Quick commerce is the future: Info Edge’s Sanjeev Bikhchandani & Zomato’s Deepinder Goyal

hello and welcome to path breakers on the show we have sanj bandani and theer goyel to talk about what it takes to build a legacy stay tuned I am niab botra sanjie and depender thank you so much for joining us on path Breakers it's good to have both of you the investor and the founder so let's go back a couple of years to the time when you just ipoed I think many people do not know about the letter you wrote to the Pender before zamato IPO on how to manage expectations could you tell us a

bit about that letter akant the CFO had written to us saying that look this is what how the book building is looking where do you think we should price the issue and uh I replied saying that listen obviously it's your call but our recommendation is not be aggressive on the price make sure there's uh enough left on the table for the incoming investors to also make money uh at the same time don't price it so low that the existing investors field Short change that you underpriced it it's okay to leave something on the table but

look you'll never get it right because you can't predict the market after the IPO so we'll go with it it was very general I don't know that's what I call correct since you had walked back road U did you share some words of advice with the pin there on how ruthless the street can be when the performance is not as per the expectations of investors well I did mention in that communication that uh in India uh it's Bad Karma if the retail investor gets hurt so make sure little guy does not get hurt and that

I believe after the company listed uh it wasn't a bed of roses in fact if anything it was The Perfect Storm the stock tanked below the issue price and you had some key exits from the company investors were exiting the stock did you take that as noise or was it a wakeup call how did you really you know navigate that turbulence I mean I don't think it was any of those it was not noise it was not a wakeup call as well because the fundamentals of the company needed work and we were anyway working on

those things I would say uh like more than noise it was sort of pressure right so that okay do it like faster if you're going to take a few quarters to do it do it faster do it sooner I think it was a combination of these two things we were already on a path we just actually accelerated that path given everything that was happening I think maybe the street was looking for some guidance some uh Clarity because a retail investor is always very focused on the bottom line and once you did put that out I

think it kind of calmed the Jitters quite a bit uh on the stre see I'll tell you one thing one thing if you're stock is correcting and uh price is going down on its own it's quite another if the Market's going down and you're going down in line with the market now what had happened in this case uh was that the US tech stock market corrected India followed after a few months zamato corrected accordingly so it not out of line of the market okay it was in line of the market and therefore actually I don't

think there would have been that much pressure on account of stock price Cor in I'll give you some words of advice I had received way back we had listed in 2006 2008 Global financial crisis 2009 our stock had corrected 75% from the peak and I met this uh gentleman in the US had gone on a visit to the US who was CEO of a large American tech company and he said sanjie I'll give you a whatever advice stock price goes up you run the business stock price stays where it is you run the business stock

price goes down you run the business that's it you did exactly that I mean after the adjusted vidda you know the last quarter profit numbers were very encouraging for the street what do you think for some levers that actually helped you to accelerate the business is actually very very complex right now to be able to pinpoint a couple of things which led to these uh kind of outcomes uh I would say it was a combination of a lot of things and I mean in hindsight we also don't even really really know what worked and what

didn't we just continue to put in our best work best effort every day M and fingers crossed after that so theend is saying he doesn't know what exactly worked but as an investor when all this was happening you always had unwavering conviction I remember speaking to you and asking you about zamato and if you had a change of heart but you were always very steadfast in your confidence what were the parameters that you were tracking actually I wasn't really tracking anything I just spoke to the once I said I look the long-term prospects of a

company don't change just because stock market corrects a bit or even substantially uh you focus on the fundamental and I asked him business he business even if when senior exits happen whatever happens he just makes me one call like I said H cool so you have the confidence that if there's a bad news you'll hear it first from dender well look very often stuff appears right on social media in print if it gets a bit much I call up and said you know anything so when sen ex happened I sort of did spend some time

and I said are you sure and he said yeah I'm sure when St when when stock price correct I did not spend any time when when Senor exit happened I concern and that is encouraging because uh as an investor you also have to answer to a board how did you manage the expectations of the board at that point because they might have been on the edge a bit no it's a question of constant conversation I think uh our board has been in has very supportive of our investing strategy we got some things wrong but what

you got right more than makes up for what we got wrong and so it's fine and things are going fine there MH but yes uh there's constant conversation about the portfolio food delivery has been a very important part of zato it contributes over half of the revenue how do you look at growth going forward for the food delivery business I think we're at a very early stage in this business right now and I'm not just saying this for the sake of it because in the US or China or most other markets people order food like

