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Info Edge: “We would be reluctant to reduce stake below 50% in Zomato”

Online food guide Zomato, an investee company of Info Edge* seems to have gained much significance for the company that it is reluctant to reduce its stake below 50% in Zomato.

Responding to an analyst question on whether Info Edge will retain its 50% stake in Zomato even if the valuation is high few months or few years down the line during the company’s Q2-FY15 earnings conference call, Info Edge founder and vice chairman Sanjeev Bikhchandani mentioned that Naukri, 99Acres and Zomato are three businesses that are currently “moving the needle” for them. “So naturally we will be reluctant to let go off any of that”.

When asked on how much are they willing to go to retain this stake, Bikhchandani mentioned that they will evaluate that on a case by case basis, depending on how the company is doing, what the risk levels are and how it is trending. “As far as we are concerned we would like to remain above 50% but I cannot be more specific than that until a specific situation presents itself.”

On Zomato’s rumored $1 billion valuation: On the rumored ET report of Zomato raising money at post money evaluation of $1 billion, Bikhchandani said that the article was speculative and they had immediately denied this story. “Zomato is doing very-very well, investors keep talking to them. We do not believe that they will get $1 billion round valuation in the next two to three months.”

On Zomato’s fundraising needs: Zomato has been quite aggressive with its International rollout, launching its operations in a new market almost every month, with the most recent one being Lebanon’s Beirut earlier this week and Canada a fortnight ago. The company is also actively acquiring companies to enter new markets worldwide. It had raised $37 million from Sequoia Capital and Info Edge to fund this aggressive rollout.

When asked on whether these funds are sufficient or they needs to raise funds again, Bikhchandani said that it depends on how fast Zomato wants to grow. “If they want to go into 10 or 12 new markets or new countries over the next few months, the burn will go up and then they don’t have money to do this for years”.

He also mentioned that it makes sense for Zomato to expand faster than slower “given the sort of ambitions they have and the size of the opportunity and the fact that there is wide empty space out there.” He added that Zomato “seems to have a play book that results in traffic leadership in 9 to 12 months on depending how they go into markets and possibly monetization in 15 to 20 months”.

The only constraint Bikhchandani sees at the moment is management bandwidth that will decide “how many markets can they go into how fast and execute well”.

Not expanding to United States anytime soon: Bikhchandani also mentioned that media reports about Zomato expanding to the United States in the next few months are incorrect. He said that Zomato might expand to other markets organically or inorganically but not the United States. Earlier in August, Zomato co-founder Pankaj Chaddah had told TechCrunch that they are looking to enter the US markets in the second half of 2015.

Zomato’s targets: Bikhchandani said that Zomato doesn’t have a loss or EBITDA targets or profit targets at the moment. He believes they are operating on two fronts – one is to gain traffic leadership in as many cities as possible and the second is to figure out how fast they can push these markets into monetization and then profits.

For the last 12 to 18 months, Zomato has been prioritizing getting to traffic leadership in markets because they believe that monetization will follow. “If it follows you six months later it is fine, but traffic leadership if you do not get to or if you lose to somebody else it is very hard to get to it”. He said that Zomato currently has leadership in about eight to nine markets which is currently not being monetized actively. They intend to focus on monetization of those markets for the next few months while at the same time opening new markets.

Zomato also posted revenues of Rs 30.6 crore for the year FY14, nearly tripling from Rs 11.38 crore in the previous year. The company has told Bikhchandani that they want to grow roughly at a similar rate this year.

“Now whether or not they will be able to do it remains to be seen, there are still six months left, it is a early stage company and they could miss the numbers if they couldn’t meet the numbers but growth is very-very high and even if they miss the numbers it is still going to be very high growth, but we don’t know, they might pick the numbers”.

Also read:

– Zomato acquires Menumania; First of many global acquisitions to come
– Zomato in FY14: Rs 30.6 Cr operating revenue, Rs 41.6 Cr operating EBITDA loss
– Zomato breaks even in India; Expands to New Zealand

*Disclosure: Info Edge is an advertiser with Medianama

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