Conflict of interest concern raised about Zomato’s investment into Shiprocket. Founder denies.

Zomato recently had invested $75 mn into Shiprocket as a part of it’s start-up investing strategy.

T V Mohandad Pai (ex Infosys CFO) in a tweet raised concern that whether there is a conflict of interest in this investment by Zomato as Deependier Goyal (Founder CEO) had previously invested into Shiprocket in his personal capacity.

Deepinder clarified that he had exited his $1,00,000 investment into Shiprocket at no profit no loss before Zomato’s investment. He on the contrary highlights that his investment had actually given Zomato access to Shiprocket and both companies have a long term strategic fit.

He further added that Zomato may continue to make similar investments in future into the companies supported by the founder.

My views –

  • I don’t see conflict of interest issue in the subject transaction. At best, there could have been a better disclosure from Zomato, which in any case seem to be continuously lapsing on sound disclosure practices.
  • Theoretically one may be able to argue otherwise. However, the fact remains that businesses are not run in a perfect world.

Lot of controversies are erupting around Zomato because despite loss making it had a strong listing. Obviously, most old school analysts/ investors like me are confused about the same and hence try to have a closer scrutiny on Company’s affairs.

The Company seems to be trying to find it’s way through. Whether it would be able to achieve the same and by when is anybody’s guess.

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