10 times more than what they do here so I think we have to get there but actually what got us here may not get us there so we'll have to innovate we'll have to find new business models maybe I mean we'll have to work with with the restaurant industry differently I don't know what it will take for us to get there I mean maybe the 20 30 40% year on-ear growth I mean seems slow but I think it might actually go up if we do the right things of course there's a lot of Headroom I

mean India would be close to $ billion if you look at China it's $40 billion but is it uh strictly fair to compare India with China if you look at the per capita income Etc well if somebody if some country has traversed the journey earlier it's useful to look at what happened there now India may not be an exact parallel comparison India may follow that path slower than China or faster than China or not follow the path at all those are things to analyze but I think you it's useful to have data from other countries

it just gives you the Benchmark of what can be right so India bypass the landlines era and just completely jump to mobile phone so we are just thinking of how can we make this transition happen faster so that's our job one strategy has been going into the smaller cities as well how is that planning out for zamato what are you seeing on the ground in terms of demand from consumers I think the demand from consumers is pretty much the same if we come to larger cities smaller cities the behavioral Trends and patterns we're seeing are

almost the same uh we just need to figure out how to uh increase the frequency of the customer ordering from the platform from now onwards so it's not about getting more customers to use the platform it is about how do we get people to order more frequently going for what are some ways in which you are trying to do that can't tell you moving on from food delivery um the quick Commerce business is a very important uh lever for zamato two years back when zamato actually decided to full-time focus on the quick Commerce business how

did you respond as an investor because it would be taking on a significant amount of risk at a time when the boat wasn't very steady so look I head the investment committee on the board at zamato so the proposal came there the investment committee and quite honestly you know I was apprehensive and I spoke to the B I said yeah loss making company I mean if you can't turn it around you know we could be in a deep hole although there is money with tomato but you don't want to burn all of it on on

something like this and the main business is not profitable yet at a corporate level and the market is asking for profits mhm in the main business and the whole company yeah and nobody's going to profit here in this space it's a very big bet are you sure he said I'm sure I said what makes you sure and he said look I'm confident we can turn around I looked at it close enough I'm absolutely dead sure and he explained how and then we are still doubtful then he said trust me so we took that leap of

faith uh I think that faith has been born out uh it's truly remarkable what uh has happened with blinkit to change the business model to Quick Commerce to get to the margins they have to get to profit as a company to get to start approaching profit as blink AS blinket stand loone uh in such a short span of time I think it's truly remarkable and it's great execution mhm great execution what did you do depend that I think earlier there was a loss of 150 rupes per order now it's come down to 105 rupees how

did you do that actually I again I don't know much at our end we say that we actually own blinket we don't run it I don't run it and uh all like credit to lb and his team all the questions he was asking me at that time and I was asking lb those questions that hey sanjie is asking those questions so even the trust me was his line to me and because I had to back him I said the same line to him so it was me backing him and him backing me so the chain

sort of worked so but it's all credit to the blinket team we we did nothing here that's a fair point did you change the way the dark rooms were working or was it some sort of a Synergy you were able to draw zato does have a very strong understanding of delivery networks so was that something that helped I think I mean if I have to give one answer to this I think that zamato culture is our Mo right so and people are really like in it and they really want to they do the right things

they do the right long-term things in order to build the like businesses that we do so I I I think we sent over some of our best people to Growers back then and blinket happened once the acquisition happened and that team figured it out because there was a lot of uh residual knowledge in how zamato was built and the kind of courageous calls that you had to take I think all of those things work it was primarily the team and then there were a million things which the team did in order to make this happen

