The funding winter and good business decisions with quick commerce have proved to be Zomato's secret sauce for success, according to Saurabh Mukherjea.
The founder and chief investment officer of Marcellus Investment Managers was talking to Moneycontrol as part of the Samvat 2081 conversations.
Marcellus is invested in Zomato through Info Edge, which has a substantial stake in the food delivery and restaurant aggregator company.
Mukherjea said, "A big part of Zomato's success has been that the funding ecosystem dried up completely for everybody barring Zomato and, to some extent, Swiggy. Therefore, we ended up with a duopoly in the food delivery space."
He also gave credit to the company's senior management, including its CEO Deepinder Goyal, "for having the clarity of thought to buy BlinkIt".
Mukherjea said, "I hadn't figured this out (then), it's only with the benefit of hindsight (that I have come to appreciate it). It’s a great play on affluent Indians wanting things fatafat (in quick time) and you've got low-cost labour who can deliver things to affluent Indians."
In quick commerce too, the scarcity of funding helped the two players, he pointed out.
He said, "In the quick commerce piece, there's only so many players who can get funded. Reliance is backing a quick-commerce (q-com) but there are only two other properly financially backed q-com plays in the country; one is owned by Swiggy, one by Zomato. Therefore, you have ended up with a duopoly sector until the funding winter for venture-capital continues."
He expects the funding winter to continue for a year or a couple of years more.
Mukherjea also noted a slowdown in consumption driven by various factors, most notably the tightening in monetary and fiscal policies.
He said, "Whenever a central bank hikes rates by 200 to 250 bps, with a 12-18-month lag, the economy slows down. The hikes of 2022 and 2023 are biting in 2024. Consumption growth has slowed down pretty much across the board, not just a big ticket, even small ticket consumption growth has slowed down."
The tightening in fiscal policy seems to have led to a significant pullback in government capex spending but there is expected to be an increased focus on welfare spending, which could help rural consumption, according to him.
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