the last few years, and is estimated at Rs 4,23,865 cr in 2018-19 and is projected to reach Rs 5,99,784 at a CAGR of 9 per cent by 2022-23, as per NRAI Food service report.
Food delivery is the new boom: Covid-19 has changed the whole ecosystem of food delivery business, with restaurants closed for a longer period; online delivery came as a rescuer for people looking at some entertainment and wanting to try their favourite food. It is growing in tandem with evolving lifestyle patterns and eating habits of Indians. Hectic work schedules and rise in disposable incomes have popularized food delivery, especially in urban areas. According to a report by Research and market, “the online food delivery market in India is expected to expand at compound annual growth rates of ~30.55% (based on revenue) and ~10.19% (based on the number of users) during the 2020-2024 period, to generate a revenue of INR ~1,334.99 Bn and develop a user base of ~300.57 Mn by 2024.” Hence, there will be room for everyone to take a bite in this category.
All in-one food service platform: According to Zomato, it is an all in-one food service platform that caters to delivery which is its larger part of the business and constitute around 75 per cent share, Restaurant Dining Platform wherein customers write their reviews and rating, It’s a loyalty platform through its Zomato Pro membership and also a farm-to-fork concept when it comes to supply chain initiative via its Hyperpure vertical. So, you might want to invest in any of the vertical that may seem profitable to you.
High on expansion: As per the food delivery platform, its revenue from operations has grown from Rs 466 crore in FY18 to Rs 2,604 crore in FY20, signifying around 5.5X growth over the three-year period. Revenue from operations for the nine months ended December 31, 2020, stood at Rs 1,301 crore. On an average, 10.7 million customers ordered food every month on the platform in India in FY20 with an average monthly frequency of over three times. In the nine months ended December 2020, 99.3 per cent of the food delivery orders came through Zomato’s mobile application.
Fast to recover from the pandemic: The food delivery industry has shown stronger signs of recovery. It continues to grow back steadily to pre-COVID levels, with the overall sector clocking ~85%+ of pre-COVID GMV (Gross Merchandise Value), up from ~75%+ in August 2020. As per Zomato, Customers are now relying on food delivery even more than usual when a city goes under a lockdown. Some cities such as Kolkata see more customers ordering online when the city is (more or less) shut, but restaurants are open. The platforms has delivered crores of orders in last few months without spreading a single case via delivery..
CSR on Top: With focus on being environment friendly, employee and partner friendly be it restaurant partners, delivery partners etc, Zomato’s top priority in 2020 and 2021 remain on being a corporate social responsibility brand.
Hence, Zomato will end up with cash of Rs15, 000 crore post-IPO, which means it will have little need for funds for a long time to come and there will be modest return for investors sitting on board.