Foodtech giant Zomato has successfully raised ₹8,500 crore through its first Qualified Institutional Placement (QIP), signaling a major step in bolstering its quick commerce business, Blinkit, and advancing other strategic growth plans.
The QIP, launched on November 25 and concluded on November 28, saw the allocation of around 33.64 crore equity shares to qualified institutional buyers at an issue price of ₹252.62 per share.
The issue price reflects a 5% discount from the QIP floor price of ₹265.91 per share and a 12% discount from the stock’s prior closing price.
This marks Zomato’s first major fundraising round since its 2021 IPO.
Allocation of Funds
Zomato plans to utilize the funds across several key areas:
- Quick Commerce Expansion: ₹2,137 crore will be used to establish and operate dark stores and warehouses for its Blinkit business.
- Brand Growth: ₹2,492 crore will go towards advertising, marketing, and branding initiatives to strengthen its position in the competitive market.
- Technology Development: ₹1,769 crore is earmarked for upgrading its tech stack, including cloud infrastructure and software development.
- District Vertical Expansion: The company also aims to scale its “going-out” or District vertical with the additional capital.
A Strategic Move Amidst Intense Competition
The timing of Zomato’s QIP coincides with increased competition in the quick commerce sector. Rivals such as Swiggy, Zepto, and BigBasket have been aggressively scaling their operations.
Notably, Swiggy recently concluded its ₹11,327 Crore IPO, oversubscribed 3.59 times, while Zepto secured about ₹2,950 Crore in funding last week.
In a letter to shareholders, Zomato’s founder Deepinder Goyal highlighted the need for additional capital, citing the larger scale of operations and the evolving competitive landscape.
The raised funds will enable Zomato to sustain its growth and invest in new initiatives amid fierce market rivalry.
Plans for Domestic Ownership
Following the QIP, Zomato reportedly plans to apply to the Reserve Bank of India (RBI) to cap its foreign institutional investment at 49%.
This move would shift the company towards majority domestic ownership, paving the way for its Blinkit business to adopt an inventory-based model.
Under current regulations, foreign-owned entities cannot hold inventory for direct sales in India.
Industry Implications
Zomato’s fundraising efforts reflect its ambitious growth trajectory as it seeks to solidify its position in quick commerce and food delivery.
With significant investments in technology, branding, and logistics, the company aims to capture a larger share of the burgeoning market while adapting to regulatory challenges and competitive pressures.
