Zomato on Friday reported a narrowing of losses at Rs 188.20 crore for the March quarter compared with Rs 346.60 crore in the December quarter and Rs 359.70 crore in the same quarter last year. Zomato said its business, excluding quick commerce, turned positive adjusted Ebitda, in the March quarter. It said it is aiming to be positive adjusted Ebitda (and also PAT) including quick commerce within the next four quarters.
Revenue for the quarter rose 69.66 per cent to Rs 2,056 crore for the quarter compared with Rs 1,211.80 crore in the corresponding quarter last year.
"In food delivery, over the last five quarters, we have improved our margins meaningfully while further strengthening our market position. We will continue with the same mindset as we look to further expand the adjusted Ebitda margin (from the current 1.2 per cent) to our stated goal of 4-5 per cent of GOV (which would translate to Rs 1,000 to Rs 1,300 crore of annual cash operating profit at the current scale of the food delivery business)," Zomato said.
Zomato said its quarterly growth in food delivery segment was low because of the demand slowdown that it witnessed from late October till the end of January this year. Zomato said it has started seeing green shoots of recovery in the first week of February.
"That recovery has continued and the business has grown well since then and the same should reflect in better GOV growth in the next quarter. We are expecting QoQ GOV growth to be in high single digits in Q1FY24. This could have been higher if not for the industry wide slowdown that continues to weigh on growth.
Zomato cited two other factors that impacted growth in the March quarter. The first was February being a shorter month (2.2 epr cent impact) and shutdown of 225 cities in January 2023 (0.3 per cent impact).
Normalised for these factors, Zomato said it would have seen a sequential GOV growth of 0.8 per cent in Q4FY23 instead of a decline of 1.7 per cent.
Zomato said there is still a long way to go in terms of margin improvement in On quick commerce side, it was pleased with the outcome so far. In March, it said, more than 65 per cent of the gross order value (GOV) was from contribution positive stores. A few stores have even crossed 5 per cent contribution margin and Zomato expects that to be the case across the mature parts of our network at some point in the future.
Zomato said its Gold membership base scaled to 1.8 million members during the quarter and while that had some negative impact on contribution margin, it was more than compensated for by progress across other revenue and cost levers which we have been working on in the last couple of quarters.
Zomato said it introduced a delivery charge for orders below a certain minimum value in the March quarter, which led to some churn in restaurants ordering from Hyperpure. While the number of unique restaurants billed fell from 44,000 in the December quarter to 42,000 in the March quarter, the overall profitability of the business improved as a result of this.
In March , Zomato's oldest city Bangalore turned profitable (before allocating central corporate overheads). Zomato said iy shut down one of its cities (Chandigarh) as it did not see the right demand density in that location.
"As we mentioned in the last letter, the quick commerce opportunity is scaling well, and we expect it to contribute meaningfully to revenue growth and profitability in the coming quarter," it said.
Zomato said delivery costs have not seen significant improvement in the last year in spite of a lot of effort.
"Our efforts to increase the efficiency of our delivery network were reversed to some extent by factors like high inflation, investing in increasing choice for customers by increasing delivery radius, etc. Anyway, we are going to continue trying harder to bring our delivery cost down (without impacting earnings of our delivery partners), and are hopeful of making progress over the next few quarters."
On ONDC, Zomato said it welcomes all innovations that could help the restaurant industry in India grow. "We continue to watch the ONDC progress closely and learn from it."
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