We are long-term, patient capital; in no hurry to exit Zomato: Sanjeev Bikhchandani
Zomato is stable, sound and solid. We are happy to hold on to a good company forever. It also has a lower cost of customer acquisition which gives it the flexibility to cut burn and still not drop in volumes. It can go public overseas but if it has to go public in India, it has to make profit first .
It is a big deal for Zomato!
It is a big deal.
And what does it mean for Info Edge?
Obviously Zomato benefits, we benefit and we have supported Zomato with all the good things we are doing. So, it is good for us also.
As the second largest shareholder of Zomato, there was this talk of how Zomato is running out of cash. Then Ant Financial increased its stake. Now you have Uber Eats on board. What is the future of Zomato?
It is looking good. The Uber deal helps in several ways. It helps in terms of synergies regarding customers, regarding rider network regarding the restaurant supply chain and also very importantly, there are four or five cities where UberEats is strong and Zomato is not as strong as it is in other cities. That will really help. There are four or five areas of synergies which this deal will help with.
Does Zomato still not need more cash or is that just market rumours?
Well Zomato has continuously been cutting down burn from 45 to 50 million a year ago to under 20 million right now.
It will need more cash clearly?
Well it has got enough cash. If it does not get more cash, it is fine. It will manage. If it does get more cash, it is only good for it.
What will Uber Eats mean for Zomato? Uber now has a 9.9% stake in Zomato. It is a global giant which is coming on board. What is this going to mean?
Like I pointed out earlier, the synergies are important and it is useful to have partners who are global. All in all, it is a good thing.
Can the Uber fleet be used for deliveries you think?
It has to be worked out how it will be operationalised and that is a work in progress.
This deal has been announced shortly after Amazon’s Jeff Bezos was in India. It is an open secret Amazon has been building its team, it wants to get into the food delivery business. So the timing is pretty good. Now, a global giant Uber is going to be backing Zomato with Amazon getting set to make its entry.
Well let us see what Amazon does or does not do. It remains to be seen if they are going to launch and when they would launch and how they would launch.
Do you only order on Zomato? Do you also use Swiggy?
The only food delivery app I have on my phone is Zomato.
You genuinely think that Zomato is bigger and better than Swiggy?
Zomato business has got two-three parts which Swiggy does not have. One is a restaurant discovery and dining out piece and that is a huge asset for Zomato. It is a profitable business. It is a large business. It is growing fast and that gives Zomato financial stability. It also gives at a lower cost of customer acquisition. It gives it the flexibility to cut burn and still not drop in volume.
Zomato has got presence in overseas markets and some of those are beginning to do fairly well. It has got a part of its footprint which overlaps with Swiggy and a big part of it does not. In that sense, it is slightly different. Swiggy has done a good job and the two players help the market, help the customers and expand the market. Healthy competition is good.
What is also very well known is that Zomato is not the best of terms with restaurants. you have talked about the dining out option. Even in today’s press release and in the blog that Deepinder Goyal has written, he has talked about the Zomato goal, something which a restaurant partner is saying is unacceptable for them. But that is not good for a shareholder like you or for the P&L of Zomato?
Actually those are ongoing conversations. A lot of restaurants now are on board with gold. So that issue is being resolved and on an ongoing basis.
Did you speak with Deepinder on this? What advice did you give him?
We are constantly in touch, not just that time. We would try to understand the situation and wherever our inputs are required, we give inputs.
Now that Uber is a 9.9% equity holder, does this mean that Zomato is going to go to many more countries?
Not immediately. Zomato is going to first focus on the India piece while continuing to consolidate the markets it is already in and after that it will look at other options.
That is obviously the plan. In the press release, there was also a quote from the global CEO of Uber.
Yes. There are many markets Zomato is already present in. I am not sure they will expand beyond those markets in a hurry. They will do a lot of work in India first.
Are you happy with your shareholding in Zomato? Are you looking for any exit?
We are patient capital, we are not a fund which has to return somebody else’s money in seven, eight or 10 years. Businesses take a long time to build. We invested in Zomato first in 2010. In the first four rounds, we went solo. Then we co-invested in the fifth round.
