The lovely tale of Liquor
during Lockdown and before
At every stage, addiction is driven by one of the most powerful, mysterious, and
vital forces of human existence. What drives addiction is longing —
a longing not just of brain, belly, or loins but finally of the heart.
Cornelius Platinga
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The use of alcohol in India for drinking purposes dates back to somewhere between 3000 and 2000 BC. An alcoholic beverage called Sura which was distilled from the rice was popular at that time in India for common men to unwind at the end of a stressful day. . Yet the first mention of Alcohol appears in Rig Veda (1700BC). It mentions intoxicants like soma and prahamana. Although the soma plant might not exist today, it was famous for delivering a euphoric high. It was also recorded in the Samhita, the medical compendium of Sushruta that he who drinks soma will not age and will be impervious to fire, poison, or weapon attack. The sweet juice of Soma was also said to help establish a connection with the gods. Such was the popularity of alcohol. Initially used for medicinal purposes, with time it evolved and became the beverage that brought life to social gatherings, and eventually consuming alcohol has become a habit for many.
With such a rich history of not just humans but also of the gods,
what is a worldwide pandemic to stop anybody from drinking?
. . .
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According to a report released by the World Health Organisation (WHO) in 2018, an average Indian drinks approximately 5.7 liters of alcohol every year. In a population of casual and excessive drinkers, with the shutters of liquor stores down, it must have been extremely difficult for “certain” people to survive lockdown. In the first two phases of lockdown, the desperation had quadrupled prices of alcohol in the Grey Market of India. Also, According to Google Trends, online searches for “how to make alcohol at home” peaked in India during the fourth week of March, which was the same when the lockdown was announced. As a consequence, a few people died drinking home-brewed liquor. People committed suicide due to alcohol withdrawal syndrome. Owing to the worsening situation and to reboot the economy, some states decided to open licensed liquor stores in the third phase of the COVID-19 Pandemic lockdown in India. This decision was the worst best decision the state governments could take. The kilometer-long queues in front of liquor stores were evidence that a pandemic can turn your life upside down yet your relationship with alcohol cannot move an inch.
The love in the hearts of those who are addicted was explicit. We might have seen addiction, we might have witnessed desperation but what happened in the month of May was madness, not just in terms of the way people pounced but also in the way the government earned. According to a report by Hindustan Times, on the first day of the third phase of Lockdown, the Indian state of Uttar Pradesh recorded a sale of over Rs 100 Crore from liquor. On the second day of the reopening of Liquor stores, Karnataka reported sales of 197 crores in a single day which was the largest ever. Eventually, the prices of Liquor were hiked to 100% to discourage people from drinking.
. . .
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There was a special corona fee that was imposed in Delhi by Chief Minister Arvind Kejriwal. A 70% corona fee was imposed in Delhi, yet the sales did not drop. The entire situation was a disaster for the law enforcement officers, social distancing was easily abandoned and a basic code of conduct was happily violated. Despite the chaos created, the states continued to collect revenues. Home delivery of alcohol was allowed in Maharashtra and e-tokens were sold in Delhi.
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Demand for liquor is inelastic which means that
the sale of alcohol is not much responsive to change in prices.
In general, since alcohol policy is a state subject in India, revenue from Liquor is a cash cow for state governments. In 2018 and 2019, four states collectively collected about 20,000 crores in taxes from the sale of liquor. As much as the state earns from the sale of Liquor it is undoubtedly, a threat to the Economy. Consumption of alcohol has dire health consequences. When a person consumes an alcoholic beverage, there is a rise in BAC because of which there is a gradual and progressive loss of driving ability because of an increase in reaction time, overconfidence, degraded muscle coordination, impaired concentration, and decreased auditory and visual acuity. This is known as drunken driving. (V. M. Anantha Eashwar, 2020) Drunken driving is the third biggest cause of road accidents and over speeding in India. Road accidents are not it; alcoholism causes sleep problems, heart, and liver issues. Also, it is not about an individual’s life, it ruins the lives of all people concerned.
