Business

Zomato’s Q2 net loss dips to Rs.430 crore: Loss widens by 87%

Zomato attributed the losses to investments in the growth of food delivery business, increased spending on branding and marketing for customer acquisition

PGurus Newsdesk

November 11, 2021

Zomato attributed the losses to investments in the growth of food delivery business, increased spending on branding and marketing for customer acquisition

Zomato loss widens in Q2; announces to invest $1 bn in startups

Zomato’s higher losses were due to increased spending on branding and marketing; a growing share of smaller and emerging geographies (which are less profitable); and increased delivery costs.

Zomato, the online food delivery platform, reported a net loss of Rs.430 crore on a consolidated basis compared to a loss of Rs.230 crore in the same period of last year, an increase of 87 percent. It had reported a net loss of Rs.356 crore in the previous quarter when it declared its maiden results as a public limited company. On a sequential basis, the loss for the company increased by 21 percent.

The adjusted revenue for Zomato stood at Rs.1,420 crore ($189 million), a 22.6 percent growth (on-quarter) and 144.9 percent growth (on-year).

Zomato’s stock declined by Rs.1.60 (-1.16 percent) on November 10 and closed at Rs.136.05. The stock is up 8.6 percent in the past three months and flat during the past one month.

According to CEO Deepinder Goyal, the losses went up owing to investments in the growth of its food delivery business.

“Three reasons to be specific – a) increased spending on branding and marketing for customer acquisition, b) increased investments and growing share of smaller/ emerging geographies in our business (which are less profitable today compared to more mature cities) and c) increased delivery costs due to unpredictable weather and increase in fuel prices,” Goyal said in a statement.

“We don’t expect the delivery costs to go up further and overall feel confident about our contribution margin staying positive in the mid, as well as long term,” Goyal pointed out.

Goyal said, “We have now committed $275 million across 4 companies over the past six months. We plan to deploy another $1 billion over the next 1-2 years, with a large chunk of it likely to go into the quick-commerce space.”

The company also announced that it has invested $75 million in Bigfoot Retail Solutions Pvt Ltd (Shiprocket) B2B logistics-tech company, for an 8 percent stake as part of a larger $185 million round. Zomato has also signed definitive documents for investing $50 million in Magicpin for a 16% stake as part of a total round size of $60 million. Magicpin drives Omni-channel growth for local retailers.

Overall customer traffic on Zomato in India increased to 59 million average monthly active users (India MAU) in Q2 FY22, as compared to 45 million in Q1 FY22. Zomato is seeing a 30 percent higher ordering frequency and significantly higher contribution margin in cities which have meaningfully higher restaurants per 100k customers’ metric.

On the investment front, in addition to the planned investment in Curefit, the company is making two new minority investments. It will be investing around $75 million in Bigfoot Retail Solutions Pvt Ltd (Shiprocket) for an eight percent stake.

Another investment of $50 million will be in Samast Technologies Pvt Ltd (Magicpin) for a 16 percent stake as part of a total round size of $60 million.

[With Inputs from IANS]

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