Explained: Why Zomato Payment Surrendered Aggregator Licence Within 4 Months
On March 13, Zomato said that Zomato Payment Pvt Ltd. (ZPPL), a subsidiary, had made the voluntary decision to give up the Reserve Bank authorization that allowed it to function as an online payment aggregator.
The announcement was made when Zomato released its Q4 results, where the food tech giant announced a consolidated net profit of Rs 175 crore for the quarter that concluded on March 31, 2024, up from Rs 188 crore in the same period last year.
In a regulatory filing, Zomato said that the Board of Directors of ZPPL chose to revoke the application that was filed with the RBI on November 11, 2021, to function as a pre-paid payment instrument issuer. Declaring it an impairment loss, Zomato also wrote down its investment of Rs 39 crore in ZPPL.
In January of this year, ZPPL was given the approval of the RBI to act as a payment aggregator. A payment aggregator is a third-party service provider that enables online payment acceptance for businesses and online payment making for clients.
Read: Zomato to Surrender RBI Licence to Operate as Online Payment Aggregator
Additionally, Zomato and ICICI Bank collaborated to introduce Zomato UPI, a unified payments interface (UPI) product, last year. There was no KYC procedure, and the feature was only available to a limited number of customers. It made it unnecessary for customers to use other payment apps to place orders on Zomato, like Paytm, Google Pay, and PhonePe.
So, why did Zomato close Zomato Payment Pvt. Ltd.?
Zomato has mentioned that they do not see any competitive advantage for the same. Against the incumbents in the payment space, Zomato doesn't feel that its subsidiary will stand apart. Not seeing any commercial advantage in the business, the company decided to voluntarily give up its license. The company said that while they were aware of this development, they could feel the real impact only when they got closure on putting in place the structure to commence operations.
When did Zomato Payment Pvt. Ltd. kickstart?
In August 2021, Zomato incorporated its wholly owned subsidiary, Zomato Payment Private Limited (ZPPL). ZPPL was established in accordance with the guidelines for payment gateway and payment aggregator services set forth by the Reserve Bank of India (RBI). ZPPL has ₹59.47 crore in paid-up capital and ₹100 crore in authorized share capital.
Zomato Payments Private Limited (ZPPL) was incorporated with an authorized share capital of ₹20 crore, divided into two crore equity shares of ₹10 each.
Zomato has never talked a lot about its payment business. Rather, the company has been very vocal about its quick commerce platform, Blinkit. During the StartUp Mahakumbh, Zomato CEO Deepinder Goyal said that Bliknit will be larger than its parent Zomato. In the Q4 results, the revenue from operations of the quick commerce platform for the financial year ended March 31, 2024, was Rs 2,301 crore, as against Rs 806 crore in the previous fiscal.
Recently, analysts at Goldman Sachs also said that Blinkit is now more valuable than the food delivery business of Zomato. While the food delivery business was valued at Rs 98 per share by the analysts, Blinkit was valued at Rs 119 per share. The company also plans to add 100 more dark stores for Blinkit.
With intense focus given to the quick commerce business, it seems that ZPPL is already a thing of the past. Meanwhile, to regulate the financial landscape tightly, the RBI has become more strict when it comes to giving the payment aggregator license. With the introduction of new draft regulations that state that non-banking entities that fail to apply for authorization and are unable to maintain the net worth of ₹15 crore at the time of applying will have to close their business by July 31, 2025, the central bank is coming up with several rules to monitor the fintech ecosystem. Some platforms that got their payment aggregator licenses recently include Amazon Pay, Groww, Worldline, and others. Meanwhile, for Zomato, it seems that Blinkit will lead the show.
