Call it impertinence (I think of it as irreverence), but I once asked Info Edge (Naukri) founder Sanjeev Bikhchandani, on an earnings conference call, if he thought that the smaller businesses that formed a part of Info Edge (Shiksha, Jeevansathi and 99Acres), would perform if they were run independently by entrepreneurs rather than as a part of a larger Internet business.
Bikhchandani’s response:
“I mean we have got businesses we are building inside the company, we have got businesses being built outside the company and we are observing businesses being funded by financial investors also, as standalone companies.”
He made the following key arguments in favor of an internal versus external approach:
- Internal funding gave them control over their destiny: “we can take a call taking a long-term view and we decide when to invest, and know how much to invest and so on, and not be dependent on the decisions of other people okay and we have seen many, many companies perhaps suffering, because they grade the first round and were not able to raise the second or third round because they were not in control with their own destiny, so I think it’s a huge asset that, for two reasons one is the financial reason that we decide to invest and how much to invest, when to invest, control over destiny.”
- Internal playbook for marketplaces is the same: “The second is because of operating experience from Naukri from other businesses to be able to transplant knowledge.”
- Economies of scale and shared know-how: “Third is we have got media buying capabilities, which are much, much larger and therefore we get better prices. We are able to invest in departments as small companies cannot invest in, such as analytics” and “if you have a small four member team or five member team doing it they could roll our products faster but we could perhaps roll our products for the more correct audience.”
Hitesh Oberoi, then COO (and now CEO) of Info Edge also defended his teams:
“In the case of both 99acres and in Shiksha teams inside our company is competing with other entrepreneurial teams outside and in many cases we are leaving them behind”…”we have a lot of good senior management people inside the company who are now driving these businesses and we have made substantial progress.”
I was a bit unfair to call it a one-trick-pony in 2015, but the fact remains that even last quarter, Rs. 333 crores of Rs 346 crores of Info Edge’s cash generation on a standalone basis, was from recruitment, while non recruitment businesses “were also cash positive and generated cash of Rs.13 crores in Q3FY25 vs. The cash loss of Rs. 3 crores in the same quarter of the previous year.”
Thankfully for Info Edge, there isn’t the kind of pressure like there was on ITC*, which was pushed into hiving off their cash burning Hotels business. In fact, one of Jeevansathi’s competitors, Matrimony is also listed. As an aside, at MediaNama’s launch event on July 19th, 2008, Bikhchandani offered 4% of Info Edge in exchange for Matrimony to Murugavel Janakiraman. Matrimony is currently valued at around 1.14% of Info Edge’s market cap.
In 2020 an investor likened Info Edge to a private equity fund. So, even as an impressively run business in Naukri grows every year, as it has done since it listed (unlike, for example, Rediff, which Infibeam bought recently) I can’t help but think of it as more of an early-stage (and substantially more prudent) version of Naspers: leveraging its balance sheet (and some money from Temasek) for external investments, the way Naspers used the money it got as dividend from Tencent.
One can argue that Info Edge’s biggest successes are external. In the 12 years that have passed since, two of its invested businesses have listed on Indian stock exchanges: Zomato* is almost twice the market-cap of Info Edge, while PolicyBazaar is closing in on Info Edge’s valuation.
For years, Info Edge was also a majority shareholder in Zomato, but chose to let it be independent and allow it to scale with external funding, and I always wonder whether it could have done the same with its other vertical businesses.
This is relevant in the context of Zomato rebranding itself as Eternal because, despite all these years, Info Edge as a standalone business remains largely defined by the company its stock exchange ticker symbol is named after (Naukri), whereas Zomato appears to be taking a very different path.
Zomato to Eternal is an acknowledgement of its reality and opportunity
Unlike Info Edge, which remains largely defined by Naukri, Zomato appears determined to redefine its market perception and ambition.
Zomato’s acquisition of Blinkit in June 2022 was unexpected, both in its timing and its subsequent success. Blinkit’s business had completed its pivot to quick commerce in Jan 2022, and it was odd that five months were enough for Zomato to make a strategic acquisition:
At the time, Swiggy had already launched Instamart, adding competitive pressure. Globally, as Zomato pointed out then, quick commerce was converging with food delivery. Goyal said that Blinkit was synergistic with the core food business, giving Zomato the “right to win” in the long term, and that this was a foray into “the next big category” for Zomato.
In hindsight, especially since Blinkit is now valued higher than Zomato (not Eternal), acquiring it for $538 million in an all-stock deal was a steal. At that time, critics called it overvalued and raised concerns about whether it was an arm’s-length transaction, because of Blinkit’s founder being married to a Zomato co-founder, which was a negative side-effect of Zomato handing out “co-founder” status as a designation for key employees.
Zomato’s Choice
Zomato had a directional decision to make after acquiring Blinkit. It could have leveraged its own brand, and called it Zomato Blinkit, similar to what Flipkart has done with Flipkart Minutes. As multiple verticals within a business grow – whether with homegrown brands or external acquisitions – companies can unify businesses under a single umbrella or keep verticals distinct.
This is evident in how Insider has been handled. When Paytm bought Insider from Only Much Louder, it rebranded the platform as Paytm Insider, whereas Zomato has quietly integrated Insider into District.
We’ve seen repeatedly in India that horizontal tech businesses tend to struggle, and I might be proven wrong about this, but we probably won’t get our version of Grab or Wechat in the country (especially since Ola appears to be all over the place).
The rebranding to Eternal mirrors approaches taken globally by Google and Facebook. While this action helped Google create clearer independent operating structures as separate companies under Alphabet—likely to simplify splitting the businesses if mandated by competition regulators—it also allowed Google to assert that it is more than just a search-and-advertising business. For Facebook, it was a mechanism to drive home the point that the company is more than its largest brand, and that it is a multi-vertical conglomerate (apart from a focused shift for Zuckerberg from social media to building the-next-big-thing-that-wasnt: the metaverse and AR/VR/XR).
