Zomato loss widens to Rs 347 crore on biz slowdown, Blinkit buy

Restaurant aggregator Zomato’s losses widened to Rs 346.6 crore for the quarter that ended in December (2022-23, or FY23), compared with Rs 63.2 crore in the corresponding period of the previous financial year (2021-22). The food delivery giant had reported a net loss of Rs 250.8 crore in the second quarter (Q2) of FY23.

Losses widened nearly 5.5x year-on-year (YoY) owing to the inclusion of Blinkit. This is the first full quarter after the completion of the acquisition of Blinkit.

Revenue for the food delivery company, however, surged 75 per cent to Rs 1,948.2 crore, compared with Rs 1,112 crore in the year-ago period.

The food delivery business was sequentially flat. The gross order value (GOV) for the third quarter (Q3) of FY23 was only 0.7 per cent in an otherwise strong quarter. Adjusted revenue declined 1 per cent quarter-on-quarter (QoQ), driven largely by a decline in order volumes.

Adjusted revenue grew 30 per cent YoY. The company attributed this fall to an industry-wide slowdown in the food delivery business since October 2022.

The current slackening was chalked up to a macro slowdown for the mid-market segment, coupled with a boom in dining out and surge in travel at the premium end. 

The company was, however, confident it would reach adjusted earnings before interest, tax, depreciation, and amortisation (Ebitda) break-even (excluding quick commerce) by Q2 of 2023-24.

Said Akshant Goyal, chief financial officer, Zomato, “Our business was already at break-even (excluding quick commerce) in January. There is a good chance of getting to adjusted Ebitda break-even (excluding quick commerce) in the current quarter if we can bank some execution-related wins in the next few weeks.”

The firm’s total expenses ballooned to Rs 2,485.3 crore in Q3, up from Rs 1,642.6 crore in the same period last financial year (2021-22).

Total adjusted Ebitda loss climbed to Rs 265 crore in Q3, compared with Rs 192 crore in the previous quarter. This was, however, less than Rs 272 crore reported in the same period last financial year.

“Having a profitability mindset is key. As a company, we have been constantly re-evaluating and optimising investments across the board, including taking a hard look at resource allocation across functions, shutting down non-performing markets, and reassessing our headcount, among others,” said Deepinder Goyal, the company’s chief executive officer (CEO).

“In the past year or so, investors have been far more focused on profitability. We are doing our best to deliver on those expectations,” he added.

Speaking about reviving growth, Deepinder added, “We continue to stay focused on our long-term growth vectors without worrying too much about near-term growth pressures.”

The firm launched its brand-new membership programme in early January. In less than a month, the Zomato Gold programme had scaled to over 900,000 members.

“We expect this programme to drive loyalty and higher frequency of ordering,” said Deepinder.

Blinkit’s GOV increased to Rs 1,749 crore in Q3, from Rs 1,482 crore in the previous quarter.

“GOV grew 18 per cent QoQ, driven by 21 per cent growth in order volume, compensating for the reduction in average order value. Growth in revenue per order led to higher revenue growth of 28 per cent QoQ,” said Albinder Dhindsa, CEO, Blinkit.

With more dark stores turning profitable, the firm also plans to expand their network.

“Currently, we believe that we can comfortably grow our dark store count by 30-40 per cent over the next 12 months. This will also depend on our ability to find the best and most cost-effective locations for these stores,” added Akshant.

Revenue for the firm’s business-to-business venture, Hyperpure, grew 26 per cent QoQ and 169 per cent YoY to Rs 421 crore in Q3 as the company focused on growth over profitability.

“Hyperpure has also begun tapping into the quick commerce opportunity. A part of the revenue growth in Q3 was on account of goods supplied to sellers on the Blinkit marketplace,” said Akshant.

The firm has recently witnessed a string of high-profile exits.

Last month, Zomato’s chief technology officer Gunjan Patidar, who was one of the original co-founders, resigned after a 10-year stint.

In November last year, Siddharth Jhawar, head of the company’s intercity delivery offering, Intercity Legends, had put in his papers.

A week later, head of new initiatives Rahul Ganjoo and co-founder Mohit Gupta also quit.

The most recent exit was of the head of Zomato’s dining business. Aman Priyadarshi resigned last week to join Sequoia-backed Kenko Health.

“Sometimes, for some people, the distance between their form (their mindset and skillset) and the company’s context becomes such that it is necessary to take a break from each other,” said Deepinder, addressing the exits.

“We have so many people in senior leadership roles who are on their second (and third) stint at Zomato,” he said, adding, “The entropy our people create in the organisation by leaving and then coming back is fantastic, to say the least, and propels the organisation forward.”

After halting its food delivery business in the United Arab Emirates in November last year, the food aggregator has now also ceased operations in the Philippines after servicing the market for nearly a decade.

“It has been a great run but we have, sadly, stopped our operations here,” the company stated on its website.

Zomato entered the Philippines market in 2013, with an investment of $1 million, Business Standard reported.