New Delhi: Technology startups seem to be gradually losing their edge after all the billion-dollar valuations made till last year. The latest to face the blow over cutting down investment is Zomato, the restaurant-discovery platform.
According to a report by TOI, HSBC's brokerage arm has cut the valuation of Zomato and brought it to $500 million (approximately 33 billion rupees). However, Info Edge (India) has disagreed with HSBC's contention and has said that the restaurant listings company will become profitable “very soon”.
The report by HSBC states: “Zomato is present in 23 markets so early on and none is profitable, which implies that to address both the investments in last-mile delivery and losses in international operations, fund-raising will be a continuous phenomenon, suggesting current valuations don't make much sense. We do a discounted cash flow (DCF) analysis and value the business at 50 per cent lower to the $1-billion (almost 6.5 cr rupees) valuation.” Info Edge also holds nearly 50 per cent stake in Zomato.
Sanjeev Bikhchandani, founder and executive vice-chairman of Info Edge told Mint in a report, “We respectfully disagree with several of the points raised by the HSBC report.”
Also in the same report, HSBC has lowered the valuation of another Info Edge investee company, PolicyBazaar, by 10 percent from the current $200 million (approximately 13 billion rupees).
According to the report by Mint, all the food technology start-ups in the country are suffering due to a slowdown in funding, with some either closing down or getting acquired after failing to raise capital. Also in January, Zomato had shut operations in four cities, which includes Lucknow, Kochi, Indore and Coimbatore.
The latest valuation slash was faced by India’s biggest e-commerce firm Flipkart when two foreign mutual fund investors marked down the value of their holdings. Fidelity Rutland Square Trust II has lowered the value by almost 40 percent to $82 (approx Rs 521 crore) a share in February, down from $135.8 (approx Rs. 6.03 billion) a share in August. Likewise, Valic Co marked down the value of its investment in Flipkart by 29 percent to $82 a share as of February, from $135.8 a share in August
