BENGALURU: With a mere 8-9% restaurant penetration in India, compared to 53% in China and 35% in the US, food delivery player Zomato is aiming to change the food consumption demography in India. But with losses as much as Rs 812 crore the Gurgaon-based firm reported during FY21, would it be able to meet the rising appetitive of retail/ institutional investors of Indian markets?
Another point of worry is the almost 25% drop in revenues for the food aggregator for FY21 at Rs 1,994 crore from Rs 2,605 crore a year ago.
According to Zomato co-founder, Gaurav Gupta, the revenues of the company have been on a rise, the cash burns have gone down , so profitability will come without giving an indicative timeline. He said that over the last three-four years, due to the kind of investments from private equity players, the business has scaled 10x. Covid did hit the food delivery business during Q1 of FY21 due to the fears of surface transmission of the virus with GOV dropping to $149 million, only to rebound to $481 million and $406 million duringQ3 and Q4 respectively.
Dismissing the fears of analysts of whether an average Indian investor is ready to bet on loss making firms like Zomato, chief financial officer Akshant Goyal said that post the IPO the company expects to have a healthy cash flow of Rs 15,000 crore or $2 billion. The company has advanced its public listing by almost a week to open on stock exchanges on July 14 at a price band of Rs 72-76 per share and increased the issue size by 20% to Rs 9,375 crore from Rs 7,500 crore. This is due to enormous interest shown by institutional investors from US, UK, Europe as well as Asia during our anchor investors’ roadshow,” he added.
The company has received interest from over 300 big funds/ investors from overseas as well as India and the top management doesn’t think that a valuation of Rs 64,365 crore, (nearly $9 billion) from $5.4 billion during the last funds raise is over-estimated.
“The valuation is based on the investor sentiments we have seen during the roadshow for large companies that have emerged as category leaders and enjoy disproportionate market shares, adopting technology which has resonated well with the investors,” Gupta added.