8 takeaways from Zomato’s investor deck for its $1.3b IPO

Unlike its witty push notifications and social media posts, Zomato’s executives had poker faces – probably to signal that they mean business – during the press event where they formally announced the startup’s US$1.3 billion initial public offering on the Indian stock exchange.

Following the listing, Zomato expects to muster up a total of about US$2 billion in the bank at a post-IPO valuation of about US$8.6 billion. This is a sizable jump from its US$4.5 billion valuation in February.

Riding high on market buzz and interest from new and young investors, Zomato was oversubscribed 38.25 times.

The arrival of the decade-old food delivery company is monumental in many ways. For one, it is the first unicorn startup to list on India’s stock exchange. It’s also one of the biggest IPO launches in the country to date, setting the tone for Paytm, Flipkart, Delhivery, Nykaa, PharmEasy, and other local tech firms aspiring to go public in the coming months.

Tech in Asia looked at Zomato’s IPO presentation and its filings with the Securities and Exchange Board of India (SEBI), and here’s what caught our eye.

1. Revenue declined in FY 2021

The company’s revenue dropped by 15% for the financial year ending in March 2021. Its gross order value (GOV) for food delivery fell by a similar level.

Zomato attributed this to movement restrictions due to the pandemic. When lockdowns began in India, many users opted to cook food at home instead of ordering online to avoid the risk of contracting Covid-19. Food delivery was also banned in the country’s “red zones”, which made up nearly half of all districts at one point.

However, this gradually changed as a better understanding of Covid-19 transmission emerged, and people felt safer about bringing in food from outside.

“Fear of surface transmission has gone away. We have delivered crores of orders in the last 18 months without a single case of transmission of Covid. People have understood food delivery is safe. That is why you see in the third and fourth quarters, business has done well,” the company said during its presentation.

2. Losses are expected to continue

3. Narrowing operating loss

4. Contribution margin turns positive

5. 4x drop in advertising and promotional spends

6. Now for the good news: India’s food services are largely untapped

7. Yelp, DoorDash, and Open Table for India

8. Rising competition from cloud kitchens and more