Zomato considers raising ₹8,500 crore through institutional share sale
What's the story
Leading food delivery platform Zomato is scheduled to hold a board meeting on October 22.
The main agenda of the meeting is to discuss a possible fund-raising exercise through an institutional share sale or Qualified Institutional Placement (QIP).
According to CNBC-TV18, the company is likely to approve a fund raise worth ₹8,500 crore at this meeting.
Future strategy
Zomato's post-fundraising plans and current foreign holdings
After the fund-raising, Zomato intends to approach the Reserve Bank of India (RBI) to cap its Foreign Institutional Investment (FII) holding at 49%.
According to the company's current shareholding pattern, foreign investors hold 50.48% of Zomato's shares.
This includes a Foreign Direct Investment (FDI) stake of 5.25% and the rest as FII.
Fiscal health
Zomato's financial position and market performance
At the end of June, Zomato had a cash balance of ₹12,539 crore. The amount was reported before the company agreed to acquire Paytm's entertainment ticketing business for ₹2,048 crore.
Despite a slight dip in today's trading session with shares at ₹260.65, Zomato's stock has grown significantly over time. It has more than doubled in value this year alone with gains of 110%.
Market competition
Zomato's fund-raising coincides with Swiggy's IPO plans
The timing of Zomato's fund-raising effort comes just as rival food delivery service Swiggy gears up for an initial public offering (IPO).
This has raised questions about why Zomato would need the money, especially since it has a lot of cash left after acquiring Paytm's event business earlier this year.
The company has already turned profitable in its food delivery segment and is close to breaking even with its quick commerce arm, Blinkit.