Swiggy rival Zomato raises Rs 8,500 crore via QIP from domestic mutual funds

Deepinder Goyal-led foodtech giant Zomato has raised Rs 8,500 crore (over $1 billion) through a Qualified Institutional Placement (QIP), issuing 33.65 crore shares at Rs 252.62 each, a 5% discount from the floor price of Rs 265.91.

The issue was opened on November 25 and closed on November 28, 2024.

This marks Zomato's first major fundraising effort since its 2021 IPO. The move aims to bolster its cash reserves and strengthen its financial position in the fiercely competitive quick commerce sector, which includes players like Zepto and Swiggy Instamart.

Participation from domestic mutual funds

The QIP saw significant participation from domestic mutual funds. Motilal Oswal’s funds emerged as the largest group of allottees, acquiring 6.92 crore shares, or 20.81% of the issue. Within this, Motilal Oswal Midcap Fund received 4.55 crore shares (13.67%), followed by Motilal Oswal Flexi Cap Fund and Motilal Oswal Large Cap Fund.

ICICI Prudential’s funds collectively received 4.25 crore shares, accounting for 12.78% of the QIP, led by ICICI Prudential India Opportunities Fund and ICICI Prudential Balanced Advantage Fund.

HDFC’s funds were allotted 2.88 crore shares, representing 8.68% of the issue. Kotak's mutual funds received 1.97 crore shares (5.95%), with allocations going to Kotak Emerging Equity Scheme, Kotak Equity Hybrid, and Kotak Balanced Advantage Fund.

Expanding Blinkit and boosting financial stability

A substantial Rs 2,137 crore from the QIP proceeds has been allocated to expand Zomato’s quick commerce unit, Blinkit. The funds will be utilized to enhance dark store operations, warehouses, and supply chain infrastructure to meet the rising demand for hyperlocal deliveries.

With a cash balance of Rs 10,800 crore as of Q2 FY25, this capital infusion will raise the company's cash reserves to approximately Rs 19,300 crore.

“While the business is now generating cash... we believe that we need to enhance our cash balance given the competitive landscape and the much larger scale of our business today,” Goyal said in a shareholder letter.

Strong financial trajectory  

For the July-September quarter (Q2 FY25), Zomato reported a staggering 388.9% increase in profit for the second quarter of FY25, posting Rs 176 crore, a sharp rise from Rs 36 crore in the same period last year.

Notably, its revenue from operations grew by 68.5% year-on-year (YoY), amounting to Rs 4,799 crore in Q2 FY25, up from Rs 2,848 crore in Q2 FY24.