Author Archives: Aristotle Consultancy

Hotel room aggregator OYO turns profitable

OYO Rooms Ritesh AgarwalSoftBank-backed budget hotel room aggregator OYO Rooms said it has attained profitability at an aggregate level.

The firm, which is operated by Gurgaon-based Oravel Stays Pvt. Ltd, claimed that it was operationally profitable until June 2015 before it went for expansion but regained profitability at a network level from February 2016, as per a statement.

“Our team delivered 15 times year-on-year growth with 2.3 million booked room-night transactions in the January-March 2016 quarter while our gross merchandise volume (GMV) continues to grow every month. Over 95% of the traffic comes from our own sales channels such as app, web and call centre,” said Ritesh Agarwal, founder and CEO, OYO Rooms.

He said Gurgaon, Delhi, Hyderabad and Kolkata have been among the cities which have been driving profitability for the company. The firm aims to triple its inventory by December 2016, he said.

In February 2016, OYO Rooms—which is the most-funded budget hotels aggregator in India—had acquired Tiger Global-backed smaller rival Zo Rooms in an all-stock deal. Earlier, it also started operations in Malaysia.

In August, the firm, which operates in 170 cities across the country, had raised $100 million (Rs 635 crore) in a fresh round of funding led by Japanese tech conglomerate SoftBank. In March 2014, it had secured $24 million from a group of investors led by Greenoaks Capital Partners.

Source – TechCircle

HSBC’s Zomato valuation off the mark, says Deepinder Goyal

Zomato CEO Deepinder GoyalZomato Media Pvt. Ltd’s CEO Deepinder Goyal said on Monday that the company’s investors remained bullish despite a report by brokerage HSBC that claimed the restaurant search and food delivery start-up was overvalued.

HSBC estimates Zomato is valued at $500 million, not $1 billion as many believe. HSBC disclosed its estimate of Zomato’s valuation in a report where it initiated coverage of Zomato’s largest shareholder Info Edge (India) Ltd, which is listed in Mumbai, with a ‘Reduced’ rating. That implies HSBC recommends investors don’t buy or hold Info Edge shares. Info Edge is the company behind India’s top jobs portal Naukri.com.

HSBC said while it is bullish on India’s internet and e-commerce business, Info Edge is not an attractive way to bet on India’s Internet story. Info Edge’s biggest investment is Zomato, where it owns a stake of 47%.

The HSBC report elicited a prompt rebuttal from Zomato. On Monday, in an email to employees, Goyal said, “Our revenue has doubled over the past 9 months. Costs have been rationalised. Burn is down 70% from the peak—it was high because we were experimenting with various business models and geographies, which we have cut down drastically—and we are now focused on the large opportunity in front of us in our core business and core markets.”

Goyal’s email to Zomato’s 2,100 employees highlights how start-up founders are scrambling to counter investor concerns over valuations.

After pumping in more than $9 billion into Indian start-ups since the beginning of 2014, investors started pulling back late last year because of a mix of global macroeconomic factors such as a growth slowdown in China, as well as growing concerns over unproven business models.

Since the beginning of the year, as many as four Flipkart investors including Morgan Stanley have marked down their estimate of the company’s valuation.

In response, Flipkart co-founder Sachin Bansal countered Morgan Stanley’s markdown by calling it a “theoretical exercise” that wasn’t based on any transactions.

To be sure, a markdown or readjustment in valuation only points out that a company may be overvalued rather than raising concerns around its survival.

Still, reports such as those by HSBC do raise tough questions about how investors valued start-ups last year.

The HSBC report cites Zomato’s advertisement-heavy business model, the fast expansion of rival Swiggy and Zomato’s money-losing international operations as the main reasons for its low estimate of the company’s valuation.

HSBC has estimated Zomato’s valuation based on expected cash flow.

But even based on revenues, Zomato’s valuation looks a bit rich compared with a large international peer.

Zomato’s counterpart Yelp in the US trades at a revenue multiple of 4-5 times. For the year ended 31 December, Yelp reported revenue of $549.7 million, while its stock currently trades at $26.50.

If one is to go by Zomato’s own estimate of touching $30 million in revenue by March 2016, the company’s valuation of $1 billion would imply a revenue multiple of 33 times.

HSBC’s critical report on Zomato comes after a tough few months for the company, which has cut jobs and other costs in order to reduce its burn rate.

Over the past year, Zomato has lost a bunch of senior leaders including chief product officer Tanmay Saksena, former Facebook Inc. executive Namita Gupta and chief financial officer Umesh Hora.

In his email, Zomato’s Goyal dismissed doubts about the company’s business model and HSBC’s estimate of its valuation.

“…nobody who knows our business has marked down our valuations. In fact, our existing investors are bullish about us, and are willing to back us further, if needed. And they have categorically said that our valuations are justified. Especially because we are more than doubling year on year, and the next year looks even more exciting for us. But external perceptions of valuations are determined by the state of the market, and the availability of facts to the person who is analysing these numbers.”

He added, “Having said that, we have a lot of work to do to justify the faith (not the valuation) our investors have put in us. We need to continue producing high quality work, innovate on our product, build and scale our new businesses to a point where they become meaningfully large and highly profitable contributors our overall business.”

Source – Livemint

India is the fastest growing e-commerce market: ASSOCHAM-Forrester study

M-commerceBeing driven by a young demographic profile, increasing internet penetration and relative better economic performance, India’s e-Commerce revenue is expected to jump from $30 billion in 2016 to $120 billion in 2020, growing at an annual rate of 51%, the highest in the world, according to a joint ASSOCHAM-Forrester study paper.

While in terms of base, India may be lower than China and other giants like Japan, the Indian rate of growth is way ahead of others. Against India’s annual expansion of 51%, China’s e-commerce is growing at 18%, Japan 11% and South Korea 10%, according to a joint study.

