Last week, food delivery startup Zomato filed filed Sebi Zomato Limited - DRHP Read more its Draft Red Herring Prospectus (DRHP) as a precursor to an Initial Public Offering IPO) in India. The company is said to be tendering shares worth $1.1 billion (Rs 8,250 crore), which includes a primary issue of $1 billion and secondary shares of $100 million.

In February, Zomato had raised $250 million in funding at a post-money valuation of $5.4 billion.

A media report report BloombergQuint Why Zomato May Be Looking At IPO Valuation Of At Least $6.4 Billion Read more quoted an analyst who opined that Zomato may be “looking at an IPO valuation of at least $6.4 billion”. Considering the fact that $6.4 billion is the arithmetic sum of the previous valuation of $5.4 billion and $1 billion in new primary funding, one hopes that this analysis was not the aforementioned analyst’s day job.

Jokes apart, it would come as no surprise if Zomato’s management and investors will be hoping for a valuation that is meaningfully higher than that of the last private funding round and will eventually get it to the coveted decacorn valuation milestone of $10 billion. This would make Zomato the highest valued foodtech startup in India and one of the highest valued Indian startups in general.

There is one impediment to this decacorn dream. Unlike private markets, the public market values companies on numbers rather than narratives. Metrics around profitability, growth, and free cash flows are critical. These aren’t necessarily Zomato’s greatest strengths. Zomato declined to respond to a detailed questionnaire sent by The Ken.

So how does Zomato measure up when it comes to these metrics? What else does the prospectus tell us about Zomato and the market? What are the other imperatives and challenges for Zomato around its public listing?

Let’s take a look.

Pandemic pop?

There is a school of thought that posits that now is the “best time” for Zomato to go public. The main driver for this bullishness is a belief that the pandemic has turned out to be a great tailwind for the company. Like many other e-commerce companies worldwide, the dynamics around work from home and general trepidation around venturing out should be a boost for Zomato’s food delivery business.

This argument is largely made on the unit economics figures that the company has published.

There are two aspects highlighted here.

First, the AOV, or Average Order Value, has risen sharply post the pandemic. From Rs 278 per order in the year ended March 2020, Zomato’s AOV stood at nearly Rs 400 ($5.4) per order in the first nine months of the year ended March 2021.

AUTHOR

Sumanth Raghavendra

Sumanth is a serial entrepreneur with more than eighteen years experience in running startups. He is currently the founder of Deck App Technologies, a Bangalore-based startup attempting to re-imagine productivity software for the Post-PC era. Sumanth’s columns appear regularly in leading publications. He holds MBA degrees from the Indian Institute of Management, Bangalore and Thunderbird, The American Graduate School of International Management, USA.

View Full Profile

Available exclusively to subscribers of The Ken India

This story is a part of The Ken India edition. Subscribe. Questions?

MOST POPULAR

Annual Subscription

12-month access to 200+ stories, archive of 800+ stories from our India edition. Plus our premium newsletters, Beyond The First Order and The Nutgraf worth Rs. 99/month or $2/month each for free.

Rs. 2,750

Subscribe
 

Quarterly Subscription

3-month access to 60+ new stories with 3-months worth of archives from our India edition. Plus our premium newsletters, Beyond The First Order and The Nutgraf worth Rs. 99/month or $2/month each for free.

Rs. 1,750

Subscribe
 

Single Story

Instant access to this story for a year along with comment privileges.

Rs. 500

Subscribe
MOST POPULAR

Annual Subscription

12-month access to 150+ stories from Southeast Asia.

$ 120

Subscribe
 

Quarterly Subscription

3-month access to 35+ stories from Southeast Asia.

$ 50

Subscribe
 

Single Story

Instant access to this story for a year along with comment privileges.

$ 20

Subscribe

Questions?

What is The Ken?

The Ken is a subscription-only business journalism website and app that provides coverage across two editions - India and Southeast Asia.

What kind of stories do you write?

We publish sharp, original and reported stories on technology, business and healthcare. Our stories are forward-looking, analytical and directional — supported by data, visualisations and infographics.

We use language and narrative that is accessible to even lay readers. And we optimise for quality over quantity, every single time.

What do I get if I subscribe?

For subscribers of the India edition, we publish a new story every weekday, a premium daily newsletter, Beyond The First Order and a weekly newsletter - The Nutgraf.

For subscribers of the Southeast Asia edition, we publish a new story three days a week and a weekly newsletter, Strait Up.

The annual subscription will get you complete, exclusive access to our archive of previously published stories for your edition, along with access to our subscriber-only mobile apps, our premium comment sections, our newsletter archives and several other gifts and benefits.

Do I need to pay separately for your premium newsletters?

Nope. Paid, premium subscribers of The Ken get our newsletters delivered for free.

Does a subscription to the India edition grant me access to Southeast Asia stories? Or vice-versa?

Afraid not. Each edition is separate with its own subscription plan. The India edition publishes stories focused on India. The Southeast Asia edition is focused on Southeast Asia. We may occasionally cross-publish stories from one edition to the other.

Do you offer an all-access joint subscription for both editions?

Not yet. If you’d like to access both editions, you’ll have to purchase two subscriptions separately - one for India and the other for Southeast Asia.

Do you offer any discounts?

No. We have a zero discounts policy.

Is there a free trial I can opt for?

We don’t offer any trials, but you can sign up for a free account which will give you access to the weekly free story, our archive of free stories and summaries of the paid stories. You can stay on the free account as long as you’d like.

Do you offer refunds?

We allow you to sample our journalism for free before signing up, and after you do, we stand by its quality. But we do not offer refunds.

I am facing some trouble purchasing a subscription. What can I do?

Please write to us at [email protected] detailing the error or queries.