Shocking Details Of Zomato's Businesses

00:00 - Intro
00:30 - What's going wrong?
03:33 - Blinkit Deal
06:33 - Why are restaurants unhappy?
08:33 - What does Zomato have to say?

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 their listing price and there is question that 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 that 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 next few years.

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

Another issue for Zomato is that their 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 wheather it can turn around things for itself?
Researched and Written by @ananndadvik

Follow Backstage with Millionaires to remain updated with our latest developments.

#zomato #startup #foodtech

[priharahj]

the problem with zomato as a person who ran a cloud kitchen is they jus loot their listes ratuarances i mean u cannot run a cloud kitchen if u are jus planning to run it on these apps as they keep looting u... frm payin for visibility to the commission on each order.... zomato is jus cutting the branch they r on.... u cannot expect both customer and the listed business to pay u... if u hv seen the number of small rasturants that open n close is so high.... zomato shud rethink and support their restaurant partner as they earn thru these store....

[priyanks]

Legends remember Zomato as a place to check out cool restaurants

[ratneshpandey]

The new video editing is through the roof.. loved the background music and way of explaining how Zomato acquired blinkit very poorly was amazing..
Got hooked to the entire video till end!!

[sathyan]

I have been ordering food on Zomato for past two years regularly and enjoying their discounts. Since last two months I have been going to restaurants myself to pick the food. Because I had the same food at the restaurant and I was surprised the cost was almost half of what I was paying to Zomato. After couple of checks in other restaurants, I realised the food prices are heavily inflated in Zomato for each item and overall If I pick the food myself it was around Rs.1000 and Zomato charges Rs.1450 for the same with discount applied. This is not sustainable and when more people figure it out, they will likely stop ordering on Zomato. I am holding half of Zomato shares since IPO allotment but I am not going to sell it now. Because with these huge margins the share price will shoot up soon with their next 1 or 2 quarter results announcement after which I will exit. This model is not sustainable in long run.

[tanyachugh]

Apart from Zomato adding Blinkit's losses to its already existing losses, another reason why the markets reacted poorly to this deal was around disclosure and conflict of interest when people found out that Akriti Chopra, Zomato co-founder is married to Blinkit founder, Albinder Dhindsa.

[Hakimshafin]

Loving the editing and storytelling ❤️ 👍

[tarungaur]

I am glad that someone posted about this drop of Zomato in the market. The company which started off as a mere discovery app for restaurants ended up making it quite big for a long time. But the fact is, in the Indian market you need to adapt as per changing consumer demands. The recent low is caused due to many reasons, one of the primary one being increased prices over the app. A restaurant has an option to list a price on the app whereas the actual prices of the restaurant are lower. This stark difference has been observed by many consumers lately. Recently, Zomato accepted an order from a location where there actually isn't any restaurant. Moreover, if you observe carefully Zomato has relative pricing for the same order at different times of the day.

[gp.nomics]

Zomato in 4-5 years will be huge, it has everything going for it. Blinkit was a hasty decision but Zomato needed this business badly, it being ancillary to their core business in the long term. Hyperpure is the golden apple, it will one day be bigger than food delivery business and might become zomato’s core business. Purely because delivery business has started showing ebidta profits and hyper-pure is growing at rocket pace I believe zomato has a great future. Plus its profitability is sustainable too. I think in 3 years it will be net profitable business and valued at 300-500 / share, just a personal take. I am holding Zomato in big qty and see risk reward very favourable in 3 to 5 years.

[mnih]

Interesting is the fact that Grofers was bought with so much debt, when your asset becomes liability you still keep owning it as you are stuck with Sunken Cost. Even I have some underperforming assets since years.

[thydoctorghost]

This is the best video explanation I've seen. Please product all videos in this format.

[utkarshchaudhary]

Production quality is so damn good on this video.
Awesome video team Bwm!

[miniv]

Liked and subscribed, and also commenting that this is such a high quality content, Well made, easy to understand and show both ends of a business rather just one, So Thank You for making it

[karthikranga]

Amazing video as always!
So many information nicely curated in a short video especially about the acquisition of BlinkIt and the losses they incurred. I think their valuation increased due to Covid and now it's just coming back to normal after realization. It may go profitable on the long term if they continue to reduce the commission, bring in more restaurants and are friendly as you had mentioned.

[shreyatiwari]

Dude 🙌🏻 watched your 6 to 7 videos straight. Great content man! Very knowledgeable. Keep up the good work 👍🏻

[jaikumar]

wow. Brilliant work. More of these please!

[Acsarus]

Zomato Pro Plus was a saving grace to me, they don't have restaurant pickup service in my area but only delivery. The closest restaurant to my place is 10 kms away, without pro/pro+ sub the delivery charges alone are minimum 70 to 100 Rs.
Then they pulled back their subscription services and now I order 4 to 5 times a month at most, where as I used to order once every 2 days, sometimes daily when I had the pro subscription.

Now coming to their commission on each order, they deduct 30% from the listed price, so if you are selling a dish for 100 Rs at your restaurant, and sell for the same price on zomato you only get 70rs, which is barely enough to break even in most cases. So what do the restaurant owners have to do? sell at 130 Rs with 30% price hike on zomato listing? no that would still fetch them only 91 Rs after 30% deduction from zomato. To get 100 Rs for a dish after zomato deductions, the owner has to sell at 150 Rs, which will fetch him 105 Rs post deductions.
Now the customer is forced to pay 50% more than the restaurant price just for the dish, now add the delivery charges, let's say 25 Rs, and add in a generous 20 Rs tip for the delivery agent, 5% tax which will add up to 200 Rs.
You are paying 100% more than what you pay at the restaurant for the same dish.

These are the predatory practices which will make the customers look for alternatives.

[LuciFerThEDeViL]

Really Great video need more like this!

[marcusravi]

The mic used in this video is better! good job!

[somnathkumbhakar]

Awesome thrill like background Audio. Felt like goosebump-ful the theme song of Succession series.
Loved this.

[rahulsagarpv]

This a well researched content ! Loved it 😊