Zomato’s Deepinder Goyal joins the Indian billionaires club

Deepinder Goyal, the founder and CEO of Zomato, has ascended to the status of a billionaire, following an unprecedented rally in Zomato shares over the past year.

The stock's meteoric rise, marked by a 300 per cent increase since its lows of July 2023, has culminated in a new high of Rs 232 on the Bombay Stock Exchange (BSE) as of 15 July 2024.

This surge has propelled Zomato's market capitalisation to an impressive Rs 1.9 lakh crore, and Goyal's personal net worth has soared past Rs 8,300 crore, making him India’s wealthiest professional manager at the age of 41.

Goyal's journey to this pinnacle of success is rooted in a humble middle-class background. An IIT-Delhi graduate with a degree in mathematics and computing, his entrepreneurial spirit was ignited by a profound passion for food.

While working at Bain & Company, Goyal co-founded FoodieBay.com, which was later rebranded as Zomato.com, after identifying an opportunity to revolutionise the food ordering process.

In 2011, with early funding from Info Edge, Goyal and his team dedicated themselves full-time to nurturing Zomato's growth, which quickly emerged as a dominant player in India's food tech industry, achieving unicorn status in 2018.

The substantial rally in Zomato's stock since early 2023 has been fuelled by optimism surrounding its quick commerce business, Blinkit, which is anticipated to outperform its peers and achieve profitability sooner than expected.

Zomato has indicated that Blinkit could break even in terms of EBITDA by the first quarter of FY 2025–26. Additionally, the profitability of Zomato's core food delivery business has bolstered investor confidence, contributing to the stock's upward trajectory.

Blinkit, Zomato's rapidly expanding quick-commerce venture, is currently outpacing competitors such as Swiggy's Instamart and Zepto, fostering increased investor optimism.

Recent reports suggest that Zomato will further boost investments in Blinkit, particularly after it achieves break-even per the adjusted EBITDA. This strategic move is anticipated to enable Blinkit to surpass Zomato's food delivery business in terms of gross order value (GOV) sooner than expected, while also solidifying its competitive position.

On 15 July 2024, Zomato and its main competitor Swiggy also increased platform fees to Rs 6 per order to enhance profitability. Although the incremental fee may seem negligible to customers, it translates to an additional income of as much as Rs 25 lakh daily for Zomato, given its daily order volume of 22–25 lakh.

This fee, currently applied in Bengaluru and Delhi, is expected to be gradually implemented nationwide, directly benefiting the company's revenue streams.

Analysts predict that Zomato will prioritise growth investments over immediate profitability to capture untapped market opportunities and establish long-term dominance.

Consequently, while Blinkit's path to sustainable adjusted-EBITDA margins may take longer compared to its food delivery margins post-break-even, factors such as advertising income, take rates and operating leverage at various levels will ensure gradual profitability improvements.

A recent Goldman Sachs note underscores Blinkit's remarkable growth, estimating its value at $13 billion, up from $2 billion in March 2023. With a per-share value of Rs 119, Blinkit now surpasses Zomato's core food delivery business, valued at Rs 98 per share

Goldman Sachs projects that Blinkit's gross order value will grow at a 53 per cent compound annual growth rate (CAGR) across FY 2024–27, with both GOV and EBITDA expected to exceed those of Zomato's food delivery business by FY 2029.

Acquired by Zomato in 2022 for $568 million, Blinkit has significantly enhanced its financial health, emerging as the most valuable entity within Zomato's diverse business portfolio.

As for Goyal's ascent from a middle-class upbringing to becoming India's richest professional manager, his trajectory pretty much exemplifies the transformative potential of visionary leadership and strategic investment.