Zomato also said that it has rolled back pay cuts across employee levels and functions and that all the original salaries have been re-instated.

A person opening Zomato app to order foodImage Credit: Picxy.com/munna
Money FoodTech Saturday, July 11, 2020 - 12:48

Foodtech unicorn Zomato expects its net loss in July to be under $1 million even as Covid-19 has set it back by about a year in terms of the size of the business, the company said in its annual report on Friday.

For June, it posted EBITDA loss of $1.5 million, while revenue hit $17 million.

Zomato said its revenue in FY20 grew by 105% to reach $394 million as compared to $192 million in FY19 while the costs grew by only 47% in the corresponding period.

For FY19, Zomato posted EBITDA loss of $277 million which increased to $293 million in FY 20.

Zomato also said that it has rolled back pay cuts across employee levels and functions and that all the original salaries have been re-instated.

Zomato has said that its food delivery GMV has recovered to 60% of pre-COVID levels.

In the first quarter of FY21, Zomato posted revenue of just $41 million, reflecting how Covid-19 impacted its business size. The company posted $12 million EBITDA loss for the same period.

Zomato CEO Deepinder Goyal said in the last few quarters, Zomato fast tracked its efforts towards making the business profitable and drive efficiency into its spends.

He said that while COVID-19 has impacted the size of the business, he claims that it has accelerated Zomato’s journey to profitability.

"Covid-19 has positively impacted the health of our business -- we seem to have gained 2-3 years along this vector. In July 2020, we estimate our monthly burn rate to land under $1m, while our revenue should land at approximately 60% of pre-Covid peaks ($23m per month)," said Goyal.

Goyal added that the unit economics of the food delivery business has improved over the last 18 months. “In Q1 FY20, we used to make a contribution margin of –₹47 per order; in Q1 FY21, we made a contribution margin of +₹27 per order,” he said.

However, Goyal says that the current contribution margin is not sustainable in the long term. “Over time, we expect contribution margin per order to normalise between +₹15-20 per order. Net EBITDA for this business segment is expected to improve, as the growth in order volume hereon should offset any corresponding drop in contribution margin,” he said.

"We expect to make complete recovery over the next 3-6 months while continuing to maintain tight control on costs/profitability," Goyal added.

Zomato’s dining out business segment is the hardest hit as restaurants remain shut for dining-out – leading to almost negligible revenue across advertising and Zomato Pro.

The company says that the recovery here is going to be slow since people will be concerned about social distancing and hygiene and restaurants will need to reorganise themselves to be able to build trust with users on these fronts.

In the wake of the Covid-19 crisis, 75% of Zomato employees volunteered for partial salary cuts.

"As of today, all the original salaries have been re-instated, and our net losses of under $1m for July reflect the increased payroll cost already," the Zomato CEO said.

Zomato generally publishes its annual report in the first week of April. But this year it delayed the release of the report due to the uncertainties brought about by the pandemic.

With IANS inputs

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