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Zomato announced Tuesday that its board has approved plans to raise $1 billion through a so-called qualified institutions placement, marking the company’s first major fundraising initiative since its 2021 IPO, as competition in India’s quick commerce sector heats up.
The timing is notable, coming just weeks before rival Swiggy’s anticipated public debut. The Bengaluru-based Swiggy, backed by Prosus Ventures, SoftBank, and Accel, aims to raise $1.4 billion in its IPO next month.
The move by Zomato, characterized by one investor as “sucking the air out of the room” for competitors, has caught market observers off guard. Jefferies analysts called the capital raise “unexpected,” given Zomato’s existing $1.2 billion cash reserves. They suggest the strategy may be aimed at reducing foreign institutional investor ownership below 50%, effectively transforming Zomato into a “domestic” company.
This shift to majority domestic ownership could enable Blinkit, Zomato’s quick commerce offering, to adopt an inventory-based model in India. Current regulations restrict foreign-owned companies to marketplace operations, prohibiting them from owning inventory sold within the country.
“Industry interactions indicate vendors’ take-rate is approximately 2% of GOV to offset operational costs and generate returns on investments,” Jefferies analysts noted. “An inventory model would give Blinkit tighter control over stock and enable calculated risk-taking in launching and scaling new categories beyond grocery.”
In a Tuesday letter to shareholders, Zomato co-founder and CEO Deepinder Goyal said the firm needed the additional capital because “the competitive landscape and the much larger scale of our business today.”
“We believe that capital by itself does not give anyone the right to win (and that service quality is the key determinant of success), but we want to ensure that we are on a level playing field with our competitors, who continue to raise additional capital,” he wrote.
Zomato, which reported a $20.94 million profit in the September quarter on revenue of $570 million (up 70% year-on-year), faces competition from Swiggy, Lightspeed-backed Zepto, and Tata-owned BigBasket. Through Blinkit, Zomato leads India’s quick commerce market, which has expanded to an annualized runrate exceeding $6.5 billion, more than doubling year-over-year.
The quick commerce phenomenon — delivering groceries, office supplies, and an expanding range of items to customers within approximately 10 minutes — has transformed consumer behavior in India, disrupting traditional e-commerce business models and exceeding market expectations.
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