Foodtech major Zomato reports loss of Rs 356 crore in Q1

Food delivery startup Zomato reported a net loss of Rs 356 crores on a consolidated basis for the fiscal year 2021-22, compared to a loss of Rs 99.8 crores in the year-ago period. It happened due to higher expenses as the company's dining-out business was impacted by the COVID-19 pandemic.

Zomato shares were trading nearly 4% higher on the BSE in early trading on Wednesday, at Rs 129 per share. Following its massive IPO last month, the food-tech company has released its first earnings report.

The company's adjusted revenue increased by 26% quarter on quarter to Rs 1,160 crore. Consolidated revenue, on the other hand, was Rs 844.4 crore for the quarter under review, compared to Rs 266 crore for the same period a year ago.

According to Deepinder (Founder & CEO) and Akshant (CFO), "The majority of the revenue growth came from our core food delivery service, which grew despite the severe COVID outbreak that began in April. COVID, on the other hand, had a considerable impact on the dining-out industry in Q1 FY22, reversing the majority of the gains earned in Q4 FY21."

The country's second wave of COVID-19 infections had a significant impact on its dining-out business, reversing most of the gains made in the previous quarter, according to the company. Its total expenses increased to Rs 1,259.7 crore for the quarter ended June this year, up from Rs 383.3 crore the previous year.

Deepinder Goyal reported its highest gross order volume, which increased 37 percent to Rs 4,540 crore in the first quarter. India food delivery business reported the highest ever Gross Order Value (GOV), the number of orders, transacting users, active restaurant partners, and active delivery partners till date in any quarter in their history.

Commenting on the results, the brokerage Jefferies said that the company maintained a buy rating on the stock and raised the target price to Rs 175 per share after it reported a strong revenue beat led by 37 percent QoQ growth in GOV.

According to Jefferies, the adjusted EBITDA loss of Rs 1.7 billion is also within expectations.

"Following a successful first quarter, we are raising our revenue expectations for FY22-24 by about 10%-20%, principally due to increased GOV (which in turn are based on higher MTUs). We have increased our EBITDA loss forecasts, but we still expect a break-even in FY25-26. We've also changed our model structure to account for ESOP charges separately from now on, and we've raised this," Jefferies noted.

"Zomato's meal delivery business is displaying great growth traction," according to Dolat Capital. Despite this strong gain in volume and pricing, the company saw a decrease in Contribution/order throughout the quarter. The drop in contribution in Q1 was ascribed to a "costlier business climate in the sector," which Zomato believes is partly attributable to increased variable costs (fuel costs) and a rise in overall delivery availability costs." The stock has a Sell rating and a target price of Rs 90 per share.

''...our India food delivery business continues to remain contribution positive; although the contribution margin reduced slightly in Q1 FY22 as compared to the previous quarter on account of growing investments in addition to the costlier business environment (due to lockdowns) in which this growth was achieved,'' added Zomato.

Zomato's non-cash employee stock ownership plan (ESOP) expenses got increased in the June quarter as a result of significant ESOP grants made for the establishment of a new ESOP 2021 scheme.

Zomato recently went public, becoming India’s first tech unicorn. The company achieved a market capitalization of Rs 1.08 lakh crore on the BSE on July 23, becoming one of the few listed entities to enter the 1 lakh crore market cap club upon stock market debut.

Zomato's Rs 9,375 crore initial public offering (IPO) laid the foundation for other leading digital firms to go public, including Paytm, Flipkart, and Ola. It became the first Indian mega startup to go public, backed by China's Ant Group.

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