Zomato is making headlines once again! The Indian food delivery giant announced plans to raise $1 billion through a qualified institutions placement, marking its first major fundraising effort since its IPO in 2021. This move comes at a crucial time, just weeks ahead of rival Swiggy’s highly anticipated IPO, where it aims to raise $1.4 billion.

Market analysts were surprised by Zomato’s decision, especially since the company already has $1.2 billion in cash reserves. Jefferies analysts suggested that this fundraising strategy might help Zomato lower foreign institutional investor ownership to below 50%, potentially allowing its quick commerce arm, Blinkit, to adopt an inventory-based model in India. Currently, foreign-owned companies can only operate as marketplaces and can’t hold inventory sold in the country.

This shift could give Zomato more control over its stock and enable it to expand into new categories beyond groceries, enhancing its competitive edge. “An inventory model would help Blinkit better manage stock and take calculated risks,” the analysts noted.

In a letter to shareholders, Zomato’s co-founder and CEO Deepinder Goyal emphasized the need for additional capital to navigate the increasingly competitive landscape. He stated, “While capital alone doesn’t guarantee success, we want to ensure we can compete effectively with rivals who are raising more funds.”

Zomato recently reported a profit of $20.94 million for the September quarter on a revenue of $570 million, a remarkable 70% increase year-over-year. The company faces tough competition from Swiggy, as well as from startups like Lightspeed-backed Zepto and Tata-owned BigBasket.

The quick commerce sector, which delivers everything from groceries to office supplies in about 10 minutes, has transformed consumer behavior in India and is now valued at an annual run rate exceeding $6.5 billion.

As Zomato prepares for this major fundraising round, all eyes are on the fast-evolving landscape of food delivery in India. With Swiggy’s IPO just around the corner, the competition is heating up, and the battle for market supremacy is far from over!