In the note, concerns have been raised regarding Zomato's ad-heavy business model, its international operations and growing competition in the online food ordering segment, says a Mint report.
"Zomato is present in 23 markets so early on and none is profitable, which implies that to address both the investments in last-mile delivery and losses in international operations, fund-raising will be a continuous phenomenon, suggesting current valuations don't make much sense. We do a discounted cash flow (DCF) analysis and value the business at 50% lower to the $1-billion valuation" HSBC analyst Rajiv Sharma reportedly said in the note.
Last year, Zomato’s valuation has jumped to $1 billion after it had secured funding worth $50 million from Info Edge, Sequoia Capital and Vy Capital. Talking of the overall funding that it has raised since its launch in 2008, the figure comes to around $225 million.
Info Edge, which owns a 50.1% stake in the company, has disagreed with HSBC's estimate, with founder and VC
"We value our investments at cost and Info Edge has not marked down Zomato at all" Bikhchandani added.
"Our ad business in various countries has up to 93% gross margin... We are profitable in eight countries as of today" a Zomato spokesperson told the publication. "We are growing fast and are on course to becoming profitable as a company very soon. Beyond this, we do not want to comment on valuation markdown speculations of third parties."
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