but the main Synergy was culture and team I would say MH no one really saw the potential of the 10-minute delivery Market everyone thought that you know you can always wait you don't need it in 10 minutes and you've totally turned that around look there were questions being asked uh you know at the board itself at least it'll be it'll be a good promise to make in order to penetrate the market but as it turned out there is a segment of customers and that's large enough to support a business like blinket which does want it

in 10 minutes does want it last minute does you know does not want to think that un plan that honestly up zato seems slow I'm so used to blinket in 10 zato this is so slow why can't I do this faster so I think there's going to be negative pressure on zomato now because customers are not willing to wait for a 30 40 minute period in fact you did say that it could be bigger than the food delivery business and uh much much faster one tenth of the time you said what Revenue do you think

would be coming from the quick Commerce business I don't know I mean I think blinket if I am right about the numbers because they changed very very fast but I think blinket is about 40 to 50% of the size of zamato right now and in some cities is actually bigger than zato right now it's growing three to four times faster so I think it's a matter of some number of months before blinket becomes bigger than zato and we'll be super proud when it actually happens is there also a better business model around the 10minute delivery

because you're working with shorter distances I think uh quick Commerce compared to any other Commerce the cost structures are very very different so the last mile is cheaper but you have an extra added dark store cost you have other things which you need to um add up so the BET was that okay each store needs to get to about ,500 ERS 2,000 ERS per day only then this will make sense and uh we didn't know whether any of our stores would actually get get to that point the only way we would get there in a

shorter distance would if customers order way too frequently like on zamato side we have four times a month blinket needed to be 10 times a month for us to get to that kind of frequency and luckily I mean the uh need for instant quick Commerce is actually quite High I mean if you can get your headphones in matter of 7 8 minutes why would you wait for a day on Amazon there's no point right and blinket is almost the same price or sometimes even cheaper than Amazon so I mean that's what people are choosing to

do and if you don't like it you can send it right now the returns are easy right so I think quick Commerce is overall a better uh e-commerce model than the current uh e-commerce model and at a certain throughput it is actually cheaper than e-commerce to run as well what do you think of the overall e-commerce segment when we talking about 10 minute delivery I was skeptical about e Commerce the sector it's hard to make money I think blinket has proved it wrong and I think that's great in one and a half years H what's

the early response you see in you know the tier 2 tier three cities we just started getting into tier 2 and tier three with blinket right now blinket is a very new business right one and a half years old we're just starting to and the initial signs are positive uh but again I mean every new city is a new game and we'll see what happens but initial signs look very very positive right now many newcomers are coming in now you also have flip cart entering the freight they are making a re-entry of sorts will that

change the equation for blinket the fact that a much larger e-commerce company like Flipkart the Pioneer in e-commerce in India has decided to re-enter uh tells us that this model is actually the future and I think zamato and blinket are well positioned to ensure that uh they don't lose out on this in the wi you do have a mo around the food delivery business what would you say is a competitive ad Advantage for blinket when you have all this competition now seeing the opportunity and coming in some of them are established players that are seeing

the big money that can be made here so what would you say is an enduring competitive Advantage for blinket I think any competitive advantage that I say in terms of tactics in terms of delivery Fleet or anything then that can be copied or paid for so none of these things last beyond a point I think the culture of the team and their mindset to innovate on a constant basis that's the only mode I mean in the like businesses we do anything right now gets click copied in 3 months so modes have to be you have

to create them every day like it's not something that lasts Beyond a point actually uh there is a great advantage that blinket has which is I suspect going to be durable I think every organization has a strategic Focus the only thing blinket does is quick Commerce that's all they do and and they lift 24x7 to do quick Commerce now if Flipkart or Amazon or a much broader horizontal sort of eCommerce player also does quick Commerce then it remains an also the Strategic focus of the organization what the brand means and blink it means you by

the time you blink it comes the brand itself means that right so the Strategic focus of the organization of the brand I think that is important and that is what will lead to the culture and that is what will lead to the m and I think that's also if business which is being led by a founder and like lb is one of the highest quality Founders that I've ever met so I mean that is also a strategic mode in the long in the longer term also what are the synergies that you think can be tapped

into between the food delivery business and blinket also we'll see right now we are separate uh businesses uh both of them doing well uh on their own fingers crossed synergies will happen when there when there's a time for them we don't do them for the like heck of it so we'll see so look it's like this when you're are running a Last Mile Logistics kind of business a delivery kind of business I think the speed Cadence of the delivery matters a lot in how the organization works and what is focused on so if Amazon and

