Hardeep Singh
On Wednesday, July 14, food tech unicorn Zomato made its much-anticipated initial public offering (IPO). The IPO was oversubscribed by 1.05 times on the first day, with substantial participation from retail investors.
Zomato signs for its initial public offering (IPO) at a time when the online food delivery sector is on the verge of transformation. Zomato is the first food-tech company in India to go public, so all sights are on it.
After SBI Cards and Payment Services’ IPO of 10,355 crores last year, the Zomato IPO is the second-largest share offering. Zomato, the worldwide FoodTech giant that we currently know, began as a modest discovery and review platform in 2008 and has since grown into a multinational corporation with operations in 16 countries.
Deepinder Goyal, Zomato’s co-founder, had already failed in this sector with his previous online food delivery company, foodlet.com, before establishing Foodiebay (Zomato). He founded Zomato with Pankaj Chaddah, who had departed four years before. Zomato has grown to become Delhi’s largest online restaurant directory by the end of 2008.
Since 2008, Zomato has developed at a rapid pace, and none of this would have been possible without its effective marketing strategy. It hasn’t simply provided us excellent food; it has also kept us entertained across all platforms with its engaging marketing strategy.
Zomato’s Journey
The company, which began as a food listing site called Foodiebay in 2008, has gone a long way since Deepinder Goyal and Pankaj Chhadah worked on the idea while still at Bain Consulting in 2008.
It became the go-to site for restaurant search and discovery just three years after its launch, in 2011. It has been rapidly growing its operations in the years afterwards, foraying into new categories, markets, and introducing new services and offers to become one of the category leaders in the sector.
As it continues to experiment in the grocery market, the company which is targeting a post-issue valuation of Rs 64,365 crore at the higher end of its offer price range of Rs 72-76 a share is anticipated to introduce online grocery services via its app soon.
It began international operations after rebranding Foodiebay as Zomato, with locations ranging from the United Arab Emirates to Sri Lanka to Lebanon. As global investors Sequoia Capital and Temasek arrived with large cheques, the ambition rose. Food delivery quickly became Zomato’s main engine, with restaurant listings, reviews, and ratings taking a back seat.
Following numerous rounds of funding by the Chinese-owned Alibaba subsidiary Ant group, Zomato switched gears and became a unicorn in 2018, with a valuation of $2 billion. Pankaj Chaddah, a co-founder, quit that year. Monthly sales for Zomato surpassed $100 million, and monthly orders surpassed 20 million.
Above all, the struggle had begun. Swiggy, a competitor, raised $1 billion in 2018, the single biggest funding round for a food tech company in India at the time. The online food delivery industry was on the verge of becoming a monopoly.
Deepinder Goyal saw what was coming as the rivalry grew. He stated, “All it takes to battle in that space is money.” The company became a unicorn in 2018 after raising $180 million and then $210 million from Alibaba’s Ant Financial, valuing the company at $2 billion; purchasing TongueStun for $18 million; and entering the B2B sector by acquiring WOTU and renaming it as Hyperpure.
In 2020, Zomato buys UberEats’ Indian division in an all-stock agreement, giving Uber Eats a 10% stake in the merged company. Temasek invests $62 million in Zomato, while Kora, a US-based investment group, invests $52 million. Zomato Market, a grocery store, is launched. Mohit Gupta is promoted to co-founder.
They raised $250 million in 2021 and inks an agreement with Grofers to invest almost $100 million in the online grocery startup by acquiring 9.3% interest. Akriti Chopra is promoted to co-founder.
Pandemic Pain and Gain for Zomato
The food delivery sales accounted for more than 75% of Zomato’s income. The pandemic turned off the tap. Restaurants were closed as part of a complete shutdown to prevent the spread of COVID-19. Consumers were also hesitant to purchase food online due to widespread concern of contracting the illness.
Their monthly transactional customers dropped by half last year, from 10.7 million to 5.8 million. Another blow was delivered. The number of active users each month dropped from 41.5 million to 32.1 million. In the meanwhile, they have been working on COVID-19 projects.
It intended to offer food to the needy, particularly daily-wage employees, through its non-profit organization Feeding India. While online food marketplaces were a hit during the pandemic, they launched their own side initiative to put its idle delivery fleet to good use and generate additional revenue.
Zomato Market, on the other hand, was a flop. Swiggy has raced ahead of competitors such as BigBasket and Dunzo in the grocery delivery market. They have invested $100 million in Grofers for a 10% share in the company, with the goal of becoming a rival in the industry following its IPO.
Also, only days before their IPO, news broke that SoftBank is investing $450 million in Swiggy, claiming that it is a stronger “superapp play” with a better grocery delivery company than Zomato. Returning to food delivery, their orders increased as customers became tired of eating home-cooked meals all of the time, and cases decreased as limitations were loosened.
Last year, the average order value surpassed Rs 400, thanks to an increase in family orders, which outnumbered single orders from young professionals in workplaces. Zomato and its competitors were in control since they didn’t have to provide significant discounts to attract clients.
The dangers are obvious as the company enters the market, but so is the vision. They now stand on three legs: meal delivery, eating out, and sustainability. Hyperpure, a farm-to-fork company, is Zomato’s next major bet.
The business-to-business initiative, which began in 2019, aims to acquire chemical-free and environmentally friendly goods for restaurant partners, ranging from vegetables to groceries. They have reached at a high level on the biggest stage of the market and it is the leading food tech company from India.
What are your thoughts regarding their IPO? Will it dominate the same in near future and what changes will it make?
