New Delhi: When Deepinder Goyal changed the name of his original restaurant-listing start-up Foodiebay to Zomato in 2010, the reason was simple—he didn’t want the company to be seen as just a food website.
A playful nod to the word ‘tomato’, Zomato seemed like a good choice. It was zingy and, at the same time, not limited to just food.
Fourteen years later, the Gurugram-based company has expanded its offerings well beyond the traditional food business, with its bold moves now reaping significant rewards.
After years of being almost synonymous with food delivery, last month the company announced plans to acquire Paytm’s movies and events ticketing business in a deal valued at over Rs 2,000 crore.
With the acquisition, Zomato will become the country’s second-largest entertainment ticketing platform, behind only BookMyShow, the leader in the entertainment ticketing market.
It’s a big move for the company, which for years has largely been associated with the image of delivery riders zipping around town with the Zomato brand emblazoned on their clothes and delivery bags.
The acquisition—which comes two years after its 2022 Blinkit buyout—is aimed at boosting what Zomato calls its “going-out” business by becoming a one-stop destination for all entertainment needs, such as events and movie ticketing.
Following the announcement, Goyal said in a statement that the company’s mission was to build products and services that power India’s changing lifestyles, keeping in line with its 2010 aim to “touch broader horizons”.
“Any further step change in scale here will depend on our ability to build newer use-cases like shopping, staycations (travel), etc,” Goyal said in a letter to shareholders following the Paytm acquisition.
“We believe, over the next decade and beyond, going-out experiences will continue to grow strongly in lockstep with overall growth in lifestyle and consumption. The proposed acquisition helps us add more scale and offer newer use cases (like movie and sports ticketing) to our customers in this segment,” the letter added.
ThePrint reached Zomato spokesperson via text messages. This report will be updated if and when a response is received.
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A long way from scanning menus
Zomato’s deal with Paytm marks yet another milestone in the company’s journey.
The idea for Zomato emerged from a simple problem: During a lunch-hour visit to a Gurugram mall in 2010, Goyal and his IIT batchmate Pankaj Chaddah noticed people didn’t have a one-stop shop to compare restaurant menus.
Then working as analysts with Bain & Company, the two began uploading scanned menus on ‘Foodiebay’, which was eventually renamed Zomato.
They had clearly hit upon a winning idea.
What began as a side hustle of posting restaurant menus and reviews soon became hugely popular, and it wasn’t long before Zomato took the next step and entered the food delivery space.
Beginning with a first round of funding of Rs 4.7 crore in 2010 from Info Edge (India), Zomato has grown into a unicorn with a market cap of more than Rs 2.5 lakh crore.
The company has four main businesses—food delivery, quick commerce, going out and B2B supplies.
While the food ordering and delivery platform accounts for the majority—57 percent—of Zomato’s revenues, other businesses are catching up fast.
Blinkit—the quick commerce business it acquired just last year in August—already accounts for 17 percent of the company’s revenues at Rs 2,301 crore, up from Rs 1,063 crore in 2022-23.
In fact, Goyal has reportedly expressed confidence that Blinkit will be bigger than the food delivery business in a year’s time.
The company’s B2B platform, Hyperpure—which started in 2018 after acquiring and renaming Bengaluru-based start-up Wotu—is seeing strong growth, and now accounts for 23 percent of the company’s revenues.
Hyperpure revenues have grown five times in two years, from Rs 538 crore in 2021-22 to Rs 3,172 crore in 2023-24.
The going-out business—which includes dining out and ticketing—is still small, accounting for about 2 percent of the company’s revenues.
However, it is expected to get a significant boost with the acquisition of Paytm’s ticketing business.
“Management’s strong demonstrated execution in the past and absence of meaningful organised competition (barring BookMyShow) makes us believe going-out could be the next big success out of Zomato,” research firm JM Financial said in a research note in August.
JM Financial termed the acquisition of Paytm’s ticketing business as a strategic fit. It said the management’s “strong demonstrated execution in the past across its previous B2C forays makes us believe that the proposed deal can significantly add value to Zomato’s stock”.
