Imagine that you are the owner of a company that is growing every day. Your revenue is increasing every day, and success is kissing your feet. Everything is going very fortunate. There is only one competitor left in the market and the wait is there for the IPO. Then Huge IPO arrives with listing gains of 56% to all investors and in a certain time, the stock price gets doubled. But suddenly, you come to know that the losses of your company have increased so much that at any point in time, you may become bankrupt. If all these things happen to you then what will happen to you?
ZOMATO, whose IPO came out very loudly. If you look at the figures, for the last 3 years, this company is in very severe losses.
| Year | Total Loss (in cr) |
|---|---|
| 2019 | 964 |
| 2020 | 2367 |
| 2021 | 812 |
On 15 November 2021, the share price of Zomato was 160 rupees was at its all-time high. The people who invested money inside the IPO and sold the shares on time, they made a lot of profit. But, what about the rest? Because today the share price of Zomato has come below its issue price. Now the question is,
- If people were seeing so many losses in the company from the beginning, then why did people fiercely invest so much money in this IPO?
- How did this happen to a great food delivery startup like Zomato?
- Is Zomato going to be bankrupt?
- What are the powerful business lessons that we can learn from this case study and implement in our business?
ZOMATO is complicated because even today most of us know Zomato as a food delivery start-up and there are very high chances that this will not be profitable in the coming time as well. But why, And if so, why are investors pouring crores of rupees into these start-ups?
Well, to understand this, you need to understand these four things.
- What is Zomato’s business model?
- What are the problems that are coming under the delivery ecosystem at this time?
- What were the plans of the company that is sold to the general public
- What is the final game plan of the company?
So in very simple words,
Zomato generates revenue in these 6 ways.
- Delivery charges.
- Commission from restaurants.
- Advertising from restaurants.
- Subscriptions.
- Hyper-pure
- Consulting Services.
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In these 6 ways, Zomato generates revenue. Zomato got a 75% jump in all its orders after Covid in 2021. That year is not over yet and Zomato has already doublets its revenue from last year. I know what you are thinking!! If this is the case then why is the stock price falling daily?
This is Zomato’s revenue stat for the year 2021, in which it is shown to the people, that even if the company is within the overall losses, on a per-order basis our revenue is profitable. Seeing this thing, a lot of people invested in its IPO but in the mid of all this, There was a lot of talk about the hyper-local food delivery space, which today is hidden from all of us and that is the gig economy.
The gig economy is one such economy, where people do not take permanent jobs, on a contractual basis or freelance basis, but work for different businesses.
Ola, Uber, Swiggy, Zomato, Dunzo, Blinkit, all these companies either give you travel or hyperlocal delivery services. even if you move from one place to another through OLA, or you can get any food from the swiggy. That Person is never an employee of these companies. So in very simple words, It is the driver of Ola or the delivery boy of Zomato, all these people are contract workers for these companies. It’s not their employees. Due to this, these companies get these three very powerful advantages.
- No fixed liabilities: These companies do not have any liabilities on the side of these contract workers.
- No Appraisals: Whenever you hire an employee, then after some time you have to increase his salary, if the business is growing then only. But in this case, because these people are contract workers, their salary is never increased.
- No employees benefit expenses: Usually, companies have to do a lot of expenses for employees. Just like Insurance, Gratuity, and Provident funds. Companies do not have to do these things because the people who are working with them are their contract workers.
