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Combative, reticent, confident: The many shades of Zomato CEO Deepinder Goyal during the company's first analyst call

At the end of the meet, analysts were left grappling with how to value an app that boasts of more than 50 million users, yet can’t turn in a profitable quarter after over a decade of being founded.

May 25, 2022 / 06:58 PM IST
Deepinder Goyal

Deepinder Goyal

At analyst calls, questions come fast and furious at a company’s management as the street is hungry for answers on earnings and is searching for vital signs for the coming quarters.

But what happens if the CEO happens to be reclusive and media-shy at that? Add to that, the —unusual—reluctance the company has shown in participating in such post-earnings meets.

That was the case with Zomato and its co-founder and CEO Deepinder Goyal when they decided to field questions from a bunch of analysts on Tuesday, a day after the food delivery platform reported that its net loss in the March quarter had widened to Rs 359 crore even as revenue zoomed 75 percent YoY to Rs 1,211 crore.

Zomato was celebrated as a trailblazer last year after it became India’s first internet unicorn to list on the bourses.But as it so often happens in markets, that is so last year. The company has since received flak for its averseness to answer questions from investors and analysts.

And oh yes, the questions are many. What does Zomato have to say about the large investments in smaller, loss-making companies? What about the pivots in strategy over the past year? How long will the losses continue?


But the Zomato management has been skittish about answering questions in real time on a quarterly basis. Instead, it has preferred forms of communication where it is in complete control—via social media and blog posts.

All eyes on profitability

Against this backdrop, the first-ever earnings meet by Zomato held special interest. Tech stocks the world over have taken massive hits amid a hawkish monetary policy environment. Investors who had once taken large positions in internet companies are looking to stop losses and make a dash towards equities that are profitable and less pricey.

Profitability actually was one of the important points of discussion at the Zomato conference.

But if the analysts expected bravado and certitude from Goyal, they would have been disappointed. He remained true to form during the company’s call, letting CFO Akshant Goyal do most of the talking.

Nonetheless, Zomato’s top two executives patiently listened to analysts and explained to them about the intricacies of the hyperlocal delivery business.

When an analyst asked if his estimate of a $20-million monthly cash burn in the quick commerce business over the next 1.5 years was correct, CFO Akshant Goyal responded saying the right way to look at profitability was on a consolidated basis. “We want to get the company to profitability without diluting anymore. The way we are thinking about it is that we have $1.6 billion of cash in the bank.”

“We don’t necessarily feel the need to get to profitability sooner by not doing the quick commerce. I don’t think that will be the right way to think about doing or not doing that business,” he added.

With an answer like that, one can’t blame analysts to conclude that the management may not have a clear plan on the path to profitability, at least for now.

More questions sprouted from this reply. Does that mean Zomato is stretching out its profitability timeline to as long as it does not exhaust its $1.6 billion cash in the bank? (Its fresh issue size was around $1.2 billion in the initial public offering last year.)

As this question was put later in the call, Goyal jumped to answer. “No. Not at all. We want to conserve as much cash as possible. And we are not going to spend all of it or even most of it (to get to profitability).”

Yet, on being asked what was the timeline for profitability, the response was: “We don’t have any timeline for this. We are actually operating in an ‘as soon as possible’ mode.”

Combative Deepinder

There was at least one instance when Goyal got a skosh combative. To a question on whether the $150 million debt to Blinkit (formerly Grofers) would be convertible to equity in case Zomato acquires the company, he responded that the detail was not important. “That should be irrelevant. Hypothetically, if we acquire a business, it is a subsidiary. Whether we convert it to equity or not should not matter,” he said.

At this point, CEO Goyal betrayed some impatience as he took a follow-up question from the analyst. Sudheer Guntupalli of Kotak AMC pointed out that Zomato had recorded an average ordering frequency of three times per month for FY21 in its IPO prospectus compared with 10 times a year reported in FY22. “Where exactly is the disconnect,” asked Guntupalli.

In his response, CEO Goyal cited the platform’s 53 million strong customer base and called attention to a separate metric called monthly transacting users. He stopped short of delving deeper into the reason behind the apparent drop in order frequency.

It was not clear whether Goyal wanted to sidestep the query or whether he understood what was being asked. But at this point, the moderator intervened and told the analyst to get back in the queue.

Zomato seemed to have a plan for the meet. The CFO mostly dealt with questions regarding financial and operational nitty gritty. Goyal would interject—with an assertive tone—on issues when it appeared that an analyst was not buying the argument.

For instance, when Jefferies analyst Vivek Maheshwari asked how Zomato was going to balance growth and cut losses at the same time, the CFO responded saying that the company has reached a scale of operations where growth leads to more operating efficiency – and hence higher profitability.

CEO Goyal intervened soon after. “To add more colour to this, I think most of our growth over the next couple of years will come from repeat customers rather than us getting us a lot of new customers.”

Analysts wanted to make sense of how Zomato calculates certain numbers like contribution margin and adjusted EBITDA. As they quizzed the executives on average order values, average order frequencies, customer acquisition costs, and unit economics, the Goyals valiantly tried to decrypt the management information system of a new-age business for the analysts.

How the session went

There was no hard limit placed on the number of questions an analyst was allowed to ask. The moderator did not repeatedly intervene if a particular analyst was probing too hard with follow-up queries. As such, the conference call, which saw the Zomato executives fielding questions from 13 analysts, had to be extended by 15 minutes beyond the slated 1 hour.

That said, one got the feeling that the analyst community was still grappling with how to value an app that boasts of more than 50 million users yet can’t turn in a profitable quarter after over a decade of being founded.

Which brings us to a question of our own. Will CEO Goyal again meet analysts?

Here is what he said in a note to shareholders: “We are going to do a call this time around (as promised), and will decide about the next quarter when we get to it.”
Deepsekhar Choudhury
first published: May 25, 2022 06:12 pm
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