Finlatics Investment Banking Experience Program Project 4: - Nischal Singhal

Finlatics Investment Banking Experience Program
Project 4
-Nischal Singhal
A private equity fund can exit a company by selling its stakes to the following :
● Another company
● Another PE fund
● The founder
● Through IPO
For this project, I’ll be looking at the major PE funds involved with Zomato and their
exits, mainly through IPO.
Zomato is an Indian restaurant aggregator and food delivery company founded by
Deepinder Goyal, Pankaj Chaddah, and Gunjan Patidar in 2008.Zomato provides
information, menus and user reviews of restaurants as well as food delivery options
from partner restaurants in select cities.
The major PE funds that invested in Zomato were-
● Info edge
● Sequoia capital
● Alibaba-Alipay
All 3 exited through IPO although Alibaba grp cut its stakes in Zomato 2 years before
the IPO was issued
1. Success or failure?
All the 3 main investors have had healthy returns on Zomato with the PE funds
investing earlier with a manifold increase in value
Info Edge
Infor edge is a pure-play internet company that runs Naukri.com,
Jeevansathi.com and 99acres.com. It was Zomato’s 1st institutional investor
Sequoia Capital
Sequoia Capital is an American venture capital firm focussing on technology
companies. It has backed companies that now control $3.3 trillion of combined
stock market value. Sequoia Capital invested in Zomato in a funding round in
2013
Alibaba-Alipay (Ant group)
Ant Group, formerly known as Ant Financial and Alipay, is an affiliate company of
the Chinese Alibaba Group. The group owns China's largest digital payment
platform Alipay. They invested in a much later stage in 2018 and sold some of
their stakes prior to IPO but still maintained a large and beneficial stake.
Zomato’s success journey:
● Founded in 2008 by Deepinder Goyal and Gunjan Patidar

● Between 2010 and 2013, Zomato raised approximately US$16.7 million from Info Edge
India, giving Info Edge India a 57.9% stake in Zomato
● In 2011, Zomato expanded across India to Delhi NCR, Mumbai, Bangalore, Chennai,
Pune and Kolkata
● In 2012, the company expanded operations internationally in several countries.
Continued expansion to new countries in 2014 and 2015
● In November 2013, it raised an additional US$37 million from Sequoia Capital and Info
Edge India
● In November 2014, completed another round of funding of US$60 million at a
post-money valuation of ~US$660 million. This round of funding was being led jointly
by Info Edge India and Vy Capital, with participation from Sequoia Capital
● In September 2017, Zomato claimed the company had "turned profitable" in all 24
countries where it operated and introduced a "zero-commission model" for partner
restaurants
● In October 2018, Zomato raised $210 million from Alibaba's payment affiliate Ant
Financial. Ant Financial received an ownership stake of over 10% of the company as
part of the round, which valued Zomato at around $2 billion. Zomato had also raised an
additional $150 million also from Ant Financial earlier in 2018.
● In 2019, Zomato acquired Seattle-based food portal Urbanspoon, which led to the firm's
entry into the United States and Australia
● During the pandemic, Zomato laid off 10% of staff. In April 2020, Zomato introduced
Contactless Dining to get ready for a post-lockdown world
● In February 2021, Zomato raised US$250 million from five investors, including Tiger Global
Management, at a valuation of US$5.4 billion
● On 23rd July 2021, Zomato went public, opening its IPO at a price band of Rs 72-76 per
share leading to the exit of PE investors while most still holding their shares
2. Return on Investment
As seen above Zomato has been a multibagger for its PE investors. The total
return and CAGR (Compounded Annual Rate of Return) is different depending
upon entry date and valuation on exit
The valuation of Zomato over the years:
● 2011 - $29 million
● 2014 end - $660 million
● 2018 end - $2 billion
● February 2021 - $5.4 billion
● After IPO, i.e point of exit Zomato is valued at $13.2 billion
Looking at returns of the PE funds
● Info edge
The largest shareholder still holds a 15.2% stake. Infoedge has made
investments at multiple points in the initial rounds amounting to Rs 152 cr.
Investments - Rs75 cr in 2010-2013 and remaining Rs77 cr in 2014-15
Current Valuation of stake (after-IPO) - Rs 15,000 crores
CAGR (after assumptions and approximations) - ~65%
● Sequioa Capital
Currently holds a 6.4% stake in Zomato. Sequoia capital too made investments
in multiple rounds amounting to Rs 301 cr.
Investments - in 2014 at $660 mil valuation and in 2015
Current valuation of stake (after-IPO) - Rs 6,300 crores
● Alibaba/ANT group
Currently holds a 14.1% stake in Zomato. Invested in Zomato at later rounds
amounting to Rs 2,800 cr
Investments - Raised $150 mil and $210 mil in 2 rounds in 2018
Current valuation of stake (after-IPO) - Rs 13,900 crores
3. Current shareholding scenario
Deepinder Goyal announced in 2020 that none of the PE funds was interested in
selling their stake before the IPO as they believed that the IPO would bring
further return to the PE funds.
The Zomato IPO was subscribed 37 times and was one of the most successful
IPOs, generating further returns for PE investors.
As seen below, although the PE funds have exited through IPO in 2021 all of
them continue to hold shares of Zomato hoping for continued returns.

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Finlatics Investment Banking Experience Program Project 4: - Nischal Singhal

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Finlatics Investment Banking Experience Program

Zomato’s success journey:

● Founded in 2008 by Deepinder Goyal and Gunjan Patidar

Looking at returns of the PE funds

3. Current shareholding scenario

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