Everybody loves ordering food from Zomato & Swiggy. Before IPO listing of Zomato there was a craze in the retail investors about taking 1 IPO lot of zomato. After zomato listing in Indian stock market

About Company

• Incorporated in 2010, Zomato Limited is one of the leading online Food Service platforms
• As of December 31, 2020, Zomato has established a strong footprint across 23 countries with 131,233 active food delivery restaurants
• Zomato had 389,932 Active Restaurant Listings
• As of FY22, Zomato is active in 1000+ cities with 500+ cities added in FY22

Market Cap Comparison

What if I say zomato is bigger than Ambuja Cements , Pidilite Industries, LTI Mindtree, SBI life Insurance & Tata  Power

Note- Figures in Crore

Yes you heard it right Zomato with a market cap of 1,61,893 Crore it is bigger than many companies though I have mentioned a few of them.

Why is this happening ?

• Zomato has Revenue (2024) of 12,114 Crore & Net profit of 351 Crore
• PE ratio is way high which is 452
• With no strong fundamental & the hype in the retail investors, Zomato has gone too far.

Key ratios

Revenue Mix

• Product wise Breakup

        Zomato has 4 major revenue streams

1. Delivery – 48.3%
2. Hyperpure- Hyper pure is Zomato’s farm-to-fork supplies offering for restaurants in India. 26.7 % revenue contribution.
3. Blinkit- Quick commerce business contributes 21.6% of total revenue
4. Dine Out Advertising- 2.6% of total revenue

• Location Wise Breakup

1. India- 95.8%
2. UAE-3.2 %
3. Other – 1%

Financial Trend

Revenue

• Revenue in 2020- 2,605 Crore
• Revenue in 2024- 12,114 Crore
• Change in Revenue (5 years) – 365% Growth

Net Profit

• Net Loss in 2020- 2,367 Crore
• Net Profit in 2024- 351 Crore

Profitable in 2024

• Until 2024, Zomato is a loss making company , it never book  net profit in positive
  
• Now in 2024, it turns profitable with a Net Profit of 351 Crore.
  

5,369 Crore loss in 4 years

• Zomato book 5,369 Crore loss in 4 years

Shareholding Pattern

Change In Shareholding Pattern

FIIs (Foreign Institutional Investors)

• September 2021: 10.27%
• March 2024: 55.11%
• Change: +44.84%

Analysis: FIIs have significantly increased their holdings by 44.84%. This indicates a strong growing confidence from foreign investors in the company or market during this period.

DIIs (Domestic Institutional Investors)

• September 2021: 4.73%
• March 2024: 15.28%
• Change: +10.55%

Analysis: DIIs have also increased their holdings, though not as dramatically as FIIs. The 10.55% increase reflects a substantial boost in confidence from domestic institutions.

Public

• September 2021: 81.43%
• March 2024: 28.05%
• Change: -53.38%

Analysis: Public holdings have decreased significantly by 53.38%. This could indicate that a large number of shares held by the general public have been acquired by institutional investors (both foreign and domestic), or it may reflect a shift in investment patterns among the general populace.

Others

• September 2021: 3.57%
• March 2024: 1.58%
• Change: -1.99%

Analysis: There has been a slight decrease in the holdings categorized as ‘Others’ by 1.99%. This category might include holdings by corporate bodies, non-institutional private investors, etc. The small change suggests relative stability in this category compared to others.

Company Valuation

Stock Price for 5 years

• Zomato launched its IPO in Juy 2021 at price of 126, since then share price fall by 63% to 46
• From this 47 level, stock price is up by 287% to a new price of 182.
• In this 5 years (2020 to 2024) company has given 45% returns to their investors

If we talk about returns in 1 year , zomato gave a returns of 171% returns in 1 year

171% returns in 1 year

Valuation

• By looking at just the Price to Earning Ratio, Zomato PE is 460
• At this Revenue & Net Profit, this PE is not justified
• In order to justify this PE , company has to increase their Net Profit but in case of Zomato it seems nearly impossible within 5 years as well.
• By looking at the PE ratio, zomato  is highly overvalued company
• If we look at the PEG- 27.5, which is really high. (Generally PEG=1 means company is fairly valued) but in case of Zomato it is not justified & highly overvalued.

What Should Investors Do ?

• At this price level of Rs 180, this is definitely not the right time to  invest in Zomato if you are long term investors
• In 2024 , Zomato turns profitable. In the future as well zomato will struggle to increase their net profit margins because of the Fix cost associated with the delivery partners , Tech team
• In short, consistent increase in net profit is highly uncertain
• Promoters holding in the company is big Zero so be careful about such companies
• Fundamental of the company is weak, it might improve in the coming future.

Check Out this – Easy Trip planners gave 248% returns in 3 years

Disclaimer

• Money Minded School is not a SEBI registered investment advisor, Please do your own research before investing
• This article is a complete guide about Zomato Ltd.
• These information and forecasts are based on our analysis, research, company fundamentals and history, experiences, and various technical analyses.
• Also, We have talked in detail about the share’s future prospects and growth potential.
• Hopefully, this information will help you in your further investment.
• If you have any further queries, please comment below. We will be happy to answer all your questions.
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