Online food delivery platform Zomato is in the process of divesting or shutting down its non-core businesses. In a blog post on Wednesday, Deepinder Goyal, Founder and CEO of the unicorn, said that these would be those businesses that "contributed less than 1% to our Adjusted Revenue and 13% to our Adjusted EBITDA loss in Q2 FY22".
Goyal reasoned that these businesses "were not going to significantly move the needle for our shareholders in the long term".
The divestment versus shutdown debate starts and ends with two questions, said Goyal. "Can we sell the business to someone for whom it is core, and can they realise disproportionate returns from what we have built? b) Is the divestment process worth the value that we will realise from the divestment?"
Fitso checked these boxes on divestment, following which Zomato is in the process of selling the company to Curefit (Curefit Healthcare Pvt Ltd) for $50 million. It is also planning to invest $50 million in Curefit "to cultivate a great long term partnership" with the latter. "Net $50 million cash investment plus value of the Fitso business (worth $50 million) will give us a cumulative shareholding worth $100 million in Curefit (6.4% shareholding in Curefit). This will help us potentially explore cross-selling benefits between Zomato and Curefit, as we see food and health becoming the same side of the coin in the long term."
Zomato has shut down its direct-to-consumer (“D2C”) experiment in Nutraceuticals. "Instead, we are choosing to back a platform play for all D2C brands (by investing in Shiprocket; more on this later). We are also shutting down our operations in Lebanon, which is the only international business we were left with (other than dining-out business in UAE) after shutting down the rest of our international operations last year," said Goyal.
According to Goyal, the company's core food related businesses are food ordering and delivery, dining-out, and hyperpure (B2B supplies for restaurants), which will "remain the key value drivers for Zomato for the next few years. These are all complex businesses and we want our entire team to stay focused on these most important value drivers for our business".