Aswath Damodaran, professor of finance at the Stern School of Business at New York University, has acknowledged that his initial valuation of Zomato might have been an underestimation due to unforeseen advancements in dining out trend in India and the successful acquisition of Blinkit.
What Happened: In a conversation with Livemint, Damodaran confessed that his initial valuation of Zomato at ₹42 per share during its listing was based on the conditions and data available at that time. However, the current value around ₹250 indicates significant shifts in the market and the company’s operations.
Damodaran said that even if value of Zomato is ₹125, it still might be overvalued.
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According to Damodaran, two primary factors have contributed to this change. The first is the swift transition of Indian consumers towards dining out, a trend he noticed during a recent trip to Chennai.
The second is the successful acquisition of Blinkit, which has evolved Zomato from a food delivery business into a last-mile service provider.
Damodaran also underlined how Zomato took advantage of the infrastructural challenges in urban India, such as traffic and parking issues.
Price Action: On Monday, Zomato was trading 2.53% higher at ₹297.85.
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