Why Zomato's IPO is Attracting Investors Despite Continuous Financial Losses
Imagine a small ball rolling and growing in size as it moves along. It grows, and it grows, and it attracts more and more attention. This ball represents the trajectory of Zomato, a food delivery giant in India, and the current bout of interest surrounding its Initial Public Offering (IPO).
The Current Financial Situation
Zomato, despite clocking continuous financial losses, has managed to attract hefty profits through its stake structure. This makes the upcoming IPO a unique opportunity. Much like a ball gaining momentum while rolling, Zomato’s ties with investment firms are strengthening as it continues to expand its user base and market presence.
Lessons from Cricket Legends
Just as a cricket player can surprise everyone, turning a once-rookie into a legend, Zomato has the potential to surprise the investors in a similar manner. Comparing Zomato to Indian cricket legends Sunil Gavaskar and Rishab Pant helps illustrate this point. Gavaskar, the legendary cricketer, represents traditional businesses like Dhanbad Coalfields or Tata Steel. These companies have a strong history but haven't managed to reach a significant market cap. Conversely, Rishab Pant, who achieved success earlier than expected, mirrors Zomato’s potential for future growth and profitability.
Endless Business Opportunities
Like Pant, Zomato presents endless possibilities for future business ventures. It’s not just about food delivery anymore. Imagine a future where Zomato acts as an advisor for new restaurant owners, helps manage hotels, or even tackles the food supply chain. This vast potential is why many investors are looking beyond the current financials.
Business Model and Financial Stages
Start-ups in the B2C sector typically go through three critical phases: bringing in new customers, retaining them, and making profits. Zomato has already crossed the first phase and is currently in the second. The company has significantly reduced its losses and is on track to achieve profitability as it continues to retain and satisfy its customer base.
Opportunities in the Indian Market
With the ever-growing middle class and urban population in India, the potential for Zomato to achieve big profits is substantial. Companies like JIO, Amazon, Paytm, GPay, Swiggy, Ola, and Uber have revolutionized traditional business models. Zomato, too, has the potential to disrupt and dominate the market in a similar way.
Common Misconceptions and Why to Invest
Many investment guides advise to stay away from Zomato’s IPO, citing traditional evaluation methods such as intrinsic value or financial ratios. However, this approach is not suitable for evaluating new-age companies like Zomato. Proponents of the IPO suggest that while not a sure bet, Zomato has the potential to be a multibagger stock.
Personal Perspective and Investment Strategy
While I haven’t subscribed for the IPO, I understand the draw. Zomato has shown steady progress and has the potential to surprise everyone. Rather than placing a large bet, I am willing to invest a small amount, around 5000, in the coming 65-75 range. This can either become 50k or 0 in 10 years, but the key is the low risk associated with a small investment.
Like any other investment, it is essential to follow market trends and make informed decisions. Zomato's IPO presents a fascinating opportunity for investors willing to look beyond traditional metrics and embrace the potential of a future disruptor.