Zomato changing the stock ticker is a symbolic move that Info Edge never made. It’s a recognition that it is no longer a food delivery company, and signals an ambition to be much more. This also attracts different sets of investors, partners, and customers who may not have considered Zomato within their investment or strategic purview earlier.
This is also a cultural change, paving the way for Zomato (food delivery), Blinkit (quick commerce), Hyperpure (B2B food supply), and District (experiential services) to be treated completely independently. This is also the next development in the Swiggy-Zomato love story that isn’t: that Eternal is more than just Zomato-the-Swiggy-competitor. This structure leaves room for Eternal to make more Blinkit and Insider like acquisitions in the future.
The next challenge: Building an Internet Conglomerate
Deepinder Goyal seems driven by conquests—whether expanding his business globally, entering the food delivery market late and proving he could outperform established incumbents, or, despite rarely speaking in public for a decade, making a series of public appearances and joining Shark Tank India (until Swiggy cut his stint short).
The shift to Eternal marks the next challenge that Goyal is tackling – building an internet conglomerate where there’s more than one (or two?) growth engines. It’s going to become tougher now, with increased competition in quick commerce and BookMyShow looking to defend its turf versus District.
One can also look at this move from a defensive standpoint. Diversification gives the company protection against a shift in trends. For example, when Facebook became a platform for older people, Instagram emerged as a worthy place for younger people. Vertical expansion gives Eternal potential for defensibility, as both quick commerce and B2B food supply potentially add higher-margin revenue streams and leverage.
While each business is at a different stage, the company’s playbook has worked well with the delivery businesses (Zomato and Blinkit) with a laser sharp focus on unit economics and contribution margins (which, for Zomato, has been there for over a decade). For example, even in a 2016 earnings conference call held for Info Edge investors, a year after it launched (outsourced) food deliveries, Goyal had pointed out that “We make Rs 20 odd rupees as a contribution margin net after everything on our online order business in India. For the 20% of orders, where we have delivery partners, we do negative Rs 2 (as contribution margin). We lose money, in spite of the fact that we’ve outsourced delivery to someone else. “
Being the largest or one of two or three significant platforms in an industry segment gives Zomato economies of scale, and hence enough leverage with both suppliers and customers. The company knows exactly which levers it needs to move to improve profitability or increase scale, whether it is by adding a platform fee to orders, reducing delivery person commissions, adding services like higher-cost priority deliveries.
I wouldn’t be surprised if it eventually implements surge pricing, regardless of competition. Zomato is also ruthless about shutting down what doesn’t work, whether it’s discontinuing inter-city food like Zomato Legends or withdrawing services from hundreds of cities. The company likely learned this lesson after a major failure in its attempt to build a global business with operations in 23 countries. Remember Urbanspoon? Probably not.
A founder friend said to me recently that it’s important for founders to make their business investible. The goal for Eternal would be to eventually be in a position where it can list each of these businesses independently, even if it doesn’t. Google is still largely valued on the basis of its core business. While delivery businesses are now known-turf (remember that at one point, Goyal didn’t want to get into the delivery business), the move into adjacent businesses like District are tricker for Eternal, and Blinkit still needs to scale before unit-level profitability becomes its primary focus.
Zomato, a few quarters ago, already began disclosing metrics of each independent business separately, and this helps bring both internal and external scrutiny to it. The separation of these businesses into different operating companies under Zomato is also important to address potential antitrust concerns from India’s impending Digital Competition Act, though there’s also the threat of ONDC. (I’m kidding)
It will probably help that Goyal has had more than just a ring-side view of what has made Info Edge operate with remarkable longevity and stability. Additionally, the company has to be careful about not losing focus on its Zomato business, because diversification invariably leads to a dilution of focus at the top.
What Next
Management bandwidth is what will define success for Eternal.
From an organisational perspective, Goyal has already carved out a leadership structure: he’s the CEO of Zomato Limited (soon to be Eternal Limited), while here are vertical CEOs for each business, including Zomato. This is something that Goyal has done well in the past (unlike Paytm): of bringing on-board competent executives, giving them ownership, and having them build out a part of the business. Whether Eternal operates with strong central control (like Reliance), or takes a more decentralized approach like Tata Sons, remains to be seen.
Eternal’s ambition mirrors what we’ve seen globally—businesses evolve, expand, and rebrand, only to eventually consolidate again. Zomato was once in 23 countries, so Goyal knows this drill. Whether Eternal remains an expanding ecosystem or ultimately, like other businesses like Info Edge or even Google and Meta, doubles down on its strongest verticals remains to be seen. Even Google’s transformation into Alphabet, while structurally logical, has not fundamentally changed how investors value its search-and-advertising business. Eternal’s evolution is fascinating because it could rewrite the playbook for Indian Internet businesses, and go beyond its vertical to become a multi-sector giant.
There are more lessons and foreshadowing, from Info Edge. In 2008, upon being asked if they were spreading themselves too thin, with too many verticals – Recruitment, Offline, Matrimony, Real Estate, Professional Networking, Education – Bikhchandani said “Hitesh and I spend minimal time on Allcheckdeals and Quadrangle – there are strong business leaders and teams there. Brijj doesn’t take up too much of our time. We are focusing on the businesses that count, for now.”
That’s what they’ve done for the decade and a half since. Now a company that they invested in and nurtured has an opportunity to become what they could have.
Ps.: I can’t really pass up another opportunity to remind Deepinder of this from 2016.
Disclosure: I have an inconsequential number of Zomato and ITC shares
Updates: Corrected an error about Zomato’s current organisational structure based on feedback.
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