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Zomato 90,000 Crore Valuation SCAM 馃槹 ? Will Zomato Fail ? Zomato Business Case Study #Zomato - YouTube
Channel: Aditya Saini
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Foodiebay the company which we now know as Zomato,
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Zomato started in 2008 with the name of Foodiebay.
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And today the valuation of this company is
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Rs. 60,000 Crore. In 2018 Zomato's revenue was only
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Rs. 500 Crore which in 2020 increased to
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Rs. 2600 Crore. But if we talk about their losses
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then the losses have increased substantially too.
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In 2018 their losses stood at Rs. 107 Crore,
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and by the year 2020 their losses reached to
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Rs. 2400 Crore.
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Zomato IPO will be on 14th of July,
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so will the Zomato IPO fail?
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Because this has happened earlier in US.
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When wework IPO was about to come, it failed.
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So will the Zomato IPO fail?
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Well, we will find answer to this in this video.
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So today I will tell you three core concepts
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which will clarify the future of this company.
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If we study the timeline of this company,
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so when Zomato started in 2008 at that time
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Zomato only used to show the reviews & menus
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of restaurants.
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It started as an Online Platform.
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They received their first funding in 2011,
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and in 2015 they actually entered in food delivery
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business.
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Before that Zomato did not deliver the food.
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But in this business, there are three
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Turning Points
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which I am going to tell you. The first turning point
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was in 2017 when Zomato Pro was launched.
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Zomato Pro is a subscription based model.
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Then second turning point was in 2019
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when they started Zomato Hyperpure
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& the third turning point, well, I will tell you later,
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that what is the third turning point with Zomato.
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Well, now let us study the three cores of Zomato.
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Their first core is their business model.
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Zomato operates on 6 stream revenue model.
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Now what is this? Their first revenue stream is
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Delivery Based Business Model
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where they deliver the food from restaurants to
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your home in which they charge you for delivery
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and commission from the restaurants.
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Apart from this to provide you discounts
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the dishes listed on Zomato are Rs. 20-30
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expensive, so that they can offer you discount
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which is ultimately goes from your pocket only.
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Then their second revenue model is
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Subscription Based Revenue Model
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which is Zomato Pro which was launched in 2017.
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Today 14 Lakh people have Zomato Pro subscription.
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So Zomato collects big revenue from here as well.
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Then their third model is
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Business Consulting.
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Because today Zomato has so much of data
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they know in which city, in which particular area
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which dish, at what price, sells in what quantity,
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and is sold in which season.
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They have all this data, so they provide consulting
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to so many restaurants, that you have this service
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from us and we will tell you what you should do in
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your business. Apart from this many people who
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want to open new restaurants, they also take Zomato
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consulting services.
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Then the fourth revenue stream is
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Advertising Fee.
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All the restaurants listed on Zomato,
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since the Zomato has a big digital space,
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has big consumer base, so many restaurants run
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their advertisements over there.
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So Zomato charges them with advertising fees.
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And then rank those restaurants or their specific
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dishes higher. Let us consider that you have
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searched Dal Makhani and I have charged some
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restaurant with advertising fees so I will rank
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his Dal Makhani at the top, whenever you search it.
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So in this way as well, through advertising
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Zomato generates a huge revenue.
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After that Zomato's fifth revenue stream is
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Zomato Hyperpure
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What Zomato does in this is, basically Zomato
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purchases the raw material in huge quantities
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and supply that raw material to these businesses,
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to all these restaurants.
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So Zomato buys in bulk quantities from here and
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supplies it to restaurants thus generates a huge
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revenue. Now you would say, brother,
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these are only five revenue streams, where is the
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sixth one. Wait for a while, I will tell the 6th one too,
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but before that let's us understand few more things.
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Then the 6th revenue stream will be clear easily.
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So to understand the 6th revenue stream we will
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first understand the second core of the business.
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The second core is - Unit Economics.
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In simple words Unit Economics means
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what is the scene per order, brother?
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Means one transaction that is occurring in my
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business, what is its scene? What is the profit?
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What is the Loss? What is my expense?
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All these factors. In 2020 Zomato was having loss
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of Rs. 30 per order.
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But by the year 2021, Zomato was making profit of
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Rs. 22.9 per order.
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Now how did all these things happen?
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To understand this you will have to understand
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Unit Economics have these 5 aspects with which
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Zomato shifted from Rs. 30 loss per order in 2020
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to Rs. 22.9 profit per order in 2021.
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So first unit economics is their Commission.
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In 2020 Zomato was earning Rs. 43 commission
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per order from each restaurant.
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Which now in 2021 stands at Rs. 62.8.
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Second unit economics is Delivery Charge.
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In 2020 Zomato was charging Rs. 15 per order
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for delivery which is Rs. 26 now in 2021.
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Their third unit economics is Delivery Cost,
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which means how much Zomato has to pay per order
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to make the delivery.
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So earlier in 2020 they had to pay Rs. 52 per delivery
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which has now dropped to Rs. 44 in 2021,
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as they have reduced salaries of delivery boys.
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Fourth unit economics is Discounts.
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Zomato was offering heavy discounts in 2020
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to their customers, so at that time Zomato's
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discounts were around Rs. 21 per order excluding
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everything, and now Zomato is offering only Rs. 7.3
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as discounts.
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So we can see a big change in their unit economics.
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And their fifth unit economics is Variable Cost,
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like advertising cost, management expenses
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& everything combined. So per order variable cost
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earlier in 2020 it was Rs. 15.7 which is now in 2021
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stands at Rs. 14.8.
