Topic Interaction - Zomato IPO

Zomato, one of Indias largest food delivery and online restaurant services, is in day two of its IPO. The issue was oversubscribed on day one. The offer is a combination of a fresh issue of Rs 9,000 crore and an offer for sale of Rs 375 crore by Info Edge (owner of Naukri.com), the largest shareholder in the company. But is it worth the hype？

• Pros:

There is a high barrier to entry in this sector. The Indian market is littered with the bodies of startups who have tried to do what Zomato does and have failed.

Zomato has a strong delivery network in the country.

There is a lot of growth opportunity in tier II and III cities and towns in India.

Losses are seen to be coming down in the next few years, as customers start paying for delivery charges.

• Cons:

Amazon (NASDAQ:AMZN) is planning to enter this space. Amazon has deep pockets and this could lead to continuing losses for Zomato.

The valuation is expensive compared to global peers.

Restaurants are increasingly getting frustrated with the amount of commission charged by food aggregators. This needs to be addressed.

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