Zomato IPO – The Best Detailed Analysis

Zomato IPO Summary

Zomato was founded in 2008 by Deepinder Goyal and  Pankaj Chaddah. Both graduated from IIT Delhi. They come up with a business idea, to build a website that helps the customers to view the menu of the different restaurants also people can write reviews that help the other customers. Initially, they built a website called foodie bay. Restaurants can list their hotel names on their website. later Sanjeev Bikhchandani from info edge invested in their business and that was the turning point for them. Info Edge owns many sites like naukri.com, 99acres.com, jeevansanthi.com, and policy bazaar.com.

They have rebranded foodie bay into Zomato. They have started expanding their business. From 2008 to 2015 They concentrated on the advertising hotel business. They have well performed in that period. In 2015 they have started a food delivery business. When they started the food delivery business many competitors are performing in India at that time. For examples

Uber eats

Ola café

Food panda

Swiggy

Scootsy

Tiny owl

There will be huge competition happening among all these companies. Apart from Swiggy and Zomato none of the other competitors couldn’t survive the competition and they exit the business.

Zomato has expanded its business into different countries. Now they are present in 24 countries in the world.

Business Model of Zomato

How Zomato makes money

Nomato makes money through different business models

• Food delivery
• Dine out
• Hyperpure (B2B)
• Zomato pro

Food delivery

Food delivery is the major source of revenue for Zomat and it contributed 85% of the total revenue to the company. If you open the Zomato application first you search for your favorite restaurant then you search for your favorite food and place an order. Suppose you paid 500 rs for the order, 400 rs for the food that you ordered, 50 rs for tax, 30 rs for delivery, and 20 rs for packaging.

They don’t make any money from delivery, tax, and packaging. They are charging a certain % of the food ordered through the app.100 will get to Zomato and 300 will go to the restaurant.

But People don’t realize that they have some additional source of income that they receive from restaurants as the listing of their restaurants’ names in the Zomato app.

Dine out

The people who want to eat in restaurants. They will search for good restaurants in Zomato and they opt the dine out. Restaurants pay more to Zomato to show their restaurants’ names on top of the list.

Hyper pure

Zomato acts as an intermediate between the farmer and the restaurants.  Zomato delivers food ingredients to restaurants and they assure the quality of supplies. from these, they are charging a certain portion as commission.

Zomato pro

Some restaurants offer flat discounts for premium customers. It leads the customers to take the pro to get more offers.

How the competition Happens

Swiggy is the major competition for Zomato. When we think about ordering online we might think about these two. They are expanding in their business. There are some differences in their business, Swiggy mainly concentrates on the food delivery business and they are focusing on the delivery of food and grocery. But Zomato has different business models. Now they are having competition from amazon. Currently, Amazon is operating in Bangalore but they have a well-established brand name that leads to customer loyalty to that brand. They have a good amount of experience in the delivery areas. In the coming years, Swiggy and Zomato will face huge competition from Amazon

SWOT Analysis – Zomato IPO

 

Strength

• Zomato is the market leader in its business
• They have well-established and adopted new technology
• They are adapting diversified business models to make money that differentiates Zomato from other competitors
• They have a lot of money on their balance sheet which means they are less debt or zero debt company

Weakness

• There is no customer loyalty to customers
• Lots of customer acquisition happens through discounts and it’s not good for long-term sustainability
• They are working in different countries but the contribution to the profit is very less

Opportunities

• Growing population and smartphone usage will increase the market
• Cultural change of eating from outside will increase the market share

Threats

• Major competition from Swiggy
• Amazon newly entered the market and Expects higher completion in the coming years
• Pushback from restaurants due to the high commission
• Cloud kitchen

Zomato IPO

Zomato is planning to raise 9375 cr. 9000 cr from fresh issue and 375 cr from the offer for sale.

How we can check is the right company to invest

Balance sheet

Zomato has a very good balance sheet. They have lots of money in their hand. They are less or no borrowing company

Income statement

Growth in the income statement is consistent and one thing needs to understand that they are also a loss-making company. That doesn’t matter when the company tries to capture the market they have to spend more.

Buy Zomato IPO or Not

As per the analysis, an investor can apply for the IPO because  Zomato is the market leader in the food delivery business and the industry will e in booming in the coming years.