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No hurry to sell, indefinite horizon on Zomato holding: Sanjeev Bikhchandani


Info Edge, India’s largest and most storied recruitment portal, has had a stellar run in the last three years with its portfolio company Zomato’s market cap surging almost 2.3X since its stock exchange debut. The firm’s bet on fintech unicorn Policybazaar is also paying off well. The company has made it clear it is in no hurry to book profits on these investments, even as it continues to nurse its own brands beyond Naukri to profitability. The firm, one of the few to survive the dotcom boom and bust cycle of 2000, has been led by founder and chairman Sanjeev Bikhchandani for a large part of this journey. And today, Bikhchandani has earned the right to be looked up to as the statesman for the sector.

Entrackr caught up with Bikhchandani in his Gurugram office and he spoke on a range of topics including Naukri, Info Edge’s investments, serial entrepreneurs and corporate governance. Here are the edited excerpts.

As a listed firm that carries a heavy overhang from its investment portfolio, does it worry you that it might impact the valuation of the core Naukri business? 

Not really. Institutional investors are smart. We give them adequate data so that they analyze Naukri thoroughly before making a conclusion about valuation. We don’t run Naukri for valuation every day or month or quarter. We look at how we create value for our shareholders in the long run. And that’s how we run our businesses. So, this hypothesis about our core or even group business doesn’t stand.

Info Edge has been an investor in Zomato for over 14 years and despite the latter’s share price rising nearly 14o% from its listing price, Info Edge didn’t sell its shares. What level of return are you anticipating from Zomato?

Actually, we don’t calculate Investment Return Rate (IRR). Info Edge invested in Zomato because of our conviction that it could become a great company. And if you are convinced about your conviction then it will happen. So, IRR is the happy incidental outcome of investing early behind companies that you want to help. That’s my belief. We are not in any hurry to sell and have an indefinite horizon.

Every VC firm has a fund cycle and pressure to return capital to their limited partners but that’s not the case with Info Edge as you are investing from your own balance sheet. Could you elaborate on this?

That pressure does not make this choice. We have a long term horizon and we call it patient capital. To be a successful early stage investor in India, you have to be quite patient because companies take anywhere between 10-15 years to go to IPO from seed stage. So if you have funds for only 6-10 years, you will not realize the full fruits of your investment. If you have a 20 year fund, you tend to perform better. However, such a horizon could be possible only when you’re investing from your own whole balance sheet. 

Do you believe that Blinkit could become bigger than Zomato?

I think both are large but Blinkit is going to be fairly large.

If we look at Zomato’s quarter-on-quarter numbers, online food ordering appears to have stagnated in top 10-15 cities. What’s your take on this?

Obviously, there is the base effect. But, we don’t see stagnation. Also, you need to compare year-on-year, not quarter-on-quarter. When YoY numbers are compared, there is growth. I think full fiscal year performance is more important than quarter. 

We used to commonly hear about Naukri’s recruitment business that it was not the online presence, but your sales force or feet on the street that made the difference. Does that still hold true? 

Online sales have never been a big part of our strategy. When you want to sell more expensive products, you need face-to-face contact. At Naukri, we have clients whom we bill several crore rupees for annual subscription and such accounts need heavy offline touch. While the product will be consumed online, the stuff around it very often will be offline. 

Over the years, several players have tried to crack the recruitment business in the blue collar segment but most of them died. What are the challenges in the segment?

Blue collar segment has broadly three challenges. First, it’s hyperlocal. The job seekers in this segment don’t move to different cities as they look for opportunities in and around their locality. Second, very often there isn’t a detailed text CV which makes the process slow and inefficient. Third, potential workforce in the segment do not search for jobs on the laptop and use vernacular languages. They are mostly on mobile. 

So you’ve got to adapt to all these things and still somehow get revenue and profit. We have been trying to get inroads in the blue collar segment for over two years now but we have just started monetizing it. Our future position in the segment depends on monetization.

Some of the celebrated entrepreneurs are launching a second or third company without their first startup churning profit. How do you see this trend?

I think this isn’t a progressive trend. As an entrepreneur, you need to focus on one thing and do really well. Once you’ve cracked that you can add on a second thing in the same company. 

Over the past couple of years, we have witnessed corporate governance issues with some startups. Even Info Edge saw serious lapses at 4B Networks. What’s your opinion about this?

By and large, my belief is that 95-98% of Indian founders are genuine but there will be a few bad examples. Investors make sure that when something wrong happens in their portfolio, it is highlighted and actions are taken to ensure that such incidents do not repeat. Any governance issue isn’t good for anyone including limited partners, investors, founders and the startup ecosystem.

What factors contributed to the lack of success with Info Edge’s e-commerce investments 99labels, MyDala, and Happily Unmarried?

Limitation of raising foreign direct investment (FDI) and heavy investment into competition were two major reasons for failure of 99labels while MyDala had a product market fit (PMF) issue. Happily Unmarried is now a part of VLCC and we are still a shareholder there.

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