Most of the losses came from Zomato's food delivery business in India even as the company will "continue to invest and expand this (food delivery) category," Zomato Founder and CEO Deepinder Goyal said. It competes with Swiggy, Uber Eats and Foodpanda.
Alibaba’s payment affiliate Ant Financial-backed online food delivery and restaurant discovery platform Zomato, in its annual report FY19, said that the company’s total cost has increased from $80 million (Rs 560 crore) in FY18 to $500 million (Rs 3,500) in last financial year. Zomato’s losses for FY19 stood at $294 million (Rs 2,058), most of which came from its food delivery business in India.
Zomato had spent money on “promotional marketing spends to acquire new users” and it will “continue to invest and expand this (food delivery) category,” Zomato Founder and CEO Deepinder Goyal said in a company’s blog post.
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Swiggy’s arch-rival Zomato also reported over 3X growth in its revenue from $68 million in FY18 to $206 million in FY19 — ahead of $180 million it had targeted.
“This is due to the investment they have put to compete on the delivery side with Swiggy. They figured out that more people are eating at home and Swiggy is eating into their market share. However, with Zomato you can also dine in apart from home delivery whereas Swiggy only does home delivery. So Zomato has to invest more to give complete experience to customers,” Harish HV, an independent analyst for internet businesses and former Partner, India Leadership team at Grant Thornton told Financial Express Online.
While Swiggy is yet to disclose its Fy19 results, the company is reportedly in talks with Uber Eats to acquire its India business. Swiggy’s valuation of $3.3 billion was last month surpassed by Zomato as HSBC valued the company at $3.6 billion. In 2016, HSBC had reportedly slashed Zomato’s valuation by half to around $500 million from $1 billion. Zomato also competes with Ola-owned Foodpanda in India.
The financial results announced by Zomato were based on management information systems and unaudited. Also, the discount-driven promotional cost borne by Zomato wasn’t deducted from its revenue as the Indian Accounting Standard applicable last year (FY18), Goyal said. However, it will reflect in its RoC documents when filed.
Zomato’s delivery business contributed a maximum amount of $155 million to its revenue followed by $49 million coming from its dining out vertical and $2 million from its sustainability business.
The company also claimed improved unit economics in the food delivery business. The company now lose Rs 25 per delivery vis-a-vis Rs 44 per delivery in March 2018. Also, “The key driver metric of unit economics — the number of deliveries per rider per hour went up to 1.4 from 0.9 last year,” Goyal said.
The sustainability business includes Hyperpure — to supply food ingredients to restaurants online — that was launched in August 2018. In February 2019, Zomato built a 30,000 sq. ft warehouse to cater to 2,500 restaurants daily in Bengaluru even as a 40,000 sq. ft warehouse was also launched in Delhi in March 2019.
Zomato, said Goyal, currently deliver food to over 200 cities in India, up from 15 cities in FY18.