In a significant move that could reshape its financial landscape, Zomato, the leading foodtech giant in India, is gearing up to launch a Qualified Institutional Placement (QIP) worth INR 8,500 crore (approximately $1 billion) in December 2024, contingent on favorable market conditions. This strategic decision comes as Zomato aims to bolster its cash reserves and maintain a competitive edge in the rapidly evolving food delivery and quick commerce sectors.
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Zomato Set to Launch INR 8,500 Crore QIP in December: What It Means for the Foodtech Giant
Strategic Financial Maneuvering
According to reports from Moneycontrol, Zomato has enlisted the expertise of Morgan Stanley to facilitate the QIP, with plans to potentially add one or two more investment banks to the mix. This move follows the approval from Zomato’s board to raise substantial funds, reflecting the company’s proactive approach to navigating the competitive landscape of the foodtech industry.
Zomato’s founder and CEO, Deepinder Goyal, emphasized the necessity of enhancing the company’s cash balance, especially after a notable decline in reserves. As of the end of September 2024, Zomato’s cash reserves stood at INR 1,726 crore, significantly impacted by a INR 2,014 crore investment for acquiring Paytm’s entertainment ticketing business. Goyal stated, “We believe that we need to enhance our cash balance given the competitive landscape and the much larger scale of our business today.”
Focused Use of Funds
Importantly, Goyal clarified that the funds raised through the QIP will not be allocated for minority investments or acquisitions. Instead, the ccompany is likely to channel these resources into expanding its quick commerce arm, Blinkit, which has shown remarkable growth. In the September quarter of 2024, Zomato reported a staggering 389% year-on-year increase in consolidated net profit, reaching INR 176 crore. This growth is largely attributed to the success of Blinkit, which is facing increasing competition from rivals like Swiggy, Zepto, and others.
Competitive Landscape
The quick commerce sector is becoming increasingly crowded, with competitors aggressively expanding their networks. Recently, Swiggy made headlines with its public market debut following an INR 11,000 crore IPO, while Zepto raised over $1 billion in just three months to enhance its operations. Other major players like Flipkart, JioMart, and BigBasket are also ramping up their quick commerce capabilities, intensifying the race for market dominance.
Zomato’s QIP is expected to not only strengthen its financial position but also enable it to enhance its dark store network for Blinkit, ensuring it remains competitive in this fast-paced environment. The anticipated increase in domestic shareholding to over 50% further underscores Zomato’s commitment to solidifying its market presence.
