Zomato Ltd., the food delivery giant, has announced plans to raise ₹8,500 crore through a qualified institutional placement (QIP), following approval from its board during a meeting on Tuesday, October 22, 2024. This move is part of Zomato’s strategy to strengthen its balance sheet amid a competitive landscape, according to a company filing.
The decision to raise additional funds comes after a significant reduction in Zomato’s cash reserves. The company’s cash balance decreased by ₹1,726 crore in the last quarter, largely due to the ₹2,014 crore acquisition of Paytm’s entertainment ticketing business. As of the end of the quarter, Zomato’s cash reserves stood at approximately ₹10,800 crore, down from ₹14,400 crore in the previous quarter.
Zomato, which has transitioned from a loss-making business at the time of its initial public offering (IPO) to one generating cash, acknowledged the need to maintain a healthy cash balance given its expanded operations and the competitive food delivery market. “While capital alone does not guarantee success, we want to ensure we are on a level playing field with competitors who continue to raise additional funds,” the company said in its statement.
The company’s quick commerce business, which operates near adjusted EBITDA break-even, is expected to benefit from the infusion of capital, while its food delivery margins remain stable. Zomato also clarified that it has no immediate plans for further acquisitions or minority investments.
Following the fundraising, Zomato plans to apply to the Reserve Bank of India to cap its Foreign Institutional Investment (FII) holding at 49%. As of now, foreign holdings account for 50.48% of the company’s ownership, with 5.25% classified as Foreign Direct Investment (FDI) and the remainder as FII.
Shares of Zomato ended the day 3.44% lower at ₹256.55, though the stock has surged over 100% this year, with a 135% increase over the past 12 months.
