Zomato, a food delivery start-up, increased its sales in 2019-20 to $394 million by a double of last year, at a deficit of $293 million. In the June quarter, it posted sales of $41 million on a deficit of $12 million, due to the effects of COVID. The Indian Foodtech giant anticipates its net reduction to be below $1 million in July, even though COVID-19 has decelerated it by about a year on company size, the business wrote in a recent annual report on Friday.
In FY19, the food aggregator startup posted $192 million in sales and $277 million in losses. Zomato reported its sales increased by 105 percent in FY20 to hit $394 million as opposed to $192 million in FY19, although the expenses rose by just 47 percent in the same period. The COVID-19-imposed lockdowns have already had a debilitating effect on the country’s food-service industry, since several eateries have been forced to close in recent months, and home delivery orders were hit with a significant impact.
“Just after the emergence of COVID-19 cases in India towards the end of March, our food delivery GMV hit a new rock bottom – GMV (gross merchandise value) was 80% down, the lowest in the past two years, in the last week of March 2020, compared to our peak pre-COVID-19 week (in mid-February),” said Deepinder Goyal, founder & CEO of Zomato.
Zomato’s GMV food delivery has managed to recover to 60 percent of pre-COVID levels as of July. The Gurugram-based business also made a point of saying the startup further acquired market dominance this year through the takeover of Uber Eats previously in January, and published a 108 percent growth in GMV in FY20. In the immediate aftermath of the Covid-19 economic collapse, 75 percent of workers at Zomato enlisted for partial wage cuts. Zomato has said it has taken back salary cuts across all job ranks and duties and restored all of the initial wages.
Zomato’s GMV rose from $718 million in FY19 to $1.49 billion in FY20. Zomato reported sales of only $41 million in the first fiscal quarter of 2020, revealing how COVID-19 impaired the state of the company. For the same period, the company recorded an EBITDA loss of $12 million. Over the last few quarters, Zomato CEO Deepinder Goyal said, Zomato has quickly processed its initiatives to improve the company’s profitability and improve operational efficiency in its spending. He said although COVID-19 had an effect on the company’s size, he says it has strengthened the path to profitability for Zomato. Now, with development stumbling, Zomato estimates its burn rate to land below $1 million, and monthly profits to return to 60% of pre-COVID peaks, even expecting to make a full recovery in the coming 3-6 months.
“Covid-19 has not adversely affected the health of our business – as we seem to have grown 2-3 years along this vector. In July 2020, we estimate our monthly loss rate to land under $1 million, while our revenue is expected to land at approx. 60% of pre-COVID peaks ($23m per month). We are expecting to make a full recovery over the next 3-6 months while also maintaining tight control on costs/profitability,” said Goyal.
Zomato further agreed that perhaps the loss of growth it is experiencing these days is owing to the young working professionals throughout metropolitan areas fleeing to their parents ‘ homes (mostly in small-town areas) where home-prepared food is the standard, particularly during an outbreak.
Nonetheless, with workplaces starting up, Zomato is projecting a fast rebound. Together with the marginal costing of Zomato also continuing to improve to some Rs. 27 per order supplied in this year’s June quarter. The year before, Zomato lost some Rs. 47 for each delivery scheduled in June. Goyal thinks the latest allocation margin isn’t feasible in the long run, though.
“We foresee a contribution margin overtime to normalize between Rs 15-20 per order delivered. Gross EBITDA for this market sector is bound to enhance since expansion in order volume must compensate for any corresponding reduction in contribution”, he said.“We expect to make a complete recovery over the next 3-6 months while continuing to maintain tight control on costs/profitability,” Goyal added.
Besides, Zomato’s profitability from dining out product lines also improved to $56.1 million in FY20 as its loyalty scheme, Zomato Gold (now Zomato Pro), was seeing registered users rise from $1 million in FY19 to $1.7 million in FY20. But this was before, COVID-19 came into the picture. The eating out part of Zomato ‘s market has been hit the hardest because restaurants stay closed for eating out – relating to almost zero sales through ads and Zomato Pro. The business predicts the turnaround here could be sluggish because customers will be worried about social distancing and sanitation, and establishments will have to reorganize themselves to establish favor on these grounds with the consumers.
The organization has created major improvements to its Hyperpure range, raising sales up to $14.7 million and growing its dining client base to 2256 establishments by the completion of FY20. Hyperpure is an effort by Zomato to supply restaurants with new, hygienic, products of the highest quality and kitchen supplies, as well as the finest ingredients.
During the initial weeks of April, Zomato usually releases its yearly fiscal report. Yet this year, due to the unpredictability created by the pandemic outbreak, it deferred the publication of the survey.