Flipkart are saying they deliver tomorrow that's one kind of cadence and one kind of network and one kind of root planning and aggregation zamato on the other hand has to deliver in 35 minutes because I want my lunch when I'm hungry and I wanted a lunch time and I want to order it only now right that's different kind of cence and therefore you a much larger Fleet of riders blink it want Del in 10 minutes very locally you cannot order different you can you cannot order from old Delhi you know leg has and 40 minutes

you know right therefore the organization Focus the Cadence of the delivery process the fleet uh the network all that is different now for a flip cart and Amazon to run two one one within the other uh may work may not work remains to be seen uh for zamato and blinkit to have you know synergies in delivery at least have the same guy deliver both or whatever may or may not happen right so don't expect it they have to exist independently and then if you find this energy is great how about hyperpure and the food delivery

business do you see ways of drawing synergies between these two hyper actually helps restaurant scale faster easier so when restaurants scale faster and easier it helps our business in like indirect way but hyperpure also has a lot of sceneries with blinket in terms of sourcing yes these two organizations already do quite a lot of work with each other uh and I think the kind of collaboration they do is only set to go up so let's see hyper actually Cuts both ways so now when you look at where zamato is what are some new adjacencies that

you feel they can tap into because there's also a lot of money that zamato has 10,000 odd grow so what adjacencies do you think could make sense so I think I think uh actually the blinket business uh has a lot of potential to grow so rather than diversify I mean all this is to be discussed but and agreed upon but uh I think the blinket business alone can deliver growth for the next decade or so which is uh really really big right along the way of somebody disty comes up uh maybe they look at it

but right now I think correct me or wrong we just focused on more than our hands and feet full right now with what we have so over time will uh blinket be like 55 and the others will be the balance 45 in terms of Revenue contribution let's see more than that per I hope everything that we have is 55 in terms of the contribution to the business look the grocery Market daily needs okay is much much larger than ordering information restaurants so that market size alone will probably Propel blinket to a significant size and scale

and possibly larger than zato but there are the other points of view that okay quick Commerce within like grocery may not scale that much so we don't know I think the trends are looking good uh but um how the scales beyond that I mean will only time will tell is this a business where having Deep Pockets uh has uh a material advantage for the company I think it gives confidence uh and if you need to burn a lot of capital for a few years then obviously it's required but in this case I think they managed

to do it without burning too much money exactly but if they didn't have this money in the bank and they were not listed there's no way they done it yeah we would have we would not have the courage to do it I think the capital in the bank gave us the courage to do it but we didn't also have to take short-term calls in order to get to the point where we got to so far and I think the compounding of consistently taking long-term calls took like brought us here in general when we don't have

money in the bank it forces us to take short-term calls that doesn't work for the short-term as well as for the longterm so I think it gave us the patience which helped like you've been through those phases to know I think five six times when you had a Runway of just a couple of month I think I think there were two near-death experiences 2015 and 201 2015 yes the downturn maybe there were more I didn't tell you about I think Co the beginning of Co was stuff also now when you look back during the beginning

of Co I called him since $5 million only I need else we will like shut down he said I don't have time for this figure it out yourself man and then I did and it worked how did you figure it out I mean took took the right calls uh I mean uh thought out of the box in fact we asked our uh entire team to op in for salary Cuts voluntarily about 80% of the organization took Sal Cuts without we didn't force anyone there was no rule and U I mean that gave us a couple

of months extra and then those couple of months extra we figured out more answers so we kept on pushing month by month and we survived so so beginning of covid that quarter no billing growth was minus 43% YY so you know we also had our own issues to solve for and uh the board had told me listen your mil fund is now $50 million we are reducing the commitment I was only asking for come on but thank you it was nice that you actually didn't give us the F do you think that Enterprise actually comes

