After Flipkart, now Zomato has landed in trouble.

Zomato’s valuation has been marked down at $500 million by HSBC Securities and Capital Markets which is about half the valuation at which it raised $60 million in its last round of funding, reports Mint.

HSBC analyst Rajiv Sharma, in a note to clients, said, “We do a DCF (discounted cash flow) and value the (Zomato) business at about 50% lower to the $1 billion valuation. Zomato is present in 23 markets so early on and none is profitable, implies that to address both the investments in last mile delivery and losses in international operations fund raising will be a continuous phenomenon, suggesting current valuations don’t make much sense.”

However, Zomato said that the investors do not understand the business model and will become profitable very soon. The company has also claimed that it is profitable in eight countries and its ad business in various countries has up to 93% gross margin.

Contrary to HSBC’s view, InfoEdge which owns 47% Stake in the firm said that the company disagrees with the points raised by the HSBC report. It also added that Zomato’s revenue has more than doubled in the last nine months and burn is down by more than 70%.

P.S At Unpluggd Winter Edition 2015, Founder of Zomato Deepinder Goyale had shared his business model and the lesson learnt by the startup. Check it out here:

Update

Here are few excerpts from what Deepinder Goyale said in the official blogpost,

Our traffic in India, our home market, also grew 8% in April 2016 over March 2016. We have over 8.5 million monthly uniques in India alone – very few Indian companies can claim that much traffic share in a single category. Also, we are currently present in 23 countries, and we are the market leaders in 18 of them.

To give you a little perspective on where we are at, we hit 33,000 online orders yesterday – at our average order values, it makes us the largest player (and only profitable players on a unit economics level) by GMV (there’s a blog post coming soon about our food ordering economics). We already are profitable in the order business at a unit economics level, and the overall online ordering business will hit profitability when we get to an average of 40,000 orders a day. We should get there in the next 3-6 months. Also, there isn’t any food delivery company in the world which owns its last mile logistics fleet, operates at scale, and is profitable.

Also, my thoughts on valuations – 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.