India's Zomato to launch $1.25bn IPO next week

MUMBAI -- Indian food delivery unicorn Zomato is hoping to raise $1.25 billion in an initial public offering of shares at a range of 72-76 rupees each next week.

The company is planning to sell 90 billion rupees ($1.2 billion) worth of new shares, while majority shareholder Info Edge India is hoping to offload 3.75 billion rupees of shares it holds. The offer period is July 14 to July 16.

Info Edge has an 18.55% stake in Zomato and Uber 9.13%. Alipay Singapore Holding and Antfin Singapore Holding -- affiliates of China's Ant Group -- hold 8.33% and 8.2% respectively.

At the top end of the price range, Zomato will be valued at 643.65 billion rupees, the company's management told media in a virtual conference on Thursday.

Zomato had earlier said in its offer document it plans to use 56.25 billion rupees of the IPO proceeds to fund growth in three core areas including customer and user acquisition, delivery infrastructure, and technology infrastructure.

Zomato Chief Operating Officer Gaurav Gupta said while most of the proceeds would be used to fund organic growth, the company will also explore acquisition opportunities similar to its $100 million acquisition of a 9.3% stake in online grocery delivery service Grofers.

Gupta said the investment in Grofers was "only from an experimental mindset right now and once we are confident we will expand in the (grocery delivery) space... If we come across opportunities that make sense, we will make use the proceeds for that." Zomato will also soon launch grocery delivery on its own platform.

Consultancy company Red Seer expects India's online grocery market to grow 41-49% in the first half of 2021 and reach a market size of $18 billion by 2024.

Apart from food delivery, Zomato also operates an ingredients procurement platform called Hyperpure and its customer loyalty program Zomato Pro. The company derives 75% of its revenue from the food delivery business, and has expanded its business by 10 times in the last three to four years. It also claims to be the largest online table reservation platform in India.

"Food services industry in India is highly underpenetrated," Gupta said. "We are trying to essentially see if we can expand the market. What we are disrupting here is the Indian habit of home-cooked food. We are very excited with the opportunity in front of us to build this kind of behavior."

According to a note by research company Jefferies in May, of the total food consumption in India, which forms nearly a quarter of the country's gross domestic product, just 10% is spent on food services. This compares with around 50% in China and the U.S.

"With a monthly active user base of over 40 million and monthly transacting users of 10.7 million in fiscal 2020, Zomato is a strong platform which connects restaurants and customers," it said.

The online food delivery business in India is mainly led by Zomato and rival Swiggy but the sector is highly fragmented. In 2020, Amazon India announced its entry into the market, upping competition in an already charged segment.

Founded by Deepinder Goyal and Pankaj Chaddah in 2008 as menu aggregator DC Foodiebay Online Services in New Delhi, Zomato is present in 24 countries and over 10,000 cities.