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Anchor investors signal confidence in Zomato ahead of IPO, invest Rs 4,197 crore

The food delivery platform attracted investments from international names like Goldman Sachs and JP Morgan ahead of its IPO launch on July 14. 

Online food delivery platform Zomato raised Rs 4,197 crore from 186 anchor investors ahead of its initial public offering (IPO) that opens today, a filing with the NSE revealed.

Why this matters? Anchor investors are qualified institutional investors who are invited to subscribe to the shares before the IPO. The price they subscribe at reflects the investors’ confidence and the demand for the company’s shares. Zomato’s investors subscribed at a price of Rs 76 per equity share, the highest-end of the band issued by the company. This comes on the heels of the National Restaurant Association of India (NRAI) asking the Competition Commission of India (CCI) to investigate the “inherently anti-competitive practices” of Zomato and Swiggy.

Details of the anchor investment

The anchor investors subscribed for a total of 55,21,73,505 equity shares, which represents around 42 percent of the IPO. Overall, 75 percent of the issue size has been reserved for qualified institutional buyers, 15 percent for high net worth individuals, and 10 percent for retail investors.

The investors include international names like Tiger Global, BlackRock, Fidelity, Goldman Sachs, JP Morgan, the Government of Singapore, and Morgan Stanley.

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Nineteen Indian mutual funds run by the likes of SBI, Kotak, HDFC, Axis, and Motilal Oswal subscribed to 184,104,960 equity shares, about 33 percent of the total funds from anchor investors.

The complete list of anchor investors can be found here.

Details of the IPO

Zomato’s Rs 9,375 crore ($1.25 billion) initial public offering (IPO) opens today (July 14) and closes on July 16.

Out of the Rs 9,375 crore that Zomato is set to raise, Rs 9000 crore will be a fresh issue and Rs 375 crore will be an offer for sale by existing shareholder Info Edge. The company is set to issue 1,30,20,83,333 equity shares, out of which 6,500,000 shares will be reserved for purchase by eligible employees.

The price band is fixed at Rs 72 to Rs 76 per equity share and bids for shares can be made for a minimum of 195 equity shares and in multiples of 195 equity shares thereafter, a press release by the company stated.

InfoEdge, Uber BV, Alipay Singapore Holding, Antfin Singapore Holding, Internet Fund VI Pte Ltd, SCI Growth Investments II, and Deepinder Goyal (5.55 percent) are some of the largest shareholders in the company.

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Kotak Mahindra, Morgan Stanley, Credit Suisse, Bank of America, and Citigroup will manage the IPO. These five companies have handled 15 issues in the past three financial years, out of which 5 issues closed below the issue price on the listing date, Zomato has warned.

Zomato’s stock is likely to be listed on NSE and BSE on July 27.

According to Zomato’s red herring prospectus (RHP), the consolidated loss for the financial year 2021 stood at Rs 816.43 crore on revenue of Rs 1,993.78 crore. Zomato has indicated that it will use the bulk of the funds from the IPO for funding organic and inorganic growth.

What are NRAI’s allegations against Zomato?

The issues that NRAI asked CCI to probe include the following “anti-competitive practices” of Zomato and Swiggy:

  • Bundling of services
  • Data masking
  • Exorbitant commissions
  • Deep discounting
  • Price parity agreements
  • Violation of platform neutrality
  • Lack of transparency
  • Vertical integration
  • Exclusivity of listed restaurants

Impact of proposed amendments to E-Commerce Rules

The government on June 21 proposed amendments that give the existing Consumer Protection (E-Commerce) Rules, 2020 more teeth.

The proposed rules cover food delivery platforms like Zomato and Swiggy and contain provisions that might impact the growth and future of these platforms. Among other things, the rules require these platforms to treat all sellers equally, to prevent the promotion of certain groups of sellers, to ban flash sales, to curb private labels, to explain the ranking process, and to stop using data to benefit their own products or a particular group of sellers.

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