Zomato to raise ₹8,500 cr via QIP as it braces for intensifying competition
Rival Swiggy is gearing up for a $1.25 billion IPO later this year, while Zepto has raised over $1 billion from private investors in the last six months alone.
The board of Zomato has approved a proposal to raise ₹8,500 crore via a qualified institutional placement (QIP) of shares to help the food and grocery delivery company take on competition from rival players like IPO-ready Swiggy and Zepto.
The Gurugram-based company’s cash balance fell to ₹10,800 crore in the September quarter of FY25 from ₹14,400 crore when it launched an initial public offering (IPO) in 2021, mainly on account of funding past quick-commerce losses and some equity investments and acquisitions. The firm acquired Paytm’s events ticketing business for ₹2,014 crore in August, an effort to broaden its services beyond food and grocery delivery.
Zomato now believes it needs to enhance its cash balance given the competitive landscape and the much larger scale of the business today, it said in a letter to shareholders on Tuesday.
“We believe that capital by itself does not give anyone the right to win (and that service quality is the key determinant of success), but we want to ensure that we are on a level playing field with our competitors, who continue to raise additional capital,” Zomato founder and chief executive officer Deepinder Goyal said.
However, the company noted that the fundraise is only for strengthening the balance sheet and will not be used to make any minority investment or acquisition.
This comes as rival Swiggy is gearing up for a $1.25 billion public market listing later this year at a valuation of around $15 billion, though a final valuation will become clearer as the road shows get under way. Another rival Zepto has raised over $1 billion from private investors in the last six months alone, along with aggressively expanding its quick grocery delivery footprint. It is also eyeing an initial share sale next year.
Zomato's stock fell 3.4% to settle at ₹256.5 on the NSE on Tuesday.
Quick commerce competition
In the analysts’ call on Tuesday evening, Zomato acknowledged growing competition in the quick commerce space. “The business is still nascent and evolving and there are still parts of the business that are not built out yet. We, of course, have to watch the competition and make some decisions accordingly but we are very focused on our business at this point,” Akshant Goyal, chief financial officer of Zomato, said.
Blinkit is expanding categories and assortment in grocery delivery, Goyal said. However, it is less focused on market share, stating that the business is already growing at 120-130% year-on-year.
Blinkit has been on an expansion spree in the last few months, much like its rivals Swiggy Instamart and Zepto, entering more cities every quarter. Last month, it launched the service in Haridwar, Vijayawada, Kochi, and Bathinda. It is also looking to launch a cafe service to offer snacks and beverages within minutes, Mint reported earlier this month.
“What we are trying to test with expansion is in how many cities and towns is this product viable and how much depth the service can have in each city,” Goyal said.
While Blinkit’s focus will remain on the top 8 cities, it wants to explore new markets and demographics, according to the finance chief.
Blinkit’s average order value (AOV) rose to ₹660 from ₹625 in the previous quarter, helped by the monsoon season where consumers tend to add more items to their cart due to limited serviceable capacity, said Albinder Dhindsa, chief executive of Blinkit. Moreover, the expansion of assortment has also led to a higher AOV.
The ongoing slowdown in consumption has not seen any noticeable impact on Zomato’s food delivery business, Goyal said. Zomato’s food delivery vertical clocked an operational revenue of ₹2,012 crore in the September quarter, up from ₹1,546 crore in the year-ago period.
Zomato said it will launch District—its new app for dining and events ticketing—which will be live in the next four weeks. “At this point, we are focused on making sure we do a good job at migrating the business from Zomato and Paytm platforms to the new District app,” Deepinder Goyal added.
Net profit jumps
Zomato’s net profit grew nearly fivefold to ₹176 crore in the September quarter, from ₹36 crore a year ago, driven by massive growth in its quick commerce business Blinkit and restaurants supplies business Hyperpure.
Blinkit, formerly Grofers that Zomato acquired in 2022, reported a 129% jump in revenue from operations to ₹1,156 crore, with dark store count totalling 791 at the end of the quarter, according to filings made with the stock exchanges on Tuesday. Average order value rose to ₹92.9 in the period, against ₹78.8 in the previous quarter, while gross order value rose 21% to ₹6,132 crore during the quarter.
Hyperpure’s revenue nearly doubled to ₹1,473 crore.
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