Download CRED
Zomato leaves a pleasant after-taste

Zomato leaves a pleasant after-taste

the food-delivery firm’s stock is a signal of good times for Indian startups
August 2, 2021
2 min read
share facebookshare twittershare linkedinshare whatsapp

Zomato leaves a pleasant after-taste

share facebookshare twittershare linkedin

Zomato leaves a pleasant after-taste

this has been a stellar year for IPOs, i.e. companies listing their shares on the public market for the first time. among the biggest of them, by size, this year is Zomato, which had a successful 9,375 crore offering. since making its debut on the market, its stock has nearly doubled in price and is holding steady. this is an encouraging sign for many other Indian unicorns that are looking to take the plunge.

five star delivery

given the size of Zomato’s IPO and the implied valuation in excess of 60,000 crore for the company, many analysts had expressed concerns. even India’s most famed investor, Rakesh Jhunjhunwala, was clear about staying away from the stock. but that seems to have done little to shake retail investors’ faith in its future. at the close of trading on Thursday, its market cap was around 1.1 lakh crore. this puts it among the top 100 Indian companies by that metric, ahead of established market heavyweights like IndianOil, Bharat Petroleum, Tata Motors, IndusInd Bank, Coal India, etc.

winning recipe

the pandemic has come as a disguised blessing for delivery-startups, and has helped Zomato pare its losses. in the first nine months of FY21, the average order value on the platform went up by 40%, while delivery charges increased by 70%. it also saw rapid growth in Tier 2+ cities due to increased internet penetration and reverse-migration due to the pandemic. additionally, similar to global markets, the industry is a virtual duopoly of itself and Swiggy. for investors, seeing parallels in the US has also been helpful. DoorDash has grown its delivery base and business since the pandemic began as people started to spend more of their disposable income on food delivery.

additionally, there is an example of a food logistics company not only breaking even but also making a profit in Meituan Dianping. it found a path to profitability after nine years of starting up and a year since its IPO. there are significant signs which point to a positive scenario. 

hungry for more

Zomato’s success has also energised other companies. the past 12-18 months have seen the influx of a record number of new investors to the Indian bourses. these new investors want to be part of companies they know and understand. this provides an opportunity for many new age VC-backed companies to make their way to the public markets. Paytm, with India’s largest ever IPO in the works, MobiKwik, Delhivery, Nykaa, Policybazaar, and many more are lining up.