Ant, Uber-Backed Indian Food Delivery Startup Zomato Sets For $1.1B US IPO

Jack Ma’s Ant Group and Uber Technologies Inc UBER-backed Indian food delivery start-up, Zomato, has proposed to raise $1.1 billion (INR82.5 billion) from an initial public offering (IPO), Nikkei Asia reports.

What Happened: The IPO coincides with India’s brutal second wave of the pandemic.

Zomato plans to sell shares worth INR75 billion in the primary market. The largest shareholder, Info Edge, is set to offer INR7.5 billion shares. Zomato may also offer a pre-IPO placement for up to INR15 billion.

Zomato will invest INR56.25 billion from the IPO proceeds in customer and user acquisition, delivery infrastructure, and technology infrastructure.

Previously, Zomato raised $250 million at a $5.4 billion valuation from investors like Tiger Global, Kora Management, Fidelity, Dragoneer, and Bow Wave. Subsequently, the company raised $660 million from new investors, including Luxor Capital, Baillie Gifford & Co., and Mirae Asset, in another funding round.

Info Edge and Uber held an 18.55% and 9.13% stake in Zomato, respectively. Ant Group’s affiliates, Alipay Singapore Holding and Antfin Singapore Holding, held an 8.33% and 8.2% stake, respectively.

Zomato has a presence in 24 countries and over 10,000 cities.

Zomato and Swiggy each control around 50% of India’s food services market.

Zomato continues to burn through cash due to competition from Swiggy and new threats. Amazon.Com Inc AMZN also launched its food delivery service in India last year, Financial Times reports.

Why It Matters: Uber sold India’s Uber Eats business to Zomato for a 9.99% stake in Zomato last year. 

Ant has invested over $560 million in Zomato. Ant’s investment worth $100 million was delayed by the new Indian government’s restrictions on Chinese investment. 

Zomato has around 11 million active users in India, ordering 3.6 times a month. Zomato expects the user base to grow to 30 million by 2025.

Indian food services market is expected to reach $74 billion by 2024. Organized food service is expected to constitute 52% of the market. 

Zomato estimates the online penetration to expand to 16%. The online food delivery market is estimated to reach $12 billion by 2024 at a 43% CAGR.