Indian food delivery platform Zomato on Thursday posted its third consecutive quarterly profit, as more Indians ordered from its food delivery and quick commerce platforms.
For the company’s fiscal third quarter that ended December 31, 2023, Zomato posted a profit of Rs 138 crore ($16.62 million), versus a loss of Rs 347 crore in the corresponding period of the previous year, and Rs 36 crore in the quarter ended September 2023.
Revenue from operations in the period rose 69% to Rs 3,288 crore. The company attributed the rise in revenue to growth in its biggest segment—food delivery. The firm said the rise in the segment is driven both by new restaurants opening up and our coverage of existing restaurants increasing.
Zomato’s profitability comes amid changing investor expectations from ‘growth over profitability’ metrics to ‘profitability at all costs’, forcing Indian startups to hunker down and slash expenses, lay off employees, and diversify revenue streams to fight the prolonged funding winter.
Adjusted revenue in Zomato’s food delivery segment rose to Rs 2,025 crore in the quarter, versus Rs 1,565 crore a year ago. This marks the third consecutive quarter of growth in adjusted revenue for the segment.
Even as Zomato earned more money per order in the quarter, the company’s total expenses continued to rise. Total expenses rose to Rs 3,383 crore in the period from Rs 2,485 crore a year ago, in part due to a rise in delivery charges and the purchase of stock-in-trade.
The delivery charges rose to Rs 1,069 crore in the quarter from Rs 655 crore a year ago, while purchase in stock-in-trade expense rose to Rs 783 crore from Rs 393 crore.
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 areas including grocery delivery, competing with players such as Zepto, and Dunzo.
To attract more consumers, the company also launched its Gold programme for users to get savings on food delivery and in-restaurant dining. The company said the increase in monthly ordering frequency was largely a result of the growing adoption of its Gold programme as Gold members tend to order more frequently compared to non-members.
“At this point, it (Gold) is being used tactically to acquire (and re-acquire) customers and hence the pricing of the membership programme is much lower than what we would want it to be. Customers have more than one option and hence we have to remain competitive on pricing,” Rakesh Ranjan, CEO of food delivery business at Zomato, said.
“We are also seeing a lot of customers switching platforms at the time of membership renewal depending on who is offering the lowest price,” added Ranjan.
To make their bottom lines stronger, Zomato’s rival Swiggy hiked the platform fee to Rs 10 from Rs 5 for a small set of users in January. “We think it is too early to predict how the platform fee will shape up. Much like the Gold program, we are still testing the waters on what works and makes sense here from a long-term perspective.”Ranjan said.
He added that to keep a strong balance sheet, the company would not do any buyback or dividend distribution in FY24 or FY25.
Zomato’s quick commerce segment Blinkit’s adjusted revenue rose 28% to Rs 644 crore. The firm attributed this rise to multiple festivals and occasions in the quarter.
Adjusted EBITDA in the segment narrowed to a loss of Rs 89 crore from Rs 227 crore, a year ago.
“Losses continue to decline and we are on track to meet our guidance of Adjusted EBITDA break-even on or before Q1FY25,” the firm said in a statement.