Early backers Info Edge, Sequoia to make big returns on Zomato IPO
The market is awash with speculation as investors ready to get a taste of foodtech unicorn Zomato when it debuts today after a $1.3 billion initial public offering (IPO).
The much-awaited listing - advanced from July 27 to July 23 - is a historic moment for Indian tech startups and is likely to set the stage for other companies, including Paytm and Policybazaar, to follow.
The IPO, which opened on July 14 and closed on July 16, is the zenith of a 13-year journey for co-founder Deepinder Goyal, who along with Pankaj Chaddah (who has since left) started Zomato as Foodiebay in 2008.
The first Indian unicorn to tap the Indian public markets, Zomato's issue price has been fixed at Rs 76 per share, and the foodtech unicorn is expected to make a strong debut on BSE and NSE.
The spotlight may be on Zomato, but it also shines a light on the people who have been patiently backing and tracking the foodtech startup through its journey – the investors.
Returns the investors will get
Zomato’s early investor Info Edge is sitting on mega returns with the issue. Sanjeev Bikhchandani-led Info Edge is the largest shareholder in Zomato, with an 18.55 percent stake. It had sold shares worth $50 million held by its unit, Naukri Internet Services, in 2018 to China's Ant Financial.
But its original investment was done at an average share price of just Rs 1.16 per unit, according to Zomato's DRHP. This means an over 65X return on the original investment. At the price of Rs 76 per share, Info Edge's stake will be worth over Rs 9,455 crore.
The IPO at Rs 76 a share will see Sequoia make about Rs 3,718 crore as worth of its total investment of about Rs 300 crore, according to analysis of its DRHP. This represents an over 12.5X return on investment.
Sequoia held a 7.3 percent stake in the company at the time of the listing, and had sold shares worth about $25 million before the IPO.
Other major shareholders in Zomato include China's Ant Financial, ride-hailing giant Uber, New York-based investment firm Tiger Global, and Singapore's state investor Temasek. These investors will also see significant gains, which have not been realised yet, in the value of their stake with the listing.
In the year ending March 31, 2021, Zomato’s total orders stood at 239 million with a total gross order value of Rs 9,500 crore.
The startup’s revenue slipped more than 20 percent to Rs 2,118.4 crore in FY21. But it managed to cut losses, recording Rs 816.4 crore, compared to Rs 2,385.6 crore last year.
As of March 31, 2021, Zomato had 389,932 active restaurant listings and a presence in 525 cities in India and 23 other countries.
The company reported net cash flow of Rs 78.55 crore. In a media briefing earlier this month, Zomato executives said Zomato would have $2 billion, or around Rs 15,000 crore, in the bank after a successful IPO.
The run-up to the IPO
Earlier this month, Info Edge, in a stock exchange filing, had notified that it has slashed the offer for sale (OFS) in the Zomato IPO by half to Rs 375 crore from the initial plan to sell shares worth Rs 750 crore.
A statement released by Info Edge on July 4 stated, "The Committee of Executive Directors of the company, having been duly authorised in this regard, have considered and given their approval today for a reduction in the size of the Offer for Sale by the Company to the extent permitted under the SEBI, such that the revised Offer for Sale by the Company would comprise of such number of Equity Shares held by the Company in Zomato, as would aggregate up to Rs 3,750 million, the terms and conditions of which will be specified in the red herring prospectus and the prospectus filed in relation to the offer, and in other offer-related documents and agreements.”
Zomato's IPO was priced in the range of Rs 72 to Rs 76 to raise Rs 9,375 crore-Rs 9,000 crore worth of fresh issue of equity shares and Rs 375 crore of a secondary share sale by InfoEdge. The company is eyeing a post-issue valuation of Rs 64,365 crore.
The foodtech unicorn has already raised Rs 4,197 crore from anchor investors, which include marquee names such as Tiger Global, New World Fund, Fidelity, and domestic mutual funds such as HDFC, SBI, and Axis.