With just six months of cash in bank, IPO was a desperate contingency plan: Zomato CEO

Zomato to stay focussed on food, will only invest in businesses that can add more than $10 billion to its market cap going forward, says CEO Deepinder Goyal

Deepinder Goyal, cofounder and CEO, Zomato This is part of a series of interviews with the winners of The Economic Times Startup Awards 2021.

MUMBAI : Food-delivery and restaurant discovery platform

Zomato

NSE 2.07 % , which won in the prestigious Startup of the Year category at the Economic Times Startup Awards 2021, was chosen by the elite jury for executing a stellar debut on the Indian public markets , thereby aiding a crush of IPOs by new-age internet companies. Deepinder Goyal , cofounder and CEO of Zomato, said in an interview with ET that the company’s IPO earlier this year was not by design. Instead, it was a “desperate contingency plan” which had to be kicked off amid the worst crisis ever faced by the food-delivery major.

As Zomato battled the first wave of Covid-19 lockdown, a foreign direct investment (FDI) rule change which prohibited Chinese investors like Ant Financial from backing Indian firms came as a double whammy. The company was staring at a six-month cash runway, and an IPO seemed like the only option left on the table.

In an expansive interview, Goyal spoke to Samidha Sharma about Zomato’s IPO decision, diversification beyond food-delivery, M&As, its grocery play through Grofers, managing restaurant partners and riders on the platform, and his own journey as the founder of one of the buzziest internet companies in the country. Here are some edited excerpts:

This year was defining for Zomato because of how you broke the barrier between the private and public markets for Indian startups. The ET Startup Awards jury highlighted this point as being a standout one. What’s the IPO journey been like?
The IPO decision was because we didn’t have any other choice, honestly! We saw a 90% drop in business after the first Covid-19 wave, and the company had six months of money left in the bank. The remainder of the funding from Ant Financial (existing investor) was not coming through (due to changes in FDI rules). While we were talking to many investors, nothing was materialising. An IPO was a desperate contingency plan, where we said it is okay if we are grossly undervalued at even $500 million, but we really need to raise $50 million. That was the start of the IPO conversation, and over time, things changed. When we decided to go public in the middle of last year, we had a lot of hurdles to cross, in terms of figuring out regulations. We worked very closely with the markets regulator Sebi, and found them to be very helpful and forward-looking. I hope it has become easier for other loss-making tech companies planning to go public now.

Did you say you had six months of cash left…
Yes, in April last year, revenues had vanished but much of the costs were intact – international operations, dining out, among others. Since the fundamentals of the business were strong, we knew that valuations are temporary and surviving this phase was important.

A few months later though you received a lot of investor interest. The Doordash IPO added to the positive sentiment. Were you tempted to stay private?
Our IPO journey had already started before the Doordash IPO. Even as we were doing all the work, the business started getting better and by December last year we had overshot pre-Covid-19 gross merchandise value (GMV). We didn’t think of scrapping the plan to go public. We had to list one day, and as the IPO plan progressed from month to month, it made even more sense to go ahead with it.

Along the way, the market turned positively and we went almost from nothing to the current IPO. But we didn’t set out to break the glass ceiling or do anything big; we were just trying to live and survive and what happened, happened.

At that time were you at all thinking it would be such a breakthrough moment for Indian startups?
We didn’t know this at all – in fact, we didn’t even know it would be a breakthrough moment for us – let alone the entire startup ecosystem. It was only about 15 days before the actual listing that we started getting a sense that this would change the game for domestic startups.

What happened that made you realise the significance of the event? […]

source With just six months of cash in bank, IPO was a desperate contingency plan: Zomato CEO