What Zomato by any other name means for its business and investors

Bengaluru: Zomato Ltd’s decision to carve out a distinct identity for its parent entity will allow it greater freedom in exploring its ambitions without putting all its eggs in one basket, while providing investors more granular insights into the company, say industry experts.

Four years after Facebook rebranded as Meta Platforms Inc. and a decade after Google’s parent became Alphabet Inc., Zomato on Thursday announced that its board had approved the renaming of its corporate identity as Eternal Ltd. It now needs shareholder approval for the name-change.

Zomato’s rebranding aligns with the food-delivery giant’s growing focus on its quick-commerce brand Blinkit, restaurant supplies business Hyperpure, and events platform District, reflecting a broader vision for long-term growth, industry executives said.

“While the Zomato app and brand remain unchanged, the new name at the company level indicates diversification and possibly future expansions beyond its core food business," said Anupriya Saxena, partner at JMJA & Associates Llp. a corporate consultancy.

Zomato will now be free to dabble in experimental projects under its different businesses without risky bets in one brand impacting another, as well as gain more flexibility in managing intellectual property and future acquisitions, experts said.

“Operating multiple businesses under one umbrella will help in streamlining various business models as also to open other vistas for the company to explore," said Shiv Sapra, partner at corporate law firm Kochhar & Co. “This can aid in a diversified portfolio through expansions into other product lines."

In a letter to shareholders, Zomato chief executive officer Deepinder Goyal said the decision stemmed from the company’s broader vision of building an “enduring institution" that lasts beyond its current leadership.

“We shape our institutions, and then they shape us. But institutions are not just legal entities, groups of people, or physical structures; they are also the mental models and paradigms within which we operate. One such paradigm, often overlooked in shaping a company’s future, is its name," Goyal said.

Zomato also plans to change its stock ticker from Zomato to Eternal after receiving approval from shareholders, he added.

On Friday, Zomato shares gained 1.89% on NSE to end at ₹233.37 apiece, while the benchmark Nifty 50 closed nearly unchanged following the Reserve Bank of India’s first rate cut in nearly five years.

Zomato was included in the 30-stock benchmark index Sensex in December and is expected to debut on the Nifty 50 as well.

Also read | What’s in a new name? A strategic shift or a cosmetic makeover?

Zomato’s diversification strategy

According to JMJA’s Saxena, Zomato’s rebranding will give investors better insights into the performance of each unit instead of having to view the business as a single, consolidated entity. This will also help investors identify profitability, losses, and growth trends for each individual business, improving decision-making for shareholders, she said.

From a regulatory point of view, the reclassification will help reduce business concentration risk, Saxena added, pointing out that if one segment faced regulatory or competitive challenges, investors could still see value in other growing segments.

However, such transparency will depend on how Zomato’s management structures its disclosures and governance practices. “A detailed segment-wise reporting and clear allocation of resources will lead to not only better transparency but also confidence of the stakeholders," Saxena said.

“Generally, separating the parent company from its core brand is seen as an option for better corporate structure and diversification," she added. “This is a common factor between Google and Zomato."

Also read | For Zomato, chasing too much growth in q-commerce may be causing indigestion

In 2015, Google renamed its parent entity as Alphabet, making Google a subsidiary and allowing it to expand beyond its search-engine business. In 2021, Facebook rebranded itself as Meta Platforms to focus on the metaverse, or virtual worlds, that the company believed would succeed the mobile internet era.

Alphabet was created also to separate the company’s moonshot projects—those far from immediate profitability but had the potential to revolutionize industries.

Zomato’s rebranding appears to have more modest ambitions. “While the transition reflects a broader strategic vision, it does not alter the underlying framework of the company’s business," said Gagandeep Sood, associate director at Fox Mandal & Associates, a corporate law firm.

Also read | Zomato’s losing steam and the Blinkit drag

Rebranding challenges

Zomato—which was founded as Foodiebay in 2007—is a household name in India thanks to its sticky offerings, generating great brand recall. While the name Eternal may take its own time to gain similar brand recall, consumers will likely be unfazed by the name change, said Sumanto Chattopadhyay, an independent creative director.

To be sure, Goyal has clarified that the company’s food-delivery app will continue to be called Zomato.

“The reputation and success of Eternal depends on the success of its various businesses. The idea is to strengthen the overarching corporate entity by building focused verticals within. Over time, Eternal will become its own identity thanks to strong brands comprising it," Chattopadhyay added.

However, the rebranding effort could see some challenges.

“Any decision in the business world brings opportunities and challenges. When Google underwent a rebranding it faced several challenges, despite the strategic reasoning behind the move," said JMJA’s Saxena.

“One of the primary issues was maintaining clear communication with its users, investors, and the general public. For the average user, the name change of the parent company didn’t directly impact the way they interacted with the products, but it did raise questions about the company’s direction."

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