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"Don't let Info Edge become a Zomato ETF," Infina Finance MD cautions Sanjeev Bikhchandani in an open letter

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With India’s online food delivery segment set to account for a tenth of the global market by 2025, the stock market will start factoring in growth constraints and moderate down the multiples.

"Don't let Info Edge become a Zomato ETF," Infina Finance MD cautions Sanjeev Bikhchandani in an open letter
Zomato's stock price has become the tail that can wag the dog, cautioned Info Edge Finance, MD Venkat Subramanian, in his open letter to Info Edge founder and VC Sanjeev Bikhchandani. Venkat, while congratulating the Padma award winner said that he hoped Bikhchandani will consider reducing the stake in Zomato in order to de-risk Info Edge.
“In my view, there are three reasons why you should (reduce stake in Zomato): 1) Disproportionate influence of a non-operating asset distracts investors from your operating businesses. 2) Current valuation of Zomato requires both the business and stock markets to not face rough weather. 3) Risk capital released from Zomato can fuel a slew of successful ventures, given your prowess in identifying emerging trends and nurturing founders,” Subramanian stated in his letter published in The Economic Times.
According to the letter, with India’s online food delivery segment set to account for a tenth of the global market by 2025, the stock market will start factoring in growth constraints and moderate down the multiples. Even the impact of higher earnings will be offset by receding multiples.
On the other hand, the letter argues, if Bikchandani is willing to take some money off Zomato and use it to back new ventures, Info Edge shareholders could be looking at a few more mega winners over the next 5-10 years.
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