Revenue from operations for the fiscal third quarter rose to Rs 1,112 crore from Rs 1,024.2 crore in the July-September period and Rs 609.4 crore a year earlier. Loss narrowed dramatically to Rs 67.2 crore, compared with Rs 434.9 crore a quarter earlier and Rs 351.3 crore in the previous-year period.
Zomato said it saw 9% growth in revenue from operations on a quarterly basis, while its customer delivery charges shrank 22%. “This was driven by a Rs 7.50 per order reduction in customer delivery charges in Q3 FY22 as compared to Q2 FY22,” Zomato said, explaining that it re-distributed its growth investments more in favour of discounts on customer delivery charges compared with 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 FY22,” it said.
Zomato reiterated its focus on the quick-commerce segment and added that it will invest an additional $400 million in the space in the next two years.
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The Gurgaon-based company also expanded to 180 new cities, taking its presence in India to more than 700 cities.
Zomato’s adjusted revenue — a combination of revenue from operations and customer delivery charges — increased 78% on year to Rs 1,420 crore. As reported by ET earlier, the company saw a massive increase in food order volumes on New Year’s Eve, resulting in gross order value (GOV) of $18 million, 78% higher than the same day last year.
Zomato’s GOV grew by 84.5% Y-o-Y and 1.7% Q-o-Q to Rs 5,500 crore in the December quarter.
“We believe that the weak Q-o-Q growth in GOV was primarily due to a reduction in customer delivery charges as mentioned above, in addition to a soft impact of post-Covid reopening (including some shift from delivery to dining out),” the company said in its earnings report.
Zomato said over the years, unit economics in its food delivery business has improved with scale. Contribution margin (as a percentage of GOV) has improved steadily from a negative 15% in 2019 to 1% today, it said. “A 5% contribution margin in our food delivery business (at the current scale) should get us to Ebitda break-even as a company (covering all common corporate costs as well).”
Quick-commerce ambition
The company said it has invested $225 million across Blinkit (formerly Grofers), Shiprocket and Magicpin and that Blinkit has scaled its operations rapidly in the buzzy quick-commerce space. Based on January sales, it is on an annual gross merchandise value run rate of $450 million with more than 400 dark stores across 20 cities in India.
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Zomato said the category offers a “huge addressable market” and is also “synergistic to its food delivery business”.
“We are very bullish on the product-market fit, unit economics, as well as the growth trajectory of the quick-commerce category. It reminds us of the food delivery category a few years ago when many platforms competed over a large and growing market but ultimately only the few who delivered exceptional experience to their customers survived,” Zomato said in its latest earnings report. “We are becoming increasingly confident in our decision to invest behind market leadership here with healthy unit economics.”
Rival Swiggy has allocated $700 million to grow its quick-commerce vertical, Instamart, ET reported recently.
Last year Zomato had committed to deploying $1 billion in startups over the next two years. “We want to continue making minority equity investments in businesses that will accelerate growth of our business. We aim to work together with founders of other companies in a symbiotic relationship and utilise their expertise to strengthen and support our business,” the earnings report said.
Other businesses and NBFC
Zomato also outlined its lending ambition with an announcement to set up a non-banking financial company that would allow it to extend short-term credit to its restaurant partners, delivery partners and even customers.
In November last year, Zomato launched Zomato Wings to help restaurants secure funding by acting as a conduit between restaurant, cloud kitchen businesses and the investors.
In its maiden quarterly earnings report — for the first quarter of FY22 — the company that got listed in July last year had committed to investing in its supplies business for restaurant partners, Hyperpure, where it had incurred a loss.
For the December quarter, Zomato said its revenue from Hyperpure grew 168% YoY to $21 million. The business has now scaled to nine cities and the company is working with 27,000 unique restaurants in this quarter — up 50% from the previous quarter.
The company added that it doesn’t intend to earn money from its dining-out business anytime soon and will instead focus on improving their product and customer engagement for the product.
Zomato vs Swiggy
Incidentally, arch rival Swiggy reported its financial results for FY21 on Thursday. Its consolidated revenue from operations fell 26.6% from the previous year to Rs 2,547 crore, while net loss shrank almost 59% to Rs 1,617 crore, as the food delivery platform weathered the first year of pandemic.
In its regulatory filing, sourced from business intelligence platform Tofler, the food and essential delivery services company said lockdowns, restrictions and multiple emergency measures taken in the wake of the Covid-19 outbreak impacted the performance of the company in FY21.
In the same fiscal year, Zomato’s revenue had fallen by nearly 25% from the year before to Rs 1,994 crore and loss narrowed to Rs 816.4 crore.
