Zomato Withdraws Application for NBFC Registration, Exits Lending Business

Zomato recently announced that it has decided not to pursue its plans to enter the lending business. According to the reports, yesterday, Zomato informed the BSE that its subsidiary, Zomato Financial Services, has withdrawn its application for a non-banking financial company (NBFC) license from the RBI.

Board’s Decision

The board of directors at Zomato Financial Services Limited (ZFSL) met and concluded that they no longer wish to pursue the lending and credit business. This decision led to the withdrawal of their application, initially submitted on April 29, 2022, aimed to allow Zomato to start a lending business. However, the company has now decided against it, “We do not wish to pursue the lending/credit business anymore,” Zomato said in its statement.

Impact on Operations

Zomato assured everyone that this decision wouldn’t significantly impact its revenue or operations by emphasizing that there would be no material effect on its financial health or day-to-day activities, so that it can focus on its core business areas.

ZPPL

Zomato had entered the lending business to help its partner restaurants during the COVID-19 pandemic. In August 2021, the company created Zomato Payment Private Limited (ZPPL) to apply for a payment aggregator license from the RBI. However, ZPPL voluntarily gave up its authorization in May 2024, stopping its operations as an online payment aggregator.

New Investments

Zomato is still making investments, particularly in its entertainment segment. Last month, the company announced potential plans to acquire Paytm’s movie and event ticketing business, a deal estimated between Rs.1,600 crore and Rs.2,000 crore. Additionally, Zomato plans to invest Rs.100 crore in Zomato Entertainment, covering its live events and ticketing operations.

Stock Performance

After the announcement, Zomato’s stock closed at Rs.208.52 on the NSE, up by 2.23% from the previous close. While the company has faced challenges in the financial services area, Zomato with its expansion plans seems determined to strengthen its main business sectors and look for other growth opportunities.

Conclusion: Zomato’s decision to withdraw from the lending business brings out its focus on core operations. Despite stepping back from financial services, the company continues to explore new avenues for growth. By investing Rs.100 crore in Zomato Entertainment and pursuing a deal with Paytm’s ticketing business, estimated between Rs.1,600 crore and Rs.2,000 crore, Zomato is clearly set on diversifying and expanding its market presence.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.