Zomato eyes grocery rollout, invests Rs 745 crore in Grofers

Food ordering platform Zomato, whose Rs 9,375 crore IPO opens on July 14, is planning to launch a grocery section on its app soon, a senior company official said.

The company recently invested $100 million (around Rs 745 crore) for acquiring a minority stake in grocery delivery platform Grofers.

"It (grocery) is a large opportunity. The online grocery is nascent right now but is growing rapidly not just in India but across the world...

"We are actively experimenting in that space and recently invested $100 million for a minority stake in Grofers, with the idea of getting more exposure to that space and building our strategies and plan around that business," Zomato CFO Akshant Goyal said.

Read more: Zomato's Rs 9,375 crore IPO to open on July 14 for subscription

"We are very soon launching online grocery on the Zomato app and that will go live soon, and with that we will foray into the space and will see how fast, how rapidly scale it," he added.

Zomato has fixed a price band of Rs 72 to 76 per share for the IPO, which will open for subscription from July 14 to 16.

The total IPO size is Rs 9,375 crore, comprising a fresh issue of equity shares worth Rs 9,000 crore and an offer-for-sale to the tune of Rs 375 crore by Info Edge (India) Ltd, Zomato said.

Going by the IPO papers, proceeds from the fresh issue would be used towards funding organic and inorganic growth initiatives and general corporate purposes.

Zomato's valuation post-IPO on a fully-diluted basis will be Rs 64,365 crore, far more than the other listed companies in the food segment such as Jubilant FoodWorks (market capitalisation of Rs 41,006 crore) and Burger King India (Rs 6,627 crore).

The online food delivery segment has seen significant growth in the last few years with Zomato and Swiggy competing head-on to grab market share.

Zomato's FY20 revenue had jumped over two-fold to $394 million (around Rs 2,960 crore) from the previous fiscal, while its earnings before interest, taxes, depreciation and amortisation (EBITDA) loss was around Rs 2,200 crore.

In February, Zomato had raised $250 million (over Rs 1,800 crore) in funding from Tiger Global, Kora and others, valuing the online food ordering platform at $5.4 billion (around Rs 40,000 crore).

Kotak Mahindra Capital Company, Morgan Stanley India Company Pvt Ltd and Credit Suisse Securities (India) Pvt Ltd are the global coordinators and book running lead managers to the issue.

BofA Securities India Ltd and Citigroup Global Markets India Pvt Ltd have been appointed as merchant bankers to the public issue.

"Zomato's IPO is the biggest over the last one year after SBI Cards and Payments in March 2020, which was worth Rs 103.55 bn. Zomato, which plans to raise Rs 93.75 bn, is expected to outstretch its cash reserves to nearly Rs 150 bn," GlobalData Senior Analyst Alisha Bajpai Singh said.