Zomato – Should you order?

I am unable to estimate the market size of business of zomato. Some say it’s the total size served by restaurants and mess services (also now they are planning to deliver on trains).

But I argue that these people will not pay for such commission fees and delivery charges then they say “I am willing to pay extra for convenience”. Personally, I never want to pay for commission bcz I can get another chicken piece or a can of red bull with my food for the price of commission.

Thus, zomato is only for people who don’t care about commission which reduces the market size significantly. I am pretty sure only upper middle class (and richer then them) would order from zomato on regular basis. People who buy from dominos or starbucks every week are real customers of zomato. Others might order only once in month or bimonthly.

Also not to forget the cart food sellers in every nook and corner of the city. If someone need cheap food instantly then they will buy it from nearby dosa or egg roll or momos cart.

I am very enthusiastic about e-commerce and a big customer of amazon and flipkart (almost one parcel every week if i take average with per order spending more than Rs1500 on average). Meanwhile I have only ordered from zomato twice in last two years with order value of 500 and 1000 resp.

Looking at the revenue of dominos, cafe coffee day, barbeque nation and other food franchises and taking commission of 20-30% of revenue I have estimated the profit of zomato that can be generated from commission is around 2500Cr at saturation (considering 50% market share). Lets say they get another 500Cr from ads, subscription, etc. So for a PE ratio of 30 the valuation becomes 90,000Cr (11 Billion dollars).

Also blinkit is a total waste of money in my opinion. There are kirana stores everywhere for instant small purchase. For bulk purchases there is dmart. People will get out of their house for buying milk, bread and eggs anyway so they will also visit kirana stores also. Rich people have servants for this purpose. I don’t see blinkit anywhere in this. This business will is only an expense which will reduce the above estimated figures.

What do you guys think on estimation of market size for zomato.