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HSBC Global Research values Indian food delivery giant Zomato at USD 5 billion

This is an estimate by HSBC and isn’t Zomato’s current valuation.

Picture by Avanish Tiwary

Homegrown food delivery startup Zomato has got a pleasant surprise as it recovers from the COVID-19-induced slowdown.

Ant Group-backed company has been valued at USD 5 billion by HSBC Global Research, the research house from London-headquartered brokerage firm HSBC Global. The Gurugram-based company was valued at USD 3 billion in January when it refilled its war chest with fresh funding from Ant.

It is to be noted that the USD 5 billion-valuation is an estimate by the research arm of the HSBC Global, and isn’t Zomato’s current valuation.

Bengaluru-based food delivery giant Swiggy was last valued at USD 3.6 billion when it raised about USD 113 million in February from existing investor Naspers with participation from Chinese on-demand services giant Meituan Dianping and Boston-based investment firm Wellington Management Company.

“We do not believe in calculating our worth in terms of valuation. We are building a business for the next 100 years, and are focused on creating value for our users, partners, and employees – you can’t put a number on that,” a Zomato spokesperson told local media Economic Times.

This comes at a time when Zomato is in talks with Singapore’s sovereign fund Temasek, along with New York-based Tiger Global to raise fresh funds.

The USD 150 million round that Zomato raised from Ant Financial in January which valued the startup at USD 3 billion hit a roadblock due to India’s change in FDI laws. Of the total amount, Zomato has only received USD 50 million in the first tranche so far.

Last week, Ant Group, in the papers it filed for a dual listing in Hong Kong and Shanghai’s STAR market, said “a change in foreign investment regulation in India led to our further evaluation of the timing of our additional investment in Zomato.” Ant Group holds about 25% stake in Zomato.

The HSBC report also highlighted the challenges that are faced by Zomato. These include likely dilution for Info Edge, low profitability of the Indian market, and an optimistic assumption that the country will catch up with mainland China in the coming years on delivery volumes, the ET report said.

“Firstly, India delivery volumes are currently less than 1/20th of mainland China volumes … Only in extraordinary circumstances would Indian volumes be 1/6th of even 1/10th of mainland China in the foreseeable future,” HSBC Global Research noted.

However, the firm said, Zomato is likely to become profitable sooner than what was anticipated before since it has cut down on discounts due to the COVID-19 induced slump. The healthcare pandemic had taken a toll on order volumes for food delivery platforms during April and May, but the numbers have now begun to bounce back over the last couple of months. In a report, Zomato said the food delivery industry has largely recovered, with the overall sector clocking GMV of around 75-80% of pre-COVID-19 days.