Zomato’s net loss nearly halves to ₹186 cr in Q1

Zomato Ltd cut its loss by nearly half in the June quarter from the preceding three months, as the food delivery platform focused on profitability amid a steep erosion in its share price.

Net loss, including those of units, narrowed to ₹186 crore during the June quarter from ₹359.7 crore in the three months ended 31 March. The food aggregator’s loss narrowed by 48% from ₹360.7 crore a year ago.

Consolidated revenue from operations rose 16% to ₹1,413.9 crore from ₹1,211.8 crore in the March quarter and 67% from ₹844.4 crore a year ago.

This was driven by a 10% sequential jump in its gross order value (GOV) to ₹6,430 crore in the June quarter. GOV growth was led by order volumes and a mild growth in average order values when compared with the previous quarter, it noted.

“Our focus on profitability has sharpened in the past few months with the change in market context, without compromising our focus on growth. We are doing that by assessing everything with a critical lens and allocating resources by taking a long-term view to sustainable growth, as well as profit,” said Deepinder Goyal, managing director and chief executive officer of Zomato.

The profitability focus comes at a time Zomato shares have plummeted after last year’s bumper listing. The food aggregator’s shares are down nearly 70% from their peak hit shortly after listing last year. Its shares came under more pressure as the one-year lock-in period for internal investors holding around 61.3 million shares or 78% of Zomato’s shares ended on 23 July. On Monday, Zomato’s shares fell 1.07% to ₹46.35 on BSE.

On profitability, Zomato said the food delivery business hit a milestone in the June quarter by getting to adjusted Ebitda (earnings before interest, taxes, depreciation and amortization) break-even, as the company saw improvement in both costs and revenue side.

Daljit Singh Kochhar, director at business consulting firm KT Advisory, noted that it is positive that the company has posted lower losses and growth in revenues. However, Kochhar said a company that has been loose with expenses could easily show 1-2 quarters of cost control while the proof is in continued cost controls alongside growth.

“I value Zomato on optionality—i.e. the probability that it will show me FCF (free cash flow)—and that requires cost discipline for 3-4 quarters and sanity in capital allocation. It’s early in the innings for me to place a bet on Zomato,” Kochhar added.

Zomato’s quick commerce business, Blinkit, which it acquired earlier this year, improved as well. In July, Blinkit’s estimated adjusted Ebitda loss narrowed to ₹92.9 crore from ₹107.7 crore in May and ₹204 crore earlier in January. The $569 million Blinkit acquisition raised more worries about Zomato’s path to profitability. Blinkit’s losses have reduced owing to operating leverage and improved execution, said Akshant Goyal, chief financial officer, Zomato. “Blinkit has also shut down a number of unviable dark stores, which were not scaling. This has also brought the losses down,” Goyal added.

Blinkit’s revenue in July increased to ₹74.9 crore from ₹58 crore in May and ₹22.1 crore in January. Its GOV in July was at ₹482.7 crore as compared to ₹402.8 in May and ₹295.5 in January.

The Zomato-Blinkit deal has received shareholders’ approval, and post the closure of the deal, the company plans to experiment with cross-leveraging Zomato’s customer base for Blinkit and vice versa. “As stated earlier, we believe that in India, super brands will work better than super apps. Which means that the Blinkit app will continue to operate independently,” Goyal said. In terms of presence, Blinkit will stay focused on the top 15 cities.