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“Zomato Conference Call” “Zomato Conference Call” May 26, 2016 MANAGEMENT : MR. DEEPINDER GOYAL – FOUNDER AND CHIEF EXECUTIVE OFFICER , ZOMATO Page 1 of 16 Zomato May 26, 2016 Moderator : Ladies and Gentlemen, Good Day, and Welcome to the Conference Call of Zomato. Joining us on the call today are Mr. Deepinder Goyal – Founder and CEO. As a reminder, all participant line will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call please signal an operator by pressing ‘*’ and then ‘0’ on your touchtone telephone. I now hand the conference over to Mr. Deepinder Goyal. Thank you and over to you, sir. Deepinder Goyal : Thank, Vikram. Hi, all. Thanks for joining the call. Let me start with saying that Zomato is in a great space and as a Company we are also in a great shape right now. Last year at the beginning of the last financial year when the market was good and we were able to raise a large amount of capital we actually decided to go after a lot of big opportunities in front of us in terms of the geographies that we could expand to and we launched a few countries and we also had made a few acquisitions in the recent past. And then, mid-last year the market shifted and a lot of competition in our home markets, and when I say home I mean India and UAE, the competition also intensified quite a bit and we had to take a lot of steps, and I would say in hindsight that we had to take the right steps to align the business to make sure that we actually are a sustainable profitable business over the longer term. So what do these right steps mean? The right steps mean that we had to be prudent in terms of where we really deployed the capital where we had and we also had to be prudent in terms of where the management was spending its time on. And as a result of the focus on 14 countries, out of all the countries that we had expanded to we actually narrowed down our focus to 14 countries which also meant that we had cut down our burn on a lot of high burn and high risk geographies that we had ventured into. So right now every market apart from these 14 countries is being managed out of India remotely. As a result of all these things we have got our cost down drastically, our burn rate peaked at $9 million sometime early last year, and right now as we speak, in May, our operating burn will be close to $1.6 million to $1.7 million. Over the last six months we have also doubled our revenue and we have been able to double our revenue while actually bringing down all the cost and bringing down all the high risk, high burn areas. We have had a very-very successful launch of our online ordering delivery business in India and UAE and the business is almost a year old. The India delivery business is currently about 20% of our India revenues and the best part of our business is that the unit economics are positive. We make about Rs.20 contribution margin on all orders we receive in India and we make about Rs.50 contribution margin on all orders we receive in the UAE. And our average order value in this business are more than 1.5 times the size of our competition which actually makes our business way more viable than pretty much anyone else and the average order values multiplied by our order volumes also makes us largest player by GMV in this market in both these countries that we are talking about. So that is the overall shape of the business and a brief summary of where we are and happy to take questions now. Page 2 of 16 Zomato May 26, 2016 Moderator: Thank you, sir. Ladies and Gentlemen, we will now begin the question-and-answer session. Our first question is from the line of Ranjeet Kumar Jaiswal from Jefferies. Please go ahead. Ranjeet Kumar Jaiswal: Sir, I would like to know how many restaurants are listed on Zomato platform in India, and out of them how many are paid listings, in terms of how many pay for advertisement? Deepinder Goyal : We have about 70,000 restaurants listed in India right now and the paid listings are going to be roughly close to about 6% of them are paid listings right now. Ranjeet Kumar Jaiswal: So as of latest figures, maybe for the month of April, what is the average number of orders per day in India and what would be the average order size? Deepinder Goyal : So we track this business on a weekly basis, a month's sales is actually way too long, our monthly growth rate on this business is about 30% and our daily average over the last week has been about 26,000 orders, 25,000 to 26,000 somewhere in that ballpark. And our average order value in India are at about Rs.480. Ranjeet Kumar Jaiswal: So you had mentioned that we have withdrawn from 23 countries and cut down to 14 countries, so these nine countries which are those countries where we have withdrawn? Deepinder Goyal : They were mostly the countries where we had only just launched and we were not market leaders yet, so there was easily going to be a lot of losses in terms of, I mean their incubation period that I would classify as business has to have over the next year or two years in all these markets. And all the markets that we are left in, they are pretty much the markets where we are already market leaders in the classic side space. To give you the names, I mean technically we are present in the US and US we actually entered through Urbanspoon acquisition and Urbanspoon acquisition was made for Australia more than the US and US we experimented a few things, things did not work out as we were planning them to so we pulled out of US. The other markets are Chili, UK and we pulled out of Ireland as well and we pulled out of Sri Lanka as well, the market size was just way too small for us to be spending time in. So we have actually cut down on high burn and high risk areas, and when I say high burn, high burn comes from two things, one is actual cash and the other is management time. So we optimize where we spend our time on and we optimize where we spend our money on. Ranjeet Kumar Jaiswal: So you have mentioned that we are going to operate in these locations from India, so we will continue our operations in these regions? Deepinder Goyal : So the product is still working and the product is still growing as well in all these markets. And see the most important part of our operations is maintaining and keeping the content up to date and in the markets that we focus on, in the 14 countries that we are still very-very focused on, we have feet on street approach to solving this problem, everywhere else we are taking remote management approach to solve this problem. And we primarily learnt the way of doing this from Urbanspoon because Urbanspoon did not have feet on street model, while feet on street has its fair advantages and disadvantages as well, it is certainly better when it comes to content quality, Page 3 of 16 Zomato May 26, 2016 but Urbanspoon was number one player in Australia by a huge margin without even setting foot in Australia. So these markets are still being managed out of India in terms of content, the product is still working and the product is also growing. Ranjeet Kumar Jaiswal: Sir one last question, of all the total revenue what would be the split between India, UAE and other countries? Deepinder Goyal : If you look at the entire last financial year, India is about at 45% and UAE is about 20%, so about 65% is India and UAE, the rest of it comes from all over other countries. Right now as of May, India and UAE add up to close to 50-ish% of our revenue and it is dropping in share in about 2% points every month on month because all the other markets are going way faster then these guys because they have a smaller base right, and there are a lot of markets. But that does not in any way mean that India and UAE are slowing down on in terms of growth, they are also going fast but they have a large base live up to… Moderator: Thank you, Mr. Jaiswal. We have the next question from the line of Shalin Kumar from UBS. Please go ahead. Shalin Kumar: Just few questions from my side, you just mentioned that you have moved out from nine countries, we do not have any sort of presence from these countries, is my understanding correct? Deepinder Goyal : We do not have any physical employees in these country but we have teams here in Delhi in our headquarters which actually focuses on content on in these countries. Shalin Kumar: But basically our USP is feet on street and then we keep on updating, that is the USP we have to keep on updating the pictures and the menu thing, so how are we going to manage that from team in India? Deepinder Goyal : So I guess it gave us a lot of tech and tech was based on calling and based on social network analysis which can be put into good news in all these markets that we are talking about, you cannot really put the tech into good use in India for example, because we are those platforms which people would want to take in India and everywhere.
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