Zomato IPO Review, Analysis and Recommendation
The IPO of food delivery platform Zomato will open for subscription on 14th July 2021. Zomato Limited one of the leading online Food Service platforms in India and several other countries. Company generated strong revenue growth in the last 3 years. However, it has incurred losses in the last 3 years. Zomato IPO Size is 9,375 Crores which is the largest IPO in the last 18 months after SBI Cards that came in March 2020. Zomato IPO date was earlier fixed in 3rd week of July which is now preponed. Should you invest in Zomato IPO or avoid? In this article we would provide complete analysis and do Zomato IPO review.
About Zomato Limited
Zomato is incorporated in 2010 and is one of the leading online Food Service platforms in India (in terms of the value of food sold). It has B2C business and B2B business.
i) Its Business-To-Consumer (B2C) offerings include food delivery and dining-out services. Customers can search and discover restaurants, order food delivery, book a table, and make payments for dining out at restaurants.
ii) Under Business-To-Business (B2B), it generates revenue from Hyperpure (supply of high-quality ingredients and kitchen products to restaurants) and Zomato Pro, customer loyalty program.
As of end of Dec-2020, Zomato has strong footprint in 23 countries with 1,31,233 active food delivery restaurants, 1,61,637 active delivery partners, and an average monthly food order of 10.7 Mn customers.
Zomato Limited competitive strengths
Zomato IPO Dates and issue details
|IPO Opening Date||14-Jul-21|
|IPO Closing Date||16-Jul-21|
|Issue Type||Book Built Issue IPO|
|Face Value||Rs 1 per equity share|
|IPO Price band||Rs 72 to Rs 76 per equity share|
|Lot Size||195 Shares|
|Min Order Quantity||195 Shares|
|Listing at||BSE and NSE|
|Issue Size||Total Size: Rs 9,375 Crores
OFS: Rs 375 Crores
Fresh issue: Rs 9,000 Crores
Objects of the issue
It has two objects of the issue:
1) Offer for sale for Rs 375 Crores: Under OFS, selling shareholders would sell the shares and company would not get any proceeds from the issue.
2) Fresh issue of Rs 9,000 Crores: Company would be used for funding organic and inorganic growth initiatives and meeting general corporate purpose.
Company promoters, Key Personnel and Financial Performance
Zomato Limited is a professionally managed company with no identifiable promoters (under the SEBI ICDR Regulations and Companies Act). Currently it has 74 shareholders. Info Edge India Limited (Pure play internet company) is the biggest shareholder in Zomato which has 18.68% share holding followed by China’s Ant group which holds 16.53%.
Mr. Kaushik Dutta is the Chairman and independent director of the company. He is Chartered Accountant with 25 years of experience. He is a co-founder of Thought Arbitrate Institute which is a non-profit research think tank working on corporate governance, public policy and sustainability.
Deepinder Goyal is the founder, MD and CEO of the company. He has masters from IIT Delhi.
Here are the restated consolidated revenue and margin details in the last 3 years.
|Period ending||Total Revenues (Rs in Mns)||Profits after tax
(Rs in Mns)
What we like in Zomato IPO?
Here are the positive factors what we liked in this company.
1) Company has posted good revenue growth in the last 3 years. Company revenues increased from Rs 1,397.7 Crores in FY2019 to Rs 2,118.4 Crores in FY2021.
2) Company has good brand name across India. Company has strong network, and its end-to-end food services approach makes it unique food services platform globally.
3) Company is technologically first company using artificial intelligence and machine learning to drive innovations in serving community of customers, delivery partners and restaurant partners.
4) Currently company want to strengthen and expand its 3 business i.e., food delivery, dining out and hypersure.
Risk Factors in Zomato IPO
1) Company posted losses in the last 3 years. It posted loss of Rs 1,010.5 Crores in FY2019, Rs 2,385.6 Crores in FY2020 and Rs 816.4 Crores in FY2021.
2) Company principal shareholder includes China’s Ant group which holds 16% shareholding in Zomato. There has been border tensions between India and China and this would have material impact on company business.
3) Company anticipates increased expenses in future. Means, its losses might still go up unless its revenues increase significantly.
4) Covid-19 or any other public health threat has an impact in past and is uncertain in future too. This can impact the operations of the company.
5) Its major strength is maintaining good relationship with its restaurant partners. If they fail to retail any existing restaurant partners, customers or delivery partners, it can impact the business.
6) Any unfavorable media coverage about the brand can impact the business. There were couple of instances in the past.
7) It faces intense competition with its competitors like Swiggy etc. Since the industry has low barriers for entry, in future if there are increase competitors, it can impact Zomato business.
8) Company has negative cashflows in the prior years.
9) Investors should read complete risk factors indicated in the RHP of the IPO document before investing in this IPO.
Zomato IPO Date Schedule including Listing date
|Finalization of Allotment||22-Jul-21|
|Initiation of Refunds||23-Jul-21|
|Credit to Demat Account||26-Jul-21|
|IPO Shares Listing Date||27-Jul-21|
Zomato IPO Share Price Valuations
Zomato IPO Price band is Rs 72 to Rs 76.
We cannot compute P/E as company has been incurring losses in the last 3 years. Hence, we cannot conclude whether Zomato Share Price of Rs 76 (upper price band) is underpriced or overpriced.
IPO Lot Size and GMP – Zomato IPO
Zomato IPO lot size is 195 shares, retail investors can apply for minimum of Rs 14,820 and maximum Rs 192,660 worth of shares on the upper price band of Rs 76.
Zomato IPO quota for retail investors is 10%, QIB is 75% and 15% for NIIs.
Zomato IPO GMP (Grey market premium) is ranging between Rs 13-17 per share. GMP is nothing but premium in offline market.
Also Read: Multibagger Stocks to invest in 2021
Should you invest in Zomato IPO?
Zomato is one of the most valuable food delivery company in India.
Company generated good revenue growth in the last 3 years.
However, company has been incurring losses in the last 3 years.We know what happened with Burger King IPO (which was in losses and we recommended this as concern, but it had overwhelming response)
Zomato is backed by China’s Ant group. However, Ant group has reduced the stake in the company and currently holds 16.53% (Alipay and Antfin put together).
Zomato IPO price cannot be ascertained whether underpriced or over-priced as it incurred losses in last 3 years.
While company is incurring losses, considering the future prospects of the company, we recommend SUBSCRIBE for this IPO for short term to long term perspective.
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