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Zomato: Loss making company with high valuation to list in hopes of raising $1.25 billion

Indian multinational corporation Zomato has announced the launch of its IPO to take place on July 14, 2021.

“We will utilize the IPO proceedings for funding organic and inorganic growth initiatives, and for general corporate purposes,” said Akshant Goyal, CFO of Zomato.

The company hopes to raise about ₹9,375 ($1.25 billion) crore through this. The shares are priced between ₹72 and ₹76 with a market capitalization valued at ₹60,000 crores ($8.04 billion).




The company has however reported losses continuously for the past three financial years, hence as per rules it is forced to cap only 10% of its issue for retail investors.

ZOMATO BACKGROUND

The company was founded by the name Foodiebay by Deepinder Goyal and Pankaj Chaddah in 2008. It was only in 2010, where it was rebranded to Zomato.

Zomato carries out its operations in several nations across the world, it has a strong presence in about 24 countries, which includes the United States, South Africa and New Zealand.



It was only in 2017 when its operations globally “turned profitable”, but its last three years have been bad.

Over the years several huge corporations have stake in the business venture. Info Edge is the biggest investor, they have stake accounting 18.6%.

Followed by Uber with 9.1%, then there is Jack Ma’s Alipay Singapore with 8.3% and finally Antfin Singapore holding 8.2%.

Zomato has also raised nearly $250 million from Kora, Tiger Global and many others investors.

BUSINESS MODEL

Zomato falls under the category of restaurant discovery and food delivery segment.

Through its application and website folks can not only avail food delivery services but also gain insight on various eateries, their menus, and reviews.

Zomato usually earns it’s revenue from the commission it charges to various restaurants listed with them along with a minimal delivery fees from its users.

LOSS MAKING BUSINESS

Zomato has a very high valuation for a company who has been reporting losses.




According to filings the company incurred a net loss worth ₹682 crores in the last nine months of the pandemic year.

The year prior to the pandemic, 2019, too wasn’t fabulous either. The company recorded net losses amassing ₹2,386 crore sadly this was up from the ₹1,010 crore it reported in 2018.

“We have a history of net losses and we anticipate increased expenses in the future,” Zomato said in its filing.

BUT THE FUTURE

The company seems to be having a very bright and radiant future even though it has been incurring recurring losses.

Deepinder Goyal, who is the CEO and Co-Founder of Zomato has said that he sees and expects his company’s worth to rise and meet nearly $50 billion over the coming five years.



Several experts believe that looking at the company’s current position irrespective of its losses, this goal might not be a very difficult task to achieve as it has a strong global presence in over 23 nations and 500 cities.