Zomato Lists at 53% Premium but Its Worth Only Rs 41, says Aswath Damodaran

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Zomato Lists at 53% Premium but Its Worth Only Rs 41, says Aswath Damodaran

By Aditya Raghunath

Investing.com -- Zomato Ltd (NS: ZOMT ) may have listed at a 53% premium to its offer price of Rs 76 and is currently trading at Rs 128.7, up over 69% but valuation guru Aswath Damodaran says the stock is not worth more than Rs 41 a share.

“With my upbeat story of growth and profitability, the value that I derive for equity is close to Rs 39,400 crore (about $5.25 billion). That may seem like a lot to pay for a money-losing company with less than Rs 2,000 crore in revenues in the most recent year, but promise and potential have value, especially when you have a leader in a market of immense size. That said, the stock's pricing (Rs 72-75 per share) makes it too expensive,” Damodaran wrote in his blog Musings on Markets.

If you download his spreadsheet on the valuation, he says the total value per share comes at Rs 40.79.

He said, “… the value that I derive for equity is close to 394 billion INR (about $5.25 billion), translating into a value per share of 41 INR. That may seem like a lot to pay for a money-losing company with less than 20 billion INR in revenues in the most recent year, but promise and potential have value, especially when you have a leader in a market of immense size. That said, the stock's pricing (72-75 INR, per share) makes it too expensive.”

He said that he sees a 10% chance of failure for Zomato. He said, “On the minus side, this is a company that is still burning through cash and will need access to capital in future years to continue to survive. Overall, I will attach a likelihood of failure of 10%, reflecting this balance.”

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  • Vinod Jose @Vinod Jose
    With such pessimistic view, why 10% failure? It should be 90% failure. 🤠
    Like 1
  • Fut Freak @Fut Freak
    what is price of 1 stock
    Like 0
    • balaji sekar @balaji sekar
      126
      Like 0
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  • Zaw Min Latt @Zaw Min Latt
    hi
    Like 0
  • abdul rahman @abdul rahman
    it's all because of new commers of market.. like me😉
    Like 2
  • Pragnay Gupta @Pragnay Gupta
    to exit kar de ?
    Like 1
    • Ganesh Hegde @Ganesh Hegde
      @Pragnay Gupta Yes kar do...profit booking
      Like 0
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  • Manthan Singh @Manthan Singh
    Do not invest in zomato its a loss making company
    Like 0
  • Ajay Uppal @Ajay Uppal
    Loss making company giving listing profits. Strange!!
    Like 1
    • saju afsal @saju afsal
      @Ajay Uppal its start up.....same like FB from begining
      Like 0
    • Mohsin khan @Mohsin khan
      If you got the ipo then ...set a stop loss at 120 and relax.
      Like 0
    • Abdul Mohammed @Abdul Mohammed
      List has giving super profits, compared to other biggies in the market Zomato is overpriced.
      Like 0
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