Indian food delivery platform Zomato has posted a quarterly consolidated profit for the first time since its inception, as more consumers ordered food and groceries on the platform.
For the first quarter that ended June 30, 2023, Zomato posted a profit of Rs. 2 crore ($2,41,751) against a loss of Rs. 186 crore in the corresponding period last year. Revenue from operations in the period rose 71% to Rs. 2,416 crore.
Zomato chief financial officer Akshant Goyal said, “We expect our business to remain profitable going forward and… believe we will continue to deliver 40%+ YoY topline (adjusted revenue) growth for at least the next couple of years.”
Zomato’s profitability comes amid changing investor expectations from ‘growth over profitability’ metrics to ‘profitability at all costs’, leading Indian startups to hunker down and slash expenses, lay off employees, and diversify revenue streams to fight the prolonged funding winter.
The company attributed the rise in revenue to growth in its biggest segment – food delivery. Adjusted revenue in the segment, which had been falling sequentially for the last few quarters, rose to Rs 1,742 crore in the quarter ended June from Rs 1,530 crore in the quarter ended March 2023 and Rs 1,565 crore in the quarter ended December 2022.
“Q1 usually tends to be a seasonally stronger quarter for us and the growing adoption of the company’s Gold program which drove higher frequency of ordering and now contributes to 30%+ of GOV in the food delivery business,” the company said.
For the company’s quick commerce segment, Blinkit, which it acquired in 2022, Zomato said the business in the quarter was impacted due to a temporary business disruption in April from the change in the delivery partner payout structure. Moreover, heat and incessant rains added to a drop in the availability of work hours for the delivery personnel for about 45 days.
While the gross order value on Blinkit rose to Rs. 2,140 crore in the quarter from Rs. 1,172 crore a year ago, the number of orders declined sequentially to 36.8 million from 39.2 million in the previous quarter. Analysts did not cheer Zomato’s acquisition of grocery delivery startup Blinkit last year saying it would delay the former’s path to profitability due to cash burn.
The company’s executives also indicated plans to expand its dining out and live business, which hosts food carnivals called Zomaland.
“Dining-out + Live = “Going-out”. We believe this combo could be the 4th large business coming out of Zomato, that powers India’s changing lifestyles. Next quarter onwards, we are going to report ‘Going-out’ as a separate business segment in our financials and contemplating spinning out the Going-out business into a separate app,” the company said.
While Zomato’s shares debuted at a 53% premium to their IPO price last year, the scrip has lost about 49% of its value from an all-time peak of Rs 169.10 in November 2021 and is trading about 14% above the issue price of Rs 76 per share. On Thursday, the company’s stock was trading up 1.6% at Rs. 86 per share.
Earlier this year, Zomato’s rival Swiggy said its food delivery business had turned profitable, excluding employee stock option costs.
With the rising use of smartphones and attractive discounts on offer, food delivery platforms have become increasingly popular in India. Currently, the segment, which is expected to breach the $10-billion GMV mark by 2025, is dominated by two players – Swiggy and Zomato.
To gain a bigger share of the market, both Swiggy and Zomato have been experimenting in other areas, including grocery delivery, which includes players such as Zepto, Dunzo, and Zomato-owned Blinkit.