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Food delivery biz helps Zomato triple revenue in FY19 as expenses surge

Food delivery biz helps Zomato triple revenue in FY19 as expenses surge
Photo Credit: VCCircle

Food-technology unicorn Zomato tripled its total revenue for the just-concluded financial year even as its expenditure grew considerably.

In its latest annual report, Zomato stated that its revenue had risen to $206 million (Rs 1,426 crore at the current exchange rate) in 2018-19 from $68 million (Rs 470.71 crore) the previous fiscal. The Gurugram-headquartered company also said that its current revenue run rate -- a projection of future earnings -- stood at $350 million.

However, the sharp increase in revenue came on the back of a six-fold rise in total expenditure to $500 million (Rs 3,461.15 crore) from $80 million (Rs 553.78 crore) in 2016-17.

Zomato attributed most of its losses -- $294 million, accounting for 60% of its total costs -- to expansion of its food delivery business in India.

“We have had tremendous growth aided by promotional marketing spends to acquire new users and be the first-to-market in many cities in India,” Zomato stated in the report.

The Deepinder Goyal-led firm said that the financials were unaudited and that discount-driven promotional costs borne by the company had not been deducted from revenue.

The latest figures are an indication that Zomato has long moved away from advertising revenue, which served as its core monetisation stream until a couple of years ago. Currently, food delivery, dine-out via subscription-based offering Zomato Gold and its loyalty programme Piggybank account for its core revenue streams, the report stated.

The food delivery business’ contribution grew four times in 2018-19 to $155 million (Rs 1,073 crore) as compared with $38 million (Rs 263.04 crore) in the previous year. In other words, food delivery now accounts for 75% of its total revenue, up from 55% in 2016-17.

“We now operate the service in more than 200 cities in India, up from 15 cities in 2017-18; and we made nearly 33 million deliveries in March 2019,” Zomato said.

HSBC Global Research recently pegged Zomato’s valuation at $3.6 billion, ahead of rival Swiggy, citing the contribution of food delivery to its total revenue.

In its quest to turn profitable by 2021, Zomato has introduced new business verticals including food supply warehouses for businesses and is reportedly in talks to acquire micro-delivery platform Dunzo.

In the food delivery business, Zomato faces formidable competition in the form of Naspers-backed Swiggy, which is currently valued anywhere between $3.2 billion and $3.3 billion having raised multiple big-ticket rounds of funding over the past year.

Zomato, too, has been busy on the fundraising front. The company has raised a total of $315 million in multiple tranches since October last year from existing investor Alibaba’s financial services arm Ant Financial, US-based growth equity firm Glade Brook and Chinese venture capital firm Shunwei Capital.

Most recently, the company raised $62.5 million (Rs 440.86 crore) in February this year in a fresh funding round from a clutch of investors including Berlin-based Delivery Hero, Shunwei and a third unidentified investor.

Last month it sold its UAE business to Germany’s Delivery Hero for $172 million (Rs 1,220 crore then). The deal also saw Delivery Hero invest $50 million in Zomato.

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