Zomato Exits Payment Ambitions: Surrenders RBI License and Writes Down Investment

Preeti Bali / 6:38 am / May 14, 2024

Food delivery giant Zomato has opted to exit the payments space after a brief foray. In a recent regulatory filing, the company announced that its subsidiary, Zomato Payments Private Limited (ZPPL), has chosen to voluntarily surrender the license obtained from the Reserve Bank of India (RBI) to operate as a payment aggregator.

Compliance and Short-Lived Aspiration

Zomato established ZPPL in August 2021 to comply with the RBI regulations governing payment aggregator and gateway services. The company had secured approval from the RBI in January 2024 to function as both a payment aggregator and an issuer of prepaid payment instruments. However, after a period of evaluation, Zomato has decided to discontinue this line of business.

Financial Implications and Strategic Shift

As a consequence of exiting the payments arena, Zomato has opted to write down its Rs 39 crore investment in ZPPL, classifying it as an impairment loss. This move reflects a strategic shift in Zomato’s focus areas.

A Short-Lived Attempt to Reduce Reliance on Third-Party Wallets

In May 2023, Zomato, in an effort to minimize dependence on external payment gateways like Google Pay, Paytm, and PhonePe, launched its own UPI (Unified Payments Interface) solution named Zomato UPI. While this initiative aimed to streamline the payment process within the Zomato platform, the company has ultimately decided to prioritize its core food delivery business.

Financial Performance and Employee Motivation

Despite exiting the payments space, Zomato’s core business continues to perform well. The company reported a profit of Rs 175 crore after tax on a revenue of Rs 3562 crore for the last quarter of FY24 (Q4 FY24). Furthermore, Zomato’s overall revenue for FY24 witnessed a significant increase of 71%, reaching Rs 12,114 crore compared to Rs 7,079 crore in FY23.

Employee Stock Options

In a separate development, Zomato, led by Deepinder Goyal, also announced the implementation of a new employee stock option (ESOP) plan. The estimated value of these fresh ESOPs stands at around $450 million, serving as a motivational tool for Zomato’s workforce.

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