Zomato has announced plans to raise ₹8,500 crore through a Qualified Institutional Placement (QIP), a move approved by its shareholders. The decision comes at a crucial juncture as its primary competitor, Swiggy, prepares for an Initial Public Offering (IPO). The fundraising is Zomato’s first since its stock market debut in 2021 and aims to bolster its financial position in a fiercely competitive landscape
DataSource: BizFinance News
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The QIP Process and Objectives
Zomato will issue equity shares to eligible institutional investors, with Morgan Stanley facilitating the process. The base price for the QIP has been set at ₹265.91 per share. CEO Deepinder Goyal emphasized the need for a stronger cash reserve to maintain competitive parity, as rivals like Swiggy continue to secure significant capital. The funds will also support Zomato’s ambitious expansion plans across multiple verticals, including its quick commerce platform, Blinkit.
Financial Performance and Strategic Growth
Zomato’s financial results reflect steady growth. In Q2 FY25, the company reported a 5x increase in net profit to ₹176 crore, with revenues climbing 69% year-over-year to ₹2,340 crore. Its quick commerce arm, Blinkit, saw a 23% sequential revenue increase, contributing significantly to Zomato’s consolidated earnings. Despite short-term losses in Blinkit due to investments in new infrastructure, the platform is nearing adjusted EBITDA break-even.
Since its IPO, Zomato’s annualized adjusted revenue has surged from ₹4,640 crore to ₹20,508 crore. However, its cash reserves have dipped from ₹14,400 crore to ₹10,800 crore due to acquisitions and operational scaling
Competitive Dynamics: Zomato vs. Swiggy
Zomato’s strategic moves come ahead of Swiggy’s anticipated IPO, projected to raise ₹3,750 crore. Swiggy has been trailing in quick commerce, where Zomato’s Blinkit has a notable lead in metrics like average order value and operational efficiency. However, Swiggy’s path to growth in traditional food delivery remains straightforward, intensifying the rivalry
Future Outlook
The ₹8,500 crore fundraising will likely fortify Zomato’s position to scale operations, invest in technology, and expand its market share in both food delivery and quick commerce. This initiative is poised to help Zomato navigate competitive pressures and continue its growth trajectory, positioning itself as a dominant player in India’s food-tech landscape.
For a detailed breakdown of the developments, refer to the Business Standard’s comprehensive coverage
Key Highlights
1. Purpose of Fundraising
- Amount to be raised: ₹8,500 crore
- Reason:
- Strengthen financial reserves for growth.
- Compete with rivals like Swiggy, which is preparing for its IPO.
- Fund expansion, especially in quick commerce through Blinkit.
2. Financial Partner
- Investment Bank: Morgan Stanley
- Base Price for Shares: ₹265.91 per share
3. Zomato’s Financial Performance (Q2 FY25)
- Net Profit: ₹176 crore (5 times increase from last year).
- Revenue: ₹2,340 crore (69% year-on-year growth).
- Quick Commerce (Blinkit):
- Revenue grew 23% sequentially to ₹1,156 crore.
- Average Order Value (AOV): ₹660 (up from ₹625 last quarter).
- Dark Stores: Increased from 639 to 791 stores.
- Monthly Active Users: 8.9 million (up from 7.6 million).
4. Zomato’s Cash Flow
- Cash Reserves: ₹10,800 crore (down from ₹14,400 crore in 2021).
- Reason for Decrease:
- Investments in acquisitions like Paytm Insider and Blinkit.
- Scaling operations.
5. Competitor Overview
- Swiggy’s Planned IPO: ₹3,750 crore.
- Competitive Edge of Zomato:
- Blinkit’s growth outpaces Swiggy’s quick commerce.
- Strong food delivery revenue growth.
