INTRODUCTION OF THE COMPANY

Zomato (NSE: ZOMATO) was launched in 2010, The company's technology platform
connects customers, restaurant partners and delivery partners, serving their multiple needs.
Customers use its platform to search and discover restaurants, read and write customer
generated reviews and view and upload photos, order food delivery, book a table and make
payments while dining-out at restaurants.

COMPANY HISTORY

On the other hand, the company provide restaurant partners with industry-specific marketing
tools which enable them to engage and acquire customers to grow their business while also
providing a reliable and efficient last mile delivery service. The company also operate a one-
stop procurement solution, Hyper pure, which supplies high quality ingredients and kitchen
products to restaurant partners. The company also provide its delivery partners with
transparent and flexible earning opportunities.

BUSINESS OVERVIEW

Zomato was founded by Deepinder Goyal and Pankaj Chadha as Foodie Bay in 2008 and was
renamed as “DC Foodie Bay Online Services Private Limited” as a private limited company
on January 18, 2010. On May 16, 2012, the name of its Company was changed to “Zomato
Media Private Limited”, on April 3, 2020, the name of its Company was changed to “Zomato
Private Limited”. Finally on April 5, 2021 the name of its Company was changed to “Zomato
Limited” upon conversion into a public limited company. The registered office of the
company is Nehru Place, New Delhi.

According to Red Seer, Zomato is one of the leading Food Services platforms in India in
terms of value of food sold, as of December 31, 2020. During Fiscal 2020, 41.5 million
average MAU visited its platform in India. As of December 31, 2020, the company were
present in 526 cities in India, with 350,174 Active Restaurant Listings.

The company's mobile application is the most downloaded food and drinks application in
India in each of the last three years since 2018 on iOS App store and Google Play combined,
as per App Annie’s estimates.
While the company had a footprint across 23 countries outside India as of December 31,
2020, Zomato has taken a conscious strategic call to focus only on the Indian market going
forward. Given the large market opportunity in India, the company believe a focused Zomato
will enhance the value for all its stakeholders.

As of December 31, 2020, Zomato had 3,469 employees worldwide. Zomato also engage
contractors and consultants to provide us temporary workforce.

PLATFORM OFFERINGS

The company's business is built around the core idea that over time, people in India are going
out to eat at restaurants more than they cook at home. To capture value out of this shift in
customer behaviour, Zomato has two core business-to-customer (B2C) offerings – Food
delivery and (ii) Dining-out, in addition to its business-to-business (B2B) offering (iii) Hyper
pure. Another important part of its business is (iv) Zomato Pro, its customer loyalty program
which encompasses both food delivery and dining-out.

FOOD DELIVERY

According to Red Seer, 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. Zomato has experienced rapid growth in food delivery in
India with its Orders increasing by 13.2 times from 30.6 million in Fiscal 2018 to 403.1
million in Fiscal 2020 and its GOV growing 8.4 times from ₹13,341.4 million in Fiscal 2018
to ₹112,209.0 million in Fiscal 2020

There are three key stakeholders in its food delivery business

Customers: food delivery allows customers a convenient, on-demand solution to search and

discover local restaurants, order food, and have it delivered reliably and quickly. On an
average, 10.7 million customers ordered food every month on its platform in India in Fiscal
2020 with an average monthly frequency of over three times. In the nine months ended
December 2020, 99.3% of its food delivery Orders came through Zomato's mobile
application.
Delivery partners: Zomato has one of India’s largest hyperlocal delivery networks in terms
of number of delivery partners as of December 31, 2020, according to RedSeer. The
company's delivery network collected food from its restaurant partners and delivered it to
customers with a median delivery time of less than 30 minutes in Fiscal 2020 (delivery time
calculated from the time the Order is placed on its mobile application to the time the Order is
delivered to the customer). The company had 161,637 Active Delivery Partners during the
month of December 2020. In Fiscal 2020, its delivery partners fulfilled 94.9% of its Orders
delivered.

Restaurant partners – on an average, in Fiscal 2020, the company had 131,233 Active Food
Delivery Restaurants every month. Restaurants are the backbone of its business, and the
company strongly believe that the company can only be viable if the company help the
restaurant industry grow and succeed more than what it could do without it.

Financial Highlights
According to the DRHP, Zomato reported a loss of Rs 682 crore in the nine months ending
December 2020. Previously, In the financial year 2019-20, the company had a net loss of Rs
2,386 crore, up from Rs 1,010 crore in the financial year 2018-19. Although the company
reported a jump in revenue from Rs 1,397 crore in FY19 to Rs 2,743 crore in FY20, its
expenses have increased from Rs 3,608 crore to Rs 5,006 in the same period.
 OBJECTIVES

 Zomato aims to be a place where the foodies hangout. The company has spread in 20
countries with it headquarter in New Delhi, India providing service to over 35 million
values customers per month. 

 Zomato works with keen interest on various strategies toachieve their goal. It includes

 Financial Objective: To increase their fund and revenue

 Marketing Objective: To tap their customers from across the glob

 Growth Objective: To grow continuously and increase their customers andpage traffic

 Globalization Objective: To expand themselves across the whole globe as aleading

service provider

Marketing Objective

 Featured and user-friendly website

 Global mobile app

 Focusing on digital marketing channels for potential customers

  Acquire the competitors: To be the largest resource in food supply market,Zomato

bought urban spoon for $52 million to enter US, Canada and Australia

 Simpler review and rating system

 Zomato uses different platforms to engage their customers with them.

 MISSION &VISION

MISSION
 Zomato’s mission statement is “better food for more people.” Since their inception
in 2008, have grown tremendously, both in scope and scale - and emerged as India’s
most trusted brand during the pandemic, along with being one of the largest
hyperlocal delivery networks in the country.

