announced its fourth quarter results on Monday, said it has roughly $1.6 billion (Rs 12,200 crore) worth of unrestricted cash but won’t make any new investments.
The company did not make any new minority investments from the $400 million corpus it had earmarked for its quick commerce aspirations.
This comes on the back of Zomato’s
talks to acquire quick commerce startup Blinkit (formerly Grofers), for which the food-delivery firm had come under the scanner.
On March 15, Zomato said it will extend a
loan of up to $150 million to Blinkit, which has struggled to raise funds.
In a shareholder letter, Zomato’s chief financial officer Akshant Goyal said, “We have about Rs 122 billion (around $1.6 billion based on an exchange rate of Rs 75 to a dollar) unrestricted cash at this point. The minority equity investments that we wanted to do are done. As far as quick commerce is concerned, we had given an upper bound of $400 million investment in the next two years (CY22 and CY23) in the last quarterly letter. As of now, we are on plan to stick to this upper limit. Just to be clear, we are not planning to make any new minority investments as part of this $400 million outer limit,” said Goyal.
Here you go – our Q4FY22 shareholders’ letter. Hope you enjoy this new format, where @akshant_g and I chat with Ms… https://t.co/l0rUlczNei
— Deepinder Goyal (@deepigoyal) 1653308714000
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“There is currently no plan for any more minority equity investments at this stage given that we have covered most of the ground on our objectives cited above,” wrote cofounder and chief executive officer Deepinder Goyal.
While announcing its third quarter results, Zomato had said it
would invest an additional $400 million over the course of the next two years to fuel its quick-commerce ambitions.
The company did not disclose any more details of the Blinkit deal as a part of the filings.
After reporting results for the quarter ending March 31, 2022, Zomato said the company does not foresee “post-Covid ramifications” affecting its growth rate anymore.
“We did see low QoQ growth in Q3FY22 as dining-out and travel opened up post-COVID. We believe that was a one-time correction of our growth trajectory on the back of two strong quarters. We think our growth trajectory is back on track,” added Goyal.
However, he added that even before Covid, growth in the business has been lumpy (and not linear), so it is essential to take a long-term view.
The Gurugram-based foodtech company on Monday informed the exchanges that its total losses for the fourth quarter of FY22 grew substantially to Rs 359.7 crore, almost triple of the Rs 134.2 crore recorded in the same period a year ago.
Quarterly revenues grew to Rs 1,350 crore in the fourth quarter, a 44% jump from Rs 750.8 crore in the same period last year.
Short-term challenges continue
ET
reported on May 10 that food and grocery delivery companies have been unable to increase payouts to their riders amid spiraling fuel prices and overall inflation in the economy. This has resulted in supply-side issues cropping up across the gig economy.
In its letter to shareholders, Zomato also highlighted the rise in fuel prices and shortage of gig workers as short-term challenges.
“Yes, increase in fuel prices does increase our delivery cost. One could say that part of our progress on improving contribution margin is getting pulled back because of fuel price increase, as we haven’t yet fully passed on the incremental cost to customers… Yes, we are seeing some stress on the availability of delivery partners in the current quarter in select large cities since the last week of April. We think this is short-term in nature, as the post-Covid economic recovery has brought back jobs in cities,” said Goyal.
In its filings, Zomato also said that it launched in over 300 new cities in the fourth quarter and is now present in over 1,000 cities.
Goyal’s conflict of interest
Over the past few months, questions have been raised about Zomato making investments in companies in which cofounder Goyal holds a minority stake, including the likes of Shiprocket and Blinkit. Goyal said that he is using his personal money to increase the value of Zomato’s shares.
“My private investments help me learn, bring those learnings to Zomato, and transform Zomato for the better. During this process, I get to know some founders really well, connect more dots, and sometimes find cultural and strategic synergies with other companies. Overall, I don’t want to use Zomato capital to build high-risk hit-or-miss relationships with other founders. I would rather use my personal money to build those relationships. What I learn from those founders is ROI enough to me,” he added.
Akshant Goyal said, “I would also like to point out that of the seven investments Zomato made in FY22, Deepinder had very small equity ownership in only two of those. Shiprocket was a $100,000 investment which he exited at zero profit/loss. The second one was in Grofers (now Blinkit), where he invested around $94,000 in 2015 and exited in January this year (at the price per share of the round prior to when Zomato invested). We stay committed to not letting this be a factor in any of our investments, and run a tight governance process with the support of our strong and independent board.”