With annual additions of 25 million internet users, India is ahead of countries like Brazil and Russia even within the BRICS nations. India has an Internet user base of 400 million in 2016 whereas Brazil has 210 million internet users and Russia has 130 million of internet user.

Interestingly, about 75% of online users are in the age group of 15-34 years since India is one of the youngest demography globally. “This is expected to be a continuing trend in coming years, given the age distribution in India”, said D S Rawat, ASSOCHAM Secretary General. It is not surprising to see the growth among categories focused on younger audiences in the last 12 months, added the paper. The maximum online shoppers are from the 15-24 years of age group, comprising both of males and females.

Online travel has seen growth across all subcategories including car rentals, airlines, hotels and travel review and information sites. The top 10 sites among the travel category show a good mix of travel options as well as information. Users are seeking information on travel options on a regular basis, with the railways being the largest target. One out of every 5 online users in India visits the Indian Railways site.

Retail category penetration has increased to 65 million unique visitors a month registering an annual growth of 55%. The growth has come across all retail categories and most of them show promising transactions and conversion rates along with growth in visitors. Apparel has been the fastest growing subcategory in retail and reaches 24% online users

Increasing internet and mobile penetration, growing acceptability of online payments and favourable demographics has provided the e-commerce sector in India the unique opportunity to companies connect with their customers, it said. Branded apparel, accessories, jewelry, gifts, footwear among the major hits on the e-commerce shopping, which is moving up fast on the mobile phones applications.

In India roughly 60-65 per cent of the total e-commerce sales are being generated by mobile devices and tablets shopping online through smart phones is proving to be a game changer, and industry leaders believe that m-commerce could contribute up to 70 per cent of their e-commerce revenues.

Source – ET Retail

Fashion startups no more unfashionable for angel investors

Fashion StartupsAngel investors who were wary of the fashion and lifestyle space in India are taking greater interest in such startups, going by the number of investments made.

Six investments have been made in the space so far this year up from four in 2015 and one in 2014. The value of investments made in fashion companies stood at $38 million in 2015, up from $21 million in 2014.

One of the investee companies is StylFlip, a social platform to sell and shop pre-owned apparel and accessories, which got an undisclosed sum from real estate developers Raj Gala Shah and Zaheer Memon. YourNest Angel Fund led a pre Series A round for Fashalot, an online to offline location based store discovery platform.

Jaipur-based fashion retail platform Yufta raised a pre Series A round from Ajay Data, a founding member of the Rajasthan Angel Investor Network. Hippily , a Mumbai-based shopping personalisation app raised $250,000 in seed funding from investors like Sridhar Ramaswamy , senior VP , ads and commerce at Google and Rakesh Mathur, founder of Junglee.

The top fashion deals of 2015 were -Voylla, which got $15 million from Peepul Capital; Relevant E-S, Wooplr and Clovia getting $5 million each from investors like Tiger Global, Helion Ventures and IvyCap Ventures; and Voonik getting $6.5 million from a funding round led by Sequoia Capital.

“Investors certainly seem to be taking a greater interest in fashion and lifestyle brands in India and are putting in money where they see growth. It’s a reflection of the changing demographics in India and customers evolving every day. There’s more focus on looking good and spending on fashion,” said imitation jewellery company Voylla’s co-founder and COO Jagriti Shringi.

Shringi said Voylla, which secured the funding in October last year has used it to increase footprint. It is expanding its retail footprint. It is adopting an omni-channel strategy and will open 100 stores this year, and will expand globally to store in store formats in markets like Dubai and the US besides kiosks in major malls across India. Twenty stores are operational currently.

“Investments in the fashion space have reached a consolidation phase now. There’s a big opportunity in the private labels and the big companies will focus on private labels,” said Navin Honagudi, investment director at Kae Capital. The fund has invested in a Fynd, a fashion discovery app that ties up local retailers and lets users locate and track inventory in those stores.

Source – ET Retail

Yumist Stops Operations In Bangalore; Expands In Delhi

Yumist expands in DelhiGurgaon-based food-tech startup operating in the daily meals segment,Yumist, has stopped its services in Bangalore.

Founded by former Zomato official, Alok Jain, along with restaurateur Abhimanyu Maheshwari in November 2014, Yumist, serves home-style meals prepared in their own kitchens.

The startup took a step back and paused Bangalore operations for the time being where it was operating out of a rental kitchen in Bangalore since August 2015. The reason cited for the pause is that Yumist did not own a kitchen facility in Bangalore which stopped them from bringing similar enhancements as NCR and fragmented the brand.

In addition, the startup has launched a 12000 sq ft, mega kitchen for NCR. The move will allow Yumist to significantly upgrade the customer experience. Besides lunch and dinner, the startup will also expand its offering to all-day options, breakfast and snacks.

In December 2015, Yumist raised $2 Mn (about INR 12 Cr.) in a fresh round of funding led by Ronnie Screwvala‘s fund Unilazer Ventures and from existing investor Orios Venture Partners. Steven Lurie, a valley-based investor also participated in in this round of funding.

Ronnie Screwvala of Unilazer Ventures said “We have a great product at Yumist and it’s made a great connect with consumers and so it’s best to focus on one territory and the NCR territory is the largest in the country so this is a good step forward for the growth plans of Yumist.”

The startup claims to have witnessed a doubled number of orders and revenue in the past three weeks.

Earlier in April 2016, Bangalore-based foodtech startup Petoo raised $1 Mn from early stage venture capital firm Axilor Ventures and some HNIs. Other players in this segment include Bangalore-based Jiyo Natural,Sattviko, WIMWI Foods, InnerChef, First Eat, Faasos, etc.

Source – Inc42