The final shape of the country's emerging digital economy is still unclear, writes Andy Mukherjee.
India’s current rate of spawning unicorns, or startups with at least a
billion dollars in valuation, is almost three per month. But all that action is
in private markets; practically nothing of the digital economy trades publicly.
Which explains the nervous excitement over this week’s initial public offering
by one of the country’s two dominant online food-delivery services.
As China cracks down on data-heavy businesses from
finance to ride-hailing, Zomato Ltd., backed by Jack Ma’s Ant Group Co., is
beefing up its IPO in the Indian market to Rs 93.75 billion ($1.3 billion)
because of high demand.
At the top of the indicated price range, the app will
have a market value of almost $8 billion, or 45% more than Jubilant Foodworks
Ltd., which owns the South Asia franchise of Domino’s Pizza Inc. While Jubilant
packs roughly a quarter of its revenue into earnings before interest, tax,
depreciation and amortization, Zomato’s
operations regularly bleed cash.
Naysayers may worry about paying so much for an
unprofitable business. To the optimists, though, the losses at Zomato are
reminiscent of Meituan’s decade-long journey to dominance. China’s third-largest
publicly traded tech firm had started out as a Groupon clone, offering deals
and discounts. It later added layers of Uber Eats-type online food delivery and
Yelp-style restaurant reviews to become an all-purpose platform for services: a
super-app. Zomato, which acquired Uber Eats’ India business before the
pandemic--giving the U.S. ride-hailing firm a near-10% stake in return--is
obviously looking to borrow from Meituan’s playbook.
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