Start-up unicorn food delivery platform Zomato is set to launch its initial public offering (IPO) on Wednesday. With the Rs 9,375-crore offer, Zomato is eyeing a valuation of Rs 64,365 crore or $8.7 billion. This will be the first IPO that will be trading on Indian bourses, coming from a start-up belonging to the Indian food aggregator space.
In an interview with CNBC-TV18, Gurmeet Chadha, co-founder & CEO of Complete Circle Consultants, and Hemang Jani, retail equity strategist at Motilal Oswal Financial Services, assessed the offer.
First up, Complete Circle’s Chadha said, “You need to spread your bets but you should not look with scepticism and say that it’s an avoid. At FY21, it’s probably 20-25 times. So, it’s very expensive, but as we go along, this number should improve and that’s the only matrix to evaluate. I was disappointed with management not guiding on when they will be EBITDA positive or how the cash burn will play out. The only risk to watch out for is how Amazon plays this because they are in Bengaluru operating at 65 pin codes and their commission rates are almost half of what Zomato is doing right now.”
Meanwhile, Motilal Oswal’s Jani said, “In a duopoly business, Zomato is a market leader and in the last three-four quarters, there are positive data points in terms of per order profitability etc., so the business eventually might evolve and they might look at multiple things once there is a war chest to the tune of Rs 8,000-9,000 crore.”
Subscribe for listing gains, Jani added, “There is going to be enough and more appetite for something like this in the current environment. So, we have a ‘subscribe’ rating for listing gains as the situation is going to evolve over longer-term and we do not have that clarity at this point of time.”
Watch the video for the entire discussion.