Zomato Raises INR 8,500 Crore Through QIP to Boost Growth Initiatives

Foodtech giant Zomato has successfully raised INR 8,500 crore (approximately $1 billion) through its first Qualified Institutional Placement (QIP). The fundraising, aimed at supporting its quick commerce business Blinkit and other strategic growth initiatives, marks the company’s largest capital raise since its initial public offering (IPO) in 2021.

The QIP, launched on November 25 and closed on November 28, involved the sale of approximately 33.64 crore equity shares to qualified institutional buyers at an issue price of INR 252.62 per share. This price represented a 5% discount to the QIP floor price of INR 265.91 per share and a nearly 12% discount from Zomato's previous stock closing price.

Fund Allocation

Zomato plans to strategically allocate the proceeds from the QIP across various business segments:

• Dark Stores and Warehouses: INR 2,137 crore will be invested in setting up and running operations of dark stores and warehouses to bolster the quick commerce segment.
• Marketing and Branding: INR 2,492 crore will be directed towards advertising, marketing, and branding across all its businesses to strengthen its market presence.
• Technology Upgrades: INR 1,769 crore is earmarked for enhancing the company’s tech infrastructure, including investments in cloud infrastructure and software development.
• District Vertical: The additional funds will also help scale Zomato's “going-out” initiative, branded as District.

Competitive Landscape

The capital raise comes at a time when Zomato faces increasing competition in the quick commerce and food delivery segments. Its rival Swiggy recently concluded its IPO, raising $1.4 billion, while other players like Zepto and BigBasket are rapidly expanding. Zepto, for instance, secured $350 million in funding last week, bringing its total funding to $1.3 billion in the past five months.

Addressing these challenges, Zomato’s founder and CEO, Deepinder Goyal, emphasized the importance of raising additional capital. “Given the competitive landscape and the much larger scale of our business today, securing additional funds is essential for maintaining our growth momentum,” Goyal stated in a letter to shareholders.

Transition to Majority Domestic Ownership

Following the QIP, Zomato is expected to apply to the Reserve Bank of India (RBI) to cap its foreign institutional investment at 49%. This strategic move aims to facilitate a transition towards majority domestic ownership. Such a shift would allow Blinkit to adopt an inventory-based business model in India, which is currently restricted under existing rules for foreign-owned entities.

Industry Implications

Zomato’s latest fundraise reflects its intent to solidify its position in the fast-growing quick commerce sector. The timing of the QIP, coinciding with Swiggy’s successful public debut, underscores the intensifying competition between the two giants. With these fresh funds, Zomato is poised to scale its operations and innovation, addressing the demands of a rapidly evolving market.

This development highlights Zomato’s commitment to long-term growth and its proactive approach to tackling industry challenges while capitalizing on new opportunities.