Company Overview

Zomato (NSE: ZOMATO) was launched in 2010, The company's technology platform connects customers, restaurant partners and delivery partners, serving their multiple needs. Customers use its platform to search and discover restaurants, read and write customer generated reviews and view and upload photos, order food delivery, book a table and make payments while dining-out at restaurants. On the other hand, the company provide restaurant partners with industry-specific marketing tools which enable them to engage and acquire customers to grow their business while also providing a reliable and efficient last mile delivery service. The company also operate a one-stop procurement solution, Hyperpure, which supplies high quality ingredients and kitchen products to restaurant partners. The company also provide its delivery partners with transparent and flexible earning opportunities.1

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Company History

Zomato was founded by Deepinder Goyal and Pankaj Chaddah as Foodiebay in 2008 and was renamed  as “DC Foodiebay Online Services Private Limited” as a private limited company on January 18, 2010. On May 16, 2012, the name of its Company was changed to “Zomato Media Private Limited”, on April 3, 2020, the name of its Company was changed to “Zomato Private Limited”. Finally on April 5, 2021 the name of its Company was changed to “Zomato Limited” upon conversion into a public limited company. The registered office of the company is Nehru Place, New Delhi.

Business Overview

According to RedSeer, Zomato is one of the leading Food Services platforms in India in terms of value of food sold, as of December 31, 2020. During Fiscal 2020, 41.5 million average MAU visited its platform in India. As of December 31, 2020, the company were present in 526 cities in India, with 350,174 Active Restaurant Listings. The company's mobile application is the most downloaded food and drinks application in India in each of the last three years since 2018 on iOS App store and Google Play combined, as per App Annie’s estimates.2

While the company had a footprint across 23 countries outside India as of December 31, 2020, Zomato has taken a conscious strategic call to focus only on the Indian market going forward. Given the large market opportunity in India, the company believe a focused Zomato will enhance the value for all its stakeholders.

Countries

  • Australia
  • Brasil
  • Canada
  • Chile
  • Czech Republic
  • India
  • Indonesia
  • Ireland
  • Italy
  • Lebanon
  • Malaysia
  • New Zealand
  • Philippines
  • Poland
  • Portugal
  • Qatar
  • Singapore
  • Slovakia
  • South Africa
  • Sri Lanka
  • Turkey
  • UAE
  • United Kingdom
  • United States

As of December 31, 2020, Zomato  had 3,469 employees worldwide. Zomato also engage contractors and consultants to provide us temporary workforce.

Platform Offerings

The company's business is built around the core idea that over time, people in India are going out to eat at restaurants more than they cook at home. To capture value out of this shift in customer behavior, Zomato has two core business-to-customer (B2C) offerings – information Food delivery and (ii) Dining-out, in addition to its business-to-business (B2B) offering (iii) Hyperpure. Another important part of its business is (iv) Zomato Pro, its customer loyalty program which encompasses both food delivery and dining-out.

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Food Delivery

According to RedSeer, Zomato has consistently gained market share over the last four years to become the category leader in the food delivery space in India in terms of GOV from October 1, 2020 to March 31, 2021. Zomato has experienced rapid growth in food delivery in India with its Orders increasing by 13.2 times from 30.6 million in Fiscal 2018 to 403.1 million in Fiscal 2020 and its GOV growing 8.4 times from ₹13,341.4 million in Fiscal 2018 to ₹112,209.0 million in Fiscal 2020

There are three key stakeholders in its food delivery business

Customers: food delivery allows customers a convenient, on-demand solution to search and discover local restaurants, order food, and have it delivered reliably and quickly. On an average, 10.7 million customers ordered food every month on its platform in India in Fiscal 2020 with an average monthly frequency of over three times. In the nine months ended December 2020, 99.3% of its food delivery Orders came through Zomato's mobile application.

Delivery partners: Zomato has one of India’s largest hyperlocal delivery networks in terms of number of delivery partners as of December 31, 2020, according to RedSeer. The company's delivery network collected food from its restaurant partners and delivered it to customers with a median delivery time of less than 30 minutes in Fiscal 2020 (delivery time calculated from the time the Order is placed on its mobile application to the time the Order is delivered to the customer). The company had 161,637 Active Delivery Partners during the month of December 2020. In Fiscal 2020, its delivery partners fulfilled 94.9% of its Orders delivered.

Restaurant partners – on an average, in Fiscal 2020, the company had 131,233 Active Food Delivery Restaurants every month. Restaurants are the backbone of its business, and the company strongly believe that the company can only be viable if the company help the restaurant industry grow and succeed more than what it could do without it.

