• Zomato’s investors include Fidelity, Baillie Gifford and T. Rowe Price
• Paytm, Policybazaar, PharmEasy, Nykaa and Ola poised to follow suit
Indian food-delivery company Zomato’s $1.3 billion IPO was oversubscribed 1.05 times on Wednesday, giving a boost to half a dozen tech peers considering listings this year.
The IPO received bids for 756 million shares against an IPO size of 719.2 million shares on its first day, stock exchange data showed. The offer closes on Friday.
The outcome is good news for companies including Alibaba and Softbank-backed fintech Paytm, Policybazaar, PharmEasy, Nykaa, and Delhivery Ixigo — all of which reportedly aim to float by year-end. Another beneficiary is likely to be CarTrade, which filed its prospectus with the Securities and Exchange Board of India in May. It’s also good news for Zomato’s investors including Ant Financial, Alipay, Fidelity, Baillie Gifford, Canada Pension Plan, Mirae Asset, T. Rowe Price, and Steadview.
Zomato’s success comes despite an expensive offering that prices each share at Rs72 to 76 — despite losses of over $112 million in the last financial year on revenues of $1.2 billion. It accumulated losses of over $551 million in the last three years even as revenue jumped 50%.
“Most digital start-ups have similar records of high cash-burn and sustained losses for long periods but Zomato is expected to report profits from fiscal 2023,” said Jyoti Roy, Equity Strategist at Angel Broking. ”It appears that these investors are willing to wait.”
On Tuesday, Zomato allotted shares worth $562.3 million to a new batch of global investors, including New World Fund, Tiger Global and BlackRock. Among its domestic investors, Axis Mutual Fund, SBI Mutual Fund, and HDFC Mutual Fund also received new share allotments.
Founded in 2008, Zomato expanded from a food delivery company into an online service platform offering food delivery, B2B and dine-out services.
“It is a good instance of a technology venture that has now turned into a confident, successful business,” said Lavanya Ashok, a partner at Trifecta Capital. “Global investors, having tasted success by investing in tech companies in more developed markets, are actively allocating capital to high-quality Indian assets.”
Masayoshi Son-led Softbank earned India’s anti-monopoly watchdog’s approval on Monday to pump $450 million into Zomato’s biggest competitor, Swiggy. The investment, which catapults the start-up’s valuation to $5 billion, has attracted interest from other foreign investors such as Falcon Edge, Amansa Capital, Think Investments, Carmignac and Goldman Sachs, according to local media reports. Zomato’s expected to have a post-offer valuation of about $8.6 billion.
Indian start-ups raised $8.1billion – in 499 deals – in venture capital (VC) funding from January to May this year, according to GlobalData, putting them on a par with their Chinese counterparts in terms of VC funding value among Asia-Pacific countries.
“Global investors, having tasted success by investing in tech companies in more developed markets, are actively allocating capital to high-quality Indian assets,” says Ashok.
By Indrajit Basu