Zomato exits 225 cities after reporting losses of Rs 346 crore
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Online food delivery platform Zomato Ltd on Thursday reported a widening of consolidated net loss at Rs 346.6 crore in the third quarter that ended in December 31, 2022 impacted by higher expenses and slowdown in food delivery business.
Consequently, the company has ceased operations in 225 smaller cities, saying that the performance of these cities was 'not very encouraging'.
The company had posted a consolidated net loss of Rs 67.2 crore in the same quarter last fiscal, Zomato Ltd said in a regulatory filing.
Consolidated revenue from operations during the quarter under review stood at Rs 1,948.2 crore. It was at Rs 1,112 crore in the corresponding period a year ago, it added.
Total expenses were at Rs 2,485.3 crore in the third quarter. In the same period last fiscal, it was at Rs 1,642.6 crore.
Zomato is one of the most-used food delivery apps in India and has recently re-launched its Gold subscription as an effort to boost profits.
“We have seen an industry-wide slowdown in the food delivery business since late October (post the festival of Diwali). This trend has been seen across the country but more so in the top eight cities," Zomato CFO Akshant Goyal said.
It remains a challenging demand environment for the food delivery business, he said, however, adding, “we are seeing green shoots of demand coming back in the recent weeks, which makes us believe that the worst may be behind us." He said in January, Zomato exited from around 225 smaller cities which contributed 0.3 per cent of its gross order value in Q3FY23.
“Performance of these cities was not very encouraging in the past few quarters and we did not feel the payback period on our investments in these cities was acceptable," Akshant said.
On whether signs are emerging about a slowdown in the long-term growth in the food delivery business, Zomato founder and CEO, Deepinder Goyal said, “We believe that the long term opportunity remains large and exciting."
The current slowdown is a result of a few temporary factors, including macro slowdown for the mid-market segment; boom in dining out for the premium-end and in travel at the premium-end, he added.
In order to revive growth, Deepinder said the company has taken steps such as launching a new membership programme called Zomato Gold and is also working on remodeling the Zomato Instant service to focus on offering customers home-style cooked meals at affordable prices.
Zomato has not revised its target of reaching adjusted EBITDA break-even, excluding its quick commerce business, by Q2FY24.
“We still feel confident about reaching adjusted EBITDA break-even (excluding quick commerce) by Q2FY24 as per our earlier estimate…The current slowdown in demand was unexpected which is impacting the growth in food delivery profits but despite that, we think we are in a good position to meet our profitability goal," Akshant said.
On the senior management exits from the company in the recent past, Deepinder said, “Company building is not just about the journey of the business. It is also so much about its people’s personal journeys. Both these journeys take their own twists and turns. And sometimes, for some people, the distance between their form (their mindset and skillset) and the company’s context becomes such that it is necessary to take a break from each other."
He also said the company does not “have the need to fill" the vacancies of the CTO and head of food delivery although it is “always on the lookout for great talent to join our team".
However, the company's decision to pull out of 225 small cities comes at a time when Zomato CEO Deepinder Goyal earlier announced that the company was looking to hire for around 800 roles.
His announcement had offered a glimmer of hope to the working population at a time when companies are laying off people to cut costs.
He posted several job vacancies on LinkedIn. However, in one of the posts, the requirement was to 'work 24*7 with no work life balance. The post faced backlash from people on LinkedIn.
