Company Law

SEMESTER V
COMPANY LAW

RESEARCH PAPER ON THE TOPIC:

INITIAL PUBLIC OFFERING IN PUBLIC SECTOR,
CASE STUDY : ZOMATO'S IPO

SUBMITTED TO:
PROF. RICHA KASHYAP
NMIMS, KIRIT P MEHTA SCHOOL OF LAW, MUMBAI

SUBMITTED BY:
ANOUSHKAA N V
ROLL NO. - CO43
BA. LLB (HONS.)
2020-25

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Kirit P. Mehta School of Law, Mumbai
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Analysis of Zomato’s Business Strategy

Foodiebay founded in 2008, by Deepinder Goel and Pankaj Chaddah, was later renamed to
the currently famous Zomato, in 2010. The reason for renaming was to avoid a similarity
with eBay and their future plans to not just limit itself to food delivery system and grow
further. The e-food platform went for an initial public offering (IPO) in mid July 2021.
Although Zomato was a traditional food delivery brand, its IPO was oversubscribed 35 times,
making its overall valuation to a peak of 12 billion dollars.

Zomato was India’s own first ever unicorn start-up to go public and list itself in the Indian
stock market. It is not possible to run a food delivery business without having hold of a vast
data base, which is why it is known as Food Tech. Zomato has expanded outside India as
well, as of 31st March 2021, Zomato is operating in 24 countries, but the Indian market
remains their ultimate focus. The acquisition of Uber Eats, another successful food delivery
brand, in January 2020, made notable headlines and strengthened Zomato’s position in the
Food Tech Industry. Now it operates in more than 500 cities in India itself. Zomato’s strategy
has included the acquisition of the similar brands of business in India as well as in foreign
countries.

Zomato has helped a lot of local or small restaurants to come into the vicinity of the public.
Making these restaurants accessible through their app, providing advertisements and even
performance analysis through their strategic analysis tools. Zomato not only acts as a food
delivery partner but also a restaurant discoverer for customers who’d want to dine out.
Everything ranging from budgets, menu, timing, reservation is displayed on the app. Users
also play an important role in creating content for Zomato by giving reviews, ratings as per
the parameters given by the app. The key players of a food delivery system, are the
restaurants, delivery persons, customer care and the customers themselves who gives reviews
and rating in the app.

Zomato has went ahead and incorporated a payments subsidiary, called Zomato Payments.
The Zomato Payments Private Limited (ZPPL) is a wholly -owned subsidiary. According to
information provided to the stock exchange by the company, Zomato Payments will involve
the establishment of a payment and settlement system, payment gateway services, prepaid
and post-paid payments instruments, and payment systems for offering payment services for
all products and services. as well as utility bills through mobile phones.

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Zomato follows the QAAA Model which consists of Quality – improving food quality
through food hygiene rating apps, Accessibility – Zomato has made its presence not only in
metro cities but also in tier 2 and 3 cities as well, Affordability – providing offers and
discounts on this application, Assortment – providing wide array of information to enable
the consumers to make an informed choice.

Zomato draws a major chunk of its revenue from delivery charges. The company started
giving Zomato pro, that is a premium account which allows the customers to enjoy exclusive
services and discounts. Restaurants pay money to Zomato to get advertised in their platform.

Zomato’s Initial Public Offering

Initial public offering (IPO) is the selling of shares by the private company, to go public.
When private firms want to sell their shares to the general public, they often turn to
investment banks for assistance. This process involves a significant amount of due diligence,
as well as marketing and compliance requirements. Purchasing shares during an initial public
offering (IPO) may be challenging due to the fact that the first sale is often intended for
wealthy investors such as hedge funds and financial institutions. Common investors are able
to acquire shares of a newly public business within a reasonable amount of time after the IPO
of the firm. Private companies are owned by its founders, but when a business fails, selling a
part of the company would be beneficial for them. A business going for IPO has to register
itself with the Securities and Exchange Commission, once all the criteria is met, they will be
listed on a stock exchange, open for the public to purchase.

The basic business-to-customer (B2C) product that Zomato provides consists of two
categories: dining in and food delivery. The firm claimed in its draft red herring prospectus
(DRHP) that it had steadily increased its market share over the course of the previous four
years to take the dominant position within the food delivery space in India.

Zomato had filed for an IPO of INR 8250 crores, of which INR 7500 crores will be a fresh
issue of equity shares. The balance INR 750 crores would be raised through an offer for sale
by Zomato’s earliest and existing investor, Info Edge.

