Takeaways from Zomato’s historic IPO

Subscribed by over 38 times already, Zomato’s IPO has created history. We look into what the IPO means for startups and entrepreneurs. And also into the team that took Zomato public



Aditi Shrivastava

Madhav Chanchani

July 16, 2021

7 Min Read

India’s first Unicorn IPO is done. And here is how it stacks up: 

Total subscriptions for Zomato's IPO were over 38 times, according to data from the Bombay Stock Exchange. That adds up to bids worth over $26.3 billion and counting.

The qualified institutional buyers portion of the issue, which is 75% of the issue, was subscribed 51.8 times.

Retail was subscribed 7.45 times and the non-institutional portion by 32.9 times. 

The anchor portion of the IPO was already subscribed 35 times, according to reports. The anchor portion, which accounted for 45% of the total $1.25 billion IPO, had mopped up $562 million earlier this week.  

We also have a detailed Org Chart of the Zomato team that pulled off this historic IPO.

Zomato’s public share listing is the first by a domestic tech Unicorn company, making it pivotal for India’s startup ecosystem. In markets like the US, IPOs account for 70-80% of the exit value for investors. For venture capital firms, M&As and secondary share sales are erratic and not outcomes that can be controlled, whereas IPOs help an ecosystem drive a steady stream of exits.

“This (the Zomato IPO) is better than the Flipkart exit because there have not been large acquisitions after it. And it was one foreign investor buying shares from another foreign investor. Here, everyone gets to participate in the wealth-creation,” said a venture investor tracking the IPO. 

Back in 2018, India’s startup ecosystem got a lease of life when Walmart acquired 77% of the country’s largest online retailer Flipkart for $16 billion. That deal gave Flipkart’s investors such as Accel and Naspers, and its employees and founders a $14-billion payday. But that mega deal, which is also one of the largest acquisitions of an Indian company by a global player, has stood out more as an anomaly. 

So where do investors in India’s startups get an exit on the tens of billions of dollars invested in the ecosystem every year? IPOs are the answer. 

Here are our main takeaways from Zomato’s IPO:

Growth, Not Profitability:  Zomato’s messaging has been clear that it will put growth first. The contribution margin for its food delivery business (or the money made on every order) was Rs 22.9 in the nine-month period ended in December. But for the full year ended in March 2021, this figure was Rs 20.5, signaling a significant drop in the last quarter of the financial year, coinciding with a record quarterly gross sales of Rs 3,313 crore ($450 million). 

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