Nomura Arm Raises a Toast to Zomato, its Valuation to $1.4b Brokerage bets on food tech co’s scalable business model, pegs its revenue at $300m by 2022
Mumbai: Nomura Financial Advisory and Securities (India), a subsidiary of Nomura Holdings, is bullish on the online restaurant discovery and food ordering firm Zomato’s growth trajectory, pegging its valuation at $1.4 billion by March 2019.
“The Street has valued Zomato at a discount to its last fund-raise valuation of $1 billion in September 2015…we conclude that the market’s valuation is too low. We raise our Zomato valuation to $1.4 bn (vs $1bn earlier), valuing its advertising and food ordering businesses at 5.5 times and 6 times (over the next five years),” said the report by analysts Ashwin Mehta and Rishit Parikh. Nomura’s optimism surrounding Zomato sent its largest stake holder Info Edge’s stock soaring to 1,221.85 per share. The stock closed 10.4% higher on Friday.
Nomura’s mark-up of Zomato’s valuation comes more than a year after brokerage firm HSBC Securities and Capital Markets (India) slashed the company’s valuation by half to $500 million raising concerns over the advertisementheavy nature of it’s business model, and the possible limitations over its ability to scale further. When contacted, HSBC declined to comment on specific details, but said their valuation for Zomato remains unchanged at $500 million they had ascribed in April last year. Nomura’s optimism surrounding Zomato is backed by its belief that the business is globally scalable and the network effects of
its restaurant discovery platform enables monetisation in food ordering at low customer acquisition costs, pegging revenues at $300 million by FY22.
Zomato’s valuation uptick by Nomura comes at a time when the company is in advanced talks to raise up to $200 million from Chinese ecommerce giant Alibaba and its payment affiliate Ant Financial, which ET had reported earlier this month. The deal could see Zomato being valued at $1.1 billion, higher than the $960 million it was val- ued at during its last fund raise in September 2015.
Interest of global players in Zomato points to a significant turnaround for the beleaguered food tech sector that struggled to raise funds until a year ago.
The deal, if it goes through, will be part of Alibaba and Alipay’s global play as Zomato has a strong presence in Southeast Asia and Middle East as well.
Zomato’s international play, especially in markets where competition is less, is being touted as a reason for the company’s ability to expand its topline. Nomura expects the Info Edge-backed firm to open up its food delivery services beyond the three countries it is currently present in. The company’s lower dependence on its delivery model for food ordering, which contributes 25% to its topline, is also one of the reasons for the optimism surrounding the firm. Post its acquisition of Runnr, Zomato is looking to selffulfil about 50% of its orders from the current 8% over the next few months across its Indian and international markets, ET had reported on Wednesday.