VISION

 ''We want to be the 'Google' of food. Our vision is to be the global platform when
someone is looking for food locally," says Pankaj Chadha, co-founder & COO.
 ISSUES AND CHALLENGES

 CHALLENGES FACED BY ZOMATO

 THE AOV HURDLE

Making deliveries a ‘cost-efficient process’ has been the biggest challenge for most consumer
internet companies in India. The unwillingness of customers to pay a ‘premium’ for the
services offered increases delivery costs and makes it tough for these companies to achieve
good margins on orders. Zomato, however, has made some progress in the average order
value (AOV) of late.

The company’s draft red herring prospectus showed that its delivery cost per order came
down to Rs 45 in the first nine months of FY20 from Rs 65 in FY19. The task now is to
sustain this improvement, which won’t be easy as it gains volumes, analysts said.

“Volumes do not always improve margins. For instance, if you receive orders from five
houses in an area and each has to be delivered in under 30 minutes, then you need to assign 3-
5 different riders, which increases the cost of delivery. The clubbing of orders is very difficult
in fresh foods,” said Sanjeev Kumar, a forecast analyst at Forrester.

According to Kumar, companies must scale up the business-to-business segment to generate

revenue. Zomato launched its B2B supplies platform Hyperpure in 2018 and it also offers
cloud kitchen infrastructure through Zomato Kitchens.

 SMALL TOWNS FOR BIG GAINS

Like most internet companies, Zomato is expanding and entering small towns. So far largely
untapped, small towns offer several opportunities to internet companies, although customer
acquisition could be a challenge.

Jefferies estimates that assuming a delivery cost of Rs 45 per order, a healthy 25 percent take
rate (vs 22.6 percent in FY20 for Zomato), zero discounting and Rs 15 in other variable costs
(similar to 9MFY21), a delivery platform would achieve breakeven only if the average order
value is greater than Rs 240.

“In tier II, III towns, the metrics would be slightly favourable given delivery costs are lower
at Rs 25-30. Assuming a similar 25 percent take rate, zero discounting and Rs 15 in other
variable costs, breakeven AOV would be lower at Rs 160-180,” it added.

However, Jefferies said the willingness to pay a premium for convenience could also be
lower in such markets, unless the platform provides discounts or incentives. A discounting
strategy would increase the cost of delivery and further impact its unit economics.

“To acquire new customers in new geographies, food aggregators will have to adopt
strategies such as discounting and spend on customer acquisition, which means high cash
burn for those markets as compared to the last 12 months,” said Ankur Pahwa, a partner and
national leader, e-commerce and consumer internet, at EY India.

It remains to be seen how Zomato will implement learnings from the past to gain customer
acceptance in smaller towns.

 THE GROCERY OPPORTUNITY

Zomato sought regulatory approval earlier this month to acquire an over 9 percent stake in e-
grocery platform Grofers. The online grocery platform raised over $120 million from Zomato
and Tiger Global.
Combining with Grofers, which according to market estimates has the second-highest market
share in the segment after Tata Group-owned Big Basket, is critical for Zomato.

“The integration of Grofers with Zomato presents an execution challenge,” said an analyst. If
Grofers moves to new cities in partnership with Zomato, then the two would have to establish
supply chains in these locations and set up warehouses, which would need investment.
  COMPETITIVE LANDSCAPE

Swiggy, a later entrant in the food delivery space, is head-to-head with Zomato on several
counts. Zomato had a head start, given its older dine-in business. However, Swiggy posted
strong growth in the past three years, with revenue at Rs 2,500 crore in FY20, Jefferies said
in a report.

Zomato’s gross merchandise value was $1.6 billion in FY20 (the Uber Eats acquisition was
not fully captured here), while Swiggy’s delivery GMV was at almost $2 billion in FY20,
Jefferies said.
Amazon, too, entered the field last year with the soft launch of its food delivery business on a
pilot basis in a few areas in Bengaluru.

“Amazon seems to be charging far lower take rates (7-12 percent) than Zomato and Swiggy
(16 percent-20 percent) to better its reach to the restaurants and catalyse the network effect,”
ICICI Securities said.
While ICICI Securities expects Amazon to take time to establish competitive advantages –
network effect, reach and data/insight into customer behaviour – other investors said Amazon
with its deep pockets is a formidable opponent.

“Amazon is giving deep discounts. For every order, customers are being offered Rs 50-100
cashback. So, it is a highly competitive market,” said an analyst.

Zomato will have to figure out a way to keep ahead of the curve in this market while
sustaining its current unit economics and attaining profitability.
ISSUES FACED BY ZOMATO

 Instant grocery-fication

With food delivery services - like Swiggy - getting into delivering household essentials and
groceries, the market has seen a jump in similar services, with rival Zomato also launching a
45-minute delivery feature.

 First on the line

Zomato had earlier started delivering groceries in April of 2020, right after the COVID-19
pandemic began but then pulled out later after logistical problems. The company ended the
venture on September 17, 2021 after re-entering in July 2021.

 Re-entry

In July of last year, the food delivery major once again entered the market, but is now pulling
out, this time for good. In an email to grocery partners, the company announced, “We have
decided to shut down our grocery pilot and as of now, have no plans to run any other form of
grocery delivery on our platform.”

 Grofers

The Gurugram based company has a stake in grocery deliverer Grofers and is set to leave
them to that segment, with the company saying, “Grofers has found high-quality product-
market fit in 10-minute grocery and we believe our investment in the company will generate
better outcomes.”

 Issues

Zomato is leaving the business as it found regular, fast deliveries were unsustainable, saying,
“We have realised it is extremely difficult to pull off such delivery promise with high
fulfilment rates consistently in a marketplace model,” in its letter.