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Dining-Out

Customers use its dining-out offerings to search and discover restaurants, read and write customer generated reviews and view and upload photos, book a table and make payments while dining-out at restaurants. The company believe Zomato is a preferred destination for dining-out search and restaurant discovery in India.

As of December 31, 2020, the company had 350,174 Active Restaurant Listings on its platform and in Fiscal 2020, 157.0 million units of CGC was generated on its platform, which makes it the largest food-focused restaurant listing and reviews platform in terms of customer base, in India, as of December 31, 2020, according to RedSeer. Zomato is also the largest online table reservations platform in India according to RedSeer, with 12.2 million Covers booked through its platform in Fiscal 2020.

The company currently monetize its dining-out offering through advertisement sales through which restaurant partners pay it for enhanced visibility on its platform. In Fiscal 2020, 8,064 restaurant partners paid for its advertising sales product in India. The company currently do not monetize table reservations or dining-out payments.

B2B Supplies (Hyperpure)

Hyperpure is its farm-to-fork supplies offering for restaurants in India. The company source fresh, hygienic, quality ingredients and supplies directly from farmers, mills, producers and processors to supply to its restaurant partners, helping them make their supply chains more effective and predictable, while improving the overall quality of the food being served.

Restaurant partners ordering supplies through Hyperpure get a “Hyperpure Inside” tag on their Zomato page, which is intended to provide customers with an assurance of the quality of ingredients used at the restaurant.

The company started Hyperpure in 2019 and are growing rapidly. In the month of December 2020, the company supplied to over 6,000 restaurant partners across six cities in India. Hyperpure helps it increase its engagement with restaurant partners on its platform, and in turn retain and grow its loyalty with them.

Zomato Pro

Zomato has an exclusive paid-membership program, Zomato Pro, which unlocks flat percentage discounts for its customers at select restaurant partners across both food delivery and dining-out offerings. These discounts are available to its customers on all days in a year (except during a few pre-determined festive days) and the Pro Restaurant Partners choose and fund the percentage discount available to Pro Members at their restaurants. The company's customers become Pro Members by paying it a membership fee. The program allows Pro Restaurant Partners to market themselves to a select audience. As of December 31, 2020, the company had 1.4 million Pro Members and over 25,350 Pro Restaurant Partners in India.

Financial Highlights

According to the DRHP, Zomato reported a loss of Rs 682 crore in the nine months ending December 2020. Previously, In the financial year 2019-20, the company had a net loss of Rs 2,386 crore, up from Rs 1,010 crore in the financial year 2018-19. Although the company reported a jump in revenue from Rs 1,397 crore in FY19 to Rs 2,743 crore in FY20, its expenses have increased from Rs 3,608 crore to Rs 5,006 in the same period.

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Zomato IPO

April  28, 2021;  Food delivery platform Zomato has filed its Draft Red Herring Prospectus (DRHP) with the market regulator today, kicking off one of India's most anticipated internet initial public offerings (IPOs) in a tumultuous year. 3

According to the DRHP filed by Zomato, the company will offer equity shares aggregating up to Rs 8,250 crore (nearly $1.1 Billion). Of this, Rs 7,500 crore will be fresh issue, while Rs 750 crore will be an offer for sale for its existing investor Info Edge.

Info Edge on April 27th said said it will sell shares worth Rs 750 crore in the upcoming initial public offering.

The company's internal review of the IPO and other processes was completed on April 22, 2021, a development that was first reported by Moneycontrol on April 23rd, 2021. Sebi is likely to take about two weeks to review the DRHP and the final launch will depend on the market conditions, a source familiar with the development said.

Zomato raised $250 million in its pre-IPO primary fundraise a couple of months ago at a valuation of $5.4 Billion from investors such as Kora Management, Tiger Global, Fidelity, Dragoneer, and Bow Wave. Post this, Info Edge, one of Zomato's earliest investors said its effective stake in Zomato is now 18.4 percent.

This was on top of the $660 million primary round that it closed in December 2020, at a valuation of $3.9 billion from ten new investors including Tiger Global, Kora, Luxor, Fidelity (FMR), D1 Capital, Baillie Gifford, Mirae, and Steadview. Goyal had said then that the company is in the process of also closing a $140 million secondary round and that it was raising primary capital as a war-chest for future mergers and acquisitions and to fight off price wars from the competition.

Zomato reported a revenue of Rs 2,486 crore for FY20, even as its losses widened to Rs 2,451 crore during this period, as the pandemic shrunk order volumes and dine out revenue.

