Jefferies marks up food-tech major Zomato valuation to $865 Mn

Global investment banking firm Jefferies has marked up the valuation of food-tech major Zomato to $865 million from $500. This is the second markup for the Gurugram-based company this year.

Nomura had marked up the valuation of food-tech to $1.4 Bn in September. 

Aggressive pricing strategy, potential consolidation in online ordering and recent investment raised by Zomato on higher valuation are reasonings behind Jefferies’ markup. A couple of months ago, Nomura had marked up the valuation of Zomato to $1.4 billion. The development was first reported by The Financial Express.

This year has been great for Zomato as it achieved profitability across 24 operational countries. Notably, it attracted unprecedented appetite for its subscriptions - Treat and Gold.

Jefferies calculated separate valuation for Zomato’s advertisement and online ordering units. It valued advertising business at $470 million while ordering at $395 million.  “Strong momentum is Zomato’s delivery business — consolidation driven by aggressive pricing strategy — will be a key trigger in driving the overall business,” said analysts in the report.

HSBC Securities and Capital Markets slashed the company’s valuation citing poor performance and mounting losses in May last year. Two months later Jefferies brought down Zomato’s to $500 million.

A quick look at Zomato's important developments this year

Earlier this month, Zomato received overwhelming response to its paid subscription product ‘Zomato Gold’. Priced with early bird discounts, the company sold out 40,000 membership within three days.

Taking straight on its rival Swiggy the company had launched commission-free ordering campaign. The move is triggering prompt many restaurants (who weren’t part of Zomato) to get on board the company. It also reached the 3-million-orders mark and claimed to have narrowed the gap with competitor Swiggy.

The Deepinder Goyal-led company had raised $20 million from existing investors, two new investors and WhatsApp’s Neeraj Arora in April this year. It also took over Runnr and Hyderabad-based Tinmen this year.

The company also brought down its losses significantly. It witnessed a 34% decrease in its total loss for 2016-17 to Rs. 389 crore from Rs 590 crore as compared to the corresponding year.