Zomato shares tumble even as loss narrows

Shares of Zomato Ltd sank 6% on Friday even as the food delivery company narrowed its net loss in the third quarter, aided by the sale of sports facilities provider Fitso to Curefit.

Zomato's consolidated net loss shrank to ₹63.2 crore in Q3 FY22 compared with ₹429.6 crore in the previous quarter, according to an exchange filing. The company had sold its stake in Fitso for ₹315.8 crore.

The food ordering firm reported tepid 1.7% growth in gross order value (GOV) on a sequential basis in the quarter ended December as people preferred dining out with easing of Covid-19 restrictions.

Average order value -- which includes customer delivery charges -- shrunk by around 3% quarter-on-quarter, mostly on account of reduction in customer delivery charges, the company says, adding that the number of orders grew 93% YoY and 5% QoQ.

Zomato's average monthly transacting users also declined to 15.3 million in the third quarter from from 15.5 million in the previous quarter.

The company's consolidated revenue from operations during the quarter grew around 9% sequentially to ₹1,112 crore as against ₹1,024 crore in the previous quarter. Revenue in the quarter ended December 2020 was at ₹609 crore.

Adjusted revenue -- the sum of revenue from operations and customer delivery charges – remained flat quarter-on-quarter at ₹1,420 crore in Q3. The company said its customer delivery charges fell 22% -- ₹7.5 per order reduction in customer delivery charges in Q3 FY22 as compared to Q2 FY22.

Revenue from its business-to-business unit Hyperpure grew 40% QoQ to ₹160 crore in Q3 FY22.

Zomato said the quick commerce category offers a huge addressable market and is also very synergistic with its food delivery business in the long term.

The company said it will enhance the upper limit of its potential investments in the quick commerce market to $400 million over the next two years. The food delivery major has invested around $225 million in the past year across three companies - Blinkit (formerly Grofers), Shiprocket and Magicpin.

This comes at a time when rival Swiggy has earmarked investments worth $700 million for its express grocery delivery service Instamart. Last month, Swiggy had raised $700 million in funding, joining the 'decacorn club' – privately-held companies valued at $10 billion or more.

Zomato, which made its stock market debut last year, said it is currently well capitalised with $1.7 billion cash on its balance sheet, and doesn’t envisage raising cash in the foreseeable future.

In the ongoing quarter, Zomato said it has made two additional minority equity investments in UrbanPiper ($5 million) and Adonmo ($15 million).

"We are in the process of setting-up our own non-banking financial company (NBFC) which will allow us to extend short term credit to our ecosystem – our delivery partners, customers and restaurant partners," Deepingder Goyal, founder and CEO of Zomato, said in a press statement.