After two days Gurugram based Food-tech company, Zomato will hit the primary market and become a public company. In its 13 years-long journey in which foodiebay became Zomato Private Limited, Zomato has faced many challenges and competition from the market and its rivals.
Some days ago, when Zomato filed its RHP (Red Herring Prospectus) with BSE (Bombay Stock Exchange), it mentioned many important things related to the company’s financial and future expectations.
Here are some of the critical points of RHP which helps investors to make a sound decision about the IPO:
Basic Details of the IPO:
|IPO Opening date||14-July-2021|
|IPO Closing date||16-July-2021|
|Issue type||Book build issue IPO|
|Face Value||₹1 per equity share|
|IPO Price||₹72 – ₹76 per equity share|
|Market Lot||195 shares|
|Minimum Order Quantity||195 shares|
|Basic Allotment date||22- July-2021|
|Initiation of Refund||23- July-2021|
|Credit of shares in Demat Account||26- July-2021|
|IPO listing date||27- July-2021|
Zomato IPO Lot Size
The Zomato IPO market lot size is 195 shares. A retail-individual investor can apply for up to 13 lots (2535 shares or ₹192,660).
Objects of the Issue:
The net proceeds from the IPO will be utilized towards the following objectives:
- Funding organic and inorganic growth initiatives.
- Meet general corporate purposes.
- Among the leading Food Service Delivery platforms.
- Recognized consumer brand equity across India.
- Widespread and efficient on-demand hyperlocal delivery network.
- A strong network of 1,31,233 restaurants and 1,61,637 delivery partners.
Quantitative and Qualitative Analysis of the company:
· As compared to last FY, Zomato’s food delivery business has suffered significantly. The total number of orders placed on its platform (in India) has decreased by 40.7% from 403.1 Mn in FY20 to 238.9 Mn in FY21.
· The Revenue from operations of the company has fallen by 24% to Rs 1,994 crore in FY21 from Rs 2,605 crore placed in FY20.
· During the FY ended in march 2021, the company made 86% of its operating revenue from its food delivery services which stood at Rs 1,715 crore.
· Zomato’s one of the B2B initiative HyperPure was least impacted vertical due to covid-19 and the lockdowns imposed, and its sales has grown by 86% from Rs 107.6 crore in FY20 to Rs 200.2 crore in FY21.
· During FY ended in March 2021, the company earned commission income from the restaurant and food places registered on its platform and at Rs. 78 cr. which accounts for 4% of the annual revenue collection during FY21.
· At the beginning of the last year, the company shed 13% of its total workforce (Approx. 520 employees) and helped to reduce employee benefits costs by 7.3% to Rs 740.8 cr. in FY21 from Rs. 799 cr. spent in FY20.
· Expenses on outsourced support were also lowered significantly, due to drop in the total food orders processed on its own platform by 40.48%, the cost has dipped by nearly 72% from Rs. 2,093.8 cr. in FY20 to Rs. 590 cr. in FY21.
· Due to the reduction in volume, payment gateway charges also diminished by 14%, from Rs. 74 cr. in FY20 to Rs. 63.6 cr. in FY21.
· Further on cost reduction, Zomato cut-down its cash burn on advertising, promotions, and marketing activities. Such costs shrink by 60.6% to Rs. 527 cr. in FY21 from Rs. 1,338.4 cr. in FY20. As compared to its total income, its advertisement and sales promotion expenses were 24.88% in FY21 compared to 48.80% in FY20.
· Orders processed through HyperPure were relatively unaffected (mention in above point also), and expenses on procurement of traded goods swell by 83.7% from Rs. 110.5 cr. in FY20 to Rs. 203 cr. in FY21.
· Zomato’s financial expenses and depreciation surged by 52.6% to Rs. 148 cr. in FY21 from Rs. 97 cr. placed in FY20 primarily due to the amortization of intangible assets due to the acquisition of Uber Eats last year.
· To make the IPO possible, the company’s management took some strict measures and the results are quite visible. The company managed to drop down its annual expenditure by 48% to Rs. 2,609 cr. in FY21 as compared to Rs. 5,006 cr. spent during FY20.
· As per FY 21, Zomato spent Rs. 1.3 to earn a rupee of operating revenue, enhancing its performance as compared to FY20 which was Rs. 1.92 spent to earn a single rupee.
· As per the data, even with a 40% depletion in the number of orders placed, the company has managed to control and reduce its losses by over 66%, as its annual loss dropped from Rs. 2385.6 cr. in FY20 to Rs. 816.4 cr. in FY21. EBITDA margins also improved outstandingly, from 79.01% in FY20 to 16.17% in FY21.
· Its balance sheet shows tremendous losses of Rs. 5,600.3 cr. at the end of FY21
As the company’s losses have been cut-down sharply, there’s still a long road ahead for the Deepinder Goyal led company.
Zomato’s performance on the stock market is vital for the Indian start-up ecosystem as it would set a tone for several companies including Paytm, CarTrade, Delhivery, MobiKwik, and Nykaa who are set to come with the public listing this year.