While Zomato did not respond to Fortune India’s queries, the prospectus states that costs will increase over time and losses will continue, given significant investments will be made towards growing the business. “We have expended and expect to continue to expend substantial financial and other resources on, among others, advertising and sales promotion costs to attract customers and restaurant partners to our platform, developing our platform, including expanding our platform’s offerings, developing or acquiring new platform features and services, expanding into new markets in India, and expanding our delivery partner network. These efforts may be more costly than we expect and may not result in increased revenue or growth in our business,” states the prospectus.

But for institutional investors such as IIFL Private Wealth, which has invested in Zomato through its Market Monopoly Fund, it’s all about envisaging the future. “The argument for Zomato is that investors see a pattern developing [in India] similar to what happened in China and the U.S., where a change in consumer behaviour [aided by technology] creates scale and size of the likes of Zomato,” says Yatin Shah, co-founder and executive director, IIFL Wealth.

Shah believes that these consumer tech companies can look at ways to increase the wallet share of consumers. For instance, analysts feel, through its B2B supply business Hyperpure and B2C grocery business through Grofers, Zomato is metamorphosing into a food tech super-app catering to a large part of the consumer food chain.

Though there are concerns around an imminent entry of the deep-pocketed Amazon in food delivery after its entry into groceries, analysts feel it will not be a cakewalk for the competition. Zomato and Swiggy have together raised more than $4.5 billion till date, even as players such as Foodpanda and Uber Eats, with expertise in food delivery, have exited the Indian market. “We believe the food delivery business cannot be built as an adjacency to another horizontal play and requires razor-sharp focus to drive returns. Hence, any threat from a third well-funded player is low. Also, a new player would have to compete with existing offerings and differentiate on factors other than pricing for building a sustainable base,” says Jhunjhunwala.



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