Zomato’s Many Fires


High-level exits at Zomato, Blinkit’s heavy losses, a retreat from international markets — it's been a rough few weeks for the Deepinder Goyal-led company

There’s more trouble in the air for zomato amid an already rocky year.

The past two weeks have not only seen high-profile exits of Zomato veterans — including cofounder Mohit Gupta — but also brought about a reality check for Blinkit, its delivery business in UAE, and now layoffs of 150 employees.

While the layoffs themselves are not inordinate in a year when giants such as Amazon, Meta and others have cut back, it is noteworthy that Zomato is the only listed new-age tech company in India to report higher QoQ losses in the most recent September quarter. So the Deepinder Goyal-led company needs to claw back a lot to get out of the red.

Indian tech companies are no strangers to layoffs or downturn as we have seen in slowdowns in the past. While 2022 has seen over 15K layoffs so far, Zomato’s troubles run deeper than that.

Before we take stock of the situation at Zomato, here’s a look at the top stories of the week:

  • Data Privacy In Focus: With the government releasing an updated draft version of the data protection bill, how will India’s internet ecosystem be impacted? Here are the key takeaways
  • Meta Shake Up: WhatsApp India head Abhijit Bose and Meta India’s director of public policy Rajiv Aggarwal have quit the company, while Sandhya Devanathan has been named as the head and VP of the India biz
  • Softbank Offloads Paytm Stake: The Japanese VC giant sold 4.5% of its stake in Paytm for $200 Mn as the lock-in period for pre-IPO investors expired, sending the stock crashing

Zomato’s Rocky 2022

Ever since its announcement last year of acquiring Blinkit (then Grofers), questions have been asked about whether Zomato needs to add another loss-making entity to its stable.

Particularly, because it came after two unsuccessful forays into grocery delivery by Zomato itself. These fears were not unfounded — despite Zomato trimming the loss and scaling up numbers in the core food delivery biz, Blinkit dragged down its quarterly performance.

But for CEO Goyal, Blinkit was a way to get one foot in the quick commerce door, and he continues to be bullish. “I know that most investors currently ascribe zero value to the Blinkit business, and that’s understandable. But I am confident this will change in due course of time,” he said in the most recent quarterly update, adding that he is “nervously excited” about where Blinkit is heading.

Departures Amid Uncertainty

But carrying Blinkit losses will not be easy for Zomato over the long run, if it does not accelerate the quarterly growth of food delivery, which it claims is turning EBITDA profitable.

Even as the food delivery business has scaled up, the gross order value (GOV) only grew by 23% YoY to INR 6,631 Cr in Q2 FY23. Similarly, the GOV from Blinkit grew 26% (QoQ) to INR 1,482 Cr. This shows that the food delivery business is not seeing too much acceleration such that it could support Blinkit’s losses in the near future.

After the boom of 2020 and 2021, quick commerce companies are also scaling down as seen in the case of Dunzo. Will Blinkit also have to scale back from loss-making dark stores and franchisees, before making a bigger push down the road?

Besides Blinkit, the company’s other experiments such as intercity delivery will also continue to rely on any cash generated by the core food delivery business. With the departure of Siddharth Jhawar (VP, global growth and intercity head), this new vertical is likely to see more growth pangs. Will it be retired like the past grocery delivery and nutraceutical forays?

Interestingly, Rahul Ganjoo, another Zomato veteran quit the company this past week after a five-year stint. Ganjoo was in charge of the new initiatives at the company, having led its food delivery vertical since 2020. It remains to be seen what kind of leadership structure Zomato will emerge with after these high-profile departures.

The departure of these key leaders comes after cofounder Gaurav Gupta quit last year. Besides this Pankaj Chaddah, who had founded the company with Deepinder Goyal in 2010, had also exited in 2018. Now Goyal is the only original founder, while Akriti Chopra was elevated to the cofounder position last year.

