Zomato raises IPO size amid robust demand; issue likely to open on July 14

IPO price band likely to be Rs 70-72 per share

Food delivery company Zomato’s Rs 9,375-crore initial public offering (IPO) will open for subscription on July 14, said investment banking sources on Wednesday.

The company initially was looking to raise Rs 7,500 crore through the offering. 

Investment banking sources said the issue size has been increased because of the robust demand from investors.

On the other hand, Info Edge, the only selling shareholder in the IPO, has cut its offer for sale (OFS) size from Rs 700 crore to Rs 375 crore.

Market sources said the price band for the IPO could be in the range between Rs 70 and Rs 72 per share. They said the company is eyeing valuation between Rs 55,000 crore and Rs 60,000 crore on a post-diluted basis.

Queries sent to the company and investment bankers didn't elicit a response  immediately.

Grey market players said Zomato’s shares are changing hands in the range between Rs 85 and Rs 90 in the grey market ahead of its IPO.

Last week, market regulator Sebi had cleared Zomato’s draft red herring prospectus (DRHP), which was filed on April 28.

Zomato’s IPO will be India’s third-largest offering in terms of fresh funds raised. 

Reliance Power and DLF had raised Rs 10,123 crore and Rs 9,188 crore fresh capital in their IPOs in 2008 and 2007.

For the nine months ended December 2020, Zomato had total cash and cash equivalents of Rs 4,967 crore. Earlier this year, the company had raised Rs 1,800 crore from Tiger Global, Kora, and others. After the IPO, the company will add Rs 9,000 crore to its kitty, taking the total to over Rs 15,500 crore. Analysts will give Zomato’s major financial muscle to tap the rapid growth in the food delivery space in India.

Currently, the company is burning cash to get a strong foothold in the market. Zomato’s losses widened every year between FY18 and FY20, from Rs 107 crore to Rs 2,386 crore. However, the cash burn helped the company grow its top line by five times -- from Rs 466 crore to Rs 2,605 crore.