out during times of frugality so many startups have actually turned the corner when this entire funding crunch happened absolutely necessity is Mother invention especially 20 years back you know you didn't have this kind of VC funding and yet you had startups you know actually not as many as you have today but uh yes you had startups we have more startups today but I think uh the last few quarters have kind of corrected well actually you'll be quite surprised to see how many profitable startups are there now and how many are getting closer to profit there

will be some that will have a problem and they might clim out and they might consolidate or whatever but there are to my mind several hundred profitable startups in India today I don't have exact count but that' be 700 what sense do you get when you interact with many of the young entrepreneurs what advice do you give to them I think um there's a lot of people they actually want to do startups now earlier it was a second option or the third option and nowadays like starting a company is one of the first options people

think of uh people are not as risk a worse that they used to be and I think people are saying okay four years of my life if I try this I'm not going to die and the worst cases I will learn so I think I think that kind of mindset is something that I'm seeing quite a lot which is leading to the growth in the number of startup that we see I think the one advice I would have is something that he gave me was the only way you lose is if you quit and if

you don't quit and you survive long enough then you end up winning survival is the only goal I mean even if right now let's say we are theoretically going through good times we're still fighting to survive so earlier we used to fight to survive the next 6 months now we fight to survive the next couple of years let's say so if you're always looking to survive then you if you are like there long enough you end up winning Sanji what about about you when you interact with young entrepreneurs uh what advice do you give them

you've seen so many cycles I have always said and uh I maintain the customer's money is better than the Investor's money because if you're getting the customer's money uh and you're getting it repeatedly from the same customer at a price that's higher than your cost chances are you have a viable business so long as you can get enough customers investors love to invest behind businesses that are getting the customer's money on the other hand if you get the Investor's money first there's no guarantee you'll get the customer money right now a lot of the advice

uh you know from the year 2010 to 20 21 people didn't regard very highly simply because there was an abundance of capital available and you had the option of raising your way out of trouble it's when the funding environment tightened that people said that okay I mean now it's pretty much part of the course you said that mentors are those giants who stand on their shoulders and you can look far ahead than you would otherwise who has been One Mentor who you have drawn inspiration and strength from I mean he has continuously been one and

um I mean over time different years different kind of people depending on what kind of situation I was ined no I want to add something here see it's like this and what I always tell our own team that the secret of successful early stage investing is to invest behind teams and Founders and companies who are going to succeed anyway with you or without you so if you think that if we had not invested in zamato or fi then they would not have succeeded of course not they would have succeeded anyway if you think that policy

Bazar would not have succeeded without our money that's not true they would succeeded anyway so our job I keep telling our investing team yeah just find the guys who are going to succeed anyway you as investors you are there for the Long Haul and you take an interest in the operational side as well which I have seen many VC investors aren't very focused B is that also an element that makes a difference uh let me put it this way I think people like us who have run businesses and people who are Financial investors both add

value we add different kinds of value but both are needed so if you talk to some of our companies which you invested in they tell us that listen uh the conversations we have with you are slightly different from the conversations we have with the financial investors so we will go more into operations by sales system incentive plan hiring do you want us to interview come and talk to operating team call center come and see you know all those things because we're doing it ourselves the financial investors bring different kind of value because they actually perhaps

do much more rigorous uh analysis uh Financial Financial modeling they probably have networks with other investors in the valley overseas which we may not have so I think both are needed and both are useful but here is the Pinder who's raised money from all sorts of people uh and he can give you a better idea of please do the Pinder what kind of idea going to make me like get murdered by one of the camps no no be honest the no I think everybody has their own value and U at the end of the day

okay so let me actually rephrase this most of the times the advice that you get from a specific person is generally the same or more of the same investor especially like Financial investor especially they know 10 of the right things to say then I'm not saying they're wrong but they're generally those same things but there is also a form and context fit like all those things don't fit into all context of all the businesses so when we get advice from Financial investors it's right as a like general rule but it doesn't always apply to us

