On July 21, 2021, I valued Zomato just ahead of its initial public offering at about ₹41 per share. The market clearly had a very different view, as the stock premiered at ₹74  per share and soared into the stratosphere, peaking at ₹169 per share in late 2021. The last few months have been rocky, as the price has been marked down, partly in response to disappointing results from the company, and partly because of macro developments. At close of trading on July 26, 2022, the stock was trading at ₹41.65 per share, and the mood and momentum that worked in its favor for most of 2021 had turned against the company. In this post, I will begin with a quick review of my 2021 valuation, then move on to the price action in 2021 and 2022 and then update my valuation to reflect the company's current numbers. 

My IPO Valuation

I valued Zomato, soon after it filed its prospectus for its initial public offering, in July 2021. The details of that valuation are in this post, but to cut a long story short, I argued that an investment on Zomato was a joint bet on India (that economic growth would bring more discretionary income to its people), on Indian eating habits (that Indians would eat out at restaurants more than they have in the past) and on the company (that its business model and first move advantages would give it a dominant market share (Read more...)