What's wrong with Zomato? | Fundamental Analysis | CA Rachana Ranade
Published: 2022-06-30
Status:
Available
|
Analyzed
Published: 2022-06-30
Status:
Available
|
Analyzed
Predictions from this Video
Incorrect: 0
Prediction
Topic
Status
The speaker expresses doubt about Zomato's ability to become profitable in the near future, citing the losses of global competitors and the company's own financial situation.
"I really failed to understand as to when this company would really turn profitable."
Pending
The speaker believes the acquisition of Blinkit will be very challenging for Zomato in the near future due to its perceived difficulties.
"my personal opinion is this seems really really difficult in the coming few months at least"
Pending
The speaker states they would not invest in Zomato due to concerns that the Blinkit acquisition will lead to increased losses for the company.
"I personally will not take this delivery of zomato uh because I personally believe that whatever this Blanket acquisition has has offered on the plate that's going to bring in more and more losses to this company"
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Zomato's valuation is considered significantly higher than its global competitors, suggesting it is overvalued.
"still they are way expensive as compared to the peers"
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The speaker questions Zomato's decision to re-enter the grocery delivery market, given their previous exits from the space due to scalability issues.
"why does it want to enter again into the same space where they themselves have exited the same space in a short span of two years is again questionable"
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The speaker predicts that the Blinkit acquisition will lead to further losses for Zomato, making its future path difficult.
"I personally believe that whatever this Blanket acquisition has has offered on the plate that's going to bring in more and more losses to this company and I feel that this is this is going to be really a tough path ahead of us"
Pending
Zomato is planning to fund approximately 1875 million (1875 crore rupees) of Blinkit's losses over the next 18 months.
"Zomato has planned to fund their losses to the extent of eighteen thousand seven fifty million in the coming remainder cy 22 means six months and next cy 23 months of twelve months"
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Zomato is currently experiencing significant losses, amounting to approximately 16,921 million (1692.1 crore rupees).
"Zomato itself is in losses now... sixteen thousand nine twenty one million losses"
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The speaker believes that both food delivery and quick commerce businesses are likely to continue burning cash indefinitely.
"food delivery and camp business are the two businesses that will be burning cash forever"
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The speaker suggests that survival in the quick commerce space is very challenging.
"it's very difficult to actually survive in this space"
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A significant related-party transaction, where a co-founder of Blinkit is married to a co-founder of Zomato, was not disclosed during the conference call, raising concerns about management transparency.
"there is a connection between Zomato's co-founders and Blanket co-founders Okay one of the co-founder of Blinkit and one of the co-founder of Zomato they are husband wife and unfortunately this was not told in the con call"
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Blinkit is a loss-making entity, and Zomato plans to fund its losses, estimating an amount of 18,750 million (1875 crore rupees) over the next 18 months.
"blinkit is a loss making company and now if it is making losses we need to fund those losses right... zomato has planned to fund their losses to the extent of eighteen thousand seven fifty million"
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Zomato acquired Blinkit for a consideration of 44,475 million (4447.5 crore rupees).
"they have paid forty four thousand four seventy five million consideration for acquisition of blanket"
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Zomato's expenses are growing at a faster rate (81%) than its sales growth (73%), leading to increasing losses.
"expenses increased at 81 percent char... expenses are growing at a pace higher than the sales growth and that is the reason why obviously losses are going to increase"
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Using the EV/Revenue valuation model, Zomato's EV/Revenue ratio is 25, which remains higher than its peers even after a decrease to 14.62.
"based on ev revenue valuation model zomato has ev by revenue of 25... still it is higher than the peers"
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Zomato's average order value (AOV) has seen minimal growth, increasing by only 1 rupee from 397 to 398 in INR over the last two years.
"average order value is increased only from 397 inr... to only 398"
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Zomato had attempted to enter the grocery delivery market twice and exited both times, citing scalability issues.
"they had already tried to enter into the space of delivering grocery and other essentials and they tried to enter twice they they said that this is not working this is not scalable"
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Before the acquisition, Zomato had provided Blinkit with a debt of 11,328 million (1132.8 crore rupees).
"Blinkit wanted to raise some money and Zomato had already given them a debt... 11328 million"
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Zomato paid an additional 11,527 million (1152.7 crore rupees) over and above the implied value for the acquisition of Blinkit.
"they paid 11 000 527 million extra only"
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When asked about profitability, Zomato's management expressed confidence in their path to profitability being sooner rather than later, without providing specific details.
"when will you be profitable so as any management i mean i can say as many of the managements would answer that what gives us confidence that our path to profitability will be sooner rather than later"
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Zomato's contribution margin, which was previously negative, turned positive in FY21.
"contribution earlier it was minus 24 then minus 11 percent now at least it came into positive in fy 21"
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The acquisition of Blinkit by Zomato was finalized for a consideration of 44,475 million (4447.5 crore rupees).
"the deal was sealed at a consideration of what of forty four thousand four hundred and seventy five million for the acquisition of blinking"
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Zomato's management claims Blinkit's proprietary tech platform, scale, brand relationships, seller ties, and dark store network differentiate it from Zomato's past experiences in grocery delivery.
"blinkit has their proprietary tech platform they can they have the scale of business they have relationship with third party brands they have types with nice sellers they have good warehouses dark store network"
Pending