Zomato net loss narrows 81% to Rs 66 cr in Q3, revenue grows 86%

The firm will invest $400 mn in quick commerce over next two years

Food delivery company Zomato saw its net loss narrow by 81 per cent year-on-year (YoY) to Rs 66 crore in the December quarter (Q3). Meanwhile, its revenue rose 86 per cent YoY to Rs 1,112 crore in Q3.

On a sequential basis, the foodtech company saw its revenue rise 9 per cent from Rs 1,024 crore in Q2, whereas net loss slimmed by 85 per cent from Rs 430 crore in Q2.

Zomato said it will continue to invest both in its core food business and in quick commerce, and raised the upper bound of potential investments in this category to $400 million cash over the next two years. It is also in the process of setting up a non-banking financial company (NBFC), which will help it provide credit to customers, restaurants and delivery partners. According to media reports, the foodtech major is planning to offer its own “buy now, pay later” service.

The company said it has around $1.7 billion of cash on its balance sheet and has made investments worth around $225 million in the past year across three companies — Blinkit (erstwhile Grofers), Shiprocket, and Magicpin.

Food delivery health

The gross order value (GOV) grew by 84.5 per cent YoY and 1.7 per cent QoQ to Rs 5,500 crore in Q3FY22. “We believe that the weak QoQ growth in GOV was primarily due to reduction in customer delivery charges, in addition to a soft impact of post-Covid reopening (including some shift from delivery to dining out),” said the company.

“Over the years, unit economics in our food delivery business have improved with scale. Contribution margin (as a percentage of GOV) has improved steadily from –15 per cent back in 2019 days to 1 per cent today. Around a 5 per cent contribution margin in our food delivery business (at the current scale) should get us to Ebitda breakeven as a company (covering all common corporate costs as well),” said Deepinder Goyal, chief executive officer and founder of Zomato, in a blog post.

The number of orders grew 93 per cent YoY and 5 per cent QoQ. Average order value shrank around 3 per cent QoQ, mostly on account of reduction in customer delivery charges. Meanwhile, customer delivery charges contracted 22 per cent. This was driven by Rs 7.5 per order reduction in customer delivery charges in Q3.

According to the company, part of the reduction in customer delivery charges is also because it started operations in around 180 new cities (the company is now in a total of more than 700 cities), where it has introduced temporary free delivery to cultivate a culture of ordering food from restaurants.

“We re-distributed our growth investments more in favour of discounts on customer delivery charges vis-a-vis food coupons. We are seeing higher return on investment with discounted delivery charges as compared to coupons. As a result, discounts per order reduced by Rs 5 per order in the last quarter as compared to Q2 of FY22,” said Goyal.

The company’s B2B supplies business – called Hyperpure – saw a rise in revenue of 168 per cent YoY and 40 per cent QoQ to Rs 160 crore in the December quarter. The service is now present in nine cities and supplied to over 27,000 unique restaurants in the third quarter – up 50 per cent from the September quarter.