L-R: Zomato’s Deepinder Goyal, Info Edge’s Sanjeev Bikhchandani and Sequoia India’s Mohit Bhatnagar
Once a company that simply “scanned restaurant menus”, Zomato made history today by becoming the first Indian startup unicorn to launch a domestic IPO.
Also in this letter:
🚨 Zomato: The numbers to know
🌟 What does this IPO mean for other startups?
🥊 When Zomato took on Burrp and won
GIF Credit: Giphy
July 14 will go down as an important day for Indian startups. Online food delivery platform Zomato’s public issue opened for investors, in what is one of the most highly anticipated Dalal Street debuts from a consumer internet company. When the issue opened on Wednesday morning, it caught the attention of everyone from startup founders and investors to analysts and meme-makers — at least on
Opinion was divided, with one set of people bullish on the IPO and another raising concerns about Zomato’s business model and lack of profits.
The issue was subscribed 1.05 times over at the end of trading hours on Wednesday.
Retail investors show interest: Only 10% of Zomato’s issue is reserved for retail investors, but they clearly want more. The retail investor issue saw 2.7 times as many bids as there were shares available.
What about others? The qualified institutional buyer (QIB) portion was almost fully subscribed at 98% while non-institutional investors (NII) subscribed to 12% of the issue and Zomato employees bid for 18%.
Anchor investors: Zomato had already raised Rs 4,197 crore (almost 45% of its total offer size) from a record 186 anchor investors ahead of its IPO. Existing backers Tiger Global, Kora, Fidelity also invested in the anchor issue at Rs 76 a share through their public market funds.
New World Fund, Baillie Gifford, Morgan Stanley, CPPIB, GIC, Kotak Flexicap Fund, are some of the leading funds that picked up shares from the anchor placement.
Financials: The company’s revenue fell 23.4% year-on-year to Rs 1,994 crore in the year ended March 31, 2021. Losses, however, narrowed to Rs 812 crore in FY21 from Rs 2,363 crore in FY20.
In March, Zomato founder Deepinder Goyal spoke about Zomato’s journey over the past decade—from the days of Foodiebay to charting its IPO course on our weekly chat show The Rundown with ETtech.
Also read: Meet the top team that steered Zomato on the long road to IPO
Zomato: The numbers to know
Zomato has four key offerings: Food delivery, dining out, business-to-business service Hyperpure, and subscription service Zomato Pro. It had 32.1 million monthly active users in FY21, down from 41.5 million in FY20.
Food delivery: As of March 2021, Zomato had 169,802 active delivery partners who fulfilled 94.1% of orders in FY21 and 148,384 active food delivery restaurants.
On average, about 6.8 million customers ordered food three times every month in FY2021. Almost all orders (99.3% of the orders) came from its mobile app.
The first wave of Covid-19 hit the food delivery and restaurant business hard in the first quarter of 2021, but the company has recovered since then.
Zomato said the second wave of the pandemic had no adverse impact on its food delivery business.
Gross order value was at Rs 9,482.9 crore for fiscal 2021, down 15.5% from Rs 11,220.9 crore in the previous fiscal. The total number of orders placed fell by 40.7% to 238.9 million in FY21 from 403.1 million in FY20.
That said, the average order value increased to Rs 395.4 in Q4-FY21 from Rs 286.9 in Q4-FY20.
Dining out: Zomato had 389,932 active restaurant listings on the platform as of March 31, of which only 2,512 paid for advertising. In comparison, 8,064 restaurant partners had paid for advertising in FY20. Unlike the food delivery business, dining out is yet to recover from the pandemic, with lockdowns continuing in many places.
Hyperpure: Zomato’s farm-to-fork supplies offering supplied 9,225 restaurant partners across six cities in India in March. The company’s revenue from the sale of traded goods, which includes income from Hyperpure, was Rs 200.2 crore for FY2021, up from Rs 107.6 crore in FY20 and Rs 14.9 crore in FY19. Hyperpure currently accounts for about 10% of Zomato’s topline.
