"EDITION 111"

Published: 7/13/2020

Good morning and welcome to another week! Seems like the weekend was relatively quiet news-wise but it seems like Mitron might have raised some additional capital, with Chingari also potentially in the middle of a raise. But coming to today's news, Zomato has cut its burn significantly & Jio has yet another backer.

  • https://tcrn.ch/2ZmILPh: Zomato projects monthy cash burn of $1M
  • ➡️ People have long debated the unit economics of food delivery in both the US & India as companies in both countries have continued to accrue losses over the last decade. But we do have some news on the positive side for Zomato, which is estimating to lose less than $1M in the month of July.

    ➡️ It has been a quite tumultuous 2020 for Zomato with the acquisition of Uber Eats India earlier this year as well as the recent troubles accessing the final tranche of investment from Ant Financial.

    ➡️ But their financials for this quarter don't look half bad as the company's revenue in the current quarter was $41M (EBIDTA-level loss of $12M), while June showed a positive trend with $17M of revenue (40% of the quarter's revenue) losing only $1.5M (12.5% of the quarter's losses)

    ➡️ The company earned (made a contribution margin) ₹27/order this quarter, compared to a loss of ₹47/order during the same time period last year. The company acknowledges that this isn't sustainable and expects it to go down to ₹15-20/order over time.

    ➡️ I think it is yet to be seen if Indian food delivery companies can ever turn profitable- the average order sizes are still quite small, there aren't a lot of folks who can afford to order online at a certain frequency, and a lot of revenue is still concentrated in the top 5-10 cities.

    ➡️ Plus with Amazon's impending scale in the market might lead to several more years of losses for these companies so it will be interesting to see if one (Zomato or Swiggy) try to exit to Amazon instead of trying to compete with the behemoth.

    2. https://tcrn.ch/3foqab3: Qualcomm to invest $97M in Jio

    ➡️ All of us might've thought Mukesh Ambani and Jio were done raising money, but we have one more investor- Qualcomm Ventures will invest $97M for a 0.15% stake in the entity.

    ➡️ We all know the success of Reliance in the telecom space, gaining close to 400M subscribers while maintaining a competitive ARPU compared to the other players.

    ➡️ Qualcomm Ventures has made a couple of bets in the Indian market (incl. Bounce, MapMyIndia & Shadowfax) but I don't think any to this effect. I assume the investment might have something to do with the eventual 5G launch in a couple of years, with Jio continuing to lead the digital revolution in the country.

    ➡️ Some investors have also said that Mukesh Ambani's perceived close ties to the ruling government & political party are an important factor into why Jio is a very attractive investment, and might reduce the regulatory hurdles they face.

    Feedback & ❤️ always appreciated BONUS (Tweet of the day): https://twitter.com/gauravmunjal/status/1282478322363113476

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