Addiction also causes economic loss. In 2000, Vivek Benegal and his team assessed 113 patients admitted to a special de-addiction service for alcohol dependence. They found that
the average individual earned a mean of ₹1,661 but
spent ₹1,938 per month on alcohol, incurring high debt.
They also found that 95% did not work for about 14 days in a month. They concluded that it led to a loss of ₹13,823 per person per year in terms of foregone productivity. A more recent study, Health Impact and Economic Burden of Alcohol Consumption in India, led by Gaurav Jyani, concluded that alcohol-attributable deaths would lead to a loss of 258 million life-years between 2011 and 2050. The study placed the economic burden on the health system at $48.11 billion, and the societal burden (including health costs, productivity loss, and so on) at $1,867 billion. “This amounts to an average loss of 1.45% of the gross domestic product (GDP) per year to the Indian economy,” the study said. (Mint, 2020)
Setho ka Gaon
With each passing day, the ‘curtain of separation’ weighs down on the women of Afghanistan, paving the way for tyranny to thrive.
Arth
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ZOMATO
By Vishal Yadav
Illustration by Kapish Jalan
Zomato started its journey as a rebranded version of Foodiebay, a food directory service where one could find everything about their favourite restaurants. It was started by Deepinder Goyal and Pankaj Chaddah, both IIT graduates working as analysts at Bain and Company in 2008. FoodieBay was established in Delhi NCR as the largest restaurant directory within just nine months. The company was rebranded as Zomato after two successful years, and since then, there was no looking back. Zomato was successful in building a diverse portfolio of investors that included Sequoia and Vy Capital, as well as Info Edge India. It achieved its $1 Bn valuations by Ant Financial's $200 million investment in the first quarter of 2019, and recently, on July 23, it also became the largest IPO in India since the beginning of 2021. It was listed on the Indian stock exchange with equity shares of the face value of ₹1, aggregating up to ₹9,375.00 Crores. The issue was priced at ₹72 to ₹76 per equity share, with the minimum order quantity being 195 Shares. The huge public issue of Zomato saw an impressive 38-fold subscription. Investors from all walks of the spectrum responded strongly. Zomato's IPO was the first Indian internet company to debut on the stock market. Zomato's stock price was up 66 per cent or Rs 50 from the IPO price of Rs 76, closing at Rs 126 per share on the NSE and BSE on its initial day.
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Zomato IPO Details
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IPO Opening Date ______________ Jul 14, 2021
IPO Closing Date _______________ Jul 16, 2021
Issue Type ______________________Book Built Issue IPO
Face Value ______________________₹1 per equity share
IPO Price ______________________₹72 to ₹76 per equity share
Market Lot _____________________195 Shares
Min Order Quantity _____________195 Shares
Listing At ______________________BSE, NSE
Issue Size _____________________ _[.] Eq Shares of ₹1 (aggregating up to ₹9,375.00 Cr)
Fresh Issue _____________________ [.] Eq Shares of ₹1 (aggregating up to ₹9,000.00 Cr)
Offer for Sale ___________________[.] Eq Shares of ₹1 (aggregating up to ₹375.00 Cr)
REVENUE MODEL
Zomato makes revenue from four segments:
1. Food delivery- it acts as an agent between customers and restaurants. They take a commission from restaurants and delivery charges from customers with an average orders of 6.8 million in FY21.
2. Zomato Pro- It is a subscription-based offering to customers in which the customer pays a fixed monthly or annual fee, and the company, in return, offers discounts and other incentives to customers. It registered 1.5 million Pro members by March 2021 and 25443 restaurant partners as of March 2021.
3. Restaurant listings- It also serves as a platform for restaurant listings, with 0.38m listings in March 2021. It allows customers to search, discover and review the restaurants, it monetises the business through advertising sales and restaurants pay the company for visibility as well.
