Rally in Zomato can be sustainable in near term considering its brand value
Zomato has a strong brand name and recall value across large and small Indian cities as its offerings include both food delivery and dining-out options.
July 25, 2021 / 09:23 AM IST
We have seen the bumper listing of Zomato and considering the brand value of Zomato, the rally can be seen in the near term. As industry delivery percentage to net-revenue stands at around 5 percent and with the Zomato average order value of Rs 400 (i.e. Rs 20 per delivery) so the company is well poised. Additionally, given the strong network effects, increasing frequency of order, huge scope for growth in tier-II and tier-III cities and being the first start-up in the Indian Food Aggregator space to be listed on the bourses, the enthusiasm among the investors about the Zomato is tremendous, hence we are positive on the Zomato for long term investment purpose.
Currently, the company is loss making however over the period of 3-years the company's orders grew by 7.8x from 3.06 crore in FY2018 to 23.89 crore in FY2021; active food delivery restaurants has also increased from 94,286 in FY2019 to 1,48,384 in FY21. Additionally, gross order value (GOV) grew 7.1x from Rs 1,334 crore in FY2018 to Rs 9,482.9 crore in FY2021. Despite the impact of COVID-19, the company's revenue has grown at a CAGR of 62 percent over FY2018-FY2021.
In this competitive market, Zomato has consistently gained market share over the last four years to become the category leader in the food delivery space in India in terms of GOV from October 1, 2020 to March 31, 2021. Further, it has made significant investments in marketing and promotions to accelerate customer adoption of food delivery in India and promote its brand.
It has a strong brand name and recall value across large and small Indian cities as its offerings include both food delivery and dining-out options. Going forward, they plan to invest in new products, technology, further deepen their relationships with restaurant partners and lastly continue to invest in their delivery infrastructure and expand their delivery partner base.
In addition, given the large market opportunity in India, we believe Zomato will focus on growing in Indian markets which will enhance the value for all stakeholders.
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