Uber eats decent gain from Zomato listing

What Uber made out of zomato’s stellar listing will make everyone surprise.

 

Uber has made 560% return on its investment in Zomato, How?

Let’s go back to 2020 when Uber sold its Uber eats India operation to Zomato in a non-cash deal. On that Zomato issued 76,376 compulsorily convertible cumulative preference shares (CCCPS), which were later converted into 6121.991 Lakhs equity shares of Zomato(9.19% stake, in Zomato).

Uber India booked a profit of ₹703.4 crore on that deal, that 9.19% stake in zomato is now worth ₹9,084 crore ($ 1.2 billion on July 23, 2021).

The deal has fetched gains for Uber, for Zomato the deal was a loss making one as it has written off ₹233 crore as impairment in its books.

The Competition Commission of India (CCI) has issued a show cause notice to Zomato for failing to take approval of the regulator for the deal.
The CCI could impose a penalty of up to 1% of the combined entity’s turnover (₹1,994 crore as of FY21) or assets (₹8,704 crore as of FY21), whichever is higher as stated in DRHP.

This is purely based on financial perspective we cannot ignore the fact that the customers and customers data zomato acquired in that deal and reducing the competition by consolidation.

The other investor who made fortune in this listing is Sanjeev Bikhchandani, founder of Info Edge, which invested Rs. 4.7 crore back in 2010 is now worth Rs. 15,000 crores.

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How Swiggy can overtake Zomato

How Swiggy can leverage over Zomato from now onwards?

  

In few days Zomato will be a listed entity, this is a the will indirectly help Swiggy to take on Zomato.
Till now both were at same level of competition, enjoing same freedom in terms of decions, discounts and compliance matters etc but Post the listing of Zomato the scene will be different.

A breaf look at current position of Swiggy and Zomato,

For FY20, Swiggy’s total income stood at INR 2,956 Cr, as compared to Zomato’s total revenue of INR 2,486 Cr

For FY20, Swiggy’s total income stood at INR 3,909 Cr, as compared to Zomato’s total revenue of INR 2,451 Cr

Swiggy is operating in 523 cities, whereas Zomato operates in 526

Swiggy's valuation $5 bln, whereas Zomato's valuation $5.4 bln(post listing around $8.1 bln)

-After listing Zomato will be having a lot of restrictions on Fund raising, decision making, consultation before decision finalization etc.
-Various compliance requirements like LODR,SEBI,FEMA etc which will restrict its decisions regarding funding and new preferrential issue and may more.
-Promotor's will have to get shareholders nod before any decision.
-Its highly difficult to cash burn in terms of discounts promotions.

-This will indirectly benefit the Swiggy, it will continue to engage in aggressive promotions and funding.
-Now Venture funds would love to invests more in Swiggy (which already pioneered by soft bank) which helps it to expand rapidly.
-VC's will get better returns from Swiggy when it lists than from what they are now getting from Zomoto.
-Recently Swiggy raised $1.25 bln from Softbank which brings its valuation almost equal to Zomato's post listing valuation.
-Both companies should have better plans in terms of Unit economics.

Swiggy should delay for at least 2 years if its planning for IPO as it can analyse from Zomato's post listing activity and it will get more VC funds to continue for some more time.
Now its IPO spree in india, as every company which is launching its IPO is getting a good response irrespective of its fundaments.