Zomato IPO to open on July 14, 2021

Zomato IPO: The initial public offering (IPO) of online food delivery platform Zomato will open on Wednesday, July 14, 2021, and will be available for subscription till Friday, July 16, 2021. The price band of the IPO has been fixed at Rs 72-76 per share of the face value of Rs 1 each. Earlier this week, the company had received a go-ahead from markets regulator Sebi. 4

The online food delivery giant aims to raise Rs 9,375 crore through the offer. The Zomato IPO comprises a fresh issue of equity shares worth Rs 9,000 crore and an offer for sale (OFS) worth Rs 375 crore by Info Edge (India), the parent company of Naukri.com, as per the information provided in the red herring prospectus available on the National Stock Exchange (NSE).

Investors who wish to subscribe to Zomato’s IPO can bid in the lot of 195 equity shares and multiples thereof, as per its newspaper advertisement to Financial Express. At the upper price band, they will have to shell out Rs 14,820 to get a single lot of Zomato. The shares will be listed on both BSE and NSE.

The Zomato IPO will have 75 per cent reserved for qualified institutional buyers (QIBs) and 15 per cent will be reserved for non-institutional investors (NIIs). The remaining 10 per cent of the issue will be available for retail investors.

The anchor portion is likely to open on Tuesday, July 13, 2021, one working day prior to the opening date for the public offer, the share allotment is likely to take place on July 22, 2021, and the shares are expected to be listed on July 27, 2021.

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Zomato IPO listing

India's leading food delivery company Zomato made a stellar debut on Dalal Street on July 23 as the stock opened at Rs 116 on the NSE, a 52.63 percent premium to its final offer price of Rs 76. The listing price on the Bombay Stock Exchange was at Rs 115, up 51.32 percent. 5

The stock closed at Rs 125.85 on BSE, up 65.59 percent with respect to the issue price, while on NSE, the stock closed at Rs 125.30, up 64.87 percent against the stock's issue price of Rs 76.

"The response from institutional investors has been strong. This suggests that the overall float available for trading might be limited leading to a higher GMP. We issued a *Subscribe with Caution* rating for this IPO, keeping in mind the long investment horizon required for high-growth companies that are currently loss-making," said Rajnath Yadav, Research Analyst at Choice Broking.

"For retail investors who have the capacity to hold for a long term, we would recommend they hold on to their investment. While investors with shorter time constraints can sell if they see listing gains. Our outlook for Zomato is positive in the long run," he added.

The share price moved to Rs 138 intraday after listing at Rs 116 against the final offer price of Rs 76.

"Despite the large size of IPO at Rs 9,375 crore and rich valuations, Zomato saw healthy overall subscription of 38x. There is lot of fancy for such unique and first of its kind listing in the market,' said Sneha Poddar, Research Analyst, Broking & Distribution, Motilal Oswal Financial Services.

"It enjoys couple of moats and with economics of scale started playing out, the losses have reduced substantially. Though, predicting the growth trajectory at this juncture is little tricky, but it’s a good bet from long term perspective,” she added.

The market capitalization of the company has crossed Rs 1 lakh crore mark, as it stood at Rs 1,08,067.35 crore after a stellar debut on Dalal Street, racing ahead of IOC, BPCL, Shree Cements.

The Rs 9,375-crore initial public offering, which opened for subsciption during July 14-16, had seen a stellar response from investors with 38.25 times subscription - highest in last 13 years among IPOs valued more than Rs 5,000 crore each.

Largely, the listing was in line with analysts' expectations despite rich valuations. First listing in the food delivery segment, positive market sentiment, healthy demand from investors, consistency in gaining market share, and expected improved financial performance attributed to the debut premium.

References

  1. ^ https://www.zomato.com/who-we-are
  2. ^ https://www.sebi.gov.in/filings/public-issues/apr-2021/zomato-limited-drhp_49956.html
  3. ^ https://www.moneycontrol.com/news/business/ipo/zomato-ipo-food-delivery-platform-files-drhp-with-sebi-6824381.html
  4. ^ https://indianexpress.com/article/business/market/zomato-ipo-opens-july-14-price-band-rs-72-76-lot-size-and-more-details-7394678/
  5. ^ https://www.moneycontrol.com/news/business/ipo/zomato-ipo-listing-food-delivery-giant-crosses-rs-1-lakh-crore-m-cap-after-stellar-debut-with-nearly-53-premium-7210471.html
Tags: IN:ZOMATO
Created by Asif Farooqui on 2021/05/05 20:38
     

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