Zomato slashes Q3 net loss on one-time gain but operating loss triples; revenue jumps 82%

Food ordering company Zomato reported strong growth in operations but saw operational expenses rise much faster to pull it deeper into the red, only to get an accounting boost in the bottom-line due to a one-time gain.

Zomato reported a net loss of Rs 63.2 crore, as against a loss of Rs 352.6 crore in the third quarter ended December 31, 2020. However, this was boosted by a one-time gain of Rs 315 crore from the sale of an investment.

Factoring in the exceptional item, Zomato’s loss tripled to Rs 383 crore from Rs 118.4 crore in the year-ago period.

Losses, however, shrunk on a sequential basis from Rs 440 crore in the three months ended September 30.

Operating revenue grew at a robust pace of 82% to Rs 1,112 crore during the quarter from a year earlier. Sequentially, however, revenue rose just 8.5%.

Zomato’s share price, which made a strong debut on the bourses last year, has corrected sharply and is now down 45% from its peak. The company’s share price rose 0.32% to close at Rs 94.5 apiece in a strong Mumbai market on Thursday. The company declared its financials for Q3 after trading stopped for the day.

The company had issued its shares at Rs 76 each during the IPO.

Other Key Highlights

1) Other expenses, which include marketing expenses, more than doubled during the quarter to Rs 1,035 crore.

2) Employee expenses, including ESOP-related costs, rose even faster to Rs 411.5 crore during Q3.

3) Out of Rs 8,728 crore raised by the company in the IPO, it has already utilised Rs 3,268 crore, bulk of it for funding organic and inorganic growth plans.

4) The company’s India business almost doubled while revenue from the UAE was flat. Revenue from the rest of the world almost halved.

5) Margins in the UAE business, which is already profitable, shrunk. Rest of the world business also came up with marginal operating profit while Indian business remained in the red.

6) Number of orders grew 93% year on year and 5% sequentially.

7) Average order value (including customer delivery charges) shrank 3% sequentially, mostly on account of reduction in customer delivery charges.

8) Active food delivery partners rose to 191,000 last quarter from 173,000 in Q2 and 126,000 a year ago.

9) The number of monthly transacting users shrank sequentially to 15.3 million from 15.5 million in Q2.

10) B2B raw material supply unit Hyperpure posted 168% year-on-year growth and 40% sequential growth to Rs 160 crore in Q3.

Management Commentary

Zomato said it remains focused on the bigger picture and the long-term growth potential of its food ordering and delivery business in the years ahead.

“Zomato continues to benefit from the changes we are helping to drive in the overall restaurant industry. The consumption of restaurant food has grown manifold in India on the back of higher accessibility, choice and affordability of restaurant food,” the company said.

Zomato said the restaurant industry in India is highly fragmented with 90% of the revenue coming from standalone restaurants and only 10% from chains. “In this ecosystem, we have played our part by helping small restaurants level the playing field for themselves and get discovered by new customers.”

“As a result, average monthly active food delivery restaurants have grown by 6x and average monthly transacting customers have grown by 13x on Zomato over the past five years,” according to Zomato.