Zomato has raised $1 billion through a so-called qualified institutional placement, completing its first major funding round since its IPO in 2021.
The $30 billion food delivery and quick commerce giant, which leads these two sectors, has issued about 336.5 million shares at ₹252.62 ($3) per share, according to a stock exchange filing on Friday.
Leading domestic mutual funds actively participated in this offering, which opened on November 25 and closed on November 28. Motilal Oswal emerged as the largest investor, accounting for 20.81% of the fund. ICICI Prudential Fund secured 12.78%, while HDFC and Kotak Fund secured 8.68% and 5.95%, respectively.
The $1 billion fundraising strategically shifted Zomato’s status to a “domestic” company by lowering foreign ownership below 50%. This will allow its quick commerce affiliate, Blinkit, to directly control products and warehouses by adopting an inventory-centric model that is currently limited to domestic companies.
The timing of the capital raise is also strategic, coming just weeks after rival Swiggy’s $1.35 billion IPO earlier this month. Zepto, another leading quick commerce startup, secured $350 million in a deal brokered by Motilal Oswal earlier this month.
Shares of Swiggy fell 4.1% on Friday, capping this week’s overall rally to 12.8%. Shares of Zomato, which is offered at a 5% discount to investors participating in the QIP, fell about 1% on Friday but remains up 127.7% year to date.
Zomato co-founder and CEO Deepinder Goyal said last month that the company, which already has $1.3 billion in cash reserves, is seeking additional funds to remain competitive.
The company, which recently reported its second consecutive quarter of earnings, is leading India’s rapid commerce market with Blinkit and is facing deep-pocketed competition from the likes of Swiggy, Zepto and BigBasket in a segment expected to generate more than $6.5 billion in annual operating revenue. You are competing with other companies.
“We expect the quick commerce industry to undergo a phase of increased competition over the next 6-12 months. Existing companies in the quick commerce industry are either seeking to raise capital or have already raised capital. Four new names including Flipkart, Reliance, BigBasket and Amazon are looking to enter the fast commerce space,” Bank of America analysts said in a note.
“First mover advantage is important in this space and given that TAM is c. 30 million households (330 million households in India), I think it is logical that market leader Zomato would want to maintain its lead c. “40% market share”
