How Zomato Failed To Crack Global Market
While expanding in India, Zomato Ltd. targeted a global push through a string of acquisitions in the last seven years. But the food delivery company, with its initial public offering lined up next week, hasn’t had luck overseas.
“We are very focused on India as an opportunity and a lot of mindshare goes there. We believe we have so much to do in India and that’s how we are building up,” Gaurav Gupta, co-founder and chief supply officer at Zomato, told to BloombergQuint in an interview. Most of the international locations, he said, have review, search and discovery platforms that are managed remotely.
Zomato's overseas buyouts, however, failed to deliver. International business contributes about a tenth of the business and 2.5% to its total assets, according to its IPO filings. But it accounted for more than 15% of liabilities and had an over 13% share in loss in FY21.
Zomato’s Rs 9,375-crore IPO opens on July 14 as the food delivery platform seeks a valuation of about Rs 60,000 crore ($8 billion).
The company recognised losses worth Rs 33.7 crore in FY21. And it reported exceptional items worth Rs 324.8 crore and Rs 122 crore, respectively, in FY21 and FY20. All these largely stem from its operations outside India.
Zomato started expanding overseas with the acquisition of Italy and U.K.-focused Cibando in 2014, and followed that up two more buyouts that year, according to its filings.
Zomato entered the U.S. market with the acquisition of UrbanSpoon in 2015 for over $50 million. But shut down business within five months as it failed to take on Yelp.
It acquired another U.S.-based company in 2015, Nextable. Zomato wrote down investment and goodwill in the company to Rs 15.5 crore in 2020.
Zomato forayed into food by buying Tonguestun Food Networks in 2019. The strategy was to create an ecosystem around food delivery. But it failed to execute and the pandemic made things worse, prompting a Rs 96.3-crore writeoff in FY20. Equity value of the unit declined Rs 131.3 crore.
In the last financial year, it wrote off equity investments in multiple global subsidiaries. Besides Tonguestun Food Network, Zomato shut operations of seven subsidiaries based out of Indonesia, New Zealand, Australia, Philippines, Turkey. Its Portuguese arm is struggling.