At some point, every executive has to ask what is holding back their growth.

A few years ago, a lot of cloud infrastructure companies (Azure, GCP) stumbled upon the same growth secret: If you can invest in fast-growing companies and get them to move their infra, it doesn’t take long to get that investment back. They were essentially underwriting their future revenues. Look at Microsoft and Google’s billion-dollar investments in various ride-hailing companies, and how they got those companies to move from Azure and GCP to AWS.

Zomato has exhausted their base of regular customers and your price has reached a point where they can’t unlock the next 10 million customers (which can be classified as the affordable/economy segment). The only way to unlock this segment is to lower price.

Of course, they can lower their delivery costs by making better use of their supply. There are dozens of supply-side optimisations that any on-demand business can do. And the more volume one does, the lower their quantum spend, because both fixed costs and variable incentives can be spread across orders. The more Blinkit grows, the better Zomato can drive utilisation.

But how much more?

Zomato will still need some demand-side incentives. How do they get restaurants to subsidise orders? Participate in discounts. Run more ads. Even carry more inventory as demand scales.

How can Zomato help with working capital for restaurants?

Lending.

Microsoft and Google invested billions and got their money back through infrastructure spending.

Zomato does not have the balance sheet/free cash flow to do that. But they can definitely partner with NBFCs to help their merchants with their working capital needs.

That money will come back to them. Merchants will order raw materials through Hyperpure. They will advertise on Zomato. They will even subsidise discounts to create demand.

If I were Zomato, I would even put a clause in these loans so that most of the money is used through the Zomato ecosystem and not through Swiggy. Can they do that? Who knows. The investment in cloud companies definitely came with clauses around infrastructure spending through them.

This is pure guesswork at this point, but my guess is that over the next few years, Zomato will make a big push into lending. First to restaurant merchants, and then to Blinkit franchisee owners.

P.S. I don’t work at Zomato and most of my posts are about what I would have done had I been in charge of a company’s strategy. That’s why despite Zomato recently withdrawing their lending licence, I still feel they will eventually go after lending.Toast has done the same in the US.