zomato IPO: Zomato IPO: Sequoia, and Mirea-Naver to get exemption from 1 year share lock-in requirement

Mumbai: Sequoia Capital and Mirae-Naver will get a unique opportunity that no other pre-Initial Public Offering (IPO) investor of Zomato are eligible for – to cash out on the company’s shares if the public offering becomes super success. Normally, all the shares held by pre-IPO investors are subject to 1 year lock-in period meaning they cannot sell the said shares atleast for a year. However, there is a special exemption from this rule provided to Foreign Venture Capital Investors(FVCI) and select category of Alternative Investment Funds(AIFs) and both the funds fall under the exempted category.

US based Sequoia Capital owns 1.3% stake in Zomato while South Korean asset manager Mirae- Naver owns less than 1% stake. There are atleast dozen other institutions that hold shares of Zomato including Ant Capital and Fidelity Group, however all of them will have to wait for one year before selling any Zomato shares.

Emails sent to Sequoia Capital and Mirae Asset Management remained unanswered. Zomato declined to comment to the development.

“All Equity Shares held by Sequoia Capital India Growth Investment Holdings I and Mirae Asset-Naver Asia Growth Investment Pte. Ltd as on the date of this Draft Red Herring Prospectus shall be exempt from the aforementioned lock-in requirement since Sequoia Capital India Growth Investment Holdings I and Mirae Asset-Naver Asia Growth Investment Pte. Ltd are FVCIs,” said Zomato in its red herring prospectus.

Legal experts say the carve outs have been made keeping in view the unique nature of FCVIs and AIFs.

“The post IPO lock-in exemption has been carefully extended to select categories of SEBI regulated funds which primarily invest through venture capital and private equity strategies which tend to benefit Indian sectors in need of capital and such funds must have completed one year holding period in the portfolio entity before being allowed to sell post listing,” said Tejesh Chitlangi, partner, IC Universal Legal. “Even within the AIF universe, such exemption is only extended to Category I and Category II AIFs, whilst Category III AIFs which may deploy complex trading strategies, invest in structured products are not granted such an exemption,”

Sequoia Capital was amongst the early investors in Zomato as it invested $37 million for the first time in November 2013. The private equity fund also participated in subsequent rounds of funding along with other investors.

Mirae-Naver on the other hand is a latest entrant into the company. It picked up a stake in Zomato during a round of funding that happened in 2020. ET could not ascertain the exact stake owned by Mirae-Naver since companies only disclose stakes of investors who hold more than 1% equity in the company.

Zomato is the first big player in start-up spacing eyeing for an India listing. The company plans to raise over Rs 9,000 crore through the offering that will open for investors on July 14.