As loss widens, Zomato ‘aggressive about conserving cash’  

Yatti Soni | | Updated on: May 23, 2022

NEW DELHI, 19/05/2022: Zomato's food delivery men ready for delivery, at Connaught Place in New Delhi on Thursday. May 19, 2022. Photo: SHIV KUMAR PUSHPAKAR / The Hindu (To go with Abhinav's story) | Photo Credit: SHIV KUMAR PUSHPAKAR

Increase in fuel prices increased delivery cost: CFO

Zomato CEO Deepinder Goyal said the company is being aggressive about conserving cash, even as the food delivery major saw its net loss widen to ₹359 crore in Q4 FY22 compared to ₹134 crore in Q4 FY21. 

Consolidated revenue from operations grew to ₹1,212 crore . (₹692 crore). Adjusted EBIDTA loss reduced by 15 per cent to ₹220 crore in Q4FY22 and adjusted revenue grew 8 per cent quarter-over-quarter to ₹1,540 crore.

On capital allocation plan, the company’s CFO Akshant Goyal said, “We have about $1.6 billion unrestricted cash at this point. Our capital needs are currently limited. Losses in the core food business are reducing rapidly, as we mentioned earlier. The minority equity investments that we wanted to do are done.” 

Commenting on whether Zomato plans to acquire Blinkit, CEO Goyal said, “the company has committed to giving the quick commerce company a short term loan of up to $150 million to fund its short term capital needs. Beyond that, there is nothing to share at this moment,”

Investment plan

In the last quarterly letter, Zomato had given an upper bound of $400 million investment in quick commerce in the next two years (CY22 and CY23). “As of now, we are on plan to stick to this outer limit. We are not planning to make any new minority investments as part of this $400 million outer limit set out for quick commerce. Think of this as the max amount of losses we may need to fund in this period of time in the quick commerce business, if and when we fully get into it,” the CFO added. 

As the restaurant food ecosystem matures, the company executives said they are seeing rapid changes in the profitability of smaller cities. The number of cities which were contribution positive in the top 300 cities was over 120 in FY22, compared to 5 cities in FY20. Further, Zomato’s average order value for FY22 was ₹398 compared to ₹397 for FY21. For the top 8 cities, the company saw the AOV increase by 3 per cent in FY22 over FY21. 

Fuel price rise

“Increase in fuel prices increased our delivery cost. One could say that part of our progress on improving contribution margin is getting pulled back because of fuel price increase, as we haven’t yet fully passed on the incremental cost to customers,” Goyal added.  The substantial cuts in fuel prices, he hoped will reduce inflation, and reduce costs for a number of businesses, including Zomato. 

“Overall, we believe there’s significant potential to optimise delivery costs through better utilisation of our fleet. We are working towards bringing down the delivery cost per order while increasing delivery partners’ EPH (Earnings per Hour) and enhancing customer experience at the same time,” said Goyal. 

The company is seeing some stress on the availability of delivery partners in the current quarter in select large cities. However, Goyal thinks this is short-term in nature, as the post Covid economic recovery has brought back jobs in cities, and some delivery partners moved to such jobs. 

“All the workforce which migrated to their hometowns (or villages) during the first Covid wave, hasn’t yet come back to the cities for work – thus hampering our delivery partner acquisition rate. We think things will normalise in a few weeks. We are also working on various long-term initiatives to drive more stability of delivery partners in our fleet,” he added.

Published on May 23, 2022
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