ValuePickr Forum

Zomato - Should you order?

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There is some confusing news floating…has he left Zomato or just the role he was in? He was leading their nutrition business last 1 year and couple days back Zomato announced its closure. But in some news items it’s mentioned that Gaurav will move to a role to start new nutrition business for Zomato…also in his letter he mentions he would continue to attend Zomato town halls…

This is the same guy who showed up to mulltiple interviews pre-IPO. Some great investor confidence. I don’t think these shutting down plans developed suddenly. Management has always been guiding closure of the mentioned business and if he was to quit, why make him give interviews.

More than 2 days after the company’s COO/ Co-Founder resignation (mentioned by CEO on Twitter), Zomato has not deemed it material enough to be disclosed to the exchanges.

It is infact the exchanges, which have now reached out to Zomato asking for a clarification.

And I found this article on the web:

Seems to be some technicality that he was not listed as a KMP because of the designation, changes, etc.

This is just beyond ridiculous that a 1 lakh+ crore market cap company hides behind some technicalities to not disclose such material info. And even after 2 days no one in the entire company understands the materiality of the event.

Pathetic corporate governance standards!

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Overview and current status of online food order business from McKinsey.

Ordering in: The rapid evolution of food delivery

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The PIL could have major impact on the business models of companies like Uber, Ola, Zomato, Swiggy etc.

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A couple of thoughts from an end consumer point of view -

When I was living in Mumbai I used to order a lot from Zomato or Home delivery services as going out in traffic was a pain. I was okay if the Dosa, Roti, or Pizza was a bit cold and lost half of its taste by the time it was delivered.

Now I live in a large town in Haryana and I don’t want to pay 20-25% more for slightly cold food that’s not as tasty as the fresh food I get in the restaurant. Also since there is no fear of covid (at least for now) and there is not much traffic in my small town.

I prefer to go out 1-2 times a week to eat out. Better, fresh, and cheaper food and also a good dining experience.

Zomato may not get the growth they are hoping for due to some of the above factors.

That brings me to a concern about how the orders will grow in future especially from smaller towns. How Cost reduction, the quantum of discounts, and employee expenses will shape up.

The quarterly losses are huge close to 343 Cr (if i am not wrong). if they reduce discounts and make ordered food more expensive, won’t customers switch back to ordering direct from restaurants or going out to eat food in a lot of cases?

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Maybe now the dynamics are not favorable to you in terms of delivery but with the rising population in every town and conditions of traffic/roads, people getting busier…gradually the shift would happen

The ease of ordering and delivery can gradually make a person who orders 1-2 times a week, eventually 2-4 times. They may end up ordering even breakfast which earlier they weren’t and even coffee with a cake for in between meals on some days

The stake in Grofers would increase grocery deliveries with time and above shift in city dynamics and consumer behavior would be a decent push.

But I agree to all your risks. I just wanted to mention some points that I can see as an opportunity and I am sure others who see capabilities in this business.

Disc: Very Small tracking position. Not a buy/sell recommendation

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New businesses such as these might pose challenges for third party businesses like Zomato.

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