Indian food and grocery delivery platform Zomato on Thursday reported a quarterly loss that widened nearly five times year on year, as a continuous surge in expenses and a slowdown in the food delivery business dampened revenues growth.
Despite a 75% rise in revenue from operations to Rs 1,948 crore for the quarter that ended Dec 22, Zomato’s net losses widened to Rs 347 crore from Rs 63 crore in the same quarter last year. This comes as the company’s expenses zoomed to Rs 2,485.3 crore from Rs 1,642.6 crore during the same period.
The numbers also come on the back of a slowing food delivery business. Last month, SoftBank-backed rival Swiggy laid off 380 employees, also citing a slowdown in the food delivery business.
“It remains a challenging demand environment for the food delivery business,” Zomato CFO Akshant Goyal said, adding, “We are seeing green shoots of demand coming back in the recent weeks, which makes us believe that the worst may be behind us.
With the rising use of smartphones and attractive discounts on offer, food delivery platforms have become increasingly popular in India. According to industry estimates, both Swiggy and Zomato process around 1.5 million orders daily. However, these numbers do not translate to profits, leading to both companies experimenting in other areas, including grocery delivery.
When Zomato acquired grocery delivery startup Blinkit last year, it did not bode very well for the markets, with the stock having lost nearly 7% since then. 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.
December quarter was the first full quarter after the consolidation of Blinkit’s quick commerce business. However, excluding the Blinkit numbers, Zomato’s adjusted EBITDA turned positive for January, Zomato said in its financial report.
“The core delivery business has been cutting down losses and was momentarily profitable (in January). It’s the acquired quick delivery business that is burning a hole, but the long-term outlook remains positive,” Bharat Birla, director at Anand Rathi, told DealStreetAsia.
While Zomato’s shares debuted at a 53% premium to their IPO price last year, the scrip has lost about 62% of its value from an all-time peak of Rs 169.10 in November 2021 and is trading about 29% below the issue price of Rs 76 per share. On Friday, the company’s stock was trading down 1.2%.
In the recent few months, Zomato has witnessed a series of high-profile exits, including its chief technology officer and co-founder Gunjan Patidar; co-founder Mohit Gupta; Rahul Ganjoo, its new initiatives head and former food delivery chief; and Siddharth Jhawar.
“We still feel confident about reaching adjusted EBITDA break-even (excluding quick commerce) by Q2 FY24 as per our earlier estimate…The current slowdown in demand was unexpected which is impacting the growth in food delivery profits but despite that, we think we are in a good position to meet our profitability goal,” Goyal said.