Zomato Q2 results: Loss widens to Rs 430 crore as delivery costs go up

Zomato Q2 results: Loss widens to Rs 430 crore as delivery costs go up

Food delivery platform Zomato, which got listed on stock markets in July, on Wednesday said its consolidated net loss widened 87 per cent to Rs 430 crore in the September quarter (second quarter, or Q2), compared with the year-ago period. Its losses increased 21 per cent, compared with the June quarter.

Founder and Chief Executive Officer Deepinder Goyal said, “This was due to investments in the growth of our food delivery business. Three reasons to be specific: increased spending on branding and marketing for customer acquisition, increased investments and growing share of smaller/emerging geographies in our business (which are less profitable today, compared to more mature cities), and increased delivery costs due to unpredictable weather and increase in fuel prices.”

Consolidated revenue from operations rose 21 per cent sequentially to Rs 1,024 crore in Q2, against Rs 844 crore in the quarter ended June. On a year-on-year (YoY) basis, the foodtech firm’s revenue from operations has grown 140 per cent, from Rs 426 crore in the September quarter of 2020-21 (FY21).

Goyal said, “We are in the process of divesting or shutting down our non-core businesses which were not going to significantly move the needle for our shareholders in the long term. All of these businesses that we are divesting or shutting down contributed less than 1 per cent to our adjusted revenue and 13 per cent to our adjusted earnings before interest, tax, depreciation, and amortisation (Ebitda) loss in Q2 of 2021-22 (FY22).”

The company said for this reason, it has shut down its nutraceutical business, selling its stake in sports start-up Fitso to Curefit for $50 million, will invest another $50 million in Curefit and in exchange and will take 6.4 per cent shareholding in the company in which Tata recently acquired a stake. The company has also signed definitive documents for investing $75 million in logistics company Shiprocket for 8 per cent stake as part of a larger $185-million round.

said it will invest $50 million in e-commerce start-up Magicpin for 16 per cent stake as part of a total funding round size of $60 million.

“Including our $100 million investment in Grofers earlier in August, we have now committed $275 million across four over the past six months. We plan to deploy another $1 billion over the next one to two years, with a large chunk of it likely to go into the quick-commerce space,” the company said.

Overall customer traffic on the company’s platform in India increased 31 per cent to 59 million average monthly active users in Q2FY22, compared with 45 million in the previous quarter.

Adjusted revenue in Q2FY22 was Rs 1,420 crore, a 22.6 per cent growth quarter-on-quarter (QoQ) and 144.9 per cent growth YoY.

Adjusted revenue is revenue from operations plus customer delivery charges. Adjusted Ebitda loss increased to Rs 310 crore in Q2FY22, compared with Rs 170 crore in the previous quarter and Rs 70 crore in Q2FY21.

Sreedhar Prasad, a senior management consultant who was a partner at KPMG and VC firm Kalaari Capital earlier, said: “Delivery platforms as a business model has wide acceptance across investors and consumers at large. Compulsion-driven acceptance due to lockdowns had significantly increased adoption, however, this benefit to business doesn’t seem to reflect in the economics.”

“I wonder why it would still cost the same or more to attract new customers, when home delivery of food and essentials has become a part of life in most parts of our country. I would expect efficiency focus as well as memberships/ subscriptions to help reduce the loss percentages in the coming quarters” added Prasad.

Revenue from its business-to-business foodtech vertical Hyperpure grew 49 per cent QoQ to Rs 110 crore in Q2FY22, the company said. Hyperpure is now present in eight cities and it supplied groceries to over 12,000 restaurants every month on average in Q2FY22.

After a hiatus of two years, the foodtech major said it has started launching food delivery in new cities again.

Gross order value in Q2FY22 grew 19 per cent QoQ and 158 per cent YoY to Rs 5,410 crore. This growth was driven by increase in the number of transacting users, number of active food delivery restaurants, and active delivery partners on the platform.

“We can attribute a large part of the increase in transacting users (and adjusted revenue) to an increase in branding and marketing expenses. During Q2FY22, we invested an incremental Rs 40 crore in branding and marketing, compared with the first quarter (Q1) of FY22,” the company said.

“Most of these spends were on television and digital marketing. The idea was to capitalise on Covid-19-led Q1FY22 growth momentum and acquire more new users, as well as get a large number of lapsed users back on our platform,” it added.

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