Zomato IPO: Growth versus profitability debate is on
Published On: Tuesday, June 8, 2021 | By: Team KnowMyStock
Ahead of Zomato's initial public offering (IPO) planned later this year the growth versus profitability debate is heating up. According to analysts at Jefferies, while one set of investors are looking at Zomatos’ growth metrics even at the cost of medium-term profitability, the other camp is looking for a clear path to profitability going ahead. Potential competition from Amazon, Thrive, etc. is also on investors' minds and so is the dynamics between Zomato and Swiggy, they said. A few investors are concerned that Swiggy, given its unlisted status, may have less investor pressure on profitability versus Zomato, which will have public market shareholders,” note the experts.
Questions are also being raised on the utilisation of Zomato’s IPO proceeds, Jefferies said, given the lack of clarity on this issue as things stand. The proposal to raise Rs 8,250 crore, or over $1.1 billion, through its initial public offering (IPO) makes this IPO one of the largest by a consumer internet company in India. There has also been a fair amount of discussion on Zomato's presence in segments like hyper-pure, dine-out subscription and the recent foray into nutraceuticals. Investors, however, have been surprised with the reluctance on trying grocery or hyperlocal opportunities.
However Zomato has said that it plans to use part proceeds to fund organic and inorganic growth, including customer and user acquisition, delivery and technology infrastructure, and acquisitions.
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