Zomato IPO Financial Analysis (Subscribe)

  • Zomato provides an end-to-end Food Services approach making it the most unique online Food Services platform globally. Zomato charges a commission to the restaurants on the basis of orders.
  • It provides Service Offerings that include Food delivery, dining out services, Hyperpure and Zomato Pro.
  • Its App is the most downloaded mobile application in the last three fiscals as per App Annie’s estimates.
  • The company had 169,802 Active Delivery Partners in the month of March 2021.
  • The company orders were 19.10 crore, 40.31 crore, and 23.89 crores in Fiscals 2019, 2020, and 2021, respectively. The gross order value was Rs 5387.01 crore (FY19), Rs 11220.90 crore (FY20), and Rs 9482.87 crore (FY21).
  • Zomato has recently invested $100 million in online grocery firm Grofers.

Zomato Limited Financial Review

The financial performance of the Issuer is weak with mounting losses and negative cash from operations. The total revenues for FY21 decreased by 23% to Rs 2118 crore in FY21 due to reduction in revenues from food delivery business. The revenues were also impacted negatively by decreasing dining out services due to the pandemic. The total revenue for FY 20 had increased by 96% to Rs 2742 crore from Rs 1397 crore in FY19 due to an increase in total orders placed during FY20. The company is not profitable and there are losses in all the three fiscals as can be seen from the below table.

Debt to equity ratio was 0.09x for FY19, rose to 2.42x in FY20 and 0.02x in FY21 respectively. Return on net worth is (10.04%) for FY21.

Table 1 - Financials and Ratios (Amount in INR Crore)
Particulars FY21 FY20 FY19
Total Revenue 2118.42 2742.74 1397.72
PAT -816.43 -2385.60 -1010.51
EBITDA -342.54 -2166.69 -2158.64
Total Assets 8703.54 2900.38 2900.38
Cash and Bank 903.66 359.88 359.88
Cash generated from operations -1036.49 -2111.58 -1715.27
EBITDA Margin -16.17% -79.00% -154.44%
Net Margin -38.54% -86.98% -72.30%

Valuation and Peer Comparison

The Issue appears to be overpriced considering negative EPS of -1.51 per share as of FY21. The Issuer has a negative P/E. The P/BV is 5x calculated at the upper price band of Rs 76 per share with a NAV of 15.09 per share as of FY21.

Zomato has no listed peers. The Issuer though faces competition from food delivery players like Swiggy, cloud kitchens such as Rebel Foods and branded Food Services players including QSRs like Dominos, McDonalds and Pizza Hut, among others.


Zomato has a presence in 525 cities in India, with 389,932 Active Restaurant Listings. The Issuer is the leading online food services platform in India in terms of the value of food sold as of March 31, 2021.

The company has weak financial metrics with key performance numbers being in the red. The Issue is overpriced at the current profitability margins. However, if we look at the online food delivery sector as a whole, the present online food delivery penetration in India is very low at 8% when compared to countries like the US (36%) and China (50%). This indicates that the sector shall have much opportunity to grow if the strategy of the company to expand, grow and turn profitable is executed as planned. The IPO may be a good bet for the long term but it comes with financial performance risk and operating efficiencies risk. Hence only risk-savvy investors with a long-term horizon should subscribe with caution.

Reviewer recommends Subscribing to the issue.

Review By CA Priyanka Choudhary on 28th Apr 2021

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Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

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