Red ink spreads in Zomato books

Firm was in the news in 2015, for laying off 300 staff, shutting down regional centres, and not meeting financial targets

Bloodbath for the food-tech sector might continue for longer than predicted, as online restaurant discovery and food ordering service Zomato’s loss before tax has shot up 262 per cent to Rs 492.3 crore for FY16. Info Edge, the largest investor in Zomato, disclosed this in its earnings results on Wednesday.

The Deepinder Goyal and Pankaj Chaddah-led company had reported losses of Rs 136 crore in the previous financial year during the same period. Zomato’s operational revenues doubled to Rs 185 crore for the FY16 from Rs 97 crore. No one from Zomato was available for comment on the issue.

Info Edge, which also owns job search discovery portal Naukri.com and real estate portal 99acres.com, has a 47 per cent stake in Zomato. The company put Zomato’s losses under the head “online restaurant discovery”. Info Edge’s capital employed (segment assets subtracted by segment liabilities) in Zomato is Rs 583.13 crore.

It has been a month of bad news for Zomato. A few days ago, HSBC’s brokerage arm HSBC Securities and Capital Markets had slashed the valuation of Zomato by half to $500 million, questioning its coveted “unicorn” (billion-dollar valuation) status.

The brokerage had raised a slew of concerns about Zomato’s advertisement-heavy business model, growing competition and businesses abroad. The report added that Zomato should instead develop a sustainable delivery business. It forced Goyal to write a blog vehemently defending Zomato’s operations. “In fact, our existing investors are bullish about us and are willing to back us further, if needed. And, they have categorically said our valuations are justified,” he said.

Zomato had in February said that it operationally broke even in six markets including India, West Asia (United Arab Emirates, Lebanon and Qatar) and Southeast Asia (Philippines and Indonesia). The company was in the news in 2015, too, for laying off around 300 employees, shutting down regional centres, and unmet financial targets. Zomato claimed it was the first among food-tech players such as Foodpanda, Swiggy to break even in key markets.

“We have always been paranoid about revenue, and therefore building a sustainable business. We have more than doubled our revenue year-on-year for the past few years, and we are going to post some great growth numbers this year as well. This proves our long-lasting conviction in our business and the fact that we are on road to creating the first truly global consumer internet company out of India,” Goyal had told Business Standard then. In April, it shut down online ordering operations in four cities — Lucknow, Indore, Kochi and Coimbatore.

The company has till date raised $225 million from investors — Info Edge, Sequoia India, Vy Capital and Temasek. According to the company, 22 per cent of its traffic and 35 per cent of revenue comes from India.

It also recently entered the transactions business and now serves around 15,000 orders a day at an average ticket price of Rs 575.

It provides in-depth information for 1.4 million restaurants across 23 countries.