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Market Insights8 Mins Read

How does the Zomato IPO stack up against Global peers

Zomato IPO v/s Global comparables

Food aggregator Zomato opened its initial public offering (IPO) on July 14, the first issue in India from among several startups that have grown rapidly over the past decade or so, thanks to disruptive technologies, rapid scale, and oodles of venture capital. The three-day Rs 9,375-crore Zomato IPO, the third-largest ever in India, will close on July 16.

The IPO will for the first time allow investors to pick up a stake in fast-growing companies, whose expanding valuations have richly rewarded investors in the private space and befuddled purists. 

Key stats

The company is raising Rs 9,000 crore as part of a fresh issue of shares, while Rs 375 crore will be the offer-for-sale component. 

Here are some key facts to know about Zomato’s financials. 

  • FY21 revenue from operations stood at Rs 1,994 crore, taking a hit from the pandemic, compared to Rs 2,605 crore in FY20. Loss, however, dropped sharply to Rs 816 crore in FY21 from Rs 2,385 crore in FY20, as the company cut on employee and marketing costs. 
  • The number of orders placed on the platform fell 40.7% to 238 million in FY21 from 403 million the year before. Despite this, Zomato was able to increase its per order value from Rs 286.9 in the last quarter of FY20 to Rs 407.8 in the third quarter of FY21. 

How Zomato compares with global peers 

While investors raise a toast to the Indian startup, how does Zomato compare to its global peers, such as Doordash or Deliveroo, leaders in the US and UK markets, respectively, in terms of size, users and financials?  

Here is a look at the companies’ app numbers. 

Given that Zomato caters to a large country like India, its userbase is significantly bigger, which is evident from its monthly active users, Play Store installs as well as June downloads, according to data from app-tracking firm SensorTower. As per last available data, Zomato had 32.1 million monthly active users, versus 20 million for Doordash and 7.1 million (estimated, as the company has not disclosed this number in a while) for Deliveroo.

But while Zomato may have a larger app userbaseDoordash’s website appears to have more engagement: site tracking firm Alexa gives it a global engagement ranking of 679 versus Zomato’s 1,206. Deliveroo website’s global engagement is difficult to assess as the company runs different country-level websites. 

The higher site engagement for Zomato’s global peers is also clear from Google Trends data, which suggests worldwide searches for Doordash and Deliveroo are mostly higher. 

Doordash and Deliveroo listed in their home markets — US and UK, respectively — in December 2020 and March 2021. But both companies had contrasting performance with IPO investors coming out ahead in Doordash but being under water in Deliveroo, not just on the listing day but even till this day. 

In terms of financials, while Zomato may have higher userbase, it lags its Western peers when it comes to revenues. 

Significance of Zomato IPO 

Zomato’s IPO is expected to be followed by Paytm’s, another high-growth startup that was instrumental in accelerating the digital payment revolution in the country. 

The IPO has created anticipation among investors – several brokers have suggested investors subscribe to the issue, especially in hopes of listing gains. As well, it has led others to wonder how to value such companies – some brokers have avoided rating the IPO altogether.

But what the Zomato IPO is expected to do is create a flurry of IPOs from technology-driven growth startups that have registered massive losses by burning cash to acquire customers, but in the process creating economies of scale and competitive advantages that give them strong positions in the marketplace. 

Such startups have taken the US market by storm, with companies from Uber to Airbnb listing in the past few years. The startup IPO space has also proven to be risky with high-profile IPOs such as WeWork coming a cropper.

Whether or not Zomato gets off to a flying start — its gray market premium (GMP) is signaling a moderately positive listing — it will likely open the floodgates to the listing of more Indian startups. 

Disclaimer

This blog article has not been reviewed by the MAS. It is prepared solely for information purposes and does not constitute an offer or solicitation for the purchase or sale of units in the funds. This does not constitute any form of investment advice and Kristal Advisors (SG) Pte Ltd does not take into account your personal investment objectives, specific investment goals, specific needs, or financial situation and makes no representation and assumes no liability to the accuracy or completeness of the information provided here. The information and publications are not intended to be and do not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort offered or endorsed by Kristal Advisors (SG) Pte Ltd.

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