Info Edge’s 50x scorecard & other nuggets on Zomato

 Info Edge’s 50x scorecard & other nuggets on Zomato

Info Edge, better known as the firm behind India’s top jobs portal and one of the top prop-tech classifieds 99acres, is set for a multi-bagger harvest as its early bet on Zomato is likely to return over 50 times what it invested in the food ordering venture, show The Capital Quest estimates.

Zomato, which was initially just a restaurant review portal, has grown to become one of the two top food ordering sites in the country. The firm’s initial public offering (IPO), the first from the club of Indian tech unicorns, seeks to raise $1.1 billion.

But the real story lies in the success saga of its financial backers. While Info Edge will hit the jackpot, Sequoia Capital will also be sitting on well over nine times what it invested even after making a partial exit three years ago.

The Capital Quest dived into regulatory disclosures to get a snapshot of key shareholders. Here’s how the pie stands distributed among the big equity holders.

The real big gainer is Info Edge, which is set to take out $100 million from the IPO. It had invested around Rs 152 crore. This is currently worth over Rs 7,200 crore and is expected to be valued around Rs 7,500 crore or more at the time of IPO.

Sequoia Capital is also sitting on big gains on paper. While it had already taken out bulk of the principal investment in a partial exit three years ago, its remaining stake will be worth around $300 million.

Among others Uber, which sold its India food business Uber Eats to Zomato a little over a year ago, will also see the value of its stake almost triple.

China’s Alibaba and Alipay put together will see the value of their investment more than double. Singapore government’s arm Temasek, which first invested in 2015, has seen the value of its money double while recent investor Tiger Global will also be sitting on neat paper gains.

None of these other investors are selling shares in the IPO.

Zomato’s 74 shareholders and its employees who are yet to convert their vested ESOPs into shares also stand to make gains on their investment.

Notably, at a town hall meeting two months ago, Zomato’s founder and chief executive officer (CEO) Deepinder Goyal told employees it would be unwise to sell shares right now as people expected the company’s valuation to touch $50 billion in five years. That’s over nine time sits current valuation.

Financial picture

A look at its operating metrics does give an indication of the trajectory but also reflects how the pandemic has had an impact on the business. One key aspect is that the firm that had expanded overseas with a mix of organic and inorganic expansion is looking at a different track hereon.

Despite having a footprint in 23 countries outside India the firm has said it will focus only on the Indian market going forward.

Broadly, the firm that essentially competes with Swiggy for online food ordering business and with firms like DineOut and EazyDiner for booking restaurant tables, has managed to tide over the year of the pandemic thanks to its core delivery business as consumers scaled back on going out physically. Unlike other peers in the restaurant table booking domain, it has diversified revenue streams.

But it was not left unscathed. The company is likely to have ended the 12 months in March 31, 2021 with lower revenues compared to FY20. For the first nine months of the year its revenues was just about half of the full 12 months in 2019-20. However, it managed to stem the losses as it significantly cut down expenses related to outsourced support services and slashed the ad & sales promotion budget by more than half, according to its DRHP.

On the flip side, there are some worrying signs. The monthly active user base as also monthly transacting users have declined to the level last seen in 2018-19. Gross order value as also number of orders have also declined significantly.

The firm had a presence in 526 cities in India with 350,174 active restaurant listings and 132,769 active delivery restaurants as of December 31, 2020.  Zomato Pro paid-membership program had 1.4 million members and over 25,350 Pro restaurant partners in India.

Zomato also has a B2B offering called Hyperpure, which is a farm-to-fork supplies offering for restaurants in India started in 2019. In the month of December 2020, it supplied to over 6,000 restaurants across six cities in India.

Ankit Doshi

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The Capital Quest