The company which made a stellar debut on the stock exchanges in July this year had posted Rs 844.4 crore in revenue from operations in the fiscal first quarter ended June 30.
The Gurgaon-based Zomato attributed the rise in loss to increased spending on branding and marketing for customer acquisition, higher investments and growing share of small and emerging geographies in the business and delivery costs going up due to unpredictable weather and increase in fuel prices.
Importantly, Zomato announced plans to deploy $1 billion in startups over the next couple of years. It also announced key investments in three companies — logistics aggregator Shiprocket, local shopping and savings platform Magicpin as well as fitness startup Cultfit, earlier known as Curefit.
According to the company, it has now committed $275 million across four companies in the past six months, including investment in online grocer Grofers. It had
invested $100 million in Grofers in August.
“We plan 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,” the company said.
Last month, chief executive Deepinder Goyal
told ET in an interview that the company was looking to back businesses that would add more than $10 billion to its market capitalisation. “We are investing in some really good founders and companies — all in synergistic or adjacent areas to our business. We hope that over time, some of these companies and founders will choose to merge with Zomato to continue on their growth path. We are not asking any of these founders or companies for future M&A rights. We want chemistry to do the work here,” Goyal had said.
These investments, according to the company, are part of its long-term view where it is prioritising in three core areas — divesting businesses that are not going to add exponential value to shareholders, increasing focus on the core food delivery business to build an ecosystem, and finally investing and partnering with companies to tap into growth opportunities beyond food.
As part of the Cultfit investment, Zomato is in the process of selling fitness app Fitso to Curefit for $50 million. “In order to cultivate a great long-term partnership with Curefit (Cultfit), we are also investing cash in Curefit. Net $50 million cash investment plus value of the Fitso business (worth $50 million) will give us a cumulative shareholding worth $100 million in Curefit (a 6.4% shareholding),” Zomato said while announcing the investments. The transaction values Cultfit at $1.5 billion, making it the newest unicorn in India. Its last publicly known valuation was around $800 million.
“This will help us potentially explore cross-selling benefits between Zomato and Curefit, as we see food and health becoming the same side of the coin in the long term,” Zomato added.
Zomato said it is deploying $75 million in Shiprocket for an 8% stake as part of a larger $185 million round and that it also invested $50 million in Magicpin as part of a $60 million funding round. Zomato is getting a 16% stake in Magicpin.
Zomato founder and CEO Goyal, who is also a cofounder of Zomato, recently joined the board of Magicpin.
Earlier this year, Tata Digital, a 100% subsidiary of Tata Sons, had
entered into a memorandum of understanding to invest $75 million in Cultfit, which was cofounded by Mukesh Bansal. Before Cultfit, Bansal had founded Myntra which he sold to Flipkart in 2014. Bansal also joined Tata Digital as its president to work closely with Tata Group executives to steer the salt-to-steel conglomerate’s ambitious plans in the digital economy. Tatas also acquired a majority in online pharmacy 1mg and e-grocer BigBasket. Cultfit’s valuation was not disclosed at the time of Tata Digital’s investment.
The investments in startups are being led by Zomato’s corporate development team, which reports to chief financial officer Akshant Goyal. The four-member team is headed by Kunal Swarup, who was previously at Kotak Investment Banking. As part of investing in its core offering, Zomato will also pour $50 million in the (business-to-business) supplies business for restaurant partners, Hyperpure, in the next 18-24 months.
Zomato reported an increase in its transacting users as well as order value in the past quarter, a trend it has witnessed in the last one year.
Zomato’s gross order value — the total monetary value of orders including taxes, customer delivery charges and gross of all discounts — grew 19% from the previous quarter to $721 million, driven by an increase in the number of monthly transacting users, active food delivery restaurants and delivery partners.
Zomato’s adjusted revenue — which is a combination of revenue from operations and customer delivery charges — in the second fiscal quarter stood at $189 million, 22.6% higher compared to the previous quarter.
The company’s monthly transacting users rose to 15.5 million from 12.3 million a quarter earlier. Zomato said it had 301,000 monthly active delivery partners and 173,000 active delivery restaurants. The food delivery firm had previously invested in online grocery delivery startup Grofers for about a 10% stake. “We have a financial stake in Grofers. Our worst-case scenario is that we have a financial investment that will give us some returns. Hopefully, it is not a financial but a strategic bet. And we’ll see whether it makes sense for us to merge at some point or not. But right now, it’s too early to say anything,” Goyal had told ET in an interview earlier.
The series of new investments come on the back of the food delivery and discovery platform undergoing changes including a cleaning-up exercise this year as part of which it shuttered its international operations in the US, the UK, Ireland and Singapore.
Zomato said in its filing on Wednesday that all the businesses it had shuttered contributed less than 1% to the adjusted revenue and about 13% to losses in the second quarter.
Earlier this year, the company seemed to be focussed on building its fitness and health verticals through Fitso and nutraceutical business, both of which it has divested from or shut down. As part of the new vision, Zomato will focus on building a hyper local ecosystem around its core business.
“The growth of the food delivery business was such that in the bigger picture, these businesses had ceased to add much to the overall business. We don’t want to build businesses which can add just $1 billion to shareholder value anymore. We need to be prudent with our team’s time and the money in our bank,” Goyal told ET last month when asked about the different businesses the company had shuttered over the year.
