Food delivery giant Zomato has announced that its board of directors will convene on October 22, 2024, to deliberate on raising funds through a qualified institutions placement (QIP). This decision was made public through a regulatory filing on Thursday, but the company did not specify the amount it intends to raise through this funding initiative.
In the regulatory filing, Zomato stated, “…this is to inform that a meeting of the board of directors of the company is scheduled to be held on Tuesday, October 22, 2024, inter-alia, to consider and approve raising of funds by issuance of equity shares by way of qualified institutions placement, as may be permitted under applicable laws, subject to such regulatory/statutory approvals, including the notice for the postal ballot for obtaining the shareholders’ approval in this regard.”
In addition to the fundraising discussion, the board will also approve the financial results for the second quarter (Q2) of the financial year 2024-25 (FY25). If the fundraising initiative is approved, it will mark Zomato’s first attempt to raise funds since its stock market debut three years ago.
This strategic move comes at a crucial juncture, as competition within the food delivery and quick commerce sectors intensifies. Rival company Swiggy is gearing up for its own initial public offering (IPO), with plans to raise as much as $450 million in fresh capital. The competitive landscape adds urgency to Zomato’s fundraising efforts, particularly as it seeks to maintain its market position.
As of the first quarter of FY25, Zomato reported having substantial cash reserves of ₹12,539 crore (approximately $1.5 billion). Some analysts suggest that this fundraising endeavor might be a strategic maneuver aimed at countering the impending IPO of its rival, Swiggy. With ample cash on hand, Zomato appears well-positioned to make calculated investments to further bolster its operations and fend off competition.
In its recent performance, Zomato reported a consolidated profit of ₹253 crore in Q1 FY25, an increase from ₹175 crore in the previous quarter and a notable jump from just ₹2 crore in the same period last year. This growth trajectory highlights the company’s successful recovery and adaptation in a challenging market environment. The firm’s revenue from operations soared by 74% year-on-year, reaching ₹4,206 crore in Q1, up from ₹2,416 crore a year ago.
Moreover, Zomato’s food delivery business has already achieved profitability, indicating a solid operational foundation. Senior management has also hinted that its quick commerce division, Blinkit, is approaching a break-even point, further enhancing the company’s financial outlook.
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While Zomato prepares for its board meeting, other players in the quick commerce space are also making headlines. Zepto, a quick commerce competitor, is looking to raise between $100 million and $150 million after securing over $1.2 billion in funding over the past 14 months. This ongoing trend of fundraising among competitors illustrates the dynamic and competitive nature of the industry, with firms continually seeking to secure capital to fuel growth and expand their market share.
As Zomato gears up for its upcoming board meeting and Q2 results announcement, investors and market watchers will closely monitor the company’s decisions regarding its fundraising strategy. The outcomes of these discussions could have significant implications for Zomato’s operational strategy and its position in the competitive landscape of food delivery and quick commerce.
In summary, the decision to consider raising funds through a QIP underscores Zomato’s commitment to sustaining its growth trajectory amidst intensifying competition. With its solid financial performance and a proactive approach to investment, Zomato aims to fortify its market presence while navigating the evolving landscape of the food delivery sector.
