Online food order delivery startup Zomato must have the occasion to cheer since HSBC Global Research has placed its valuation at $3.6 billion. The sweeter aspect of this is that this takes Zomato a little ahead of its arch rival in the business in India, Swiggy. The last reported valuation of Swiggy was $3.3 billion.
In a report on InfoEdge, HSBC has justified its decision to bump up the valuation of Zomato by claiming that the company’s business model has undergone change over time and its main food delivery business has gone up to 70% of its overall revenue. The other factor that came into consideration during this valuation exercise by HSBC. The value of InfoEdge that holds 26% in Zomato too has been factored in, HSBC says.
But the real challenge for Zomato may crop up if and when it reaches out to investors for funding and what kind of valuation they will accept while making their investments in the startup.
Some of Zomato’s business splans have been taking off. One is its customer loyalty programme Zomato Gold which may bring in straightforward revenue. The other is Zomato has just managed to sell off its UAE operations to a German food delivery company Delivery Hero bringing in $172 million.
The third and possibly the most important factor is that Zomato has moved on with its on-ground performance by expanding its operations from 15 cities to 100 cities and this has resulted in drastically reducing the loss the company was incurring on every order from Rs 45 to Rs24 now.
HSBC’s report on this has gone even further to state that in their estimation, India’s market for food delivery should be pegged at around 300 million orders per month (China does 600 million) and the level touched so far is around 75 million. This is largely shared by Swiggy and Zomato leaving the others far behind.