The five questions on Zomato’s thali

Zomato has reshuffled its team in the past few weeks. Photo: Mint
Zomato has reshuffled its team in the past few weeks. Photo: Mint


Zomato has had a tough first year as a listed company. After a listing high, it’s been downhill since. But it is sticking with its convictions and is now re-orienting itself.

On 23 July, Zomato completed one year as a listed company. In his latest letter to shareholders along with the company’s results for the June quarter, chief executive officer Deepinder Goyal wrote: “This past year has been extremely humbling to say the least. While we’ve had practice in building the organization stronger and better through the many lows (and near-death experiences) we’ve had through the past decade, both the highs and lows that came with going public were unprecedented for us." Here are five prisms where Zomato has faced those extremes over the past year, and which will remain focal points going forward too.

1. Shares trailing

Goyal says he doesn’t look at Zomato’s share price unless someone draws his attention to it. The stock’s performance itself has been one of the two points of investor angst. It’s been a tale of two halves. In 2021, the stock held its own. In 2022, it drifted lower, and then crumbled.

Against the issue price of 76, the stock listed at 115—a sizable listing gain. That day, in a blog post, Goyal said: “We are going to relentlessly focus on 10 years out and beyond, and are not going to alter our course for short-term profits at the cost of long-term success of the company." That approach sits in conflict with the stock market, which can be extravagant and persistent in its demands. Even more so, given that Zomato, at its current price of 55, trades 67% off its all-time high and 28% below the price at which it sold shares to the public.

2. Investors cashing in

The latest round of weakness also draws from the one-year milestone. Since Zomato doesn’t have an identifiable promoter, all investors who owned Zomato shares before it went public could not sell their shares for one year. The passing of that milestone has seen at least two prominent investors lighten up. Uber, which received Zomato shares when the latter bought UberEats in India, has sold its entire 7.8% stake. Tiger Global has sold 2.3%.

Whether more pre-issue investors have exited will become clear only after 30 September. (Companies have to share their shareholding pattern data with stock exchanges as it stands on the last day of every quarter.) The average purchase price for several pre-issue investors would be below the current price. Trading volumes have shot up. Even after excluding the Uber and Tiger Global sales, average trading volumes in Zomato in the past 10 days are about eight times that in the 10-day period preceding that.

3. Growth recipe

Amid the upheavals on the stock market, Zomato announced its results for the June quarter last week. After a handful of tame quarters, the numbers for its core business of food delivery are encouraging and worthy of a company that is in high-growth mode and is seeking rich share valuations. On a quarter-on-quarter (q-o-q) basis, Zomato’s average monthly transacting consumers grew 6.4% and total order value 10%. This propelled it to 18% q-o-q growth in revenues.

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One refrain of Goyal in his shareholder letters has been Zomato turning its lens on growing fast in its core business while moving on a path towards profitability. That has meant running a tighter ship. Thus, it has exited some countries, cities and lines of business, and does not plan to make any more minority investments in other startups. In the latest quarter, amid that high growth and control over expenses, it has managed to rein in losses.

4. Blinkit gambit

But losses are not going to disappear from Zomato in the coming quarters. On 24 June, a month before the one-year milestone and after small advances, Zomato acquired quick commerce company Blinkit (formerly, Grofers) in all-stock deal worth 4,447 crore. Previously, Zomato held 9.3% in Blinkit and had committed to lending it $150 million.

Blinkit frames the dilemmas, and challenges, for Zomato the public company. On one hand, Zomato needs to grow to justify its valuations. The 9,000 crore raised by it from the public needs to be deployed, and profitably at that. On the other hand, its choice of quick commerce and the Blinkit acquisition has not gone down well with investors.

On its part, Zomato sees synergies. It now has three vehicles of growth: food delivery, Hyperpure (food supplies to restaurants) and Blinkit. Earlier this year, Blinkit pivoted from selling groceries online to quick commerce, and is seeing greater traction.

5. Richly valued

According to a recent research report from Jefferies India, Blinkit “elongates the path to profitability" for Zomato. Funds should not be a problem for Zomato to press on all three engines. As of June, it had cash of about 11,400 crore. In 2021-22, without Blinkit, its operations needed a cash infusion of 693 crore. With Blinkit, that will go up. In July, Blinkit lost 46 crore to earn revenues of 75 crore. How Zomato scales up and integrates Blinkit into its current core, and how it balances the pursuit of high growth with financial prudence, will be keenly watched.

Globally, listed companies in the food-delivery space have endured massive drops on the stock market this year. Even after those corrections, Zomato’s revenue multiple exceeds those of its peers significantly. How it shapes its distinct story will determine how its stock moves in the long run. is a database and search engine for public data.

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