Existing investors such as Tiger and Kora will certainly hope that public market investors see the rising graph of Zomato’s valuations and give it a valuation of over $7 billion in its planned IPO later this year
While investing around $100 million in Zomato Pvt. Ltd in its previous funding round, Kora Management LP had said: “With 700 million active broadband subscribers in India, of which 500 million have come online only in the past four years, Zomato has many more mouths it can feed." About three months later, while the broadband subscriber base has not changed much, the assessment of how many mouths Zomato can feed has increased quite dramatically. Zomato’s latest funding round values the firm at a pre-money valuation of ₹37,850 crore ($5.15 billion). For the previous funding round of $660 million, the pre-money valuation stood at ₹24,300 crore ($3.24 billion). That represents a jump of 56% in a matter of just a few months.
Kora is among the leading investors in the latest round, along with Tiger Global Management LLC and Fidelity Management and Research Co. LLC. Kora accounted for 88% of the current fundraise of $250 million. In the previous financing round, the three investors had contributed over 50% to the total.
The pre-IPO fundraising could be as high as $500 million, said media reports, in which case the share of the three investors may eventually be lower. Even so, as an analyst at a domestic institutional brokerage said: “The strategy of getting mostly the same investors to double down is a tried and tested trick from the PE (private equity) playbook."
Existing investors, such as Tiger and Kora, will certainly hope that public market investors see the rising graph of Zomato’s valuations and give it a valuation of over $7 billion in its planned initial public offer later this year.
Reports also suggest that Antfin Singapore Holding Pte. Ltd is looking to sell at least a part of its stake in a secondary transaction ahead of the IPO.
In January 2020, it had bought Zomato shares at a pre-money valuation of $3 billion, suggesting it could exit with returns of over 70% in just a little over a year.
“One reason I can think of for the increase in Zomato’s valuations in such a short span of time is that the funding environment has become even more generous and the IPO now appears imminent. Secondly, the jump in growth during end-2020, indicating high value of consumers acquired by foodtech firms are turning out to be sticky and have a strong latent demand for food delivery," said Vivekanand Subbaraman, analyst, Ambit Capital Pvt. Ltd.
Greater visibility of the initial public offer results in a liquidity premium generally, said an analyst at a multinational brokerage, adding that the spectacular listing of DoorDash Inc. has raised the profile of food delivery firms among investors.