Zomato, despite having ₹10,000 crore in cash reserves, is planning to raise additional funds, leaving investors puzzled. While the company has substantial cash and expects it to grow further, the reasons for this move remain unclear.

Some believe the funds may be used for expanding quick commerce operations beyond metro cities, managing high-value inventory, or pursuing acquisitions. However, given the limited acquisition opportunities in the quick commerce space—especially since major players like Flipkart and Amazon are not viable targets—many question the necessity of raising more capital.

Industry experts have weighed in on Zomato’s decision. Karan Taurani, Senior Vice President-Research Analyst at Elara Capital said that Zomato may be aiming to take advantage of the high investor interest currently surrounding high-growth companies, particularly with Swiggy’s initial public offering (IPO) approaching.

Since Zomato has not raised funds since its IPO in 2021, Taurani speculated that the company might be looking to create a cash reserve for future inorganic expansion or acquisition plans.

Also Read: Zomato to review fundraising via QIP on October 22

From a sector perspective, Anil Talreja, Partner at Deloitte India, pointed out that challenges in the industry are often tied to foreign direct investment (FDI) restrictions. However, he also stated that the growth of the e-commerce sector is driving companies like Zomato to seek new funding sources, as their aspirations for growth remain high.

On the topic of FDI restrictions, Moin Ladha, Partner at Khaitan & Co, explained that these rules are designed to prevent companies from using their structures to facilitate multi-brand or single-brand retail. Only marketplace models are permitted under the current regulations. However, portfolio investment follows a different regime, which allows for investment up to a certain limit, unless otherwise capped by FDI restrictions.

Zomato’s market value is about ₹2,30,267.99 crore, and its shares have risen by nearly 130% over the past year.

For the entire discussion, watch the accompanying video

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