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Zomato IPO: The company’s business, risks, and COVID-19 impact

Food delivery and aggregator Zomato last week filed for an initial public offering with the SEBI; Zomato's largest shareholder InfoEdge will be divesting a part of its stake for Rs 750 crore through the offer. The company plans to raise Rs 8,250 crore — Rs 7,500 crore of fresh issue and Rs 750 crore of an offer for sale, per the draft red herring prospectus. Of the total fresh issue, the company can raise Rs 1,500 crore by undertaking a pre-IPO placement, while the remaining would be through the IPO route. The offer for sale is by Info Edge, which is an early investor in Zomato and currently the largest shareholder; it will offer shares worth Rs 750 crore. Info Edge's ownership will be locked for one year after the IPO as per SEBI rules. Zomato's business Zomato was founded in 2008 as a restaurant discovery website and is now one of the main players in the food delivery market along with Swiggy and new entrant Amazon. The company now earns most of its revenue primarily through food deliveries, it charges restaurants a commission for deliveries and collects delivery fees from customers. [caption id="attachment_134753" align="aligncenter" width="803"] Source: Zomato's DRHP[/caption] 99.3% of food delivery orders came via mobile app as of December 2020. The company has 160,000 delivery partners who fulfilled 94.9% of orders along with over 130,000 active restaurants for food delivery. The company earns revenue from charging commission to restaurants and collects food delivery charges from the customer. During…

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