Zomato Media Pvt Ltd has now been valued at $500 million by HSBC Securities & Capital Markets (India) Pvt Ltd, about half the valuation at which the restaurant search firm raised its last round of funding in September.
HSBC has cited concerns surrounding Zomato’s advertisement-heavy business model, growing competition in the food ordering space and money-losing international operations for the lower valuation.
As per report published in Livemint, Sanjeev Bikhchandani, founder and executive vice-chairman of Info Edge said “We respectfully disagree with several of the points raised by the HSBC report,”.
InfoEdge holds nearly 50 percent in Zomato.
HSBC, in its 19 April report, initiating coverage of Info Edge (India), said that except for its job website Naukri.com, other businesses in the portfolio do not look promising.
“We do a DCF (discounted cash flow) and value the (Zomato) business at about 50% lower to the $1 billion valuation,” HSBC analyst Rajiv Sharma said in the note to clients. “Zomato is present in 23 markets so early on and none is profitable, implies that to address both the investments in last mile delivery and losses in international operations fund raising will be a continuous phenomenon, suggesting current valuations don’t make much sense,” the report said.
In the same report, HSBC also lowered the valuation of another InfoEdge investee company, PolicyBazaar, by 10 percent from the current $200 million.
However, Zomato has disagreed saying, “We’ve not raised any financing round since the last one to have a valuation reset. Our investors are as bullish about Zomato as they were before.
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We are growing fast and are on course to become profitable as a company very soon. Beyond this, we do not want to comment on valuation markdown speculation of third parties,” said Times of India quoting the company’s spokesperson.
Food technology start-ups in the country have suffered due to a slowdown in funding, with some either closing down or getting acquired after failing to raise capital, Mint report said. In January, Zomato too shut operations in four cities—Lucknow, Kochi, Indore and Coimbatore.