14th July 2021 now holds a historic mark on the Indian Stock Exchange when the listed Zomato IPO finally opened. The initial public offering (IPO) of the country-wide food delivery online portal, Zomato, remained open till 16th July 2021. A week later, on July 23rd, Zomato IPO was at Rs 115 on the BSE trading. At the same time, on NSE, Zomato IPO was trading at Rs 116 that marked a significant 53 percent premium increase over the price of the issue.
Following its debut on Dalal Street, the 13-year-old food tech start-up Zomato’s founder and CEO Deepinder Goyal appeared for his first interview since the landmark IPO event happened. There he earnestly spoke on a range of topics ranging from company culture, keeping up with the competition, battling out mental health challenges, talent hiring, and the IPO itself. He capped off his interview emphatically with the words, “We are feeling liberated.”
Zomato IPO listing was a much-needed answer to the Indian stock market. It was always a matter of concern if it would ever value tech companies or accept a company in loss to the public. Ever since the IPO listing took place, the start-up culture has been reinvigorated with a fresh motivation to challenge itself and its competition to succeed more. Which then brings us to a most in-demand question – How did Zomato execute its IPO plan?
Zomato IPO Plan Execution
No wonder Zomato has been trending everywhere recently. From social media to the news channels to the daily tabloids – Zomato is everywhere. Now, to spill the beans on how Zomato executed its IPO, let’s begin with visionary Deepinder Goyal’s thoughts on it first.
Goyal was Always Planning on the IPO
Zomato’s IPO rush was something that was always on Goyal’s mind. A few years back in 2018, he revealed the same during a chat with a reporter. He had stated there that listing Zomato IPO has been the plan for the past few years. However, another food tech start-up Swiggy dented its plan with the competition it brought Upon it. Swiggy quickly became a well-capitalized newcomer, and it pushed Zomato to roll up its sleeves and start battling it out tooth and nail to snag investors. And in the whole process, the IPO plans had to be shelved for the time being.
Reorganize its Shareholding
Following Goyal’s IPO listing plans, Zomato reorganized its shareholding positions as the competition peaked. Despite its huge initial share sale moment, Zomato took the approach that can well be defined as a playbook on “How to execute an IPO plan?”
Zomato continuously shuffled its cap table since the beginning. It did so to remain IPO-ready whenever the time comes. The most significant breakthrough came when the Gurugram based company executed secondary transactions to ensure China’s Ant Group could partially dilute its stakes. It turned momentous for Zomato’s IPO executed due to changes introduced by India for the Chinese FDI in Indian Companies in April 2020.
As per the January 22 report, when the Alibaba affiliated group – Ant’s partial stake sale was executed, Info Edge founder Sanjeev Bikhchandani emerged as Zomato’s largest shareholder as an early investor in the company. As a result, less was spoken about Chinese shareholders when discussing Zomato’s cap table. Several US-based investment funds soon doubled following these changes as Zomato shifted its focus on adding new types of backers. Some of these investment funders were Tiger Global, Dragoneer, and Fidelity. Also, it is worth noting that Paytm’s IPO plans too had been stumbling in blocks because of the so-called “China overhang,” which otherwise the Goyal’s lead Zomato tackled smartly.
The changes brought in by the Gurugram based company worked brilliantly in its favor as several crossover funds known for investing in both private and public markets lined up for it. A combination of well-aligned events that raised more capital for the company ended up roping over 180 anchor investors.
The Doordash Effect
When Zomato was busy shuffling its cap table for IPO-ready, another food tech start-up named Doordash Inc. got itself listed on the New York Stock Exchange. Zomato noted how the loss-making food delivery app witnessed a surgical price rise by more than 85 percent on its debut. It gave the company a market capitalization of approximately $60.2 billion. It was a huge growth when compared to its $15 billion value in the private market. The whole event prompted Zomato to take a similar approach to Doordash Inc to get its IPO.
The Covid-19 Blessing
While most of the world was crippled by the effects of the coronavirus, some flourished during the peak Covid-19 times. As the restaurants dropped their shutter following the coronavirus lockdown, the loss-making food delivery apps – Zomato and Swiggy got their wings back and started trimming on their losses rapidly. Both the companies focused mainly on recovering their losses during this time.
Here, initially, Zomato’s revenue took a quarterly year-on-year tumble to Rs 1,994 crore in FY21. However, it minimized its losses from Rs 2,363 crore in FY20 to Rs 812 crore in the same duration. What followed this up was Deepinder Goyal’s tweet where he stated that the company had registered a record 60 percent increase in sales during the New Year’s Eve in comparison to the previous year. He even highlighted the peak orders per minute that hit a smashing 4,254 numbers that netted them a gross merchandise value of Rs 75 crore on the same day.
The First is Always Remembered
With the opportunity in place, Goyal was aware of the positive impact its company will have on becoming the first listed IPO. Hence, Zomato stayed with the deadline and worked around the clock nonstop. And as expected, the Zomato food tech IPO benefited from the euphoria it created in the stocks market.
Global Bull Run
With all the steps above, Zomato managed to sync it all by offering low-interest rates, global liquidity, and several US-led tech IPOs to acclimate a perfect time to get itself IPO listed.
Takeaway
As you may have read, it all started with a vision backed with master strokes after masterstrokes with the Covid-19 luck that propelled Zomato to become the first Indian IPO (Initial Public Offering) in the Indian Stock Market Exchange.
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