The data has been compiled from various sources and might have small difference but overall theme is to subscribe or not — we will focus on that
Zomato IPO is little different because company is showing losses and when they will break-even is not sure. So read further and analyse all points with a pinch of salt. Many investors dream of being a venture capitalist one day and to all those guys, Zomato is giving you a chance.
Put your HAT of venture capitalist and drop the hat of investor to view this IPO. If it works good — ENJOY!!, If it does not–Don’t lose sleep.
Zomato IPO– Incorporated in the year 2008 as a restaurant-discovery website – Zomato, is now one of India’s largest food delivery company.
Business — Zomato has four business segments – two core B2C offerings including food delivery and dining-out. There is B2B ingredients procurement platform ‘Hyperpure’ and the customer loyalty program, ‘Zomato Pro’ as well
Region of operation — Company has operations in 23 foreign countries – UAE, Australia, New Zealand, Philippines, Indonesia, Malaysia, USA, Lebanon, Turkey, Czech, Slovakia, and Poland. However, the company generates 90% of its revenue from India.
Offer purpose — 9,000 crore will be a fresh issue, while the remaining an offer for sale from the oldest investor – Info Edge (India) Ltd. Company will be possibly using this money for organic and inorganic growth
Company unit economics of profitability is not sustainable as of now
Highly competitive industry and many players have shut down in past few years. Any new player with deep pockets can come and start competing. Amazon has already started with aggressive pricing
High dependence on order size and repeat orders for making money
Adjusted for cash and cash equivalents, Zomato has an asset-light balance sheet and it will help company to sustain for few more years with almost 16000cr cash and cash equivalents
Covid-19 has given push to delivery based eating model and it will possibly help the company to cut operational costs with lower discounts and higher delivery charges
Only two major players in fray and other players are only focused on one part of business while Zomato is well leading ahead in other domains as of now
Company has been growing and survived last few years onslaught when many players have shut shop(including uber, ola, foodpandaetc). The way Indian population is moving to nuclear families, demand for food delivery will increase and so will be competition.
Hence ability to charge high prices may remain limited.
Diversification into other areas like stake in grofers, kitchens, increase in memberships may help the company to survive against competition a bit longer.
How fast they can expand in tier 2 and tier 3 towns and how much they are able to extract from people is the key in next few years for breaking even.
Its the only player in 4 different segments as compared to peers is an advantage for them as of now
Valuations are extremely stretched out. Nothing much to talk sensible here
Should we apply?
People falling into high risk taking category can bid in IPO and and add more after listing to play out this theme over few years.
People who can take risk of capital erosion can subscribe with one lot and book out on listing gains if any.
Please note that company is not profitable and entire capital put in company shares can go down the drain if things do not turn in anticipated way
Whatever you want to do with this IPO , don’t become a long term investor if you applied for listing gains or vice versa. Be sure of why you are applying and stick to that
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