On a consolidated basis, Zomato reported a net loss of Rs 434.90 crore in Q2 September 2021 as compared to a net loss of Rs 229.80 crore in Q2 September 2020.
Consolidated net sales surged 140.40% to Rs 1,024.20 crore in Q2 FY22 over Q2 FY21. Adjusted revenue in Q2 FY22 stood at Rs 1,420 crore ($189 million), recording a 22.6% growth quarter-over-quarter (Q-o-Q) and 144.9% growth year-over-year (Y-o-Y). Adjusted EBITDA loss increased to Rs 310 crore ($41 million) in Q2 FY22 over Rs 170 crore ($22 million) in the previous quarter (Q1 FY22) and Rs 70 crore ($10 million) in Q2 FY21 last year.
The losses were on account of - a) increased spending on branding and marketing for customer acquisition; b) increased investments and growing share of smaller/ emerging geographies in 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.
India food delivery Gross Order Value (GOV) in Q2 FY22 grew 19% Q-o-Q and 158% Y-o-Y to Rs 5,410 crore ($721 million). This growth was driven by an increase in the number of transacting users, number of active food delivery restaurants and active delivery partners on the platform.
In line with GOV growth, adjusted revenue for India food delivery grew 20.7% Q-o-Q to Rs 1,250 crore ($166 million), which represented 88% of the total adjusted revenue for the company in the same quarter. During Q2 FY22, Zomato invested an incremental Rs 40 crore ($5.4 million) in branding and marketing as compared to Q1 FY22. Most of these spends were on television and digital marketing. The company planned to capitalize on the COVID-led Q1 FY22 growth momentum and acquire more new users as well as get a large number of lapsed users back on its platform. While this resulted in losses expanding further, Zomato believes this was a great opportunity to double down on expanding its user base cost efficiently.
On the profitability front, the contribution as a percentage of GOV was 1.2% in Q2 FY22 as compared to 2.8% in Q1 FY22. The reduction in contribution margin is on account of the following - a) increased investments in growth geographies - growing share of smaller, emerging cities in its business, which are currently less profitable than the more mature cities; and b) increase in delivery cost per order (Rs 5 per order increase in Q2 FY22 as compared to Q1 FY22). The rise in delivery cost per order was due to prolonged and unpredictable rainy season (which still continues in many parts of the country, oddly) and sharp increase in fuel prices.
Revenue from B2B supplies business, Hyperpure soared 49% Q-o-Q to Rs 110 crore ($15 million) in Q2 FY22. Currently, Hyperpure is present in 8 cities and we supplied to over 12,000 restaurants every month on an average in Q2 FY22.
Meanwhile, Zomato is in the process of selling Fitso to Curefit (Curefit Healthcare) for $50 million. In order to cultivate a great long term partnership with Curefit, Zomato is also investing cash in Curefit. A net $50 million cash investment plus value of the Fitso business (worth $50 million) will give a cumulative shareholding worth $100 million in Curefit (i.e. 6.4% stake in Curefit). This will help in potentially explore cross-selling benefits between Zomato and Curefit.
Zomato has shut down its direct-to-consumer (D2C) experiment in Nutraceuticals. It is also shutting down its operations in Lebanon, which is the only international business Zomato was left with (other than dining-out business in UAE) after shutting down the rest of its international operations last year.
Zomato signed definitive documents for investing $75 million in Bigfoot Retail Solutions (Shiprocket) for a 8% stake as part of a larger $185 million round. Shiprocket is a B2B logistics-tech company that enables online commerce by providing seamless shipping and fulfillment services to direct-to-consumer (D2C) brands and omni-channel sellers. It currently serves over 60,000+ brands and merchants across categories such as apparel, electronics, beauty and personal care, grocery, among others.
Separately, Zomato has also signed definitive documents for investing $50 million in Samast Technologies (Magicpin) for a 16% stake as part of a total round size of $60 million magicpin drives omni-channel growth for local retailers. It has a network of 170,000+ paying merchants in categories including fashion, food, electronics, grocery, pharma, entertainment across 50 cities in India.
Including the $100 million investment in Grofers earlier in August 2021, Zomato has now committed $275 million across 4 companies over the past six months. It further plans 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.
Shares of Zomato advanced 2.39% to Rs 139 on BSE. Zomato was one of the leading Food Services technology platforms in India in terms of value of food sold, as of 31 March 2021.
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