Alibaba-backed food delivery platform Zomato on Friday announced its plans to lay off 13% of its 4,000-strong workforce among other cost-cutting measures to tide over the Covid-19 crisis.
CEO Deepinder Goyal said in an open letter that he expects the number of restaurants to shrink by an estimated 25-40% over the next 6-12 months due to the lockdown.
The Gurugram based unicorn hopes to continue to improve on its “very generous amount of runway” as it looks to reduce capital burn rate.
We have advised 13% of our workforce to start looking for jobs outside of Zomato, while we support them financially and emotionally for the next 6 months.— Deepinder Goyal (@deepigoyal) May 15, 2020
“All our employees who no longer have any work at Zomato, will continue to be with us at 50% salary for the next 6 months. During this time, outside of the handover period of 1-2 weeks, we expect these folks to spend 100% of their time and energy towards looking for jobs outside of Zomato,” Goyal said.
Additionally, employees will see a temporary pay reduction of up to 50%, starting June. The cuts will be lower for people with low salaries. The reduction in pay will be eligible for “2x employee stock options.”
“I foresee (and hope) this to be around 6 months from now. We will speak about this in more detail during the upcoming global townhall,” Goyal said.
Another measure includes the reduction of real estate costs, which is Zomato’s highest expense after payroll. The company has decided to make partial and full remote work a permanent feature. It operates over 150 offices globally, most of which are spaces for the sales and logistics teams.
The letter also contained a business update on the company’s strategic expansions during the lockdown period. Zomato said it is set to launch its grocery delivery business in the United Arab Emirates and Lebanon. The platform currently operates in 185 cities in India
“We see long term potential in this segment. Grocery also fits perfectly into our vision of better food for more people,” Goyal said.
The company has also launched its food delivery business in Turkey and takeaway service in Australia, New Zealand and Portugal.
The company said it also expects to scale its Hyperpure business, without providing any details. Hyperpure is a business-to-business foodtech vertical that provides fresh produce to restaurants. It recently launched a warehouse in Mumbai.
During the lockdown, Zomato had raised about $5 million from Pacific Horizon Investment Trust, a fund managed by British investment management firm Baillie Gifford. Prior to this, in January it raised $150 million funding at a valuation of $3 billion from existing investor Ant Financial, which is an affiliate of Chinese conglomerate Alibaba.
Late April, rival Swiggy was in the news for its set of cost-cutting measures to survive the effect of the Covid-19 outbreak on business.