The massive Indian foodtech company Zomato is preparing for rapid expansion as it plans to raise further funding. The company said in a recent regulatory filing that the October 22, 2024, meeting of its board of directors will be devoted to the topic of funding raising via a Qualified Institutional Placement (QIP). Its financial performance for the quarter ending in September 2024 will also be examined by the board.
Zomato has indicated its intention to broaden its market penetration and step up its competition in the foodtech and entertainment industries, even if the business did not disclose the precise amount of capital it intends to raise.
Credits: Mint
Record-Breaking Growth in Q1 FY25
Zomato has shown remarkable performance in the first quarter of FY25, which runs from April to June 2024. A startling increase from ₹2 crore during the same period previous year to ₹253 crore was claimed by the company. From ₹2,416 crore in Q1 FY24 to ₹4,206 crore, its operational revenue increased by 74%.
This growth has been made possible in large part by the popularity of Zomato’s rapid-commerce business, Blinkit, which is becoming more and more popular among consumers looking for speedy delivery of essentials like groceries. This significant increase in revenue has strengthened Zomato’s position as a leader in India’s very competitive foodtech market.
But there is still a lot of competition, particularly with companies like Zepto, Swiggy’s Instamart, and even relatively new firms like Flipkart Minutes, BigBasket, and JioMart vying for customers’ attention. The quick-commerce sector is expanding quickly, and businesses are under constant pressure to develop and broaden their offerings.
The Fundraising Strategy: What’s at Stake?
The upcoming QIP, which allows the company to issue equity shares to institutional investors, could provide Zomato with the financial muscle to push forward on multiple fronts. The fresh capital is expected to be crucial as Zomato seeks to scale up its new business verticals, including its ‘going-out’ segment and the broader entertainment sector.
Earlier this year, Zomato made headlines with its acquisition of Paytm’s entertainment ticketing business for ₹2,048 crore. Since then, the company has been strategically investing in the events space. A key part of this plan is Zomato’s forthcoming app ‘District,’ which will cater to customers looking for event bookings and ticketing, adding a new dimension to its services beyond food delivery.
Zomato’s Expansion into the Entertainment Space
Zomato’s acquisition of Paytm’s ticketing division is a wager on the rapidly expanding entertainment and live events sectors rather than merely a diversification tactic. With a number of events posted only for Zomato members, the firm has already observed a high demand for tickets sold on its site.
Zomato has brought in industry veteran Kunal Khambhati, who previously oversaw the live events and IP segment at BookMyShow, as part of its attempts to expand up this vertical. His knowledge will probably be extremely important in forming the company’s new events and experiences division.
Competition in Quick Commerce Heats Up
While Zomato’s foray into entertainment is exciting, the core business—food and quick commerce—remains highly competitive. Quick commerce, which promises rapid delivery of groceries and other essentials, has become a battleground for players like Zepto and Swiggy’s Instamart. Both companies are aggressively expanding, and even IPO-bound Swiggy is eyeing new growth avenues to challenge Zomato’s lead.
Zomato’s Blinkit has held its ground in this competitive space, but the landscape is constantly evolving. Other major players like BigBasket, JioMart, and Flipkart Minutes have entered the arena, making the quick-commerce sector even more crowded.
To keep pace, Zomato is rumored to be relaunching its logistics service Xtreme. Initially launched in 2023 to cater to merchant deliveries, the service will now reportedly focus on supporting Zomato’s core food delivery business.
Leadership Changes Amid Rapid Expansion
Zomato is seeing significant leadership changes as it expands into new verticals and solidifies its position in key markets. Chief People Officer (CPO) and co-founder of Zomato Akriti Chopra left the company last month. Gunjan Soni, the independent director, also resigned shortly after, citing greater job obligations abroad.
The timing of these changes is critical for the company, as it gets ready for the next stage of its expansion in terms of both its business portfolio and leadership structure.
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