Zomato’s Sprawling Investments See A Blurry Path Ahead

Zomato is one of the leading food apps in India. It has a seamlessly functioning app, social media platform and services. Everything's good so far except its acquisitions. In more than a decade, it has had over a dozen acquisitions. Read up more here!
Zomato’s Sprawling Investments See A Blurry Path Ahead

What’s Happening?

Remember UberEats? Yes, the food app that Zomato gulped for Rs 2,850 crore back in 2020. It’s a good thing for a startup to become an acquisition king, but not all investments have reaped benefits. For instance, Zomato acquired Urbanspoon in 2015 for $53 million. The company thought of expanding its brand in the foreign waters, but that didn’t happen. Global growth flatlined in the past couple of years, and Zomato had to pull itself out from these markets and shut down operations.

One example of impulsive investment was Zomato Market. The company started ‘Market’, a grocery delivery service. This service model was attempted by many before but did not receive success. It had to exit the business in just five months because of poor unit economics and a gradual revival in the grocery delivery by kirana stores. Zomato is burning a lot of cash and does not really get in return. So, what is the larger vision of Zomato?

Should This Concern You?

Zomato’s impulsive investments are a big question. In 2018, it acquired TechEagle, a drone company. After two years, it cancelled the deal. Experiments are fine, but it is really burning a lot of cash in acquisitions. Recently, Zomato’s founder and CEO Deepinder Goyal sold all his personal shareholding in Blinkit (formerly known as Grofers) to Tiger Global. Moreover, the company has set aside $1 billion to deploy across startups in the next 1-2 years, with a major focus on the quick e-commerce space.

Financially, the company reported a net loss of Rs 430 crore in the September quarter of FY22 as compared to the net loss of Rs 356 crore in the June quarter. The net loss has widened due to higher expenses. The shares of the company are also down 24% since its listing. Investors also seem to be doubtful of the company’s high ambitions. It’s vying to be present in every food-related business, but it’s not working out anymore.

What Lies Ahead?

It seems that Zomato’s vision is not clear. The company has Rs 9,000 crore capital, which it needs to use for organic and inorganic growth purposes. Zomato’s core business is not profitable then how will the investments bring money? The track record has not been swift since it divested many businesses soon after the launch. The path of success for Zomato seems to be blurry right now.

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