Food-delivery major Zomato has launched its initial public offering (IPO) today. This makes Zomato the first Indian unicorn start-up to feature on the bourses. It is expected that the IPO will boost Zomato’s market valuation by $9 billion.
The company fixed its price band at Rs72–76 per share at the face value of Rs1 each. Ahead of Wednesday’s IPO, the anchor portion of the offer opened on Tuesday and Zomato raked in over Rs4,196 crore from 186 anchor investors.
Among the anchor investors are JP Morgan, Morgan Stanley, Tiger Global Investment Fund and Blackrock.
Rising market share
Zomato’s core business offers two segments — food delivery and dining out. In its draft red herring prospectus (DRHP), Zomato said that it has consistently gained market over the last four years and leads the food delivery space in India. Online food orders with the company surged from 30.6 million in 2018 to 403.1 million in 2020.
On the road to recovery
The COVID-19 pandemic severely impacted Zomato’s business. Lockdowns and curbs on movement made the food delivery business plunge to its lowest in two financial years. However, the company witnessed strong recovery in subsequent quarters with number of online food orders rising significantly.
The gross order value during the third quarter was Rs29,810 million — highest for the company in any quarter till December 2020.
Smart unit economics
One of Zomato’s biggest achievements is the company’s unit economics. Having good unit economics means Zomato is at a better stage in achieving its break-even point and turning a profit on each order placed by the user. This happens when the average order value keeps rising. This happened during the pandemic.
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Should you invest
The food delivery major and restaurant aggregator’s IPO will remain open till July 16. Retail applicants can bid for a minimum of one lot of 195 shares and in multiples thereof, up to a maximum of 13 lots.
The Zomato story
Incorporated in 2008, Zomato is an Indian start-up backed by China’s Ant Group. Zomato has a presence in 24 countries outside of India. The company seeks to use its IPO proceeds to fund its organic and inorganic initiatives and for general corporate purposes.