Zomato's revenue surges but net loss widens; sells Fitso to Curefit but will keep spending

Zomato on Wednesday released its results for the second quarter of 2021-22 which showed widening of the online food delivery platform's consolidated net loss to Rs 434.9 crore, due to its recent investments in the growth of its food delivery business. For same period last year, the company posted a net loss of Rs 229.8 crore. Consolidated revenue (Operations) for the company was at Rs 1,024.2 crore, which was Rs 426 crore during the same period last year.

In a letter, Zomato founder and CEO Deepinder Goyal and Chief Financial Officer (CFO) Akshant Goyal informed that losses were up due to investments in the growth of Zomato's food delivery business. They pointed three reasons for losses.

• Increased spending on branding and marketing for customer acquisition
• Increased investments and a growing share of smaller/emerging geographies in our business (which are less profitable today compared to more mature cities)
• Increased delivery costs due to unpredictable weather and increase in petrol and diesel prices. 

Stating long term views of the company, the letter mentioned three things - brutal prioritisation, that is disinvesting or closing businesses that are not likely to drive any exponential value in long term, Investing in the firm's core food businesses and the ecosystem around it to make it a vigorous long term value drive, and building the hyperlocal e-commerce ecosystem.

"Our core food-related businesses food ordering and delivery, dining-out, and hyperpure (B2B supplies for restaurants) will remain the key value drivers for Zomato for the next few years. These are all complex businesses and we want our entire team to stay focused on these most important value drivers for our business," the letter said.

The company informed that it is selling Fitso to Curefit for $50 million. The CEO and CFO informed, "We are also investing cash in Curefit. Net USD 50 million cash investment plus the value of the Fitso business (worth USD 50 million) will give us a cumulative shareholding worth USD 100 million in Curefit (6.4 per cent shareholding in Curefit)."

Zomato invests in Shiprocket & Magicpin

Zomato also informed that it is investing $75 million in Bigfoot Retail Solutions Pvt Ltd (Shiprocket) and $50 million in Samast Technologies Pvt Ltd (Magicpin). In August, the online food platform had invested $100 million in Grofers. 

"We have now committed USD 275 million across four companies over the past six months. We plan to deploy another USD 1 billion over the next 1-2 years, with a large chunk of it likely to go into the quick-commerce space," it added.

Zomato also informed that it is shutting down its business in Lebanon, "which is the only international business we were left with other than dining-out business in the UAE after shutting down the rest of our international operations last year."