Bengaluru: Food technology start-up Zomato Media Pvt. Ltd on Wednesday said its revenue in 2016-17 rose 80% from a year ago to touch $49 million due to growth in advertisements and the food delivery business.
Chief operating officer Surobhi Das said in a company blog that during the period, Zomato's cash burn fell to $12 million from $64 million a year ago.
“FY16, a year ago, wasn’t ideal for us despite having achieved 2X revenue growth over FY15. That’s because our cash burn was very high at an average of $4.2m a month. Along with the burn rate, we were also in the middle of consolidating/rationalising our international operations to make better use of our execution bandwidth moving forward,” Das wrote in the blog post.
In fact, the turbulence in FY16 led to an erosion in valuation for Zomato, when HSBC Securities and Capital Markets (India) Pvt. Ltd in May last year slashed its valuation by about half to $500 million. Zomato had raised $60 million in September 2015 from Temasek and Vy Capital at a valuation close to a billion dollars. Overall, the company has raised about $225 million since inception in 2008.
“If companies in the online food delivery business, in particular, gain market traction, Zomato.com’s advertising business model could lose business. As a result, we think the company needs to develop a profitable online delivery business itself (and not outsource) at least in its top markets to complement restaurant search. This implies that Zomato.com will have to keep raising funds and investing for some more time to come, which would dampen profitability for a couple of years,” HSBC was quoted as stating in a Mint report on 9 May 2016.
Zomato currently operates in 23 countries, making it one among a few of Indian consumer Internet start-ups with a global presence.
Das claimed in Wednesday’s blog post that between December 2016 and March 2017, Zomato had reduced monthly cash burn globally to about $250,000, as against $4.2 million in March 2016.
The company’s advertising revenue, its core business until it entered food delivery in May 2015, grew 58% year on year to $38 million in FY17, while the food delivery business, where Zomato competes with Swiggy (Bundl Technologies Pvt. Ltd), clocked $9 million, an eight-fold growth over FY16.
Zomato claims to have recorded 2.1 million monthly orders in March.
Apart from advertisements and food delivery, Zomato also handles table reservation. It has also rolled out a subscription product called Zomato Gold, allowing consumers to buy a subscription to get exclusive offers like happy hours for drinks at various pubs and restaurants. The feature has been rolled out in Dubai and Lisbon and will be launched in India soon.
Zomato also plans to create kitchen spaces in areas where there isn’t adequate supply of good restaurants and will allow restaurants and top brands to prepare and deliver food exclusively for Zomato through these kitchens.
While Zomato is a leader in the advertisement space, it faces stiff competition from Swiggy in the food delivery segment. Swiggy, like Zomato, is adequately funded, having raised about $75 million from Accel Partners, SAIF Partners, Norwest Venture Partners and Bessemer Venture Partners, among others. The company is in talks with Naspers and Fosun to raise another $50 million.
Swiggy’s revenue rose to Rs23.59 crore for the year ended 31 March from Rs11.59 lakh a year earlier. Losses bulged to Rs137.18 crore from Rs2.12 crore in fiscal year 2015, the company’s filing with the Registrar of Companies shows. Total expenses were Rs160.77 crore, implying that Swiggy burnt about Rs13 crore per month in FY16.