Zomato board approves ₹8,500 crore fundraising via QIP; Deepinder Goyal explains the rationale behind raising money

The company, in its letter to shareholders, said that its GOV (B2C business) saw a growth of 55% year-on-year to ₹17,670 crore. Its adjusted revenue grew 58% YoY to ₹5,127 crore, while adjusted EBITDA came to ₹330 crore. The figure in the year-ago period stood at ₹41 crore. 

Why is Zomato raising funds despite strong cash position?

Deepinder Goyal, the CEO of Zomato, said that the company's consolidated annualised (quarterly*4) adjusted revenue has grown 4x in a period of about three years—from nearly ₹4,640 crore at the time of its IPO in July 2021 to ₹20,508 crore now (Q2FY25 annualised).

In the same time period, its cash balance has reduced from nearly ₹14,400 crore to about ₹10,800 crore (mainly on account of funding past quick commerce losses and some equity investments and acquisitions).

"While the business is now generating cash (vis-a-vis a loss-making business at the time of the IPO), we believe that we need to enhance our cash balance given 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," Goyal added.

On the company's margins, the company said that while most of its stores today are profitable with expanding margins, they are not seeing margin expansion at an aggregate level at this moment because of the investments they are making toward scaling its infrastructure. This includes not just the stores that they are adding but also the back-end large warehouses.

"For example, in Q2FY25, we added 152 net new stores and 7 warehouses. Since new stores and warehouses take a few months to ramp up, they end up being margin dilutive in the short term," the statement added. 

The company's margin stood at 4.7% during the quarter.

Update on District App

The new app should be live in the next four weeks. "At this point, we are focused on making sure we do a good job at migrating the business from Zomato and Paytm platforms to the new District app," Zomato said.