The Zomato dilemma: a realistic growth trajectory and share price fair valuation?
Publication date: 1 April 2024
Abstract
Learning outcomes
This case study is related to start-up post-listing investment analysis. Through this case study, students will be able to perform the business analysis guided by the Venture Evaluation Metric tool, perform financial analysis using the discounted cash flow methods and perform investment analysis recommendation with justifications from the business and financial analysis performed above.
Case overview/synopsis
This case study sets out the study of a scalable start-up, Zomato, which is a successfully listed start-up firm in India. Despite the start-up development success in the pre-listing, the firm has exhibited a continuous unprofitable finance performance in the post-listing and has further experienced a volatile share price performance, both of which have puzzled existing and potential investors. In addition, some analysts are in the opinions that the firm share price valuation have been inflated with overvaluation since in the initial public offering stage and remain traded with overvaluation in the market. Notably, considering the negative indicators mentioned above, investors are concerned about long-term sustainability of the firm business and financial performance. In the context of post-listing investment, the following questions are material to investors: What is the realistic growth trajectory for Zomato in the medium term? What is Zomato’s share fair value in the medium term? Can one see opportunities or risks ahead of investing in Zomato’s shares? What will be the investment strategy for new investors?
Complexity academic level
This case study is suited to bachelor’s and master’s level in business schools studying entrepreneurial finance analysis.
Supplementary material
Teaching notes are available for educators only.
Subject code
CSS 1: Accounting and finance.
Keywords
Acknowledgements
Disclaimer. This case is written solely for educational purposes and is not intended to represent successful or unsuccessful managerial decision-making. The authors may have disguised names; financial and other recognizable information to protect confidentiality.
This case study is written solely for educational purposes and is not intended to represent true management or investor decision-making. All information incorporated in the case is publicly available obtained from the company website, annual report, equity analyst report, industry report and other sources. Consequently, the perspectives and interpretations represented herein are not necessarily those of Zomato.
Conflicts of interest: The authors report no conflict of interest concerning; a financial or personal interest in the outcomes of the research; undisclosed financial support for the research by an interested third party; and a financial or personal interest in the suppression of the research.
Citation
Tuyon, J., Huang, C.-H. and Swanepoel, D. (2024), "The Zomato dilemma: a realistic growth trajectory and share price fair valuation?", , Vol. 14 No. 1. https://doi.org/10.1108/EEMCS-08-2023-0293
Publisher
:Emerald Publishing Limited
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