Zomato becomes first Indian unicorn to go public raising US$1.26B in successful IPO

INDIA – Food delivery start-up Zomato has become the first Indian unicorn to go public, successfully raising over US$1.26 billion in an IPO that was more than 38 times oversubscribed. 

The food delivery startup which also lets users book tables and aggregates reviews for restaurants debuted in India’s National Stock Exchange (NSE) in July at ₹116 (US$1.56), a 53% premium over the IPO price of ₹76 (US$1.02), and closed at ₹125.8 (US$1.69) per share on its first day. 

Zomato has said it will utilise the net proceeds from the fresh issue for funding organic and inorganic growth initiatives and general corporate purposes.  

The home-grown food delivery platform launched in 2008, operates in about 525 cities in India and has partnered with close to 390,000 restaurants.  

The company, which is yet to turn profitable, posted a consolidated loss of ₹816 crores (US$1.1 billion) in FY21 as compared to loss of ₹2,385 crore (US$3.2 billion) in the previous year. 

Mint reported that even after the IPO launch, the company’s market capitalization remained above the ₹1 lakh crore (US$13.44 billion) mark which it had crossed soon after listing, making it one of the top 50 most valuable publicly traded firms in India. 

Zomato is the first of a slate of prominent local start-ups to go public at a time when Indian markets have shown their resilience despite economic uncertainty from the pandemic. 

The company along with rival start-up Swiggy dominates India’s US$4.2 billion food delivery market, which is highly competitive but also very fragmented. 

Swiggy which is based in Bengaluru, India recently announced the closure of US$1.25 billion funding led by SoftBank Vision Fund 2 and Prosus. 

Swiggy CEO Sriharsha Majety said that funding will be mainly pumped into the startup’s biggest non-food businesses which have witnessed tremendous consumer love and growth in the past 15 months of the pandemic. 

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Part of the funds will also be used to further accelerate the company’s multi-year strategy of growing its core food delivery business and building new food and non-food adjacencies in 2021 and beyond, Swiggy said. 

India’s population is expected to overtake China’s this decade, making investments in tech companies like Zomato attractive to investors. 

Tracking the current market trends, Nilesh Shah, group president and managing director at Kotak Mahindra Asset Management Co. in Mumbai opined that Indian tech companies “can attract global investors who’ve burnt their hands in Chinese tech companies.”

His statements were echoed by one venture investor who was quoted by CNBC saying 2021 would “herald the beginning of a new era for the Indian start-up ecosystem,” with a number of significant IPOs to come. 

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