Zomato raises $1 billion in first major fundraising since listing in 2021

Zomato has raised $1 billion through a so-called qualified institutional placement, completing its first major fundraising since its IPO in 2021.

The $30 billion food delivery and fast-commerce giant, which dominates both categories, issued about 336.5 million shares at ₹252.62 each ($3), according to a stock market filing published Friday.

The placement, which began on November 25 and closed on November 28, saw strong participation from leading domestic mutual funds. Motilal Oswal emerged as the largest investor with his family of funds bagging 20.81% of the issue. ICICI Prudential funds gained 12.78%, while HDFC and Kotak funds gained 8.68% and 5.95%, respectively.

The billion-dollar fundraising strategically elevates Zomato’s status to that of a “domestic” company by pushing foreign ownership below 50%. This would allow its fast-trading unit Blinkit to adopt an inventory-based model, currently reserved for domestic companies, allowing direct control over products and warehousing.

The timing of the capital increase is also strategic, coming just a few weeks after that of its rival Swiggy’s $1.35 billion IPO earlier this month. Zepto, another leading fast commerce startup, obtained 350 million dollars earlier this month in a deal brokered by Motilal Oswal.

Shares of Swiggy fell 4.1% on Friday, capping this week’s overall rise at 12.8%. Zomato shares, offered to investors participating in the QIP at a 5% discount, fell about 1% on Friday, but remain up 127.7% year to date.

Zomato co-founder and CEO Deepinder Goyal said last month that the company, which already had $1.3 billion in cash reserves, was seeking additional funds to maintain competitive parity.

The company, which recently reported its second consecutive quarterly profit, leads India’s fast commerce market through Blinkit, competing with well-funded rivals like Swiggy, Zepto and BigBasket in a sector expected to generate more than 6.5 billion dollars in annual annual revenue.

“We see the fast commerce sector going through a phase of increased competition over the next 6 to 12 months. Fast commerce incumbents are seeking 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.

“In this space, the first mover advantage is significant, and given that the TAM is approx. With 30 million households (330 million households in India), we think it makes sense that market leader Zomato would want to maintain its leading position c. 40% share.