India’s first food delivery unicorn fires up start-up ecosystem

Food delivery giant Zomato on Friday became India's first new-age technology unicorn to list on the country's bourses, scripting a stellar debut that could soon pave the way for similar internet-based consumer start-ups to contemplate initial public offerings.

The company, backed by Jack Ma's Ant Group, in fact, rode on the Covid outbreak that has prompted a trend of people moving to order food items online the world over. Such was the fantabulous listing -- true to hype -- that Zomato's market capitalization breached 12 billion US dollar mark in the first hour itself, making it one of the 50 most valuable traded firms.

The listing price was Rs 115 and Rs 116 on the Bombay Stock Exchange and the National Stock Exchange (NSE), respectively, as against the offer price of Rs 76. NSE's flagship NIFTY 50 index is used by domestic and global investors as a barometer of the Indian capital market as well as the economy.

'Future exciting, but a long way to go'

"The future looks exciting. I don’t know whether we will succeed or fail -- we will surely, like always, give it our best," Zomato founder Deepinder Goyal tweeted.

In a letter to the company's shareholders, tagged on the micro-blogging site, Goyal also hailed its business rival -- Japan's SoftBank-funded Swiggy -- but said that both the food delivery companies "have a long way to go before we can call ourselves world class by our customers’ standards".

"India is a tough market to operate in, but if you are building to succeed in India, you are already exceptional. I say that because I believe Zomato and Swiggy are two of the best food delivery apps in the world today. We have a long way to go before we can call ourselves world class by our customers’ standards, but we are determined to get there.

"We have lived through many ups and downs -- something not every company has the privilege of living long enough to do. I have made many decisions which have been good for the company, while some have caused our stakeholders a lot of heartburn...

"We are going to relentlessly focus on 10 years out and beyond, and are not going to alter our course for short-term profits at the cost of long-term success. The tremendous response to our IPO gives us the confidence that the world is full of investors who appreciate the magnitude of investments we are making...," he wrote.

Decoding Zomato

Founded as Foodiebay in 2008 by Goyal and Pankaj Chaddah, both technology graduates, and rechristened Zomato two years later, the food delivery firm's technology platform connects customers, restaurant partners and delivery partners, serving their multiple needs.

The service is currently available in almost all major Indian cities and in several countries.

The company's customers use the Zomato platform to search and discover restaurants, read and write customer generated reviews and view and upload photos, order food delivery, book a table and make payments while dining out.

On the other hand, the company provides restaurant partners with industry-specific marketing tools which enable them to engage and acquire customers to grow their business while also providing a reliable and efficient last-mile delivery service, according to information available on the food delivery giant's portal.

In April 2020, Zomato introduced Contactless Dining to get ready for a post-lockdown world -- an initiative that aims to minimise customer contact by eliminating the use of high-touch elements such as the menu.

A month later, Zomato retrenched over 500 employees citing massive losses due to the Covid-19 pandemic, despite the fact that the demand for home delivery of food from restaurants was soaring during the period. In August, however, Zomato drew praise for letting female employees take 10 days leave every year over menstrual cycle health effects.

Raising Funds

Zomato has always been successful in raising funds. Between 2010 and 2013, the company raised some US dollars 16.7 million from Info Edge India, a leading human resources management company, giving the latter a 57.9% stake in Zomato. And in October 2018, Zomato raised US dollars 210 million from Alibaba's payment affiliate Ant Financial.

The Company's Future

Zomato has managed to narrow down its losses to around US dollars 110 million, as of March 2021. But experts feel the company has a long way to go.

"It enjoys a couple of moats and with economies of scale started playing out, the losses have reduced substantially. Though, predicting the growth trajectory at this juncture is a little tricky, but it’s a good bet from a long-term perspective," Sneha Poddar of leading brokerage firm Motilal Oswal Financial Services, told the media.

Other Start-ups

American business magnate-owned Berkshire Hathaway-backed Paytm, hospitality company Oyo Hotels and cab aggregator Ola, both backed by SoftBank, are the other new-age start-ups that are planning to list on the Indian bourses soon, with an aim to raise funds to amplify their operations.