Zomato on Monday (August 1, 2022) reported a reduction in its consolidated loss to INR 186 Cr in the June quarter of the financial year 2022-23 (FY23) from INR 360 Cr in the corresponding quarter last year, caused due to increase in order volume.
Quarter-on-quarter (QoQ), the loss narrowed by 48.2% from INR 359.4 Cr reported in the March quarter of FY22. Zomato’s operating revenue also jumped over 67% YoY (YoY) to INR 1,413.9 Cr from INR 844.4 Cr in the June quarter of last year.
The startup said its overall revenue growth was driven by strong growth in gross order value (GOV) to INR 6,430 crore in Q1FY23. Its GOV stood at INR 4,540 in Q1 FY22.
GOV’s growth was driven by robust growth in order volume and modest growth in Average Order Values (AOV) compared to the previous quarter, Zomato said. However, it did not publish AOV for the June quarter. AOV for its food delivery business was INR 398 in FY22. On the profitability front, Zomato said its food delivery business broke even in adjusted EBITDA in 1Q23.
Deepinder Goyal, Founder and CEO of Zomato, said, “Our focus on profitability has intensified over the past few months with the changing market context without compromising our focus on growth,”We do this by looking at everything with a critical lens and allocating resources with a long-term view of sustainable growth and profit.”
Zomato’s total expenses rose 40.3% year-on-year to INR 1,767.7 in Q1FY23. In the corresponding quarter last year, the startup reported total expenses of 1,259.7 cr.
In the June quarter of this fiscal year, supplies and related charges had the largest share of total costs, contributing more than 32%. Zomato’s expenses in this segment rose to INR 572.4 Cr from INR 296.7 Cr reported in the year-ago quarter.
Employee benefits expenditure of INR 348.9 crore was the second largest contributor to Zomato’s total expenditure. However, quarter-on-quarter, the startup’s spending under the banner declined by over 14% from the INR 406.8 Cr reported in Q4 FY22. Besides, it also fell by 10.7% YoY from INR 390.7 in the June quarter of FY22.
Zomato’s advertising and promotion expenses also saw a decline of around 8% year-on-year to INR 277.6 from INR 301.5 reported in 1QFY22. Zomato said its margins are being negatively impacted by higher fuel costs and wage inflation.
Akshant Goyal, Chief Financial Officer of zomato, said, “On the demand side, it has a negative impact, but it’s hard to quantify at this point in our business because of the many moving parts. Similarly, on the cost side, margins are negatively impacted by higher fuel costs and wage inflation. However, overall efficiencies have helped us make good progress in improving contribution margins.”
Akshant further said, “Convenient shopping covers a wide range of essential expenses, including groceries, fruit and vegetables, beauty and personal care, over-the-counter medicines, stationery and more. Therefore, we expect the total customer base, average order value as well as monthly order frequency to be higher than food delivery.”
Zomato shares have been on a downward spiral for the past month or so since the startup announced its acquisition of flash commerce platform Blinkit in June. Adding another loss-making company to its portfolio has raised investor concerns.
However, Zomato has assured its stakeholders that Blinkit’s losses are decreasing every month. While Zomato did not provide a clear outlook for the next quarter, it reiterated its target towards growing revenue and reducing losses.