A week after Zomato's shareholders approved its decision to acquire Blinkit (earlier called Grofers), its Founder and CEO, Deepinder Goyal, shared his thoughts on the company's internal communication platform. He told team members that he planned to consolidate operations of the various entities into a multi-CEO business model.
His note on Slack read, "Now that the Zomato Blinkit deal is approved, we have three companies—Zomato, Blinkit and Hyperpure—in the order of business size/impact. In addition to these three, we also have Feeding India. We are now at a stage of life where we are maturing from running (more or less) a single business to running multiple large companies."
Goyal added that Zomato is "transitioning from a company where I was the CEO to a place where we will have multiple CEOs running each of our businesses, all acting as peers to each other, and working as a super team with each other towards building a single large and seamless organisation. Starting today, we are going to call this larger organisation 'Eternal'."
Blinkit is headed by its Co-founder and CEO, Albinder Dhindsa, while Vishal Kumar manages Feeding India, a non-profit acquired by Zomato in 2019. Rahul Ganjoo is the CEO of the start-up's food delivery vertical, and Mohit Gupta is in charge of new businesses.
Getting Back On Track
Goyal used adjectives like "boundless, timeless, undying, endless and permanent" to describe Eternal, which will have multiple companies. While giving employees a heads up that they can expect to see the Eternal logo and T-shirts soon at its new office, he stated that the entity already has "Zomato (delivery plus dining out), Blinkit, Hyperpure and Feeding India." He also shared other ideas with team members in his Slack memo.
What is striking about Goyal's messaging is its timing; it comes at a time when Zomato's stock price saw a steep decline. It was triggered by the expiry of the lock-in period for shares held by pre-IPO shareholders, primarily comprising promoters, employees and other institutions.
Zomato was listed on the Bombay Stock Exchange and National Stock Exchange in July 2021, climbing to almost Rs 169 on NSE in November 2021. However, over the past few weeks, it has been down 76 per cent from this peak.
While social media erupted with memes following this, many well-known people too remarked about the stock's over-valuation. It included Ashneer Grover, former BharatPe founder and Shark Tank India judge. He tweeted that if Zomato had merged with Swiggy instead of BlinkIt, its stock price would have touched Rs 450.
Finance Professor Aswath Damodaran also evaluated the decline of Zomato's share prices in a blog post. "Even if the Blinkit acquisition pans out, it is an open question whether Zomato can continue to deliver growth effectively and efficiently through this acquisition-driven strategy, using its own shares as currency, especially as it scales up," he remarked.
He, however, has not given up on Zomato completely. According to him, "Zomato is a young, money-losing company, and the likelihood of failure acts as a drag on value; this will benefit the company since it provides not only a cushion for the firm but also eliminates dependence on external capital for the next few years."
Kotak Institutional Equities also noted, "Zomato's food delivery business is well-poised to grow at a strong pace over the next decade led by attractive market opportunity and strong execution capability." While expecting a $525 million of losses in food delivery and quick commerce over FY23-24, it maintained that Zomato would still have a $1.1 billion cash balance by March 2024.