There’s plenty of uncertainty about the ‘Zomato Pay’ loyalty programme too which is expected to be revamped soon to include food delivery in addition to the current dining-out rewards. This will be a key cog in Zomato’s efforts to maximise revenue per user and from the most active user base that is more accustomed to ordering in than dining out.

Layoffs After Blinkit Integration

Whatever course the new loyalty and subscription programme takes, Zomato has at least begun integrating Blinkit within the main app.

The investments in Blinkit, Shiprocket, Magicpin and other companies in the past year were seen as spokes linked to the core food delivery business as well as Hyperpure B2B supply and the dining out biz. But the upside from this synergy seems to be some way off still, even if it is underway.

The most recent layoffs have impacted over 150 employees or 3% of Zomato’s total workforce, and are said to have come as some product integration work has come to an end. This is likely the Blinkit integration within the Zomato app, which was ongoing since Diwali.

Besides this, the company has launched a ‘Vibes Check’ feature for restaurants to promote themselves through short videos. This recent addition is yet another experiment that Zomato is banking on to boost the dining-out business.

International Biz Slows Down

While the Zomato app has seen a facelift, elsewhere, the company is looking to go leaner.

Over the past 5-6 years, Zomato had acquired a bevy of companies in various markets to enter the food delivery game in those geographies. Last year, it wound down ops in the UK, US, Singapore and Lebanon. This week, it announced that it would cease food delivery ops in the UAE, which was its first international foray in 2012.

The UAE business was run by Rocket Internet-owned Talabat from 2019. Talabat is now terminating the food delivery ops, while Zomato will continue to offer restaurant discovery, dining-out services as well as Zomato Pay.

Scaling back from international markets is a clear sign that Zomato needs to sharpen its focus on India, which makes the most business sense for the company. The Indian food delivery market is still underpenetrated, as most analysts have said while talking about the upside for Zomato.

But the challenge has always been about growing in a sustainable way. Even though the improved adjusted EBITDA numbers in the September quarter might indicate that Zomato has made progress there, the Blinkit problem will not be solved in the next few quarters.

✨ Sunday Roundup: Funding, Tech Stocks & More

  • Startup Funding This Week: Indian startups raised $344 Mn across 28 deals in the past week, with ContentStack’s $80 Mn round being the largest one. This is more than double the funding tally of the previous week.
  • Nykaa Goes Down: Shares of Nykaa plunged and ended the week over 7% lower than last Friday after the expiry of the lock-in period for its pre-IPO investors
  • EMT Eyes Acquisitions: After reporting a YoY rise in profits last week, EaseMyTrip is looking to acquire at least three companies by the end of FY23 to boost various travel verticals

That’s all for this Sunday.

Till we see you next week,
Team Inc42

You have reached your limit of free stories
Become An Inc42 Plus Member

Become a Startup Insider in 2024 with Inc42 Plus. Join our exclusive community of 10,000+ founders, investors & operators and stay ahead in India’s startup & business economy.

Unlock 60% OFF
Cancel Anytime
Unlock 50% OFF
Cancel Anytime
Already A Member?
Discover Startups & Business Models

Unleash your potential by exploring unlimited articles, trackers, and playbooks. Identify the hottest startup deals, supercharge your innovation projects, and stay updated with expert curation.

Zomato’s Many Fires-Inc42 Media
How-To’s on Starting & Scaling Up

Empower yourself with comprehensive playbooks, expert analysis, and invaluable insights. Learn to validate ideas, acquire customers, secure funding, and navigate the journey to startup success.

Zomato’s Many Fires-Inc42 Media
Identify Trends & New Markets

Access 75+ in-depth reports on frontier industries. Gain exclusive market intelligence, understand market landscapes, and decode emerging trends to make informed decisions.

Zomato’s Many Fires-Inc42 Media
Track & Decode the Investment Landscape

Stay ahead with startup and funding trackers. Analyse investment strategies, profile successful investors, and keep track of upcoming funds, accelerators, and more.

Zomato’s Many Fires-Inc42 Media
Zomato’s Many Fires-Inc42 Media
You’re in Good company