Zomatos Q3 Loss Swells To <span Class='webrupee'>₹</span>346 Cr On Slump In Food Delivery Business

Loss surged to ₹346.6 crore for the third quarter ended 31 December from ₹63.2 crore in the year earlier, the company said on Thursday. However, the company’s revenue grew 75% to ₹1,948 crore from ₹1,112 crore a year ago.

“We have seen an industry-wide slowdown in the food delivery business since last October (post-Diwali). The trend has been seen across the country but more so in the top eight cities," Zomato said in a statement.

View Full Image

Zomato’s gross order value inched up 0.7% on a sequential basis but grew 21.5% from a year earlier to ₹6,680 crore.

Chief financial officer Akshant Goyal expressed optimism about the future of food delivery.

“It remains a challenging environment, but we are seeing green shoots of demand coming back in the recent weeks, which makes us believe the worst may be behind us."

“We believe the long-term opportunity remains large and exciting. We think the current slowdown is due to factors like a macro slowdown for the mid-market segment, the boom in dining out for the premium end and a boom in travel at the premium end."

According to calculations by Mint, the company’s Ebitda (earnings before interest, taxes, depreciation and amortization) loss has narrowed to ₹366.2 crore from ₹488.8 crore a year earlier.

Zomato relaunched its loyalty programme Zomato Gold in January, and revenue from subscriptions is likely to give its revenue a fillip from the March quarter.

The company is also in the process of rebranding its 10-minute food delivery service Zomato Instant to provide home-style meals at affordable prices.

Expenses remained higher mainly due to higher advertising spending, rise in delivery and related charges and strikingly higher depreciation and amortization rate.

The company’s adjusted Ebitda loss, which excludes the recently integrated Blinkit acquisition, came in at ₹265 crore, against ₹272 crore in Q3 of the previous year.

Zomato added 23 million customers in 2022 against 23.6 million in the previous year. These are customers who placed at least one order on Zomato in the year.

On the reintroduction of Zomato Gold and its impact on the company’s timeline to profitability, the management said the short-term impact would be offset by improvements in other revenue and fixed and variable cost drivers. “In the long term, we believe we will be able to make Zomato Gold itself profitable."

“We still feel confident about reaching adjusted Ebitda (ex-quick commerce) break-even by Q2FY24, as per our earlier estimate," Goyal said.

Among Zomato’s other segments, Hyperpure’s revenue grew 1.7 times to ₹421 crore in the December quarter.

Shares of Zomato rose 0.28% to ₹54.40, the highest in a month, against a 0.23% rise in the Sensex.

“Zomato’s business seems to get a hit due to a slowdown in food delivery business post the Diwali festival in the third quarter. The food delivery business faced headwinds, in an otherwise strong third quarter, with adjusted revenue showing a sequential decline due to deterioration in key operating metrics such as average transacting customers and the number of delivery partners. We feel that the Blinkit business is putting further pressure on the profitability of the company. It looks like the company is still far away from achieving profitability, and investors would be better off finding other avenues for investing. With the macro environment looking increasingly difficult as high inflation would impact discretionary spending, the near-term future for food delivery business looks cloudy," said Manish Chowdhury, head of research, Stoxbox.