 "Pankaj Chaddah")
Online restaurant search, rating and food ordering company, Zomato, which was in the news in 2015 for laying off about 300 employees, shutting down regional centres, and unmet financial targets, is aiming for operational profit this year.
Co-founder Pankaj Chaddah told Business Standard in an interaction that "the pain for us has been over for a while now", but not for the industry. "Yes, there is a bubble," he said when asked where the tech start-up universe, specifically the food app companies, was headed.
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Zomato would go for acquisition when there's a potential target, but right now it's watching the space going through turmoil. At least three such firms would be on the block this year, one of which may just fade away, Chaddah crystal-gazed.
"We have restructured and shut down verticals in the past seven years, we have done a lot of that before. But, it has never happened at such a scale. This is what caught everyone's attention," Chaddah, who's managing the online ordering business, said. The company realised that the investment made in collecting information through walk-ins at high-street restaurants around the world was not adding value, as most of the content was available online. That resulted in lay-offs, primarily in content operation, he said.
Having begun in 2008, Zomato is targeting break-even by May and operational profit subsequently. From 2,600 employees now, it's targeting to increase the numbers to 4,000 by end of the year.
Chaddah claimed the firm was not looking at fundraising as they "have ample money in the bank". So far, the company has raised $223 million, with the last funding in 2015. Investors include Info Edge, Sequoia India, Vy Capital and Temasek.
Chaddah didn't want to comment on whether Zomato was valued at below or more than $1 billion - the unicorn mark that every tech start-up wants to reach as quickly as possible. In value terms, Zomato is the market leader, while in volume terms two players are ahead of it, according to industry estimates.
Stressing that consolidation is waiting to happen in the food tech space, Chaddah said one of Zomato's rivals could be wiped out completely and two others were likely to be up for sale.
"In terms of consumption, a lot of players, who grew quickly in the beginning, did a good job of educating the users with discounts… Sadly, it did not work, as they were creating unsustainable businesses. As a consequence of that, I see a couple of businesses folding up soon. My guess is one out of three will fold up, and the others might get acquired," Chaddah said. When asked if any of these companies would be acquired by Zomato, Chaddah said it would depend of the value that has been created by them.
At present, Zomato is pushing its online food ordering business. While 95 per cent revenues for the group comes from search and discovery operations, five per cent comes from food ordering. "Search and discovery is growing at a fast pace, almost 10-15 per cent month-on-month. The online ordering business is growing at 30-40 per cent month-on-month. Overall, in two years, I think online ordering revenue contribution would grow to 20 per cent." It plans to spend $40 million in two years in establishing itself in new markets across the globe.
Agreeing there is a bubble in the start-up space, Chaddah said, "Certain industries will correct themselves, some others will get more funding and blow the bubble further. I think a lot depends on investors when they figure out what is good business and what is unsustainable. There has been a bloodbath in the e-commerce space for a long time, as too many people have been running on negative."
On Zomato co-founder and chief executive Deepinder Goyal's letter to the sales team a few months ago, asking them to shape up or ship out as investors' financial targets were not being met, Chaddah said: "That's how sales people are inspired to perform in most organisations." He added that there has been no issue between Zomato and its investors.
Is there any truth in Chinese search company Baidu being in talks with Zomato? "Investors keep talking… in the past five years, close to 40 of them must have spoken…," said Chaddah.
Would it like to be known as the Amazon of the food tech world or an Uber? "While we can be compared to Amazon at one end, we are like Google on the other... But we want to be known as the Zomato of the food world."
