Foodtech giant Zomato has secured board approval to raise up to INR 8,500 Cr (approximately $1 billion) through a qualified institutional placement (QIP).
According to INC42, the foodtech major revealed its board has created a fundraising committee to decide on the structure, issuance form, price, discounts, and terms of the QIP, in an exchange filing.
Zomato’s first fundraise post-IPO, says Deepinder Goyal
In Zomato’s Q2 FY25 shareholder letter, founder and CEO Deepinder Goyal stated that the company is raising funds for the first time since going public to boost its cash reserves.
Continue Exploring: Zomato allots shares worth INR 53 Cr under ESOPs ahead of Q2 earnings
“… We believe that we need to enhance our cash balance given the competitive landscape and the much larger scale of our business today. 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,” Goyal explained.
Additionally, Goyal stated that the company has no plans for minority investments or acquisitions with the funds raised. Instead, the capital will strengthen Zomato’s balance sheet. It’s important to note that Zomato’s cash balance decreased this quarter because of its acquisition of Paytm’s entertainment ticketing business. The company’s cash reserves fell to INR 1,726 Cr due to a INR 2,014 Cr investment for the acquisition.
Continue Exploring: Zomato’s net profit drops 30% to INR 176 Cr in Q2 FY25
Zomato’s net profit drops 30% to INR 176 Cr
Meanwhile, Zomato reported a net profit of INR 176 Cr for the September quarter of 2024, down 30% from the INR 253 Cr profit in the previous quarter. Operating revenue was INR 4,799 Cr, up 14% from INR 4,208 Cr in Q1 FY25.
Goyal mentioned that Blinkit, Zomato’s quick commerce arm, continues to break even on an adjusted EBITDA basis, while margins for their main food delivery business remain steady. Blinkit reported an adjusted EBITDA loss of INR 8 Cr, but Zomato’s food delivery business had an adjusted EBITDA profit of INR 341 Cr.
Reports suggest that the QIP will boost Zomato’s domestic shareholding to over 50%. It’s unclear who the new shareholders will be. As Goyal noted, Zomato’s fundraising plans coincide with its competitors. Swiggy, Zomato’s main rival, recently filed for a $1.4 billion IPO.
Moving forward, Zepto, a quick commerce competitor, is planning another fundraising round after already raising over $1 billion this year. This latest round is expected to bring in $150 million by the end of October.
