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Food delivery platform Zomato said its revenue in FY20 grew by 105 per cent at $394 million compared to FY19, while losses grew by nearly 6 per cent to $293 million in the corresponding period.
While Covid-19 has impacted the size of its business, setting it back by a year or two, it has accelerated Zomato’s journey to profitability, and in July it expects to post 60 per cent of its pre-Covid peak ($23 million/month) revenue and reduce monthly burn rate to under $1 million, founder and CEO, Deepinder Goyal, said in a blogpost on Friday.
“Moving our business towards profitability was a core focus for us in FY20 and we made significant progress along that journey. We expect to make complete recovery over the next 3-6 months while continuing to maintain tight control on costs/profitability,” said Goyal.
After the rise of Covid-19 cases towards the end of March, Zomato’s food delivery GMV hit its lowest point in two years – GMV was 80 per cent down in the last week of March 2020, compared to its peak pre-Covid-19 week (in mid-February). The unit economics of its food delivery business has improved consistently over the last 18 months - in Q1 FY20, it made a contribution margin of – ₹47 per order which turned positive in Q1 FY21, with a contribution margin of +₹27 per order.
“We do not believe that the current contribution margin in our business is sustainable in the long term, we expect it to normalise between +₹15-20 per order. Net EBITDA for this business segment is expected to improve, as the growth in order volume here on should offset any corresponding drop in contribution margin,” said Goyal.
Cost-cutting measures
In order to quickly reduce costs during the initial days of the Covid-19 crisis, Zomato had announced that it would lay off 13 per cent of its workforce of 4,000 employees. It had also requested its staff to volunteer for salary cuts – 75 per cent of employees volunteered for partial salary cuts resulting in a total reduction of 14 per cent in payroll costs. All the original salaries have been reinstated, at present.
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