data edge, HSBC disagree over Zomato valuation

Info Edge’s Sanjeev Bikhchandani. Photo: Ramesh Pathania/Mint

data edge’s Sanjeev Bikhchandani. image: Ramesh Pathania/Mint
New Delhi: Zomato Media Pvt. Ltd has been valued at approximately $500 million by brokerage HSBC Securities and Capital Markets (India) Pvt. Ltd, approximately 1/2 the valuation at which the restaurantsearch company raised its last spherical of funding in September.

HSBC has stated issues surrounding Zomato’s advertisement-heavy commercial enterprise model,growing opposition inside the food ordering space and moneydropping international operations for thedecrease valuation.

Zomato and its largest shareholder info part (India) Ltd disagreed, announcing the restaurant listingsagency will become profitable “very quickly”.

“We respectfully disagree with numerous of the factors raised through the HSBC record,” Sanjeev Bikhchandani, founder and govt vice-chairman of data part said in a telephone interview.

Zomato’s “revenue has more than doubled inside the last 9 months and keeps to move north at an excellent clip. expenses were rationalized and burn is down by using greater than 70% from the peak. Thecorporation has masses of cash and its unit economics are in reality appropriate.”

HSBC’s estimate that Zomato is drastically puffed up comes amid accelerated scrutiny by way of buyersof so-referred to as unicorns, or non-public agencies that are valued greater than $1 billion. It additionallycomes days after buyers in Flipkart Ltd, India’s most valuable begin-up, marked down the organisation’s valuation by means of 30-40%.

To make sure, putting a price on those businesses is neither easy nor absolute.

HSBC, in its 19 April file, starting up insurance of information part (India), stated that besides for its taskinternet site Naukri.com, different groups inside the portfolio do now not appearance promising.

“We do a DCF (discounted cash drift) and price the (Zomato) commercial enterprise at about 50% lowerto the $1 billion valuation,” HSBC analyst Rajiv Sharma stated inside the be aware to customers. “Zomato ispresent in 23 markets so early on and none is worthwhile, means that to deal with each the investments inlast mile shipping and losses in global operations fund elevating might be a non-stop phenomenon, suggesting modern valuations don’t make a lot feel.”

A spokesperson for Zomato said HSBC has no longer contacted the business enterprise for its views and “doesn’t glaringly understand” the enterprise well.

“Our investors are as bullish about Zomato as they had been before. we’re growing speedy and are onroute to turning into worthwhile as a employer very soon. beyond this, we do no longer want to touch upon valuation markdown speculations of 1/3 events.”

“Our advert enterprise in numerous nations has up to ninety three% gross margin… we’re profitable in 8international locations as of nowadays,” the spokesperson delivered.

Zomato raised $60 million in sparkling capital in September 2015, largely from Singapore’s Temasek Holdings Pte and existing investor Vy Capital, valuing the organization at approximately a billion bucks. The corporation, in which info side owns approximately 47%, has raised about $225 million sinceinception in 2008.

“We fee our investments at fee and information facet has no longer marked down Zomato in any respect,”said Bikhchandani.

He additionally emphasized that the advertisement business is scalable with growth potentially coming from greater restaurants moving from loose to paid.

He, however, agreed that a completely low percentage of restaurants presently pay. “mobile has barelyall started to be monetized and greater than 50% of Zomato visitors is from the cell. So in our opinion, thead version of Zomato has a long way to go earlier than it’s miles saturated,” he added.

restaurants on Zomato that pay for advertising and marketing account for an insignificant 6-8% of itsoverall restaurant database and the nascent on line food ordering commercial enterprise will take time tochange into a sturdy revenue stream, in keeping with the HSBC document.

“In our view, for Zomato.com to end up a market leader within the restaurant seek area, it desires toconsciousness on online meals ordering and construct final-mile transport competencies,” in line withthe report.

In February, Zomato said that it reached operational profitability in six markets—India, the United Arab Emirates, Lebanon, Qatar, the Philippines and Indonesia.

however, the HSBC report says that Zomato’s recent fee attention may additionally most effective assistprofitability within the near term and no longer the long time.

“If agencies inside the on-line food delivery enterprise, specifically, benefit market traction, Zomato.com’s advertising and marketing enterprise version could lose enterprise. As a end result, wesuppose the company wishes to broaden a profitable on-line shipping business itself (and notoutsource) as a minimum in its top markets to supplement restaurant search. this means that Zomato.com will have to maintain raising budget and investing for a few extra time to return, whichmight dampen profitability for a couple of years,” the record delivered.

HSBC did no longer provide any further remark beyond the posted report.

meals generation startu.s.a.inside the us of a have suffered due to a slowdown in funding, with someeither final down or getting obtained after failing to raise capital.

Dazo shut down in October and Spoonjoy, run via Emvito technology Pvt. Ltd, changed into obtained with the aid of hyperlocal transport company Grofers (Locodel answers Pvt. Ltd) the identical month.

Eatlo Tech solutions Pvt. Ltd ended operations in December.

any othermeals ordering start-up TinyOwl has been struggling to elevate cash and scaling returnedoperations.

In January, Zomato too close operations in four cities—Lucknow, Kochi, Indore and Coimbatore.

but, the conflict within the meals ordering space is now constrained to 3 players—Zomato, Rocket netsubsidized Foodpanda.com and Bengaluru-primarily based Swiggy (Bundl technology Pvt. Ltd), which hascontrolled to elevate close to Rs.340 crore on the grounds that its release in 2014.

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