Its important dates, price band and lot size – has not been finalized yet, but they have filed DHRP with SEBI. So we thought of telling you all the important updates, like its business revenue, model earnings and the covid impact, the industry outlook and its strengths and weaknesses. But before that don’t forget to subscribe to groww Let’s talk about Zomato as a company. Whenever you hear Zomato, you feel like eating something, but did you know that it was started in 2008 as a restaurant discovery website, and today it is one of the biggest food delivery app in India And when they started delivery in 2015, they were not alone. There were many companies already doing that Like Swiggy TinyOwl, OLACAFE, foodpanda, runnr and scootsy, but today the main competition is between two companies, Zomato and Swiggy, but to give them competition. Another big player is coming Amazon. I will tell you about this further in the video, but lets first talk about Zomato’s revenue model and how do they make money? Zomato was a restaurant discovery platform that used to tell us everything like dishes menu locationetc. It is the largest food focused restaurant listing reviews and online table reservation platform in India. It makes money through those restaurants that pay them to improve their visibility. As of Dec 2020, it had 3.5lakh active listings on its platform. Other than this. It has an exclusive paid membership named Zomato pro, which provides flat discounts on selected restaurants and dine outs.
Hence Zomato makes money from this membership too, and as of Dec 2020, it had 1.4 million. Such members. Zomato has a subsidiary company called hyperpure which provides raw materials to restaurants. It not only helps them to forecast demand but to source raw materials such as grains fruits and vegetables on a larger scale, but is a part of the bundle services aligned with food delivery. This business was started in 2019 and as of Dec 2020, it has supplied raw materials in 6000, restaurants in 6 cities And, lastly, it makes money through food delivery.. It acts as a delivery agent between restaurants and customers. They take a commission from restaurants and delivery charge from customers. They have operations in 23 countries other than India like UAE, Australia, New Zealand, Philippines, Indonesia, Malaysia, USA, Lebanon, Turkey, Slovakia and Poland, But the company’s 90 revenue is generated from India. Only. Let’s see the impact of Covid 19 on the company.. In the first quarter of 2021, there was a significant impact on its business.. It hit its lowest GOV, meaning gross order value in a quarter in two FY, After which the food delivery business saw a good recovery.. In Q1 of 2021, its GOV was Rs.11000 million, wherein in the 3rd quarter it was Rs. 30000 million, which was more than the 3rd and 4th quarter of 2020. Let’s check the industry overview.. If we see the food delivery business in FY21, India saw contradictory moves. The first quarter saw a very bad time.
It was at its lowest, whereas in the 3rd quarter it was on its all time high. Since people were not able to go out and eat, they tried making up for it by ordering home online. I was so happy when I could start ordering food online again. Anyways. The Indian food market is divided into 3 channels, dine in takeaway and delivery. According to CLSA, food delivery will see the highest growth out of these 3.. The market size is expected to increase to 11 billion by FY26 from 3.5 billion in FY20, Increasing population, smartphone penetration, expansion to new markets and higher frequency from existing customers. Zomato’S biggest competition is Swiggy and the newest is Amazon.. None of them are listed, whereas Zomato is bringing its IPO. Zomato and Swiggy both are in the food delivery business, but they have different strategies. Zomato is trying to focus on every aspect of the restaurant business, whereas Swiggy focuses on the food delivery aspect. The delivery of food grocery alcohol, meat, medicine and delivery and pick up of every other item. It has a membership of Swiggy Super where it gives discounts with free delivery. Amazon has started test marketing of food delivery last year. At first they started food delivery only for their employees in Bangalore and then till 14th of the city And has a network of 2500 restaurants. Vs 15000 offered by Zomato, Zomato and Swiggy need to watch. Out. Lets see what happens in the food delivery section.
If we see its financials Zomato reported a loss in the first 9 months of FY21, The company has close to no debt.. The company secured 155 million orders in the first 9 months of FY21, with a total gross order, value of 6169.9 Crores, whereas they got 403 million orders in FY20, amounting to 11220.9 Crores. You can gauge the covid impact through the number of orders.. The avg value of order went up from Rs. 278 in FY20 to Rs.’8. In the first 9 months of FY21, The monthly transacting users have grown from 9 lakh in FY18 to 1 CR in 2 years, but reduced to 58 lakhs in the first 9 months of FY21. And the dining out business is still recovering, as people are not going Out due to Covid., If we observe this table, we can see the total revenue per order and total cost per order, Adding all the commission and other charges. The revenue has increased. From 58.9 per order in FY20 to 89.6 per order in the first 9 months of FY21. If we see the total cost, which comes from adding delivery, cost discounts and variable cost has decreased From 89.4 per order to 66.7 per order.. They had a loss of 30.5 per order in FY20 to a profit of 22.9 per order, but it is to note that marketing, advertising and branding costs are excluded from this.. Let us now talk about its strengths and weaknesses., Starting with strengths.
First being the network effect, It is a phenomenon wherein the productservice gains additional value. When more people use it., The more people will use it. The more restaurants will get listed on Zomato, which in turn will attract more customers. As of Dec 31 2020. The company has 161637 active delivery partners who fulfilled 94.9 of the total orders and the median delivery time was less than 30 minutes.. It has a widespread and efficient on demand. Hyperlocal delivery, system. Zomato is a strong brand presence that is recognized whole over India. Like I said, people hear Zomato and they remember. Food. Zomato has been successful in retaining customers whose spending has also increased with time., which is a huge, competitive advantage.. If we see the weaknesses, the company is not profitable as yet and is expected to remain the same as spending is increasing. There were many players, but now only Zomato and Swiggy are left and now Amazon is entering, which is a very big threat to both these companies. Zomato is backed by Chinese billionaire Jack Ma’s Ant Group, meaning it will always be a foreign owned and controlled company, Implying they would have to fulfill many requirements under the FDI policy and laws. They have also said that they might not be able to perform some commercial activities without the Govt’s approval. Now, what do we know about the IPO till now? Zomato wants to raise Rs. 8250 Crore through the IPO, where 7500 Cr will be from fresh issue and rest OFS InfoEdge, which is the early investors, will sell Rs 750 Cr worth of shares through offer for sale.