Zomato’s blockbuster IPO: Should you order in?

Staff Writer   /   July 13, 2021

Zomato Limited, India’s leading online food ordering company, is hitting the markets with its blockbuster ₹9375-crore Initial Public Offering on July 14, 2021. The price band of the IPO has been fixed at ₹72 to ₹ 76 per equity share. Taking part in the IPO may be tempting given the brand’s high visibility. Also, Zomato is India’s first unicorn to hit the capital markets. Let us find more about the much-awaited IPO.

Company details

The company was incorporated as “DC Foodiebay Online Services Private Limited” on January 18, 2010. The company is a professionally managed company and does not have an identifiable promoter in terms of the SEBI ICDR Regulations and the Companies Act. Consequently, there are no members forming part of the ‘promoter group’ in terms of the SEBI ICDR Regulations. Deepinder Goyal is the Founder and the Managing Director and the Chief Executive Officer of the company. Prior to founding Zomato, he worked with Bain and Company.

Zomato is one of the leading food services platforms in India in terms of value of food sold, as of March 31, 2021. During Fiscal 2021, 32.1 million average MAU visited their platform in India. As of March 31, 2021, they were present in 525 cities in India, with 389,932 active restaurant listings. Their mobile application is the most downloaded food and drinks application in India in each of the last 3 fiscal years on iOS App store and Google Play combined.

Zomato’s core business is that of a technology platform that connects customers, restaurant partners and delivery partners. The company wants to build its business across four revenue streams – Food delivery, Dining out, Hyperpure (supplying raw materials to restaurants) and Zomato pro (customer loyalty programme). At present, food delivery is the primary contributor to topline. In FY21, the company made around ₹62 per order on its platform. Its average order value in Q4 is ₹395.

IPO details

The IPO bids can be made for a minimum of 195 equity shares and in multiples of 195 equity shares thereafter. This means as a retail investor applying for 1 lot of Zomato IPo shares would cost you ₹14820 at the upper price band of ₹76.

The IPO consists of fresh issue aggregating up to ₹9000 crore and an offer for sale of by Info Edge (India) Limited aggregating up to ₹375 crore, totalling Rs 9,375 crore. This offer includes a reservation of up to 6,500,000 equity shares for purchase by eligible employees, on a proportionate basis and such portion not exceeding 5% of the post-Offer Equity Share capital.

Upto 15% of the offer shall be available for allocation on a proportionate basis to Non-Institutional Bidders and upto 10% of the offer shall be available for allocation to Retail Individual Bidder(s).

The Equity Shares offered through the Red Herring Prospectus are proposed to be listed on BSE and NSE.


As per FY21 data, Zomato’s total income is ₹2,118 crore. The adjusted EBITDA for the company is minus ₹325 crore. Also, the company’s net loss for the year is ₹816 crore. From a networth perspective, the company is valued at ₹8,096 crore.

Zomato’s IPO documents hints at a continued sharp recovery across key operational metrics in Mar-21 – (1) restaurant count, (2) MAU, (3) MTU, (4) Orders and (5) GOV. The robust increase in signed up restaurants on delivery / discovery platforms.

IPO valuations

There is a lot of interest in Zomato IPO and special attention is being devoted to valuations. On a post-issue basis, Zomato is valued at 30 times Price to FY21 Sales.

Brokers view

GEPL Capital – “We recommend a SUBSCRIBE rating to the issue for risk-taking investors for potential listing gains but would wait for sustained profitability and FCF breakeven as an investment as current valuations will limit the upside in the medium term.’

Ventura Securities – “This cash pile (IPO proceeds) should easily help sustain burn-rates for a good 7-9 years…given the fledgling nature of the business, duopoly market, immense upside penetration potential, humongous untapped online opportunity of the adjacent vertical and scarcity premium, we recommend a SUBSCRIBE for listing gains.”

Jefferies – “At FY20’s absolute run-rate, the cash balance would suffice for 6-7 years of cash burn and building lower burn-rate, this implies as much as 10-years of cash burn. Expansion beyond the core business is a fair possibility and there is a limited clarity on the categories which Zomato might explore and deploy capital.”

Nomura – “We like Zomato for its 1) ability to drive network effects from the content it generates on its platform and that is a key moat that drives its relationships with restaurant partners and consumers. This continuous engagement funnels into its revenue generating businesses like delivery and hyperpure; 2) making a quick pivot – such as expanding into food delivery by controlling the supply chain and expanding into adjacencies such as grocery delivery through investment in Grofers and; 3) focus on profitability.”

Motilal Oswal Securities – “Though, valuing such early stage businesses on a plain vanilla financial matrix might not give the right picture and may look distorted. Investors with a high risk appetite can subscribe for Listing Gains given fancy for unique and first of its kind listing in the food delivery business.”

You as an investor can take a call on investing based on your risk appetite. The share might be aggressively priced, but the internet companies are betting on hypergrowth and disruption in the existing business models. The company with a strong balance sheet and a dominating marlet presence is likely to command a higher share of the eating-out market.

IPO factbox
CompanyZomato Limited
Open DateJul. 14
Close DateJul. 16
Allotment DateJul. 22
Listing DateJul. 27
IPO band₹72 to ₹76 per share
Share face value₹1 per share
Bid Lot195 shares
IPO RegistarLink Intime India

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