What is the view on , how have you looked at the stock performance? Do you believe that the long term story looks intact?
I believe so. I have found a shift this time. Reliance is known to first do capex and then monetise. These new plans on energy, getting Aramco on board means they are sweating their assets as they build on it. So Rs 75,000 crore on new energy business is welcome. We have seen Shell do that in 2016. All global energy makers have to make that shift towards clean energy. I am pretty excited about the long term.
Also, a key trigger could be the demerger of the business into three or four entities with Jio, retail and the oil to chemical (O2C) business getting listed separately or demerged. I continue to get excited by what they are doing in the retail space. It is a good platform and an aggregator play. Another trigger could be any tariff hike. It is an interesting space. Reliance is one company which can get to $500 billion this decade and eventually will become a $1-trillion company.
What are you making of the Zomato valuations? Do you think it is commanding extremely high valuations not worth or are you on the side that it is a new age tech company and is in a completely different bracket from a QSR or a traditional hotel company and therefore right to command this kind of valuation?
We need to answer three questions when we look at these new age start-ups; a)Are these businesses here to stay? The answer is yes. b)Is the business evolved or will evolve further? I think the business has evolved more. c)The winner takes all. For every one success, there will probably be a dozen failures. My understanding right now is that these businesses are here to stay. Only time will tell who will rule the food delivery space. So some allocation can happen but you have to be mindful and be very agile.
They have more than 41 million active users, It is the most downloaded site on iOS and Playstore. They have essentially four revenue models — commission from the stores which we call the take rate; advertising; their loyalty programme which is Zomato Pro; and the B2B play which is HyperPure where they supply to the restaurants.
The only thing we need to watch out for is how Amazon takes to this space. They have done a pilot in Bangalore, they are doing it in around 62 pin codes, their commission rates are at about 10-11% versus 20-21% for Zomato and Swiggy. That means the cash burn can go up and the path to profitability could extend a little more.
