The non-obvious takeaways from Zomato's IPO prospectus

The pandemic was meant to be boom time for food delivery giant Zomato. However, while average order value has spiked and contribution margins have turned positive, a closer look at the numbers reveals a company with falling revenue, shaky unit economics, and no clear path to profitability. Could Zomato's public listing dream turn into a nightmare?

Zomato recently filed its draft red herring prospectus in anticipation of a $1.1 billion listing on India's bourses later this year

While the company now boasts a healthier average order value and contribution margin, revenue and users have dropped

Zomato's US-based peer DoorDash, was valued at a revenue multiple of 17X. A similar multiple would peg Zomato below its current valuation of $5.4 billion

Its decision to list in India rather than overseas might have a lot to do with these shaky foundations

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.

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

Others tell you what. We tell you the ‘So What?’

Read articles that decode the most significant shifts happening around business, technology, startups and healthcare. 1000+ articles for subscribers of the India edition. 150+ articles for subscribers of the Southeast Asia edition. Plus premium newsletters that help you make sense of the world around you.

So much journalism in India is superficial.

Articles are generic, almost cookie-cutter in their approach. And they don’t provide enough context on the issues they cover. The Ken is different. I don’t always agree with everything they say but I appreciate their commitment to publishing deeply reported narratives and investigations. Their reporters find new ways to analyze tech among other industries. And that’s always worth a read.

Sid Talwar / Co-Founder and Partner / Lightbox Venture Capital

As entrepreneurs, we thrive on being in the know at all times.

A personal subscription to The Ken was a no brainer. But as startup founders, this isn't enough. Team members also need to be in the know, for everyone handles customer-facing responsibilities and an ecosystem change that impacts customers also impacts us

Kiran Jonnalagadda / Co-founder / HasGeek and Internet Freedom Foundation