Zomato Eyes New Fundraising Through QIP as Competition Heats Up in Quick Commerce and Leadership Changes Unfold
Zomato, the food tech giant, has announced that its board will deliberate on raising funds through the issuance of equity shares via a Qualified Institutional Placement (QIP) during a scheduled meeting on October 22, 2024. This information was disclosed in an exchange filing made by the company on October 17, 2024. However, Zomato did not specify the exact amount it aims to raise through this QIP process.
The filing revealed that Zomato’s board will consider and approve the plan to raise funds through the issuance of equity shares as per applicable laws. Any decision regarding the quantum of the funds would be subject to regulatory and statutory approvals. Additionally, Zomato indicated that it would seek shareholder approval for this fundraising effort through a postal ballot. Alongside the funding discussion, the board will also review and approve the company’s financial results for the quarter that ended in September 2024.
Zomato’s recent financial performance has been notably strong. The company reported a significant surge in net profit to INR 253 crore in the first quarter of the financial year 2024-25 (Q1 FY25), compared to a mere INR 2 crore in the same period the previous year. This remarkable growth in profitability was accompanied by a 74% increase in operating revenue, which climbed to INR 4,206 crore during the June 2024 quarter, up from INR 2,416 crore in Q1 FY24. The impressive results were largely driven by Blinkit, Zomato’s quick commerce division, which has consistently demonstrated robust growth.
However, the quick commerce space in India has become increasingly competitive. Rivals such as Zepto and Swiggy’s Instamart, which is preparing for an IPO, are aggressively vying for market share. Other major players, including Flipkart Minutes, BigBasket, and JioMart, have also entered the fray, intensifying the competition. In such a competitive landscape, the fresh capital raised from the QIP could be instrumental for Zomato to maintain its market position and fuel future growth.
Beyond quick commerce, Zomato is also looking to expand its ‘going-out’ vertical. In an effort to scale this segment, Zomato acquired Paytm’s entertainment ticketing business earlier this year for INR 2,048 crore. This acquisition has enabled Zomato to sell exclusive event tickets on its platform, catering to the growing demand in the entertainment space. To further bolster its event and entertainment business, Zomato has recruited Kunal Khambhati, former head of live events and IP at BookMyShow, to lead its expanding efforts. The company is also gearing up to launch a new app called ‘District,’ which will focus on enhancing its ‘going-out’ offerings.
Additionally, there are reports that Zomato is contemplating relaunching its quick parcel service, Xtreme. Initially launched in October 2023, Xtreme was designed to provide logistics services for merchants via a standalone app. However, the revamped service will now likely focus on Zomato’s core food delivery business, potentially enabling the company to optimize its logistics and delivery operations further.
Despite these ambitious plans, Zomato has recently experienced some leadership changes. Last month, Akriti Chopra, Zomato’s co-founder and Chief People Officer (CPO), resigned from her position. This was followed by the resignation of independent director Gunjan Soni earlier in October, who cited increased work commitments as her reason for stepping down.
These developments have affected investor sentiment, as evidenced by the dip in Zomato’s share price. On October 17, 2024, Zomato’s shares closed 1.3% lower at INR 270.65 on the Bombay Stock Exchange (BSE), reflecting market concerns about the company’s leadership transitions and the increasing competition in the quick commerce space.
In conclusion, Zomato’s board meeting on October 22, 2024, will be a crucial one, as the company seeks to secure additional capital through a QIP, which could support its expansion into new verticals and help it navigate the growing competition in the quick commerce segment. With strong financial performance and ambitious growth plans, the outcome of this meeting will be closely watched by investors and industry stakeholders alike.