Zomato Aims For a $1 billion QIP Debut in December

According to many media sources, food delivery and fast commerce giant Zomato Ltd. has selected investment bank Morgan Stanley and started developing its projected qualified institutional placement (QIP) offering of up to INR 8,500 crore (about $1 billion).

Depending on the state of the market, Zomato plans to deploy the QIP in December. According to the sources, the syndicate may be expanded to include one or two additional investment institutions. According to them, the final sale size might fall between $800 million and $1 billion. The Zomato QIP proposal follows its rival Swiggy Ltd.'s massive INR 11,327 crore IPO, which went public on the stock exchanges on November 13 with a 7.69% gain. Over the IPO price of INR 390, the stock made its NSE debut at INR 420 per share.

Recent Performance at BSE

Even though Zomato's stock price is down 9.6% from its 52-week peak of INR 298.2 on September 24, the company's stock has increased by about 118% so far this year. On November 14, Zomato's shares ended the day up 4.27% at INR 269.6 per share on the BSE. Zomato's funding proposal is presently awaiting shareholder approval. Up until November 22, shareholders have the opportunity to vote in favour or against the proposal.

Justification for Fundraising

Zomato told its investors that the $1 billion fundraise was necessary to bolster its balance sheet at this time and that it has no plans to acquire any minority businesses or make any minority investments. In around three years, Zomato's consolidated annualised adjusted revenue has increased fourfold, from INR 4,640 crore at the time of its July 2021 IPO to INR 20,508 crore at this time (Q2FY25 annualised). Zomato informed its shareholders in a notice asking for their vote on the fundraising proposal, "Our cash balance has decreased from INR 14,400 crore to approximately INR 10,800 crore in the same time period (primarily due to funding past quick commerce losses and some equity investments and acquisitions)."

Given the competitive environment and the considerably greater scale of Zomato's business now, it further stated that even though the company is currently making money (as opposed to a losing business at the time of the IPO), it feels that it needs to improve its cash balance. "The company wants to make sure that Zomato is on an even playing field with its rivals, who are raising more money, but it also thinks that capital alone does not grant anyone the right to succeed (and that service quality is the primary determinant of success)," the company stated.

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