Zomato Losses Widen: Q1 Earnings Report

Zomato Reports Tripled Losses in First Quarterly Report

Following its public listing last month, Zomato experienced a more than threefold increase in losses during its initial quarterly earnings report.

This rise in losses is attributed to increased company expenditures and the detrimental effects of the pandemic on the dining-out sector.

Financial Performance Overview

The Gurgaon-based company documented a net loss of $48 million for the quarter concluding in June.

This figure represents a substantial increase compared to the $13.5 million loss reported during the corresponding period in the previous year.

Despite the increased losses, Zomato demonstrated significant revenue growth.

Revenue climbed from $35.7 million to $113.4 million over the stated timeframe, coinciding with a surge in online food ordering across the nation.

Order Volume and ESOP Expenses

The company successfully processed over 100 million food orders in the last quarter.

Furthermore, Zomato has now surpassed one billion total orders placed over the past six years.

According to a blog post authored by Zomato’s leadership, a significant portion of the losses stems from non-cash expenses related to Employee Stock Option Plans (ESOPs).

These ESOP expenses increased considerably in Q1 FY22 due to substantial grants made under the new ESOP 2021 scheme.

Executives anticipate this disparity between reported profit/loss and Adjusted EBITDA will persist in future reporting periods.

Impact of the Second Wave

The second wave of the coronavirus, which began impacting India in April, had a considerable negative effect on the dining-out business during Q1 FY22.

This impact effectively reversed much of the progress the industry had made in the previous quarter (Q4 FY21).

Stock Performance and Investor Relations

Zomato’s shares, which initially performed strongly on the Indian stock exchanges following its debut, experienced a 4% decline on Tuesday leading up to the earnings release.

The stock closed at a price slightly below its initial public offering price of $1.68 per share on July 23, which had previously valued Zomato at $13 billion.

The company has announced a shift in its investor relations strategy.

Zomato will now conduct only one analyst call annually, supplementing this with blog posts and quarterly shareholder letters to address investor inquiries.

Competitive Landscape

In the Indian market, Zomato’s primary competitor is Swiggy, which is supported by SoftBank and Prosus.

Swiggy recently secured $1.25 billion in a new funding round last month.

Prior to investing in Swiggy, SoftBank Vision Fund 2 conducted an evaluation of Zomato, according to sources familiar with the deal.

Both companies have been actively diversifying their offerings in recent quarters.

This expansion includes venturing into the grocery delivery sector.

Paving the Way for Other Indian Startups

Zomato represents the first consumer internet startup in India’s current wave to become publicly listed.

Several other Indian companies, including Paytm, MobiKwik, PolicyBazaar, and Nykaa, have submitted the necessary documentation to pursue initial public offerings later this year.