Zomato’s IPO will open on July 14. Here’s what investors should look for

As the coronavirus disease (Covid-19) pandemic struck India last year, the demand for online food delivery services provided by aggregators like Zomato increased immensely, after states and Union Territories (UTs) initially banned dining-in at restaurants, hotels, food stalls etc.
Zomato, which is a consumer internet company, has presence in 525 cities across India and over 32 million users visit the platform each month.(Mint file photo)
Zomato, which is a consumer internet company, has presence in 525 cities across India and over 32 million users visit the platform each month.(Mint file photo)
Published on Jul 09, 2021 10:58 AM IST
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By | Written by Harshit Sabarwal | Edited by Avik Roy, New Delhi

Indian food delivery giant Zomato on Thursday announced plans to raise 9,375 crore ($1.3 billion) through an initial public offering (IPO).

As the coronavirus disease (Covid-19) pandemic struck India last year, the demand for online food delivery services provided by aggregators like Zomato increased immensely, after states and Union Territories (UTs) initially banned dining-in at restaurants, hotels, food stalls etc.

Also Read| Zomato to join India’s 100 most-valued club

Zomato, which is a consumer internet company, has presence in 525 cities across India and over 32 million users visit the platform each month, news agency AFP reported on Thursday, adding, the company also offers service in 23 countries across the globe. The company is also backed by Chinese business magnate Jack Ma’s Ant Group.

Details about the Zomato IPO

As mentioned earlier, Zomato will be raising 9,375 crore through an IPO. The IPO will consist of a fresh issue of equity shares worth 9,000 crore and an offer-for-sale to the tune of 375 crore by Info Edge (India) Ltd, the company said on Thursday. The IPO will open on July 14 and will close by July 16 and Zomato will issue new shares priced between 72-76 each.

Earlier this week, Zomato had received an approval from the Securities and Exchange Board of India (SEBI) for the IPO.

Zomato’s performance in recent years

The online food delivery sector has witnessed significant growth in the last few years and especially during the ongoing Covid-19 disease pandemic. In the financial year (FY) 2020, Zomato’s revenue jumped over two-fold to $ 394 million ( 2,960 crore) from the previous fiscal.

In February, the company raised $250 million (over 1,800 crores) in funding from Tiger Global, Kora and others, valuing the online food ordering platform at $5.4 billion (around 40,000 crore), news agency PTI reported on Thursday.

In January 2020, Zomato acquired UberEats' business in India and said the deal gave Uber a 9.99% ownership in Zomato.

Also Read| Zomato IPO: Price band, opening date and other details

What to look for while investing in a consumer internet company?

Startups in India have seen a seven-fold rise in the previous decade and many of these provide services with regard to artificial intelligence, internet of things (IoT) finance, education, healthcare, food among others, according to a report by KPMG in 2019.

As a result, many people have started investing or want to invest in startups as the business is scalable and there is scope of diversification with regard to investments.

However, a report by the Indian express (indianexpress.com), said on Thursday that apart from a consumer internet company’s business model and the scope of expansion, it is crucial to carefully examine the price of the issue. The report further added that if a company, which is launching an IPO, is demanding a greater valuation, then investors may wait to make an entry.

(With agency inputs)

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Saturday, January 22, 2022