Zomato Aims for December Debut of $1 Billion QIP, Morgan Stanley Onboard

Zomato, the leading food delivery and quick commerce platform, is preparing for a significant Qualified Institutional Placement (QIP) to strengthen its balance sheet. The company has enlisted Morgan Stanley to oversee the process, with plans to launch the QIP offering in December, subject to favorable market conditions. The total fundraise could range between $800 million to $1 billion (approximately Rs 8,500 crore). The company is also considering adding one or two more investment banks to the syndicate for a larger offering.

Purpose of the Fundraise

The primary objective of this fundraising is to fortify Zomato’s balance sheet. The company has clarified that the raised funds will not be used for minority investments or acquisitions at this stage. Zomato informed investors that its main goal is to build its cash reserves amidst increasing competition in the market. Although Zomato has been profitable, particularly with its quick commerce segment, the company wants to ensure it has a robust financial foundation to continue its growth trajectory.

No Immediate Plans for Acquisitions

Zomato reassured its stakeholders that the capital raised will solely be used to enhance the company's financial position and will not go towards any acquisitions or minority investments for now. The company emphasized that it has a strong focus on operational efficiency and cash flow generation rather than expanding through acquisitions at this point.

Zomato’s Recent Stock Performance

Zomato's stock has shown notable growth despite a slight dip in recent months. As of mid-November, its stock price closed at Rs 269.6 per share, up by 4.27 percent. While the stock has decreased by 9.6 percent from its 52-week high of Rs 298.2, it has seen an impressive 118 percent increase in value since the beginning of the calendar year. Despite this fluctuation, the company’s financial outlook remains positive as it aims to secure capital for future competitiveness.

QIP Following Swiggy's IPO Success

Zomato's QIP plans come on the heels of a successful initial public offering (IPO) by its rival, Swiggy. Swiggy raised Rs 11,327 crore through its IPO in November 2024, which saw a 7.69 percent gain on the day of listing. Zomato’s fundraising is part of its ongoing strategy to ensure that it remains competitive in the food delivery and quick commerce sector, as larger players continue to attract investment.

Growth in Revenue and Cash Reserves

Zomato’s annualized Adjusted Revenue has seen substantial growth in recent years, increasing fourfold from Rs 4,640 crore in 2021 to Rs 20,508 crore for Q2FY25. However, its cash balance has reduced from Rs 14,400 crore at the time of its IPO to approximately Rs 10,800 crore. This reduction is primarily due to investments in expanding its quick commerce segment and supporting past equity investments. Zomato’s leadership believes that boosting its cash reserves is crucial for maintaining a competitive edge in a rapidly evolving market.

Seeking Shareholder Approval

Zomato is currently seeking shareholder approval for the proposed QIP, with votes set to be cast by November 22, 2024. The approval process is an important step in finalizing the fundraising initiative. By securing shareholder consent, Zomato hopes to strengthen its position and continue its journey as a leader in the food delivery and quick commerce space.

Conclusion: Capitalizing for Future Success

The upcoming QIP offering is designed to help Zomato maintain its momentum in a competitive landscape. The funds will strengthen its cash position, enabling the company to compete effectively with rivals and sustain its growth. While the capital will not be used for acquisitions or investments at this point, it will ensure that Zomato remains on a strong financial footing as it continues to innovate and lead the industry.