Bengaluru | Mumbai: Zomato NSE -0.68 %, the first Indian unicorn to list on the bourses last month, will continue to chase growth and build a long-term business, cofounder Deepinder Goyal told ET, undeterred by questions raised on the food-delivery and restaurant-discovery platform’s profitability and eye-popping valuation.
The 38-year-old chief executive said that “life hasn’t changed drastically” after the company raised more than $1 billion from the public markets last month, vaulting it to the top league of publicly traded firms in India.
“This was beyond anyone’s expectations and anyway we had kept our expectations very low… What we got was very good,” Goyal said in his first media interaction after what has arguably been the buzziest initial public offering in recent years, and which set the stage for a crush of Indian startups eyeing public market debuts this year.
The Gurugram-based company’s market capitalisation stood at Rs 1.09 lakh crore Monday.
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Goyal said the company has stayed away from the “noise” post-IPO over the past week. “We are chasing growth…and want to be a successful large company over the long term. That’s what we are optimising for,” Goyal, who did not make any public appearances in the run-up to the listing, said.
He reiterated that daily stock price, analyst calls and being a public firm did not affect him or employees at Zomato. In March, this year, Goyal in an hour-long interview on audio-chat app Clubhouse, told us that valuation comes with pressure and that’s not the best thing.
Being a public entity will not change its outlook in a hyper competitive food-delivery market as well.
“I have not been looking at the stock for the last few days, I have no idea what’s happening there… We will continue to focus on our work, there is no pressure,” Goyal said. “In fact, in the tech private markets, you have scrutiny which is month-on-month instead of quarter-on-quarter now that we are public. So, it is a much better life…”
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Rival Swiggy’s chief executive Srisharsha Majety told ET last month that the food delivery app would remain aggressive not only with its discounting practices but also on investments in its non-food and food businesses, after the company raised $1.25 billion from investors including SoftBank Vision Fund.
On discounting, Goyal said, “We are in a very dynamic business…and take weekly or sometimes daily calls on our discounting strategy. There’s no pressure on us after becoming a public company… We are focussed on doing the right things for the business. We have spent almost one-third the money compared to competition to get here and have been very efficient. Why should we change what has already been working for us?”
ET reported on July 6 how both Zomato and Swiggy had been engaged in deep discounting —by as much as 60%—to corner market share.
Last year, order volumes had nosedived following the first wave of the pandemic after which food delivery platforms had paused on aggressive discounting. By December 2020, sales volumes had made a full recovery and were growing until the Covid second wave hit India.
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While the first quarter of the current financial year was impacted by the second wave, Zomato and Swiggy executives have said sales recovery has been better over the last couple of months. On the back of this revival, platforms have again started significant discount deals on their platforms.
Going beyond food
Cofounded by Goyal and Pankaj Chaddah as Foodiebay in 2008, Zomato has since changed its business model from being primarily a restaurant-discovery company with an ad-based revenue model to a delivery and operations-heavy firm.
Apart from the food-delivery business — which contributes nearly 75% to Zomato’s revenue — the grocery segment is another area where a big battle is brewing between the two players.
ET was the first to report that Zomato had invested $100 million in e-grocer Grofers, even as it relaunched its own grocery marketplace — Zomato Market — starting from Delhi-NCR.
On the investment in Grofers, Goyal said the SoftBank Vision Fund-backed firm was the only large online grocer standing, and that prompted Zomato to back it.
The online grocery market has witnessed a round of consolidation, with the Tatas acquiring BigBasket earlier this year. Mukesh Ambani-led Reliance Industries, which is scaling up JioMart, as well as incumbents like Flipkart and Amazon India — which continue to expand their e-grocery offerings amid increased consumer demand for essentials — are the others competing in the sector.
“We don’t have much idea (about online grocery) and are just trying to learn. We think it’s a big space, but we are not sure if we want to do it in the long term or not,” Goyal said. “The investment in Grofers is separate. We have our own grocery offering which is a marketplace model that went live in Delhi two-three days ago.”
Spat with NRAI
Food delivery — in terms of gross merchandise value (GMV) — is back to levels seen before the Covid-19 second wave, though companies have faced criticism from industry stakeholders like the National Restaurant Association of India (NRAI) over their deep discounting and commission structure.
In fact, NRAI has filed a complaint with the anti-monopoly watchdog, the Competition Commission of India (CCI), against Zomato and Swiggy.
Goyal said it was a ‘one-sided spat’ and that Zomato does not have a problem with anyone.
“Restaurants are largely happy. Our restaurant Net Promoter Score (NPS) — which indicates loyalty to a platform — is very high. In the second wave, we were hiring 40,000 riders a week, that was how fast we were scaling and there were no jobs back then. Restaurants were not able to cater to that volume. We actually fuelled growth for the restaurant sector, jobs for riders, growth for ourselves and catered to customers,” he said.
When asked if the NRAI’s complaint seeking a CCI probe bothered him, Goyal said no.
On recent discontent among a section of delivery executives who are not permanent staff and who did not directly benefit from the company’s IPO, Goyal said Zomato was financially empowering its around 200,000 delivery partners. He said the company was not exploiting them and that they were earning at least Rs 20,000 per month.
“As for the resentment you spoke about, people need to dig into the facts to see whether there is something wrong that we are doing or not. If two lakh people are unhappy with us, why would they be working with us? They are the fundamental backbone of our business…,” he added.
