Gauging Market Mood, Zomato Plans to Advance IPO Launch

Online food delivery and restaurant discovery platform Zomato could advance its initial public offer (IPO) launch as the company and bankers appear inclined to crunch timelines, amid a certain amount of skepticism over the continuing strength of the recent market rally. The much awaited offering- the second biggest in nearly four years – might open mid- July or even earlier instead of July 19 as was planned previously, said people with direct knowledge of the development.

Zomato and the bankers to the issue now want to launch the IPO on July 14, said one of the people quoted above.

Zomato did not respond to ET queries. Further, bankers have now recommended a price band of Rs.72-76 for the issue, higher than what was planned earlier. The size of the issue is likely to be around Rs. 9,350 crores, which will comprise a fresh issue of Rs. 9,000 crores, and an offer for sale of roughly Rs.350 crores.

Zomato on Wednesday received approval from Registrar of Companies (ROC) to proceed with the IPO, the people said. The company received final approval from the market regulator Sebi earlier this week.

“The current thinking is that IPO should be launched earlier when the going (for the market) is good,” the person said. Companies and bankers decide on the sentiment in the stock market. While equities have so far remained calm despite concerns over foreign fund outflow’s, rising crude oil prices and rich share valuations, there are worries that the market could be vulnerable to sharp sell-offs.

While bankers expect strong investor demand for the Zomato issue, a steady market is critical for better issue pricing.

“The approval from Sebi and ROC have come faster than anticipated and the company wants to close the IPO process quickly in the challenging market conditions,” said the person aware of the development.

Zomato issue would be the second biggest IPO in the last four years after the Rs. 10,355 crores offer from SBI Cards and Payment Services. In October 2017, General Insurance Corporation of India raised Rs. 11,176 crores through an IPO.

Zomato had filed its draft red herring prospectus (DRHP) at the end of April. Info Edge, one of the key shareholders of Zomato on Sunday has reduced the offer for sale in the latter’s IPO to Rs.375 crores. Info Edge, the parent company of Naukri in April informed the stock exchanges of its intentions to sell shares worth $100 million (Rs.750 crores) in Zomato IPO. Info Edge currently owns around 18.5% stake in the company, which according to the DRHP, was acquired at an average cost of Rs. 1.16 per share.

The company plans to use Rs. 5,625 crores of the net proceeds towards funding organic and inorganic growth initiatives.

Zomato has reported 463% jump in total revenue from Rs. 487 crores in FY18 to Rs. 2,743 crores in FY20. In the nine months that ended December 31,2020, the company said its total revenue stood at Rs. 1,368 crores.   S-ET

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