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Zomato - IPO - Review + Recommendation

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resh:
Zomato is Loss Making and Far from profitability. We believe that we will get it at a Discount Post-IPO and hence AVOIDING investment in Zomato IPO.

Views of Edelweiss Capital,
While we concur with management on the opportunity size, we believe network effect in the food delivery space is not the strongest. Hence, execution excellence would be key to long-term value creation. At its upper band, the company is valued at USD7bn pre-money, which is a 30% premium to the last funding round by Vulture Capitalists.

While growth remains strong, valuation at 19.7x FY22E and 13x FY23E price to sales at the higher end of the price band is certainly not cheap. Global peers trade at 2–10x price to sales.

Motilal Oswal Analyst Sneha Poddar said,
The valuation also appears expensive at 25x FY21 EV/Sales compared to average of 9.6x for global peers and 11.6x for Indian QSRs. Though, valuing such early stage businesses on plain vanilla financial matrix might not give the right picture and may look distorted. Investors with high risk appetite can Subscribe for Listing Gains given fancy for unique and first of its kind listing in the food delivery business.

Vikas Jain of Reliance Research said,
Given average MAU of 61mn (Zomato + Swiggy) for online food delivery services in total internet users population of >624mn, we believe online food deliver industry can potentially see sustain double-digit growth in the coming years. Therefore, considering huge
scalability in business, duopoly market and asset light business model, we recommend SUBSCRIBE to this IPO from long-term perspective.

Kotak Securities Analyst Sumit Pokharna has NOT GIVEN RATING to IPO.

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