A STUDY ON VALUATION OF STARTUPS USING REAL OPTIONS AT ZOMATO

Abstract

This paper analyzes the potential implementation of a Real Options Approach to startup valuation, using Zomato Ltd. as a case research. Conventional methods of assessing companies often neglect the responsiveness, flexibility, and growth potential of digital platforms. The research elucidates critical decisions through an analysis of Zomato's corporate strategy, growth initiatives, and diverse revenue streams. These alternatives encompass the capacity to expand, contract, postpone, or terminate new ventures such as Hyperpure and Blinkit. Financial forecasting, scenario modeling, and option pricing techniques are employed to ascertain the company's strategic value. Genuine options consider intangibles that conventional models overlook, such as customer acquisition and network effects. The research revealed that managerial decisions during situations of uncertainty directly influenced the company's valuation. The statistics indicate that incorporating option values significantly enhances Zomato's valuation, underscoring the importance of this approach for businesses in turbulent markets. The Real Options Approach offers a more thorough and anticipatory view on the expansion of platform-based companies.