so we have to filter out a lot but when we talk to somebody like infoedge we have to filter out less so that's the difference between these two I do understand that against a very disruptive background and black sworn events it's hard to have an annual operation plans because you have to be agile you have to be flexible at the same time you are looking at $1 billion over the next 5 6 years what are some levers you will use to get there we don't have a goal actually uh we don't put any Targets for

any of our teams and we just expect all our people to put in their best work I think as uh the last few quarters have shown the best work generally yields better outcomes than the best projections of the the best targets we could have put out because my uh belief is that if you put a target people would only work up to that Target and stop there they would never think can can I be do beyond the target but if you have the right team on board I mean there's no point giving them a Target

just like let them set them free and they'll do the best that they can so let's put it this way $17 billion $200 billion projection in the next 5 six years how do you want to scale that I mean people will scale it but team will scale it on its own you are a CEO I have to ask you my think my job is not the CE CEO it's the chief HR person that's more of my job than being the CEO and my job is to make sure that we have the right people at the

right like places and uh I'm helping them I'm coaching them in order to do their jobs better like I can't do everything myself but some levers that will give you an advantage I don't know I mean to be very honest we actually figure them out every single day I mean things go wrong things go well things go well right now one year from now they don't work so I mean it's about being I think one of the lers would be to keep your eyes open and just listen to the customer and see what they're saying

if a business scales 5 to 7x with enough gas in the tank for future growth uh that's when they'll get the valuation they don't chase valuation they chase business and business growth and that's how all good companies run now whether they'll get to 5 7x in the next 5 to 7 years we don't know I mean we don't even know that revenues that we will get I don't even know our current Revenue as an absolute number right now I only know last quarter kitney growth I right so I only know growth numbers I don't know

the absolute numbers at all and I think the whole team is wired like that what do you think would be a sweet spot when it comes to growth doubling year on year would be lovely sanjie you've been invested in zamato since uh 2010 in fact you did four solo rounds as well um what next I mean will you always be invested in zamist right I can't commit that uh would I like to stay invest in zamato uh as long as there's growth and value creation to be left the answer is obvious obvious whether we will

or we don't depends on the infer board and yeah it's periodically reviewed MH and uh we take it from there but you know like I said zamato management just executes plan strateg executes they don't plan for market cap and market cap market market like r% swing that's got nothing to do with us classic example is the flip cart headline just last week and markets reacted to that but I wasn't looking at it from a valuation perspective I wanted to understand it from profitability as well what the path is going to be in the coming years

we hope we get to the right level of profits and I really mean right because we don't want to continue maximizing profits all the time right because um we work in a Marketplace and we have to balance the interests of everyone so at a certain point we will maintain profitability I think zamato is pretty much very close to that point where the maintain maintain will start and blinket will get there in a couple of years maybe there has been no cash burn when it comes to the quick Commerce business but given the Dynamics in the

market do you think that this could be something you need to resort to if competition does it I mean so far it doesn't look like we will need to do that but um the Dynamics um the market dynamics change overnight delivery business for instance you know when you had your closest competitor doing that kind of cash burn like it or not zamato had to work that part yeah I I don't know I mean depends on uh somebody wanting to start doing this so and you'll follow let me put it this way the fact that zamato

uh has a couple of million dollars in the bank okay we'll hopefully encourage others to rethink any strategy of predat pricing knowing fully well that zamato has this kind of gas in the tank mhm and that will enforce rational behavior on everybody's part what would be some Milestones that you would want zamato to achieve in the next 5 years I don't have any not quantitative qualitatively if there would be some benchmarks youp for no I mean I think like culturally I think if it it would be super cool if we have a a team of

potential CEOs like like I mean if we can get to a bench of four five people who are ready to run large businesses on by like themselves like lb quality CEOs it would be super cool to get to that point so I think look any most operating entrepreneur of what theault that's achievement number one uh customer in this case restaurant partner are they benefiting zato are they making money are the customers happy are we doing all of this at reasonable economics mhm and are we Market leaders and are we known to be a well governed

excellent company our shareholders happy mhm thank you so much sanjani and theend for speaking with us joining us on path Breakers thank you so much much thank [Music]