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About the Company

Incorporated in 2010, Zomato Ltd is one of the leading foodservice platforms in India in terms of the value of food sold. The company has two core businesses i) Business to customer (B2C) wherein they offer food delivery and dining out. ii) Under business-to-business (B2B), they offer Hyperpure. In addition, they offer ‘Zomata Pro’ to their customers, a loyalty program both for food delivery and dining out. Further, there are 3 key stakeholders in their food delivery business – (i) Customers, (ii) Delivery Partners, and (iii) Restaurant Partners. As of March 31, 2021, they have 1.5mn members on their platform. They are present in 525 cities in India, with 389,932 Active Restaurant Listings. As per App Annie’s estimates, its mobile application is the most downloaded food and drinks application in India in each of the last three fiscal years (FY19-21) on the iOS App Store and Google Play combined.

Objects of the Issue

* Funding organic and inorganic growth initiatives.

* General corporate purposes.

Valuation

The food service industry is highly under-penetrated in India with ~8-9% of the industry. This is substantially low when compared to global economies like the United States (~47-50%) and China (42-45%). Due to Covid-19, the foodservice market in India was largely impacted however re-opening of the economy will help gradual pickup in growth. Going forward, food services in India will gain share from the unorganized market and growth will be driven by changing consumer behavior, reduced dependence on home-cooked food/kitchen set-up, increasing consumer disposable income & spending and higher adoption among the smaller cities.

Zomato is one of the largest foodservice players in India which operates in India’s largest hyperlocal delivery network. For the last 4 years, the company has been consistently gaining market share in terms of Gross Order Value as of March 31, 2021. Further, it has made significant investments in marketing and promotions to accelerate customer adoption of food delivery in India and promote its brand. It has a strong brand name and recall value across large and small Indian cities as its offerings include both food delivery and dining-out options. Going forward, they plan to invest in new products, technology, further deepen their relationships with restaurant partners and lastly continue to invest in their delivery infrastructure and expand their delivery partner base. In addition, given the large market opportunity in India, we believe Zomato will focus on growing in Indian markets which will enhance the value for all stakeholders.

On the flip side, the company is financially making losses (minimized as compared to last year), which remains a concern however the management has strong growth plans going ahead which will aid revival. Considering its financial performance, it would be prudent to wait for a meaningful turnaround to change the long term stance. However, investors may consider subscribing for the listing gains.

Key risks:

* (i) Low barriers to entry mean high competition amongst the players in the sector.

* (ii) Financially, it is loss-making.

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