Zomato Q2 loss nearly doubles but revenue jumps; announces three deals

Food delivery platform Zomato Ltd’s consolidated net loss during the three months through September almost doubled from a year earlier as it continued to invest in growing its business

Net loss for the July-September quarter expanded to Rs 435 crore from Rs 230 crore a year earlier and Rs 359 crore in April-June, the company said Wednesday.

Adjusted EBITDA loss increased to Rs 310 crore in Q2 from Rs 170 crore in the previous quarter and Rs 70 crore in Q2 last year.

Adjusted revenue, which includes revenue from operations and customer delivery charges, increased two-and-a-half times to Rs 1,420 crore from Rs 580 crore a year earlier and rose 22.6% from Rs 1,160 crore in the first quarter.

Revenue jumped as more people ordered food online to avoid contracting Covid-19, even though authorities have mostly lifted movement and dining-out restrictions.

This is the second time that Zomato is disclosing its quarterly earnings. The company went public in July after raising Rs 9,000 crore through an initial public offering that was covered 38 times.

Zomato Q2: Other highlights

1) India food delivery gross order value in Q2 grew to Rs 5,410 crore, up 19% from Q1 and 158% year on year.

2) The company sells Fitso to Curefit for $50 million; also invests $100 million in Curefit for 6.4% stake.

3) Zomato to pick up about 8% stake in B2B logistics-tech firm Shiprocket for $75 million.

4) Zomato to buy about 16% stake in hyperlocal commerce startup Magicpin for $50 million.

Zomato management commentary

Zomato founder and CEO Deepinder Goyal said the company’s EBITDA losses went up due to investments in the growth of its food delivery business and cited three reasons.

One, increased spending on branding and marketing for customer acquisition; two, increased investments and growing share of smaller markets in its business (which are less profitable today compared to more mature cities); and three, increased delivery costs due to unpredictable weather and increase in fuel prices.

Goyal also said the restaurant industry bounced back in Q2. Overall customer traffic on Zomato’s platform in India increased to 59 million average monthly active users in Q2 from 45 million in Q1.

“We believe that almost all the restaurants across the country are open for business today. The restaurant industry was one of the most severely impacted sectors from the Covid-19 pandemic and it gives us immense joy to see the restaurant community getting back up on their feet after a prolonged phase of uncertainty for the past 18 months,” he said.

Announcing the three deals with Curefit, Magicpin and Shiprocket, Goyal said Zomato will divest or shut down non-core businesses and will instead invest in businesses that have greater growth potential.

“Including our $100 million investment in Grofers earlier in August 2021, we have now committed $275 million across four companies over the past six months,” he said. “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.”