Zomato co-founder blogs to counter HSBC assay, valuation cut

Bengaluru: In a blog aimed at 2,100 staffers across the globe that they mustn't fret and "get back to work", the co-founder of leading online restaurants aggregator Zomato on Monday made point-by-point rebuttal of an HSBC analysis that has halved its valuation to $500 million. First came Deepinder Goyal's status report: Zomato drove over 50 percent of the business for some of the bigger restaurant in the country. The traffic in India grew 8 percent from March to April, with 8.5 million monthly unique hits. In 18 out of 23 operating countries it's the market leader. He then explained why the HSBC model didn't work for him. Goyal said last-mile logistics was not a major contributor to revenues, and that most of it came from from the dining out and nightlife categories -- and that the search business remained a funnel to get traffic without much cost. "A unique advantage that cannot be contested," he said, adding when the current business is worth 33,000 online orders a day and getting towards 40,000, there can't be a food delivery firm in the world that can own the last-mile logistics fleet for such operations and remain in the green. Then came Goyal's bit on HSBC's apparent reading of Zomato's US acquisition. He said Urbanspoon was acquired not for its presence in the US, which HSBC calls an overcrowded market, but for its foothold in Australia and Canada. "Our traffic is kicking ass in these two markets," he said, adding Melbourne and Sydney were already among the top 5 revenue generators. In the 1,284-word blog -- "Unicorn or not?" -- Goyal also had a take on the analysis that advertising sales-based models could not scale up in the US. "But Yelp, our largest counterpart in the US, is showing extremely positive signs on great sales execution," he said. As for Zomato, he added, it had healthier margins on ad sales and even some Japanese companies -- Hotpepper, Tabelog and Gurunavi -- had "mouth-watering margins". "The (HSBC) report then goes on to say it is unlikely we will hit profitability in our markets in the near term. But we already have, and we made an announcement when it happened," Goyal said and took the example of the Philippines where Zomato revenues were 1.5 times the operational costs. "Also, my thoughts on valuations -- nobody who knows our business has marked down our valuations. In fact, our existing investors are bullish about us, and are willing to back us further, if needed. And they have categorically said that our valuations are justified," he said. "What matters is that your business has strong fundamentals, positive unit economics, prospects for growth, and a clear path to profits," he also said in one of the several tweets. "There’s something that we say often -- 'we are only 1 percent done'. We are truly 1 percent done and if we continue to focus on execution, the noise will die down very soon," he said in the blog. "Let’s get back to work."