Shocking Details Of Zomato's Businesses

When Zomato went public last year, it was considered as the biggest startup IPO in the Indian market. Its valuation was just around $5 Billion before going public, and they were targeting a valuation of over $8 Billion post-IPO.

And that did happen, honestly. Zomato’s IPO was super-successful. Their investors made 65% gains on listing day itself. Overall, the IPO was oversubscribed by 38 times.

But a year since, Zomato's stock price is down more than 50% from its listing price and there is a question of whether can Zomato become profitable ever.

Zomato’s acquisition of Blinkit came with a lot of confusion and panic for investors, and following the acquisition, Zomato lost 25 percent of its value in just 4 days.

Zomato acquired Blinkit as this acquisition was considered a natural extension of Zomato’s core business, food delivery, and it will also bring synergies, increase the addressable market and the potential profit pool and also make the business more defensible.

But Zomato paid a massive 3000 crores on top of Blinkit's actual value. More than 1100 crores was the loan given by Zomato to Blinkit and 1800 crore Rs is what Zomato will be spending on Blinkit to cover it's losses in the next few years.

This changed the sentiment among the public for Zomato and the company has struggled on the stock market ever since.

Another issue for Zomato is that its core business of food delivery doesn't seem sustainable. If we take a look at Zomato's competitors on global scale, none of the companies have made profits from delivering food alone and that is one of the reasons why Zomato is now eyeing grocery delivery and other sectors to expand into.

And lastly, restaurants aren't really happy with Zomato as well. Here’s a quote directly from Jubilant, the parent company of Domino’s: “In case of an increase in commission rates, Jubilant will consider shifting more of its businesses from online restaurant platforms to the in-house ordering system."

Zomato now is focusing heavily on profitability. The company’s CEO Deepinder Goyal has said categorically that they’re gonna be focusing on profitability moving forward. This is a huge pivot for them because up until very recently they were pretty comfortable burning through tons of money, but now Deepinder has actually speculated that their core business might be profitable in about a year.

These potential profits are also intended to be stable, and long-term - this isn’t a one-year strategy, this is Zomato attempting to permanently be in the black. Their strategy here involves 3 key business lines: food delivery, quick commerce through Blinkit, and Hyperpure, and in case you’re not familiar with Hyperpure, this is actually a potentially game-changing business for Zomato. It’s a platform whereby Zomato provides fresh, hygienic, high-quality ingredients to restaurants, and it’s growing pretty fast.

It will be very interesting to track Zomato's story from hereon and see whether it can turn around things for itself.

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