Somato’s story begins when all the employees arranged to see the menu card on their intranet to solve the problem of not being able to see the menu card in the office canteen.
Launched in 2008 as Foodiebay, the company initially uploaded only menu cards to a website. Then came the facility of rating food. Then, it started delivering food from restaurants to customers’ homes/offices.
In 2010, it changed its name to Somato. Somato has accelerated the business of dabbawalas for over 100 years with technology. Today Somato delivers food in nearly 1,000 cities across 24 countries.
Stock price falls
Somato has released its IPO in July 2021. The price was pegged at around Rs 72-76 per share. Somato shares were well received and listed on the National Stock Exchange at Rs 116. This is a price hike of around 53 percent.
Subsequently, it touched its lifetime high of Rs 169 in November 2021. After that continued declines ended trading at Rs 41.60 on 27th July evening. Notably, it touched a lifetime low of Rs 41.20. That’s about a 75 percent decline from the lifetime peak.
Knowing how Somato makes its money makes its downfall a little easier to understand.
How to Earn Somato?
Its main sources of revenue are food delivery commission, commission from restaurants, advertisement fee of restaurants etc. It earned Rs 4,760 crore from the food delivery business alone in the last financial year 2021-22. It is noteworthy that this is about 86 percent of the total revenue of 5,540 crores.
Subsequently, it sells organic agricultural products and food products to restaurants under the name HyperPure. Restaurants selling organic food products from them are exclusively promoting ‘Hyperpure Inside’ on its app. Hyperpure has generated revenue of around Rs 540 crore in FY 2021-22. It also earns some money through ‘Somato Pro’ dining.
May: Q4FY 22 Shareholders’ Letter and Results
How to do business
Somato’s order book hit a new high of 53.5 crore in FY 2021-22. The wholesale order value has also seen a huge jump to around Rs 21,300 crore. However, the average order value was Rs 397 in the last FY 2020-21 and has only increased by Rs 1 in this FY 2021-22. The average number of active customers placing orders and the number of active deliverers have both increased.
Basic problem
If the expenditure is much higher than the income, no matter what the father is, one day he will fall. The same goes for Somato.
Revenue of Somato Company
2020 – 21 = Rs 2,118.4 crore
2021 – 22 = 4,687.3 crore rupees
Total Costs of Somato Company
2020 – 21 = Rs 2,608.8 crore (loss Rs 822 crore)
2021 – 22 = Rs 6,205.5 crore (loss Rs 1,220 crore)
Related to: Zomato Limited’s unaudited consolidated financial results
Where does this path go?
In April 2020, Somato jumped into the delivery business of essential items like groceries. Out of it by June 2020 itself. Again picked up groceries during July 2021 and left during September 2021. In May 2020, it took over the liquor delivery business in some states of India and closed it in April 2021.
Recently, Somato has fully acquired grocery delivery company ‘Blink It’, a quick commerce company, for a stake in the company.
Somato has applied for a non-banking financial institution license. But when some investors and chartered accountants raised questions about it, there was no proper response from Somato. What is the relationship between Somato and Financial Institution Licensing..? If the idea is good then why ignore the questions without explaining them?
Such things make one suspect that the captain of the Somato ship is confused.
Lender, taking that loan
Somato has acquired around 9.16% stake in Grofers (Blink It) in FY 2021-22. After that Blink loaned around Rs 1,100 crore to IT. By acquiring Blink It in 2022, Somato has also acquired that Rs 1,100 crore debt. Isn’t it like they are deactivating the bomb they planted..?
Somato’s acquisition of Bling It is seen as a setback in the stock markets. India’s famous chartered accountant Rachna Ranade has mentioned on her social media that Somato has said that Somato will invest around Rs 1,875 crore in Blink It in the 18 months after drug shortage.
With Somato floating in losses running into crores, what shareholder can afford to invest in a loss-making company like itself? How can a company that cannot make its own company profitable, make another company profitable? That’s why investors are selling Somato shares.
– gowtham