Financial services company Motilal Oswal added that Zomato has demonstrated its capability to unlock value from its acquisitions earlier, most notably Blinkit, and the going-out business could give Zomato a strong “mind share” of the recreational spending of urban customers.
Building ‘super brands’ rather than ‘super apps’
Zomato is banking on its plans to launch a dedicated app named ‘District’ to offer customers a host of services—from movie and IPL tickets, to dining-out reservations, as well as live entertainment and weekend getaway options.
According to JM Financial, this aligns with its strategy of building ‘super brands’ rather than a single ‘super app’.
“Zomato’s management believes that due to the fragmented nature of the Indian entertainment and going-out experiences market, customers use multiple apps for different use cases,” JM Financial said.
“The company believes it can address this issue by creating a dedicated going-out app ‘District’ that can serve as a one-stop platform for all these experiences, to drive strong customer engagement and incremental demand,” it added.
This seems a wise choice as super apps—one app for all customer needs—have not worked as well in India as they have in China.
From the likes of Paytm to conglomerates like the Tata Group, many have tried to build a super app, but with limited success.
In 2022, the Tata Group launched its super app Tata Neu, while Reliance Industries launched Myjio for its consumer and entertainment offerings. Another billionaire, Gautam Adani is also aiming to enter this space via Adani Enterprises.
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Hits and misses
However, not every business that Zomato has touched has turned to gold. Its efforts to go global, for instance, haven’t been so successful.
According to market intelligence platform Tracxn, Zomato has made at least 17 acquisitions across seven countries so far. However, these acquisitions have been a mixed bag for Zomato, with some hits and some misses.
The company, once present in nearly 23 countries, has exited almost all foreign markets.
In an interview with a TV channel in 2022, Goyal admitted that the international business “does not fit into our roadmap anymore. Not at all”.
Initially, shareholders and some analysts were not positive about the Blinkit acquisition in 2022.
Kotak Institutional Equities downgraded the Zomato stock after the Blinkit announcement, while Jefferies flagged quick commerce as “more challenging than food delivery given high competition”.
The company shares, too, went into a downward spiral after the announcement.
However, the acquisition paid off. Motilal Oswal Financial Services said in a research note released in August that Blinkit’s growth continues to defy gravity.
It noted that while food delivery is now steady, Blinkit “notoriously defies any attempts to value the stock fairly, due to its feisty growth and the disruptive and evolving nature of quick commerce”.
According to a UBS report, Blinkit had a market share of 40-45 percent in the quick commerce market as of July 2024, followed by Swiggy Instamart with 20-25 percent, Zepto with 15-20 percent and BB Now with 10-15 percent.
“Given the sector’s strong growth and margin potential over the past year or so, it is not surprising that other companies eye this space as well,” it said.
Competition, though, will be tough.
Apart from e-commerce giants Amazon and Flipkart, companies like Reliance and Ola are also reportedly looking to launch quick commerce services.
Zomato is hoping to have an edge because of its decision to keep Blinkit as a separate app instead of integrating it with the food delivery application.
Listening to customers
But anybody in a competitive market can’t afford to drop the ball.
That’s why Zomato—known for its catchy taglines drawn from popular Hindi movie songs and dialogues—keeps launching innovative offers to grab new customers.
On Raksha Bandhan, for instance, the company accepted international orders on Blinkit for a limited period, allowing people living abroad to send Rakhis and gifts to their families in India in just 10 minutes.
Zomato has always tried to be seen as being open to customer feedback, even when it is not positive.
For example, after facing backlash over its ‘pure veg fleet’ in green uniforms, the company was quick to acknowledge the drawbacks and dump the initiative.
In July, the company launched a delete-order feature in response to a December 2023 request from a user whose wife caught his late-night order. While it acted as fodder for memes, the move gave the impression of a company listening to its customers.
Analysts have given Zomato’s latest acquisition a thumbs up, with most confident about the company’s overall growth.
“Zomato continues to be one of our preferred picks in the listed Internet space as we believe it is well positioned to benefit from robust industry tailwinds across its B2C businesses,” JM Financial said.
(Edited by Sugita Katyal)
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