4. Hyperpure- It’s a B2B subsidiary company of Zomato, which supplies raw materials such as grains and vegetables to restaurants. It has 9225 customers in 6 cities as of March 2021.
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Zomato operates in 23 countries, including Australia, New Zealand, the Philippines, Indonesia, Malaysia, UAE, USA, Turkey, Czech Republic, Slovakia, Czech and Poland while receiving 90% of their revenue from India.
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INDUSTRY OVERVIEW
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The food delivery business saw contradictory moves during FY21. It was very challenging in the first quarter, hitting its lowest point whereas it reached its highest level in the third quarter. The industry saw a sharp V-shaped recovery. Lockdown turned out to be a blessing in disguise for these companies. There are three main channels in which the Indian food services market is divided: takeaway, delivery, and dine-in with the food delivery industry being the fastest-growing of these three. CLSA predicts that the market will grow to $11 billion by FY26, from $3.5 billion in FY20. A surge in demand will be caused by increasing population, smartphone penetration, expansion into new markets and higher frequency from existing clients.
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FINANCIALS
The company's revenue increased from 1397.72 Crs to 2742.74 Crs FY20, but the pandemic caused the revenue to fall to 2118.43 Crs FY21. Although the company is not registering profits, its losses have decreased from 2385.6 Crs during FY20 to 816.43 Crs during FY21 The OPM(operating profit margin) is -28.95%, NPM(net profit margin) is -38.54, EPS(earning per share) is -1.51%, and the debt is negligible at 0.0002.
STRENGTHS
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Comprehensive Coverage
Zomato covers almost all aspects of restaurant food chains, from ordering to delivery, online advertisements and the various payment methods. Zomato's growth has been 7% since FY18, compared to the industry's growth rate of only 3.6%.
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Network Effect
It is a phenomenon wherein the product/service gains additional value when more people use it. E.g.-The more people use Zomato, the greater the number of restaurants that will be listed on it and thus eventually will lead to the creation of a greater network.
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Delivery Network
The company owns a highly efficient, high-demand, hyperlocal delivery network that can be easily monetized. Zomato's delivery partners fulfilled 94.1% of the orders, with a median time of 30 minutes in FY21.
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Brand Name
Zomato is synonymous with food for its customers, earning an identity of its own in the country.
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OBSTACLES AHEAD
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Even with the great achievements listed above, the sour point of the story is that Zomato is still not profitable, and its status is expected to remain the same for the time being as its expenses are also expected to rise in the future. If Zomato enters the online grocery or payment aggregator business, it will burn a lot of cash, delaying its profitability further.
Zomato faces competition not only from Swiggy (another food-tech unicorn) but also from other cloud kitchen platforms like Rebel Foods. Amazon.com Inc. is also a threat; it is currently piloting its Bengaluru food delivery service and plans to grow slowly. Restaurants have also joined forces against online delivery apps because of high take rates, data masking by the aggregators and have begun promoting direct ordering platforms such as Thrive or DotPe. in the past couple of months.
It also faces some problems from the government side, as one of its largest shareholders, Ant Financial, could not participate in Zomato's preIPO round due to the government's decision not to clear Chinese investments.
CONCLUSION
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Past 1991's liberalization, Indian businesses were dominated by large families. Infosys, Wipro were among the first founder-led companies to generate significant shareholder value. Next came the rise of internet-based companies such as MakeMyTrip or Info Edge and then finally, the third wave of mobile consumer start-ups. Zomato and the other upcoming IPOs within the next 12 months are great opportunities for first-generation founders to dream of building innovative businesses. Zomato’s IPO has proven that Indian capital markets have come of age and are very receptive and open to innovative business models as Private and Public markets are willing to reward and provide capital for companies that solve large-scale customer problems. These funds have come from both domestic and international sources. This is great news to entrepreneurs who want to start businesses without fear of running out of capital.
Cover Story by
Vishal Yadav
Senior Editor, Editorial Board
Illustration by Kapish Jalan
Senior Designer, Editorial Board
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