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

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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.

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