Zomato Pro: Zomato had about 1.5 million Pro members and over 25,443 Pro restaurant partners in India as of March 31. The company generated revenue of Rs 57.5 crore from its subscription product in FY21, down from Rs 87.9 crore in FY20 but up slightly from Rs 56.2 crore in FY19.
Employee count: Zomato had 3,755 employees worldwide as of March 31. It also has a temporary workforce of 866 people who are not on the payroll.
Tweet of the day
We track the company’s evolution from its Foodiebay days to a food delivery service in 525 Indian cities and towns.
Over the years, Zomato has also acquired several companies to increase its user base and grow its market share. In April, the company had said it benefited significantly from two key acquisitions — Uber’s India food delivery business in FY20, which helped increase its market share, and logistics provider Runnr (Carthero Technologies Private Limited) in FY18 to provide logistic services for online orders. Here’s a quick look at all the firm’s prominent startup purchases.
Earlier this year, we also collaborated with data platform Tracxn to see how Zomato’s valuation has risen and its cap table has evolved over the years.
What does Zomato’s IPO mean for other startups?
As Zomato’s Dalal Street debut set the stage for other top-tier startups in India, we spoke to Infosys cofounder Kris Gopalakrishnan and others on what it could mean for the startup ecosystem.
“We want more startups to launch IPOs and have access to capital through this route as well. This could also give exits. It’s also good for the public, which will get to own some shares of successful startups. I am glad about the Zomato listing and expect more startup IPOs going forward” said Gopalakrishnan.
Snapdeal cofounder Kunal Bahl said that Zomato’s public offering shows that “founders should not shy away from transformations if that’s what’s needed. In the end, it can be rewarding”. Meanwhile, several domestic startup founders and venture capital investors also sent good wishes to the Gurugram-based firm.
India’s startup ecosystem will be keenly watching how this offering unfolds as it could set the tone for the upcoming tech IPO rush. The public issue will also likely be a test of Indian investors’ appetite for startup unicorns.
The IPO queue: Car buying portal CarTrade and digital payments firm Mobikwik have filed draft documents with India’s markets regulator for their listings. Digital payments firm Paytm, beauty e-tailer Nykaa, online insurance aggregator PolicyBazaar, e-commerce logistics firm Delhivery, and eyewear retailer Lenskart, among others, are also in various stages of their IPO plans.
Last week, we spoke to several influential founders and investors on our chat show, The Rundown by ETtech, on the significance of these upcoming IPOs, the state of the startup ecosystem, and how investors deal with rapidly rising valuations. You can read the key takeaways here and listen to the entire episode here.
Also read: Smells like teen spirit: Young Indians keen on IPOs of new-age companies
Copycats, critics and controversies
Before we go, here are some memorable footnotes from Zomato’s journey.
Burrp’s relevance however faded in the following years even as Zomato charted an aggressive expansion across the country. In 2015, Goyal was asked during a Reddit AMA (Ask Me Anything) on how they beat Burrp, to which he replied “I think the Burrp team ran themselves to the ground”. In 2017, BookMyShow acquired Burrp for a meagre Rs 6.7 lakh.
Debate over India’s tech capital: In 2014, Goyal kicked up a storm through a cheeky job advertisement, which asked techies to join the company in its ‘mission’ to make Delhi the true ‘tech capital’ of India instead of Bengaluru.
Zomato.xxx: In 2012, Zomato launched a new site on the xxx top-level domain, typically reserved for adult websites. The site showcased food photos sourced from Instagram’s APIs, with infinite scrolling.
In 2015, the company ran marketing campaigns on some of the world’s biggest adult websites to boost its late-night food delivery business. However, Goyal later said they would pull these campaigns, “because we sense we crossed the fine line between marketing irreverence and cultural insensitivity”.
Menu-scanner controversy: In 2015, the infamous Housing.com cofounder Rahul Yadav mocked Zomato as a company that had been “scanning menus” for the past seven years during a Reddit AMA.
Today’s ETtech Top 5 was written by Vikas SN and Digbijay Mishra in Bengaluru and Apoorva Mittal in Mumbai. It was edited by Zaheer Merchant in Mumbai.