Zomato IPO: Hype or fair?



Although Zomato did not respond to questions from Fortune India, the prospectus says costs will increase over time and losses will continue as significant investments will be made to grow the business. “We have spent and plan to continue spending significant financial and other resources on, among others, advertising and sales promotion costs to attract customers and partner restaurants to our platform, by expanding our platform. form, including expanding our platform offerings, developing or acquiring new platform features and services, expanding into new markets in India and expanding our network of delivery partners. These efforts may be more costly than expected and may not result in increased revenue or growth for our business, ”the prospectus states.

But for institutional investors like IIFL Private Wealth, which has invested in Zomato through its Market Monopoly Fund, it’s about looking to the future. “The argument for Zomato is that investors see a model develop [in India] similar to what happened in China and the United States, where a change in consumer behavior [aided by technology] creates the scale and size of Zomato, ”says Yatin Shah, co-founder and executive director, IIFL Wealth.

Shah believes these mainstream tech companies may be looking for ways to increase consumers’ wallet share. For example, analysts believe that with its B2B Hyperpure sourcing business and B2C grocery business through Grofers, Zomato is metamorphosing into a food tech super app for much of the consumer food chain. .

While there are concerns about the imminent entry of the deep-pocketed Amazon into food delivery after it enters the grocery store, analysts believe it won’t be fun for the competition. Zomato and Swiggy have together raised more than $ 4.5 billion to date, even as players such as Foodpanda and Uber Eats, with expertise in food delivery, left the Indian market. “We believe the food delivery industry cannot be built as an adjacency to another horizontal game and requires razor sharp focus to generate returns. Therefore, any threat from a well-funded third actor is low. In addition, a new player should compete with existing offers and differentiate on factors other than price to build a sustainable base, ”explains Jhunjhunwala.


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