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Zomato surges ahead of Swiggy in Valuation Game, HSBC Report Claims

Zomato can take a sigh of relief as the startup gears up for its fresh fundraising round that may fructify in a matter of months and weeks. This is all thanks to HSBC Global Research’s latest report that has pegged the Gurgaon based startup’s valuation at $3.6 billion, or about Rs25,000 crore. This is not only 70% higher than Zomato’s valuation during the last funding round but is also slightly higher than the valuation boasted by Swiggy.

The official logo of Zomato
HSBC pegs Zomato’s valuation at $3.6 billion

The surge in valuation will come as a huge morale booster for the foodtech major in its quest for supremacy amid intense competition from Swiggy. HSBC’s comment on Zomato’s valuation came as part of its report on InfoEdge Limited, which is the largest stake holder in the Gurgaon headquartered company.

It is little difficult not to spot the ironical situation as it was HSBC that had considerably marked down Zomato’s valuation in 2016. That marking down significantly affected foodtech major’s fundraising ability.

Here is why HSBC has increased Zomato’s valuation

Zomato’s business has changed fundamentally owing to its increasing reliance on food delivery unit, this is the reason HSBC has pinned down on for the valuation upsurge. The brokerage firm claimed in its report that today the foodtech major is earning more than 70% of its revenue from food delivery business while the rest it earns from ‘restaurant discovery’ business. This augurs well for the company as India’s foodtech sector in coming years is most likely to imitate the empathic success that today its Chinese counterparts are enjoying.

To give an idea, Indian foodtech companies are well behind its Chinese counterparts when it comes to monthly orders. While Chinese companies currently dispatches monthly orders of $600 Mn Indian companies could barely manage $100 Mn. Although this may look like another story where Chinese dragon has clearly slayed the Indian tiger, it also hints the vast market opportunity for Zomato and Swiggy if Indian economy continues to grow at 7-8%.

HSBC, on its part, has claimed that Zomato can clock 300 million food-delivery orders per month by 2024.

It simply cannot be said that HSBC is being too optimistic on Zomato as far as the valuation goes. This is partly because the Gurgaon based company is slightly better off than Swiggy from financial point of view.

Zomato earned marginally higher revenue at Rs 466 crore in FY18 as compared to Swiggy’s Rs 442 crore in the same period. Zomato’s losses also stood far lesser at Rs 106 crore as compared to Swiggy’s losses at Rs 397 crore in FY18.

Eventually, HSBC’s valuation upsurge for Zomato will be firmly tested when the company raises its next funding round. In case if the valuation holds true then it will be another interesting twist to India’s nascent foodtech sector.


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