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Zomato shuts down South African subsidiary to continue its focus on the Indian market

Zomato SA’s contribution was reportedly nil and its closure leaves just one international unit still standing.

zomato

Zomato South Africa Proprietary Ltd. (Zomato SA), a step down subsidiary of Zomato Ltd., completed its deregistration on January 3, 2022, according to a disclosure statement filed with the National Stock Exchange.

The company initiated the process of deregistration in November last year, as per another disclosure filed by Zomato. The company clarified that Zomato SA did not have active business operations. It added that the subsidiary had no turnover while its net worth hovered at Rs 46,00,000.

“It may be further noted that Zomato SA is not (a) material subsidiary of the Company and the closure of Zomato SA will not affect the turnover/revenue of the Company,” read the disclosure statement with the NSE dated November 23, 2021.

Zomato SA’s closure is yet another move by the company to trim excess fat from its books ever since it went public* last year. The listing brought its financial fundamentals such as revenue, profit, and liabilities into the spotlight, raising concerns around its profitability.

Zomato’s cleanup exercise

Zomato SA is not the first international subsidiary that the food delivery firm wound up in a bid to streamline its operations. Here is a list of subsidiaries that were subject to closure:

Lebanon: The Lebanon unit of Zomato Ireland Limited, a wholly-owned subsidiary of Zomato, was shut down on December 15, 2021, according to a disclosure made by the company with the Bombay Stock Exchange. The filing revealed that the turnover of the Lebanon Branch constituted 2.38 percent of the overall turnover in the financial year ending 2021. The company said that it wanted to focus on the core India market as one of the reasons to shut down its international subsidiaries.

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United States: The food delivery firm first dissolved its table reservation business in the US, NexTable, by entering into a stock purchase agreement with Justin Doshi, Thusith Desilva, and Robert Tyree for the sale of its stake at $100,000. The company then shut down its US subsidiary— Zomato US LLC (ZUL) — to focus on its India operations. It was known as UrbanSpoon earlier. ZUL’s contribution to Zomato’s turnover stood at nil.

UK and Singapore: The next two closures came in the form of Zomato’s two international subsidiaries in the United Kingdom and Singapore. Zomato UK Limited (ZUK) and Zomato Media Private Limited (ZMPL) had a net worth of Rs. 16.4 lakh and Rs. 6.5 lakh respectively.

Zomato’s only active subsidiary is in the UAE, according to a report in Economic Times. The company earned Rs. 31 crore from the UAE and a few other international markets as stated in its quarterly earnings report in August 2021, the report added.

What has happened in India?

The closure of subsidiaries hasn’t been restricted to Zomato’s overseas market. It exited the grocery business by ceasing operations on September 17 this year. The reasons cited by the company were gaps in order fulfillment, poor customer experience, and increasing competition from rivals promising express delivery.

The firm also shut down its nutraceutical business in India without elaborating on its reasons. The term “nutraceutical” means medicinally or nutritionally functional foods such as yogurt and supplements, among others. This move coincided with the government’s plan to introduce strict private label regulations for marketplace e-commerce firms in the country, a report in Moneycontrol said.

*Disclaimer: This author was allotted shares in Zomato’s IPO.

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I cover several beats such as Crypto, Telecom, and OTT at MediaNama. I can be found loitering at my local theatre when I am off work consuming movies by the dozen.

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