As losses mount, Zomato turns focus to conserving cash

Mumbai/Bangalore: Online food delivery platform Zomato’s CEO Deepinder Goyal has said that the company is being “aggressive” about conserving cash amid widening losses, and will not make any fresher investments in the quick commerce space (q-comm), for which it had earlier earmarked $400 million. The company also acknowledged a shortage of delivery workers, saying that many professionals who left for their villages during the first Covid-induced lockdown in 2020 have not returned yet.

Zomato’s expenses nearly doubled as its consolidated net loss for the March quarter widened to about Rs 360 crore, compared to Rs 134.2 crore in the corresponding quarter last year. The company posted revenue from operations of Rs 1,211.8 crore, up 75 per cent compared to last year.

According to a letter shared by the company with its shareholders on Monday evening, Zomato has about Rs 12,200 crore unrestricted cash at this point and it said the capital needs are currently limited. To that effect, it said it will not be making more fresh investments from its $400 million corpus in the q-comm space, where it has previously placed its bets on Blinkit (formerly Grofers).

“As far as quick commerce is concerned, we had given an upper bound of $400 million investment in the next two years (CY22 and CY23) in the last quarterly letter. As of now, we are on plan to stick to this outer limit,” Goyal said. “We are not planning to make any new minority investments as part of this $400m outer limit. Think of this as the max number of losses we may need to fund in this period of time in the quick commerce business, if and when we fully get into it,” he added.

To be sure, in March, Zomato had extended a loan of $150 million to Blinkit, which was faced with a cash-crunch situation that led to it shutting down over 50 of its dark stores and laying off hundreds from its workforce. Last year, Zomato invested $100 million in Blinkit for nearly 10 per cent stake. The food-tech platform had extended another $100 million to Blinkit earlier in March 2022.

Zomato also accepted that there was a shortage of workers. “We are seeing some stress on the availability of delivery partners in the current quarter in select large cities since the last week of April. We think this is short-term in nature, as the post-Covid economic recovery has brought back jobs in cities, and we lost some delivery partners to such jobs,” Goyal said. “On top of it, all the workforce which migrated to their hometowns (or villages) during the first Covid wave, hasn’t yet come back to the cities for work”.

On Monday, Zomato’s shares on the BSE closed 2 per cent lower at Rs 56.80. It hit the bourses last year with an issue price of Rs 76. At the time of publishing, Zomato’s market capitalization stood at Rs 44,879.83 crore, which is over Rs 88,000 crore less than its peak cap of Rs 1,33,144.38 crore in November 2021, when the stock had scaled an all-time high of Rs 169.