[Updated] Zomato's losses nearly halve in June quarter, riding on higher food deliveries

Photo: Mint

Editor’s Note: This story has been updated to include the company’s results announced late in the evening.

Indian food delivery startup Zomato on Monday reported a quarterly net loss that nearly halved from the year-ago period, as more people ordered food on its platform.

For the quarter ended June, Zomato narrowed its consolidated loss to Rs 185.7 crore from Rs 356.2 crore in the same quarter last year. Consolidated revenue rose 67% to Rs 1,413.9 crore in the quarter.

The company’s biggest segment – food delivery – hit an adjusted EBITDA break-even in the reported quarter for the first time.
Gross order value — the total value of all food delivery orders placed online on Zomato’s platform — for the first quarter rose 41.6% to Rs 6,430 crore from a year ago, with average monthly transacting customers at 16.7 million, the company said.
Zomato also accepted that there is a negative impact of inflation on the demand side but said it is hard to quantify. Similarly, on the cost side, the margins are getting negatively impacted due to higher fuel costs and wage inflation.

Even though its revenue grew 67%, the company’s expenses rose to Rs 17.7 million from Rs. 12.6 million, according to its latest quarterly earnings report.

Zomato shares have been facing intense selloff pressure since the lock-in period for 78% of its stock ended last week. Venture capital firm Moore Strategic Ventures also divested its entire stake in the food delivery company at a loss, according to block deal data accessed by DealStreetAsia.

Meanwhile, valuation guru Aswath Damodaran downgraded the stock to Rs 35 from Rs 41 a year ago.

While the company debuted at a 53% premium last year, its shares have lost about 72% of their value from an all-time peak of Rs 169.10 in November 2021 and are trading about 38% below the issue price of Rs 76 per share.

The company has also received a lot of criticism for its Blinkit acquisition. Analysts argued that Zomato’s path to profitability would get further delayed due to a cash burn of $165 million a year for Blinkit, which has seen its losses pile up. In FY 2021, Blinkit reported a loss of Rs 6,127 crore.

While the company did not say anything about its timeline for profitability on Monday, CFO Akshant Goyal said, “We have received the shareholders’ approval for the transaction. 97%+ votes were in favour of the transaction. We are now awaiting approval from stock exchanges. The financials of Blinkit will start getting consolidated into Zomato’s consolidated financials post the closing.”

The company is also reportedly moving to a multiple-CEO structure for its businesses and renaming the company ‘Eternal’ at a time its shares are reeling amid a row of negative news.

“We are transitioning from a company where I was the CEO to a place where we will have multiple CEOs running each of our businesses, all acting as peers to each other, and working as a super team with each other towards building a single large and seamless organisation,” Deepinder Goyal, CEO and MD of Zomato, wrote on the company’s Slack channel last week after shareholders approved its acquisition of quick commerce startup Blinkit, according to media reports.

Zomato did not respond to a request for comment by DealStreetAsia.

“Eternal will have multiple companies — it already has Zomato, Blinkit, Hyperpure and Feeding India. Eternal will be an internal name for now — you should start seeing the Eternal logo at a few places in our new office. As well as some t-shirts,” he further said.

With the rising use of smartphones and attractive discounts on offer, food delivery platforms have become increasingly popular in India. According to industry estimates, Swiggy and Zomato process around 1.5 million orders daily. However, these numbers do not translate to profits, leading to both the companies experimenting in other areas, including grocery delivery.

Apart from the $570 million Blinkit acquisition, Zomato has made at least six minority investments worth around $200 million in the last year – including $75 million in Shiprocket and $50 million each in Magicpin and Curefit.

The company also said that there is no plan to make any more minority investments as the company is in cash conservation mode. 

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