With an ambitious offer to raise a total of Rs. 9375 crores and a price band of Rs. 72-76 per
share while having a face value of Re. 1, many people believe that it is outrageously
overpriced. However, the initial public offering (IPO) has been met with enthusiasm from the

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investors. At an issue price of 76 rupees, the offering was more than 38 times oversubscribed
overall, and it was oversubscribed by retail investors by 7.5 times. It is thought that the
success was due to a worldwide bull run in conjunction with the issue being released at the
ideal time.

To conclude, even while investors are feeling confident about the future thanks to the
expanding global price surge, the question of whether or not the stock can maintain its current
value remains up for debate. Moreover, Zomato is highly dependent on third arty supply. The
market rivalry is likely to be quite fierce due to the existence of Swiggy as its primary
opponent as well as the introduction of Amazon food. There is a widespread consensus
among financial market analysts that the stock value is too high, cannot be maintained even
over the medium term, and is likely to undergo a price adjustment in the near future.

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References

• Vijay Govindarajan and Anup Srivastava, What Zomato’s $12 Billion IPO Says About
Tech Companies Today, HARVARD BUSINESS REVIEW, ( Sept 27, 2022, 9:34
PM), https://hbr.org/2021/08/what-zomatos-12-billion-ipo-says-about-tech-
companies-today.
• CHITTORGARH, https://www.chittorgarh.com/ipo_review/zomato-ipo/3103/ ( last
visited Sept. 26, 2022).
• Chandeep, Zomato’s IPO: A Case Study, SALT, (Sept 27, 9 PM),
https://www.salt.pe/blog/zomatos-ipo-a-case-study-ckuo6uoxf32941ns990ury5be.
• Ranju Sarkar, 4 acquisitions in a year! Zomato founder on a shopping spree,
REDIFF, (Sept 26, 2014, 09:59 PM), https://www.rediff.com/business/report/pix-4-
acquisitions-in-a-year-zomato-founder-on-a-shopping-spree/20140926.htm.
• Greg McFarlane, IPOs for Beginners, INVESTOPEDIA, (Sept 27, 2022 8:45 PM),
https://www.investopedia.com/financial-edge/0312/ipos-for-
beginners.aspx#:~:text=An%20initial%20public%20offering%20(IPO,%2C%20mark
eting%2C%20and%20regulatory%20requirements.
• Soumyarendra Barik, Zomato Incorporates Payments Subsidiary Zomato Payments,
ENTRACKR, (Sept 28, 2022, 6 PM), https://entrackr.com/2021/08/zomato-
incorporates-payments-subsidiary-zomato-payments/.
• Ritika Sharma, Zomato Business Model: Everything you need to know, THE
STRATEGY STORY, (Sept 28, 2022, 8: 59 PM)
https://thestrategystory.com/2021/10/15/how-does-zomato-make-money-business-
revenue-model/.
• Jonathan, Zomato IPO – A Success Story or an Over-optimistic Market Response? ,
GLOBSYN, (Sept 27, 2022, 3:54 PM), https://www.globsyn.edu.in/blog/zomato-ipo-
a-success-story-or-an-over-optimistic-market-response
• ETtech, Five takeaways from Zomato's IPO filing, THE ECONOMIC TIMES, (Sept
29, 2022, 5 PM), https://economictimes.indiatimes.com/tech/startups/five-takeaways-
from-zomatos-ipo-filing/articleshow/82290197.cms?from=mdr
• Anirudh Laskar, In a first, State-Owned LIC may invest in Zomato’s Public Offer,
LIVEMINT, (Sept 29, 2022, 2:45 PM),

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https://www.livemint.com/companies/news/in-a-first-state-owned-lic-may-invest-in-
zomato-s-public-offer-11626029438014.html
• Astha Behl, Reporting Continuous losses and launching Zomato IPO – a case study,
JIMS, (Sept 28, 2022, 6:13 PM), https://www.jagannath.org/blog/pdcs/reporting-
continuous-losses-and-launching-zomato-ipo-a-case-study/
• Payal Bhattacharya, Explained: Why Zomato IPO is creating a buzz among investors,
TIMES OF INDIA, (July 12, 2021, 5:20 PM),
https://timesofindia.indiatimes.com/business/india-business/explained-why-zomato-
ipo-is-creating-a-buzz-among-investors/articleshow/84397848.cms

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