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So the big change that you are seeing in unit
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economics, with this Zomato shifted from a loss
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of Rs. 30 per order in 2020 to a profit of Rs. 22.9
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per order in 2021.
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Now the question is whether this model
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a sustainable one? Will this sustain in long term?
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So, well, to understand this you understand these
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two things 1st is customers & 2nd is restaurants.
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Understand these two aspects, first is
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Customer Problems.
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The first problem that customer will face is
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High Delivery Charge. Customer has to pay heavy
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delivery charge and the second problem for
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customer is their discounts are decreased.
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So overall the customer is getting expensive food.
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Now the question is will customer leave Zomato?
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The answer is No. Why?
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Because customer don't have many choices.
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They have one choice that is Swiggy
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but if he has taken Zomato Pro then he will not go
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anywhere, so in a way, customers don't have choices.
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Now the second problem is faced by restaurants.
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Restaurants have to pay high commissions
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to Zomato, so there are chances in future that
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restaurants will leave the Zomato platform.
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Now the problem is that if there are no restaurants
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with Zomato then what customer will do on its app?
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To understand this firstly you understand
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the third core of Zomato which is very important.
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And that is their Future Plans.
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What Zomato is going to do in future?
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So the Zomato IPO is worth Rs. 9375 Crore.
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And the price band for this IPO will be Rs. 72 to Rs. 76.
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Now the money that Zomato is raising
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from general public, what is Zomato going to do
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with it? The money that they will get with IPO,
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well, two things will be there, first
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the investors will get an exit.
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The investor who have invested money in Zomato
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will now take a good exit.
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Zomato has raised a funding of $2.1 Billion till now
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from investors, so some investors will get exit
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& the 2nd thing that Zomato will do, listen carefully
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Disruption
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Zomato will create Disruption in food tech
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industry, there are high chances of this.
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Do you remember when I have explained business
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model then I haven't told you the 6th point.
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I had said, wait for a while, you will get this later.
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So that 6th point is Zomato Kitchens.
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Zomato, Zomato Hyper Pure and Zomato Kitchens
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through this they are going to open cloud kitchens.
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The competitive advantage that Zomato have today
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is their Data Bank.
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Zomato has so much data that it knows everything.
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Zomato knows that which dish in which area should
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be sold at what price, how much its sales are, in which
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season it is sold, what is its buying frequency.
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All these details are already there with Zomato.
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Zomato will use all this data to open its cloud
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kitchens. Now why will they open cloud kitchens?
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The reason behind this is that if you open normal
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restaurants, cloud kitchen needs 1/4th of the cost.
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Actually the cost is half of that but Zomato will
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have it at 1/4th cost. Why? Because Zomato won't have
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to pay for any advertising. Well let me tell you what
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cloud kitchen is. It is basically an online kitchen.
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You don't need any dining area in cloud kitchen.
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You can run 2-3 different brands under one kitchen.
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And you just need to sell those brands online.
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There are many brands today operating on cloud
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kitchen e.g. Faasos, Behrouz Biryani apart from this
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Mandarin Oak, Oven Story all these brands are from
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Rebel food and they operate on cloud kitchen.
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You won't find any outlets for them but these brands
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are well known as we order online food from them.
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So similarly why Zomato will have 1/4th cost?
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Because Zomato has such a big platform & so many
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customers and it won't have to spend on
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advertisements as it is their own platform.
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They can rank their own dishes which are from
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their cloud kitchen, very high on the platform,
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& the 2nd disruption that Zomato will bring will be
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through its Hyperpure business.
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Its basic function is it provides raw material used
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for food to businesses, to all the restaurants.
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Now hyperpure and cloud kitchens which will be
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opened by Zomato, with these two Zomato will
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help many brands to shift their model to cloud
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kitchen.
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With which they will save money & Zomato will also
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be benefited because Zomato will provide them
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area to open their cloud kitchen.
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So Zomato will earn through commission or royalty.
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Apart from this Zomato can generate a big revenue
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through its hyperpure chain.
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Why? Because all those restaurants will get the raw
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material through hyperpure.
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Now hyperpure won't supply to single restaurant
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it will supply to so many restaurants,
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currently hyperpure serves to 6000 restaurants,
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in 6 cities. So when hyperpure will grow big,
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when they will purchase products to supply so many
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restaurants, they will purchase in bulk which will
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give them volume discount.
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With volume discount they will get them at low cost
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but they will of course not offer at that price to
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restaurants, they will offer at some higher rate,
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so they will generate huge profit out of that too.
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So these are Zomato's future plans.
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Thus Zomato will sustain its profitability.
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So even if restaurant owners leave the Zomato
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still high chances are there that Zomato will
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maintain its profitability and grow as well.
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So the question is should we invest in Zomato IPO
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or not? So for that you can follow any of the two
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approaches, if you want to invest in IPO & you don't
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have the demat account then open now with the link
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in the description. Go and open your demat account,
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only then you can invest in IPO.
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Now follow one of the two approaches either
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Fundamental or Futuristic
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Fundamental approach is studying Fundamentals.
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I have told you the fundamentals,
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fundamentals are not very strong as if now.
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The business has just entered into profits but
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there is no guarantee in the future whether it will
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be in profit or not.
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But if we see the futuristic approach then the
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business can generate very good profit in future
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because Zomato's future plans are very strong.
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So it's your own decision.
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Apart from this we have started second channel
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Honestly By Aditya Saini
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If you haven't checked out yet then you can check out.
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