Zomato, please serve profits

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From a start-up that sought to solve a ‘hunger’ problem to becoming the first Indian unicorn to hit the public markets, Zomato’s rise is the coming-of-age of the new generation digital companies. Zomato beat several records and exceeded expectations as it debuted on Dalal Street with a 51% jump over the issue price.

Besides stellar listing gains, there are several lessons to be learnt from the success of food delivery platform, including the way the art of mainstreaming IPO, consumer-friendly communication and leveraging D2C connect – which as of today is not just about selling directly by removing middlemen, but also about developing a relationship between a brand and its consumer which Zomato has perfected.

Zomato also vaulted into the elite club of the top 50 most valued companies, with its market capitalisation briefly crossing Rs 1 lakh crore during the day despite several debates on the steep valuations, the loss-making business and the continuous cash-burn which the company will keep seeing for years to come. In fact it overtook some of the mainstream companies and sector giants for decades in valuation including the likes of Tata Motors, Coal India, IOC et al. As an observer you both wonder and question the feat. Is Zomato really worth it?

Several market experts have raised eyebrows on the heavy losses still on books of Zomato and no signs of turning black yet. Despite raising over Rs 9,000 crores, the company will continue to burn-cash. Some stock market veterans have pointed it is not the job of investors to fund a company’s wish to expand its business. Investors want to reap the benefits of a company’s earnings by way of return on investments.

So, What’s next for Zomato ? Well, the company should really see it as day zero as it enters the real business world. It has to work towards showering true respect for investors. All-round returns to shareholders should be the idea now. Push for profits should be the mantra.