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Early stage investments in India take a long time to create value: Sanjeev Bikhchandani on Zomato IPO

When questioned about whether Info Edge will hold onto its Zomato stake with reports of an initial public offering (IPO) looming for the food delivery platform, Sanjeev Bikhchandani said “we are not in any hurry to sell anything. We are not running out of funds. We see substantial value creation going forward. Having said that – never say never, but there is no pressure for us to sell”. 

In September this year, Zomato CEO Deepinder Goyal announced intention to take the company public in 2021. Bankers and legal advisors have reportedly been hired. “The challenge in India is that early stage investments take a long time to create value,” Bikhchandani, founder and ex-vice-chairman of Info Edge (India) Ltd., which is one of Zomato’s earliest investors, said on a investor call on Wednesday.

  • “IPOs take a long time to happen. If Zomato and PolicyBazaar IPOs happen in the next 1-3 years, it would have taken 11 years and 13 years [respectively] to go from inception or first round to IPO. Most VC funds are 8-year funds with extensions. To get exits, we have to be very patient. We have been in Zomato and PolicyBazaar for 10 and 12 years and a lot of the value creation happened in the last two years,” he said. “To really make money in in India, you have to be very patient and stay with a company for a very long time – and that’s fine,” he added in conclusion.
  • Info Edge CEO Chintan Thakkar said the company is aware of reports around Zomato as well as PolicyBazaar intending to go for IPOs. “That’s true in a sense because the companies have been preparing themselves.” he said. A company’s journey from start-up to IPO is quite long and one needs to be prepared for it, he said. “There is definitely an intention behind it, but when it will happen is a premature question to answer,” he said. The current focus is to assess whether a company is ready, “so that when you finally decide that you want to go for it, we will go for it”. “Right now, it’s just about preparing the company for it,” he concluded.  

Delivery revenue should exceed pre-Covid levels in a month: Bikhchandani

Zomato’s delivery segment is growing well in terms of revenue and should be back to pre-COVID levels soon, Bikhchandani said. The company’s unit economics has changed since COVID-19: they are now charging for delivery and giving lower discounts, which has resulted in the revenue per order and consequently average order value going up, he added. Zomato should exceed pre-COVID levels of revenue in a few months, he said on an investor call on Wednesday evening.

Gross merchandise value (GMV) for food delivery should be back to pre-COVID levels in a month or two, Bikhchandani added. Revenues and volumes is trending towards pre-Covid levels, and the unit economics remain encouraging, Hitesh Oberoi , CEO and managing director, said.

In October, US-based Kora Investments pumped $52 million into Zomato, with a larger amount follow-up amount expected in the coming months. In September, the company had raised $60 million from MacRitchie Investments, a subsidiary of unit of Singapore-based Temasek Holdings, and another $100 million from US-based hedge fund Tiger Global.

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