Application for the delivery of Indian cuisine Zomato has completed its first significant fundraising effort since its 2021 IPO by raising $1 billion from institutional investors
In a qualified institutional placement, the food delivery and quick-commerce giant issued approximately 336.5 million shares at a price of ₹252.62 each ($3), as indicated by a stock exchange filing filed on Friday.
Leading Indian mutual funds demonstrated substantial participation in the fundraising event. Motilal Oswal’s family of funds acquired 20.81% of the shares issued, making it the largest investor. HDFC and Kotak funds acquired 8.68% and 5.95%, respectively, while ICICI Prudential’s funds secured 12.78%.
Zomato’s status is strategically altered to that of a “domestic” company as a result of the $1 billion fundraising effort, which brings its foreign ownership below 50%.
This would enable its quick-commerce unit, Blinkit, to adopt an inventory-led model, which is presently exclusively available to domestic firms. This would provide direct control over warehousing and products.
The capital raise’s timing is also strategic, as it occurs just weeks after Swiggy’s $1.35 billion IPO earlier this month. Motilal Oswal facilitated a $350 million investment in Zepto, an additional prominent quick-commerce startup, this month.
Swiggy’s shares experienced a 4.1% decline on Friday, bringing the week’s aggregate increase to 12.8%. The shares of Zomato, which were offered to investors who participated in the share placement at a 5% discount, were down approximately 1% on Friday.
However, they have risen by 127.7% year-to-date to this point. Zomato’s market capitalization is approximately $30 billion.
Last month, Deepinder Goyal, the co-founder and CEO of Zomato, announced that the company was raising the additional funds to maintain competitive parity, despite the fact that the company already had $1.3 billion in cash reserves.
The company, which recently reported its second consecutive quarterly profit, is the leader in India’s quick-commerce market with Blinkit. It competes against well-funded competitors such as Swiggy, Zepto, and BigBasket in a sector that is expected to generate over $6.5 billion in annual run-rate revenues.
“We anticipate that the quick-commerce sector will undergo a period of heightened competition within the next six to twelve months.” Quick-commerce incumbents are either in the process of raising capital or have already done so.
Bank of America analysts wrote in a note to clients that four new names, including Flipkart, Reliance, BigBasket, and Amazon, are seeking to enter the quick-commerce space.
In this sector, the first mover advantage is significant. Given that the total addressable market (TAM) is approximately 30 million households (330 million households in India), we believe it is logical for the market leader, Zomato, to strive to preserve its 40% market share.
