Thread by @srinivasan19041

Forwarded as received in whatsapp

The Zomato Story
(Excellent write up, am just sharing)

TRADING OF LOSS - NEW PARADIGM

Company X accumulated losses of over Rs 4,600 Crore

Incurred Loss of Rs. 106.9 Crore in 2018
Loss of Rs. 1000 Crore in 2019
Loss of Rs. 2400 Crore in 2020

Loss of Rs. 800 Crore in 2021
Loss of Rs. 350 Crore in 3 Months Apr to June 2021

Aggregating Total Loss of Rs. 4600 Crore from 2018 to 2021 June

With these Losses continuing to mount high, they managed to stand on their feet from 2018 till Today.

Strange that it is not a year-old Business nor having previous years of accumulated profits that can set-off their current and future Losses. Hence it is quite evident that Net Loss is funded by Capital and Debt.

But why do the Investors keep pumping the fund in the Startup even when they see no Profit in 4 years.

If the Business was running on Loss

Q) Were the Employees not paid ??
Answer is No, They were paid handsomely

Q) Were the Customers forced to Pay the high amount ?
Answer is No, they were instead given Meals at high discount

Q) Might the Founders and Top Brass were taking less Perks ?
Answer is No

Founder Basic Salary was Rs. 3.50 Crore
Co-Founder -Gross Remuneration was Rs. 3.70 Crore

CTO 1.50 Crore
CFO 3.26 Crore

Q) Any Income Tax
A: Since the Company was running at a loss, there is no Income Tax payable

So who was bearing the brunt of Heavy Loss ??
The Answer is the Investor of X Company having stakes in the company.

It is obvious that the Loss of 4670 crore is funded by External Investor

So isn't it the Existing Investor of X Company at Loss?
How does this External Existing Investor gain if the Company is running Loss ??

Now here is the trick.
There is a Trading of Loss.
What If I tell You that Loss can be sold at a Profit??
Yes that is possible.

Investors (Top 5 Investors were holding around 50% Stake) who pumped funds into this startup have already had their funds eaten up by the losses.

Yet in the books they held Numbers of Share and % of Stake.

VALUATION- The Talking Point

Now, The Company went for Independent Valuation by a Valuer

The Valuer valued the Loss Making Company for Rs.60000 Crore !!! Strange but true.

With this Valuation, the Company went for IPO. That means they are going to list their Shares in the Stock-market making their Shares easily accessible to the Public to Purchase, and sell further.

Strong Advertisement, Endorsement by Some Experts, News Channels, Social Media, etc created such a hype in the market of forthcoming IPOs that it gave the impression to every Stock-market Trader of a Cake 🎂, that no one was going to give a miss.

With such a Marketing, Valuation and Expert Endorsement, IPO got oversubscribed by whopping 38% with Listing priced at Rs 116 which was Valued at 72-76 (which itself was questionable)

The interesting point was that Company X went for IPO for Rs. 9400 Crore, Out of Which only 400 Crore was only pumped into Company, Rest 9000 Crore was Part of Offer for Sale by Existing Investor.

(Did anyone notice that Subscribing to IPO means purchasing Shares from existing Investors which generally people are reluctant to do, as they are more interested in funding the company than buying such shares from existing Investors.)

That means out of 9400 Crore subscribe and funded by Public in the form of Rs. 116 share, first 9000 crore will go to the Early Investors.

Now here we go !!!!

Who are these Early Investors ?
These are the same people who funded the loss making Company and now they sold their stake at higher profits.

Now the Value of Share of Early Investors is 1010 times higher than when they purchased the share at first.

So, for 4700 Crore Loss Making Company, everyone was paid more than their worth
- Employee
- Customers
- Founders
- Top Management
- And at Last and at Higher rate - The Investors

So who is now Handling the Loss ?
Yes, WE Public holding shares of X Company !!!

Right.
The Loss has been passed on from the Top 10 Investors to the Public at a Profit ranging from 60 to 1010 times !!

This is the Stock-market for You !!!!
And, a new way of making money.

CREATE A VALUE PERCEPTION, and NOT VALUE.
Sell the DREAM and not PERFORMANCE.
PROFIT is history.
Market Valuation is the way to make money.

Kind ATTN: @ikkmurugan @BUSHINDIA for your comments & analysis