We are happy to hold, we are not in any hurry to exit. In Policybazaar, we first invested in 2008 and we continue to invest. We invested as recently as 2019. So, we are long-term, patient capital and quite honestly we are happy to be holding on to a good company forever.
Zomato can be profitable in three to six months if we wish to. It can continue to invest more and continue to not make a profit for a while. Those are strategic issues and not out of compulsion anymore.
We will cooperate with the entrepreneur, we support the entrepreneur and naturally we will support other investors who are there. We will do what it takes and we are not in a hurry to exit.
You also understand the markets so well do you think Zomato will go in for an IPO? It is a trend across the startup universe?
It is a little early for Zomato to think of an IPO. Zomato should try and get to profit first.
Yes, of course, we have learnt that from Weworks.
No, no if it wants to go public in India. WeWorks is a different situation. WeWorks had issues on disclosures and governances which came out after the RHP was filed. Zomato can go public overseas but if it has to go public in India as an Indian company first. If you want to go public in India, it is a good idea to get to profit first.
By when do you think Zomato will be profitable?
That is a matter of strategy and choice. Zomato can be profitable in three to six months if we wish to. It can continue to invest more and continue to not make a profit for a while. Those are strategic issues and not out of compulsion anymore.
And that is not any direction that you give to Deepinder Goyal or the board?
No, no. See it is a constant conversation and a lot of the thinking was led by the management, by Deepinder and his team. We are happy and comfortable to support them.
In the last couple of weeks, the big story has been of the layoffs in Oyo. Now, Oyo is looking at a road to profitability. Do you think Indian startups need to be more obsessive about the bottom line, the EBITDA?
The environment has changed in the last year or two. Economics and profits are coming back centrestage and those are the conversations many startups are having.
But it is going to take time. You cannot just say okay turn off the tap, we are going to become profitable?
Yes, there would be a transition period but you got to have the funding available to fund the losses during the transition and some may need to do it faster than us.
As far as the food tech space goes, at one time it felt like it has peaked out but clearly these companies are having to innovate themselves. Do you think it will have to go beyond delivery like what Zomato is doing? Travis Kalanick is, for example, is betting big on Cloud Kitchen and he founded Uber?
Zomato has a point of view on the strategy there. My understanding from conversation with Deepinder is that Zomato does not want to compete with the restaurant clients and therefore are unlikely to launch their own Cloud Kitchen brand. However, they are happy to do infrastructure where restaurant brands come and house themselves and are able to produce.
When the entire fight was happening with the restaurants, I am sure you got a lot of calls from restaurateurs. Did they ask you to control Deepinder?
There were conversations going on. Most of the conversations were between NRAI and the Zomato management. Let me put it this way; what Zomato was doing there may have been some sort of friction but I do not think it was unreasonable.
What does Ant Financial mean for an investor like you? Ant Financial has come to the rescue of Paytm as well as Zomato. Is it good, is it bad? Do you have any views on it?
Good investments are good and not so good investments are not so good. Any company that is using the money to achieve its goals is a good investment and Zomato has been doing that. I cannot say much about Paytm because I do not know about it, but Zomato is a good investment, it is a good company, it is a sound company and it will be alright.
Is there no fear about Zomato? Isn’t it running out of cash?
No. Zomato is stable, sound and solid.
Let us talk about the rest of your portfolio. What about Naukri? You have the best insights into that controversial topic of job creation. How is Naukri doing?
Well, we currently have our board meeting on February 12th and I cannot talk about the results.
But you get insights into the market. Is it picking up or not?
We have been saying for the last two, three, four quarters that a sluggishness is emerging. I do not think that is going away for a couple of quarters. Having said that, it is possible that this time it would be a lagging indicator where the economy will recover first, companies recover next and only then hiring will go on. We have to wait and watch.
How do you make sure your portfolio companies keep abreast of innovation?
There are businesses that we own and run in InfoEdge which are Naukri, 99acres, Jeevansathi, Shiksha. There our teams are in charge and our own people drive the innovation agenda. There is a lot of investment going on. A lot of innovative work is going on in the area of AI, machine learning, analytics, big data in all our internal companies.
As far as the investee companies are concerned, each has its own agenda. We obviously work with them and talk to them but the innovation agenda is driven by the entrepreneurs themselves. It is not as if we are telling them what to do.